Nicaragua Falls Short in Implementing Anti-Money Laundering Regulations
Managua, Nicaragua - A crucial measure to combat money laundering and terrorist financing is yet to be implemented in the country’s financial institutions.
Insufficient Records on Electronic Transfers
According to Article 25 of Law 977, financial institutions that act as originators, intermediaries or beneficiaries must keep up-to-date records for at least five years after the transfer is made. However, Nicaragua has yet to establish provisions for remittances under criteria 16.3 and 16.4.
Lack of Customer Due Diligence (CDD) Measures
The lack of regulations has raised concerns among financial institutions, which must identify customers or occasional customers at the time of establishing a business relationship or when conducting occasional transactions exceeding a certain threshold. However, even supervisory authorities have not established thresholds for adopting CDD measures in case of occasional transactions nor require verification of identity using data or reliable information from an independent source.
Verification of Identity and Beneficial Ownership
Furthermore, Nicaragua has yet to provide provisions for financial institutions (FIs) to:
- Verify the identity of a person purporting to act on behalf of a client
- Identify and verify the beneficial owner
- Identify the natural person or persons who ultimately own or control a customer, including those who exercise ownership or control through a chain of ownership or other means of control
Beneficial Ownership Requirements
The law defines the beneficial ownership as “the natural person or persons who ultimately own or control the customer” and requires FIs to verify their identity. However, there are still no specific provisions for compliance with this criterion, particularly regarding the obligation to verify the identity of:
- Settlor
- Trustee
- Protector
- Beneficiary
- Any other person exercising effective and definitive control over a trust
Risk Management Procedures
In addition, Nicaragua has yet to establish procedures for risk management related to conditions under which a customer may use a business relationship prior to verification. This raises concerns about the potential risks of money laundering, terrorist financing, and proliferation financing (ML/TF/PF) in the country’s financial system.
International Concerns
The lack of regulations and inadequate implementation of anti-money laundering measures has raised concerns among international organizations and financial institutions, which have called on Nicaragua to take immediate action to address these gaps. The country’s failure to implement effective anti-money laundering regulations may have serious consequences for its reputation and economic stability.