Guatemala Cracks Down on Banks’ Tax Information Compliance
In an effort to strengthen tax supervision and curb financial crimes, Guatemala’s regulatory bodies have issued new regulations requiring banks to provide information related to local and foreign bank accounts, transactions, investments, assets, and other operations whenever there is reasonable doubt regarding activities that may merit investigation.
Tax Information Requests
Under the new regulations, banks must furnish information in response to authorized requests from authorities. These requests must be approved by a judge and comply with the guarantees of confidentiality established by the Constitution. The Tax Code outlines a procedure and requirements for these requests, which can only be denied by a judge in exceptional cases.
Consequences of Non-Compliance
Banks that fail to comply with a valid court order to provide information are subject to criminal penalties for resisting tax supervision. This highlights the importance of banks maintaining accurate records and being transparent in their operations to avoid such consequences.
Prudential Regime: Capital and Liquidity Requirements
In addition to meeting tax information requirements, Guatemalan banks must also maintain a minimum amount of capital and liquidity to ensure financial stability. The Monetary Board has issued regulations requiring banks to maintain at least 10% of the assets and contingencies considered according to the risks under the board’s regulations.
Minimum Amount of Required Patrimony
The Regulation for Determination of the Minimum Amount of Required Patrimony for Exposure to Risks, Applicable to Banks and Financial Companies outlines the requirements for a bank’s computable patrimony. This includes:
- Primary capital: paid-in capital, legal reserve, permanent reserves from retained profits, other permanent capital contributions, and State contributions (for State banks)
- Complementary capital: up to the sum of primary capital
- Patrimonial position: calculated by subtracting required patrimony from its computable patrimony
Insolvency, Recovery, and Resolution
The Banks and Financial Groups Act governs the resolution and suspension of failing banks. When a bank has a patrimonial deficiency, it must notify the SIB and present a regularisation plan for approval.
Regularization Plan Requirements
A regularization plan must include measures to:
- Reduce assets
- Reduce contingencies
- Suspend operations subject to patrimonial requirements
- Implement other necessary measures
Banks under a regularization plan are prohibited from:
- Paying dividends
- Granting loans to their shareholders, general manager, or related companies
Consequences of Non-Compliance
The SIB may appoint a delegate with veto powers to ensure compliance with the regularisation plan. In extreme cases, the Monetary Board may suspend a bank’s operations when it has suspended payment of its obligations or when the patrimonial deficiency is higher than 50% of the required legal patrimony.
Conclusion
Regulators are urging banks to ensure compliance with these regulations to maintain a stable and secure financial system in Guatemala. Banks that fail to comply risk facing severe consequences, including criminal penalties for resisting tax supervision. It is essential for banks to maintain accurate records and be transparent in their operations to avoid such consequences.