Honduras AML Progress: New Ratings Granted in Seventh Enhanced Report

January 2020, Arequipa, Peru

In a commendable step towards enhancing its Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) systems, Honduras has received new ratings following the seventh enhanced follow-up report from the Financial Action Task Force on Money Laundering (GAFILAT). This report assesses Honduras’ progress in addressing technical compliance deficiencies and implementing new FATF Recommendations since its Mutual Evaluation Report (MER) in 2015.

Honduras Enhanced Follow-up Report

The report, titled ‘Honduras Enhanced Follow-up Report,’ shows that Honduras has made significant improvements in several technical compliance areas. The progress report comes under the enhanced follow-up process which focuses on countries with significant AML/CFT system deficiencies.

Honduras’ New Ratings

Based on the progress made, Honduras was re-rated on several FATF Recommendations:

R.3: Assess the money laundering (ML) and terrorist financing (TF) risks
10: **Establish and implement a functioning and risk-based **CDD system
17: Secure the effective implementation of targeted financial sanctions
23: Ensure the provision of adequate resources
29: Apply a risk-based approach to international transfers
34: Ensure the availability of information and timely exchange of information with FIUs

These re-ratings reflect the country’s efforts to address identified technical compliance deficiencies.

Addressing Previous Deficiencies

Honduras had several technical compliance deficiencies identified in its MER, including:

Incomplete risk assessments
Insufficient documentation of customer due diligence

Since then, Honduras has taken steps to address these deficiencies. The country has focused on enhancing its National Risk Assessment (NRA) process and ensuring that reporting institutions (RIs) update and document their risk assessments and customer due diligence (CDD) procedures.

Overcoming Pre-existing Challenges

Previously, Honduras had deficiencies in areas such as:

Establishing a clear definition of the scope of reliance on third parties for customer identification
Providing clarity on beneficial ownership

The seventh enhanced report shows that Honduras has made progress in these areas. The country’s legal framework now provides clarity on the scope of reliance on third parties, and Honduras has taken steps to ensure beneficial ownership information is accurately recorded and monitored.

Addressing New Requirements

The seventh report also assesses Honduras’ progress in implementing new FATF Recommendations that have changed since the on-site visit to the country. These include:

2: Determine and continue to assess the risks of money laundering and terrorist financing
5: Identify and detect ML and TF activities
7: Identify and freeze or seize assets derived from or involved in ML or TF
8: Convict and sanction those involved in ML or TF
18: Ensure that TF is part of the risk-based approach
21: Establish and implement measures to mitigate inherentML/TF risks in the digital environment

For instance, Honduras has taken steps to strengthen its legal framework against money laundering and terrorist financing, including updating its criminal code to include counterfeiting, industrial, and intellectual property-related crimes as predicate offenses for money laundering.

The Road to Effectiveness

The seventh enhanced follow-up report does not address Honduras’ progress in effectiveness, which will be evaluated in a subsequent follow-up evaluation. The focus on technical compliance in the current report is a significant stride towards enhancing the overall effectiveness of Honduras’ AML/CFT system.