Financial Crime World

Costa Rica’s Risk-Based Approach to its Customers: Enhanced Measures for PEPs

Strengthening Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Measures

A recent report has highlighted Costa Rica’s efforts in strengthening its anti-money laundering (AML) and combating the financing of terrorism (CFT) measures. The report focuses on the country’s risk-based approach to its customers, with a special emphasis on the enhanced measures applied to politically exposed persons (PEPs).

Identification of PEPs and Relatives

According to Article 25 of Decree 41016-MP-MH-MSP-MJP, notaries in Costa Rica are required to request information from their customers to determine whether they are PEPs or relatives of PEPs. If a customer is identified as a PEP, the notary must apply enhanced customer due diligence (CDD) measures, including requesting information on the origin of funds.

Enhanced CDD Measures for PEPs

  • Requesting information on the origin of funds
  • Applying stricter controls and monitoring
  • Conducting regular reviews to ensure compliance with AML/CFT regulations

Minor Deficiencies

While Costa Rica has made significant progress in this area, there are still some minor deficiencies that need to be addressed. For example:

  • There are no explicit provisions requiring notaries to identify family members of PEPs beyond the second degree of consanguinity or affinity.

Measures to Assess Risks and Establish Controls

Costa Rica has also implemented measures to assess risks and establish controls on money laundering (ML), terrorist financing (TF), and proliferation financing (PF) that may arise from new products, business practices, and technologies. This includes:

  • A procedure for managing ML/TF/PF risks prior to launching new products or services.
  • Establishing a risk-based approach to supervision.

Responsibility of DNFBPs

However, Costa Rican DNFBPs are not permitted to delegate the performance of CDD to third parties, which means they must take full responsibility for establishing and implementing their own due diligence policies and procedures.

Conclusion

The report concludes that Costa Rica has made significant efforts to improve its AML/CFT measures, but there are still some minor deficiencies that need to be addressed. As a result, it is proposed that the rating of Recommendation 22 be reclassified as Largely Met.

Recommendation 28: Regulation and Supervision of DNFBPs

Challenges in Implementing Risk-Based Supervision

Costa Rica has also faced challenges in implementing risk-based supervision for its DNFBPs. The country’s regulatory body, CONASSIF, had not yet established provisions for a risk-based approach to supervision.

Importance of Verifying Information

The report highlights the importance of verifying information on company structure and beneficial ownership to prevent criminals and their associates from having or being a significant stakeholder in DNFBPs.

Need for Grading System for Fines

Additionally, there was no grading system for fines applicable to DNFBPs based on risk assessments.

Conclusion

Overall, Costa Rica’s efforts to strengthen its AML/CFT measures are commendable, but there is still more work to be done to ensure full compliance with international standards.