Money Laundering in Nicaragua: What You Need to Know
Nicaragua has been at the center of international attention due to its tumultuous political landscape and allegations of corruption. In an effort to protect consumer and user rights, the country’s government recently passed reforms to the “Law for the Protection of Consumer and User Rights” (Law 842).
New Penalties for Banks and Loan Agencies
The updates to Law 842 aim to establish penalties for banks and loan agencies that close accounts or reject clients for any reason, unless their actions are based on Nicaraguan law. This move appears to prohibit banks in Nicaragua from denying services to individuals and entities targeted by US sanctions.
Responding to the Extraterritorial Reach of US Sanctions
According to experts, Law 842 is a response to the extraterritorial reach of US sanctions and other laws. The United States has imposed sanctions on dozens of Nicaraguan individuals and entities with ties to President Daniel Ortega for corruption, money laundering, and human rights violations.
The Expanding Scope of Anti-Money Laundering (AML) Law
Recent changes to AML law aim to disrupt and prosecute conduct that implicates US laws, regardless of where it occurs. Global banks are now responsible for closing correspondent accounts if they fail to comply with subpoenas issued by US agencies investigating possible violations of US laws.
Conflict Between US Sanctions Laws and Foreign Governments’ Responses
The conflict between US sanctions laws and foreign governments’ responses, such as Nicaragua’s Law 842, is expected to intensify in the coming months. As the US government continues to use its expanded authorities under the National Defense Authorization Act (NDAA) to combat “dirty” money flows, global financial institutions will be caught in the middle.
Implications for Money Laundering
Nicaragua’s move highlights the growing tension between US sanctions laws and foreign governments’ attempts to resist their expansion. How this conflict plays out remains to be seen, but it may foreshadow how US authorities and the international financial community react to similar blocking-type measures in other countries.
Key Points:
- Law 842 aims to establish penalties for banks and loan agencies that close accounts or reject clients without a valid reason.
- The law appears to prohibit banks from denying services to individuals and entities targeted by US sanctions.
- The conflict between US sanctions laws and foreign governments’ responses is expected to intensify in the coming months.
- Global financial institutions will be caught in the middle of this conflict.
- Nicaragua’s move may foreshadow how US authorities and the international financial community react to similar blocking-type measures in other countries.