Financial Crime World

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Ecuador’s Financial Institutions Must Implement Stricter Due Diligence Measures

QUITO, ECUADOR - The Ecuadorian government has introduced new regulations aimed at combating money laundering and terrorist financing. As part of these measures, financial institutions (FIs) are required to implement enhanced customer due diligence (CDD) procedures for certain clients.

Enhanced Customer Due Diligence Procedures

According to the new rules, FIs must:

  • Verify the identity of all customers
  • Obtain a copy of their annual tax return or income certificate as proof of income source
  • Monitor any variations in their customers’ income or property

Enhanced Due Diligence Measures for Specific Entities

FIs are also required to implement enhanced due diligence measures for:

  • Politically Exposed Persons (PEPs)
  • Individuals listed on the United Nations sanctions list
  • Entities from non-cooperative countries or jurisdictions

For PEPs, FIs must:

  • Establish risk management systems to determine whether a prospective customer is a PEP
  • Obtain senior management approval prior to initiating relationships with PEPs
  • Implement measures to establish the source of funds and ultimate beneficiaries of wealth

Reporting Requirements and Record Keeping

FIs are required to:

  • Report suspicious activities to the Ecuadorian Financial Intelligence Unit (UAF)
  • Maintain records of all transactions

Correspondent Banking Relationships

Correspondent banking relationships must be subject to enhanced due diligence measures.

Consequences of Non-Compliance

Failure to comply with these regulations may result in penalties, including fines and imprisonment.

Key Takeaways

  • Financial institutions must verify the identity of all customers and obtain a copy of their annual tax return or income certificate as proof of income source.
  • Enhanced due diligence measures are required for PEPs, individuals listed on the United Nations sanctions list, and entities from non-cooperative countries or jurisdictions.
  • FIs must report suspicious activities to the Ecuadorian Financial Intelligence Unit (UAF) and maintain records of all transactions.
  • Correspondent banking relationships must be subject to enhanced due diligence measures.

Sources

  • Ecuadorian Financial Intelligence Unit (UAF)
  • Superintendence of Banks, Securities, and Insurance
  • Constitution of Ecuador
  • Law No. 2018-02 on Prevention of Money Laundering and Financing of Terrorism