Financial Crime World

Money Laundering in Nicaragua: Understanding the Concerns

What is Money Laundering?

Money laundering, a criminal activity that involves concealing the source of illegally obtained funds to make them appear legitimate, has become a significant concern globally. In recent years, Nicaragua has been working to strengthen its anti-money laundering (AML) regime, but it still faces challenges in implementing the technical requirements set by the Financial Action Task Force (FATF).

Challenges in Implementing AML Requirements

According to the FATF’s Benin Follow-Up Report 2023, Nicaragua has made some progress in addressing AML/CFT weaknesses. However, the country remains non-compliant with several key recommendations.

Areas for Improvement

  • Risk Assessment and Risk-Based Approach: Nicaragua needs to improve its risk assessment framework and apply a clear and consistent approach to identifying high-risk customers and transactions.
  • National Cooperation and Coordination Mechanisms: The country needs to strengthen its national cooperation and coordination mechanisms to ensure that different government agencies and financial institutions work together effectively to combat money laundering.
  • Legislation on Money Laundering: Nicaragua’s legislation on money laundering is largely compliant, but it lacks specific provisions for confiscation and provisional measures.

Other Concerns

National Law and Regulation

  • The country’s law on terrorist financing is partially compliant, with some gaps in its implementation.
  • Nicaragua has struggled to implement targeted financial sanctions related to terrorism and terrorist financing.
  • The country’s AML/CFT regime lacks effective measures to address the risk of money laundering through non-profit organizations.

Financial Institutions

  • Nicaragua’s financial institutions have been criticized for failing to implement adequate customer due diligence, record-keeping practices, and internal controls.
  • The country lacks a comprehensive approach to correspondent banking and money or value transfer services.

Recommendations for Improvement

  • New Technologies: Nicaragua needs to improve its AML/CFT regime in areas such as new technologies, wire transfers, reliance on third parties, and internal controls and foreign branches and subsidiaries.
  • Reporting of Suspicious Transactions: The country’s authorities need to strengthen their reporting of suspicious transactions and tipping-off and confidentiality mechanisms.
  • Transparency and Beneficial Ownership Requirements: Nicaragua needs to enhance its transparency and beneficial ownership requirements for legal persons and legal arrangements.

Conclusion

While Nicaragua has made some progress in implementing the FATF recommendations, it still faces significant challenges in addressing AML/CFT weaknesses. The country’s authorities must take concrete steps to strengthen its AML/CFT regime and bring it into line with international standards.