Financial Crime World

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Guatemala Introduces Stringent Rules to Combat Money Laundering and Financing of Terrorism

The Guatemalan government has introduced new regulations aimed at preventing money laundering and financing of terrorism in the country’s financial sector. The rules, which came into effect on [date], require banks to provide detailed information to authorities and maintain a minimum amount of capital to mitigate risks.

Banks Must Provide Information to Authorities

Under the new regulations, banks must provide information to:

  • The Monetary Board
  • The Central Bank
  • The Superintendency of Banks (SIB) regarding their customers’ accounts, transactions, and investments.
  • The Tax Authority (SAT) in accordance with procedures set forth in the Tax Code.

This information will help authorities identify suspicious activities and prevent money laundering and financing of terrorism.

Banks Must Maintain Minimum Capital Requirements

To mitigate risks, banks must maintain a minimum amount of capital, which includes:

Primary Capital

  • Paid-in capital
  • Legal reserve
  • Permanent reserves from retained profits
  • Other permanent capital contributions
  • State contributions (for State banks)

Complementary Capital

  • Profits from the current period
  • Profits from previous periods
  • Surplus from asset revaluation
  • Other capital reserves
  • Debt instruments convertible to stock
  • Subordinate debt for more than five years
  • Bonds combining characteristics of debt and capital
  • Other components determined by the Monetary Board

Failure to Comply with Regulations Leads to Severe Consequences

The violation of banking confidentiality is considered a grave offence, entailing:

  • The immediate removal of those participating in it
  • Civil and criminal liabilities
  • Banks that fail to comply with a valid court order to provide information are subject to:
    • Criminal penalties for resisting tax supervision

Insolvency, Recovery, and Resolution

The Banks and Financial Groups Act includes a section governing the resolution and suspension of failing banks. When a bank has patrimonial deficiency, it must:

  • Notify the SIB
  • Present a regularisation plan for its approval
  • The authority may approve, reject, or amend the bank’s proposal.

The plan must include at least one or all of the following measures:

  • Reduction of assets, contingencies, or suspension of operations subject to patrimonial requirement
  • Capitalization of reserves or profits to cover patrimonial deficiencies
  • Increase of authorized capital and issue of shares to cover patrimonial deficiencies
  • Payment to creditors with the bank’s own stock, with their consent
  • Contracting of one or more subordinated credits within the bank’s capital structure
  • Sale in public offer of shares for total or partial solution of patrimonial deficiency
  • Sale or negotiation of assets and liabilities

Consequences of Failure to Comply with Regulations

When a bank is subject to a regularisation plan, it must:

  • Not pay dividends
  • Not grant loans

Failure to comply with the regulations can lead to severe consequences, including:

  • Suspension or cancellation of its operating licence.