Law 977: A Step towards Financial Transparency in Nicaragua

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Background

On July 20, 2018, the Nicaraguan government published Law 977 in La Gaceta, Diario Oficial No. 138. This law aims to combat money laundering, financing of terrorism, and the proliferation of weapons of mass destruction.

Key Provisions

• Establishes obligations and requirements for financial institutions, including insurance companies, to maintain transparency and prevent the use of their services for illicit activities.
• Only legal entities constituted and domiciled in Nicaragua can practice insurance and reinsurance. Foreign insurance companies can operate in the country by establishing a branch.
• Branches of foreign insurance companies must have a physical presence in the national territory and be represented by attorneys or agents incorporated in the Republic of Nicaragua.

Insurance Regulations

• Natural or legal persons domiciled in Nicaragua are prohibited from buying insurance from companies without proper authorization to operate in the country, except for export and import transportation, or accidental damage that may occur outside of Nicaragua.
• Foreigners wishing to engage in insurance brokerage or agency activities in Nicaragua must be residents in the country, have a work permit, and be authorized to exercise the activity under the law.
• Foreign natural or legal persons regulated by Law 977 must maintain a physical presence in the national territory.

Measures for Public Entities

• Annex III, Entry 2, allows Nicaragua to accord benefits to financial institutions or public entities wholly or majority owned by the State that supply financial services and are established with a public interest purpose. These benefits may include:
  • Extension of State guarantees
  • Tax exemptions
  • Exceptions to the usual juridical form requirements
  • Exceptions to the legal requirements to begin operations

Conclusion

Law 977 aims to promote transparency and prevent the misuse of financial institutions for illicit activities, while also promoting economic development in Nicaragua. The measures outlined in this law aim to ensure that financial institutions operating in the country are transparent and compliant with regulations, ultimately benefiting the public entities and citizens of Nicaragua.