By: Armando Vega (Associate)
Keeping a healthy financial system at a country level represents an attraction to all investors.
Nicaragua, as member of the Grupo de Acción Financiera de Latinoamerica (Group of Financial Action in Latin America) (GAFILAT), has the duty of updating itself and keeping the international standards in the legal framework of Anti-Money Laundering and Terrorism Finance (AML/TF).
Consequentially, Nicaragua on July 20th, 2018, started the day with new laws updates that will regulate the matter of Prevention of Money Laundering, Finance of Terrorism and Financing of Proliferation of Weapons of Mass Destruction (ML/TF/PF), being this:
- Law N° 976 (Ley de la Unidad de Análisis Financiero) (Finance Analysis Unit Law)
- Law N° 977 (Ley contra el Lavado de Activos, el Financiamiento al Terrorismo y el Financiamiento a la Proliferación de Armas de Destrucción Masiva) (Law against Money Laundering, Finance of Terrorism and Financing of Proliferation of Weapons of Mass Destruction)
Subsequent to the approval of the laws abovementioned, on October 3rd were published on the local gazette the Decrees N° 14-2018 and 15-2018, which belongs to the regulation of each one of them.
These laws come to safeguard, protect and strength the country’s financial system, being at the forefront of natural or legal persons who desires to deposit money of illicit origins in the financial system, with the objective of using it for their own benefit or to finance illegal acts across borders
It is also noteworthy that both laws complement each other in the legal framework of this article.
Law N° 976 and its regulation, highlights the following innovative aspects:
Defines what should be considered as suspicious transaction, which according the article n°2 of the law is: “Any act, operation or transaction, isolated, repeated, simultaneous or serial, regardless of the amount of itself, made or attempted by any natural or legal person, which in accordance with the regulations in force, the uses or practices of the activity concerned, results unusual or lacks of economic or legal justification “.
Strict measures and vigilance are necessary from experts accountants to combat and support a healthy financial system, as a result the Public Accountants Institute of Nicaragua is empowered of the creation of an association emphasizing on gathering and detecting any suspicious, unusual, illegal operation, movement or activity identified by the obliged subject under its jurisdiction. Article 10 of the law.
Non-Profit Organizations (NGO) represent a valuable social support for any country, however they become vulnerable and are an easy target for illicit activities and corruption due to the fact that criminals will pretend to be benefactors for this organization when they are actually avoiding to file or report the origin of the money. Therefore, according the article five of the law, the non-profit organization began to be mentioned in the legal framework of prevention of ML/TF/PF.
The obliged subjects play a transcendental role for a healthy financial system all over the country, reason why the government strictly request their alignment and support on monitoring diligently this matter. There are always those who fail to see the importance of this matter and the impact of investment creation that comes along with it. As a result, the law foreseen temporary suspension of operations of a Subject Obliged or its operational closure if it doesn’t wish to collaborate with said mission. Article 7 of the law.
On the other hand, the Regulation of the Law (Decree No. 14-2018) authorizes the Unidad de Analisis Financiero (Financial Analysis Unit) also know as UAF to establish necessary mechanisms and procedures in order to access directly, secured and protected to the registered information of the data base of certain public institutions. This is accordance with the Article 5 of the Law.
An innovative aspect of the Regulation is the issue of a certificate that certify that the obliged subject is duly registered on the record that the institution manages. This is accordance the article 17 of the Regulation.
In the Article N° 20 of the regulation it is established that the Unidad de Analisis Financiero (Financial Analysis Unit) may perform evaluations by sector of the Obliged Subjects, keeping as parameters the following:
- Factors related to the clients of the Obliged Subject.
- Geographical presence.
- Products, services and their distribution channels
Law N° 977 and its regulation, highlights the following innovative aspects:
Law article n° 4 defines the non-profit organization as the following: “Legal persons that are involved in the collection or disbursement of funds for the accomplishment of humanitarian, religious, cultural, educational, social or fraternal purposes, or for the accomplishment of other types of welfare “.
According with the abovementioned, the articles n° 37 and 38 of the law followed by the articles n° 13, 14 and 15 of the decree n° 15-2018, established the legal regulations and duties that the NGO must follow with the purpose of prevention of Money Laundering, Finance of Terrorism and Financing of Proliferation of Weapons of Mass Destruction.
In order to reinforce the purpose of UAF, a national commission for AML/ATF/APF is establish. This commission is a coordinated set of authorities that are related to the prevention of ML/TF/PF. All in accordance with the law´s articles n° 5 and 6.
Compared with the previously established on the article n° 9 of the repealed law n° 793, in regard to the legal and natural persons, defined as “Obliged Subject”, the law n° 977 article n° 9, increase the list of obliged subjects within the following regulated fields:
- Financial Institutions supervised by the Superintendence of Banks and Other Financial Institutions.
- Entities supervised by the National Microfinance Commission.
- Entities supervised by the Financial Analysis Unit in the Prevention of (ML/TF/PF)
- Authorized Public Accountants, registered in the Public Accountants Institute of Nicaragua
- Any other natural or legal person that in accordance with the aforementioned Law is designated as the Obliged Subject or by the specific Law that creates it.
We recommend a brief reading of the aforementioned article of the law with the purpose of reviewing if your company is within the regulated field by the Law n° 977.
A new regulation of this law is that corporations should not issue bearer shares. Existing corporations that already had issue bearer shares will have twelve months to turn them into registered shares. Such conversion must be duly inscribed in the Public Register of Commerce of each corporation domicile. Article n° 46 of the law.
We believe that maintaining a healthy financial system is to promote a long-term economic and social progress for the welfare of the country, taking into account that it allows the development of productive sectors such as: construction, technology, industries and employment creation.