Financial Crime World

Financial Institutions in Honduras Face Compliance Risks: Report

A recent report on the Mutual Evaluation of Honduras has highlighted several compliance risks facing financial institutions in the country. The evaluation assesses a country’s implementation of anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, and found that Honduras faces significant challenges in ensuring the effective supervision and regulation of its financial sector.

Compliance Risks

Risk Assessment and Supervision

  • Honduras is only partially compliant with Recommendation R.1, which requires assessing risk and applying a risk-based approach.
  • The country’s financial institutions are struggling to implement adequate customer due diligence procedures, as outlined in Recommendation R.10.

National Cooperation and Coordination

  • Honduras was found to be largely compliant with Recommendations R.2 and R.3, which relate to national cooperation and coordination, and the criminalization of money laundering and terrorist financing offenses respectively.
  • However, the country’s implementation of measures to confiscate and freeze assets related to these crimes is deemed partially compliant.

Regulation and Supervision

  • Honduras needs improvement in its regulation and supervision of financial institutions (Recommendation R.26).
  • The country’s powers of supervisors (Recommendation R.27) also require enhancement.

Transparency and Beneficial Ownership

  • Honduras was found to be non-compliant with Recommendation R.24, which requires transparency and beneficial ownership of legal persons and arrangements.

Areas for Improvement

  • Regulation and supervision of designated non-financial businesses and professions (DNFBPs)
  • Reporting of suspicious transactions
  • Powers of law enforcement and investigative authorities

Recommendations

In response to the report’s findings, financial institutions in Honduras are urged to prioritize the implementation of robust AML/CFT controls to mitigate compliance risks. The country’s regulatory bodies must also take steps to ensure effective supervision and regulation of the financial sector, including:

  • Improving its powers of supervisors
  • Enhancing transparency and beneficial ownership requirements

By implementing these recommendations, Honduras can improve its compliance with international standards and reduce the risk of money laundering and terrorist financing in the country.