Over the last decade, Argentina has made significant strides in developing its AML regulations. The country is one of the 39 members of the Financial Action Task Force (FATF), and after a critical mutual evaluation published by the FATF in 2010, the country has been continuously working on developing its Anti-Money Laundering (AML) regulations to meet the relevant requirements. As a result, the FATF published another evaluation report in 2014 stating that Argentina managed to address the deficiencies in its financial system.
The country has also granted a higher level of independence to its Financial Information Unit, widening the scope of regulated businesses, and introducing new regulators. This has dropped Argentina’s risk score from 6.74 in 2016 to 5.03 in 2021.
Due to its geographic location, Argentina has to take additional measures to confront money laundering. It shares a Tri-Border Area (TBA) with Brazil and Paraguay, which increases the risks of drug trafficking, money laundering and terrorist financing. Argentina has confronted this issue by establishing a series of regulations and special institutions, as well as by joining the FATF. Among the latest developments, Argentina established the National Committee for Combating Money Laundering and Terrorist Financing in 2019.
As the Argentine government continues developing its AML regime, businesses operating in the country need to pay close attention in order to comply with inevitable regulatory changes. That’s why Sumsub prepared a guide to simplify the compliance process and keep you up to date on important developments in the country.
The list of businesses that need to comply with Argentine AML regulations has expanded since the country became a FATF member in 2000. This includes:
- Financial institutions* and private pension fund managers;
- Exchange offices;
- Natural and legal persons engaged in games of chance (e.g. casinos);
- Stockbrokers and stock brokerage firms and intermediaries engaged in the purchase, lease, or borrowing of securities in the field of stock exchanges;
- Intermediaries registered with futures and options markets;
- Insurance companies.
The complete list of affected businesses can be found here.
*Financial institutions include commercial/investment/mortgage/credit banks, financial companies, and other obliged entities “carrying out regular intermediation between the supply and demand of financial resources.”
AML regulations in ArgentinaArgentina is continuously creating and amending AML regulations to address developing ML activities.
Law 25.246 (also known as “AML Law”) was enacted in April 2000. The main provisions of the law are:
- Amendment of the Penal Code, providing detailed definitions of money laundering and auxiliary crimes;
- Creation of the Financial Information Unit (UIF);
- Establishment of a stricter regulatory framework for the financial sector and a list of obliged entities that must report to the UIF.
As a result of its 2010 FATF evaluation, Argentina passed Law 26.683 in June 2011. One goal of this law was to amend the Argentine Criminal Code to provide AML a status of a separate crime. Accordingly, money laundering is now considered to be any transaction of money or other assets exceeding 300,000 Argentine Pesos (approximately $2700) acquired as a result of criminal activities.
Law 26.683 also strengthened the role of UIF, making it independent from other institutions and expressly confirming its powers of supervision, inspection, and sanctioning. The law additionally expanded the list of businesses that need to comply with AML legislations in Argentina, while the period of reporting of suspicious transactions was extended from 30 to 150 days.
Apart from the laws mentioned above, other important Argentine AML regulations include:
Who’s the regulator?
The Financial Information Unit (Unidad de Informacion Financiera (UIF)), which functions within the National Department of Finance, is the governmental body in charge of the analysis, treatment and transmission of information for preventing money laundering and terrorism financing in Argentina.
Accordingly, the UIF serves as the financial regulator for companies providing banking and other financial services, as well as for several non-financial industries (e.g. casinos, high-value goods, etc.) responsible for examining compliance with and enforcement of AML legislation in Argentina.
Businesses are obliged to report all suspicious activities to the UIF. If the UIF decides that the reported activity can be considered a crime, they file a criminal complaint.
The UIF is empowered to request documents, reports, and background information from businesses if they’re suspected in money laundering. The UIF can also request through the Attorney General’s Office to suspend any suspicious transaction and seize any documentation that might be used for investigative purposes.
The Central Bank of the Republic of Argentina (BCRA) and the National Securities Commission (CNV) also possess the limited authority to impose AML requirements within their scope of competence.
How to stay compliantSince Argentina adopted FATF Recommendations, all businesses regulated by the UIF, BCRA, and CNV must identify customers, carry out customer due diligence and apply the risk-based approach to ensure that measures to prevent or mitigate ML/FT are commensurate with the risks identified. Regulated companies should also keep records and report any suspicious activity to supervisory institutions, among other requirements related to each category of obliged entities. The UIF’s main AML requirement is for obliged entities to conduct their own risk assessment and design policies and preventive measures based on the findings. The resulting measures should include, but not be limited to:
- Procedures for remaining compliant with applicable laws at all times;
- Client identification and ongoing monitoring;
- Specific procedures regarding Politically Exposed Persons (PEPs) and Ultimate Beneficial Owners (UBOs);
- Procedures for risk-based differentiation of clients;
- Transaction monitoring;
- Reporting procedures;
- Data retention procedures;
- Appointment of a compliance officer;
- Provision of regular training to personnel.
Customer Due Diligence refers to the measures that businesses take to gather and verify clients information for the purpose of assessing criminal risk. This process involves:
- identifying the identity of the customer;
- identifying the beneficial owner, where relevant, and verifying their identity;
- assessing and, where appropriate, obtaining information on the purpose and intended nature of the business relationship or transaction.
Therefore, obliged entities should implement KYC/AML/CDD measures when dealing with new business relationships, occasional transactions, suspicion of money laundering, unreliable documentation and ongoing monitoring obligations. In short, obliged entities must perform ongoing monitoring of the business relationship with their customers and update their CDD periodically.
Additionally, obliged entities must also determine the extent of their CDD measures and ongoing monitoring by using a risk-sensitive approach. This means paying attention to the types of customers, business relationships, products or transactions they deal with. Accordingly, any Customer Due Diligence (CDD) procedure must be carried out in accordance with the risk profile assigned to the given client. Those risk levels will determine the KYC information required and the subsequent intensity of management and monitoring of the account. Furthermore, obliged entities are required to demonstrate that the whole process was appropriate according to the relevant AML/CTF requirements to their supervisory authority.
The obliged entity must have appropriate policies, procedures and tools that allow it to conduct sufficient, timely, and up-to-date identification of all clients. This also means verifying the information presented by clients and carrying out adequate monitoring of their operations. According to the provisions of UIF Resolution No. 29/2013 and other relevant resolutions, the obliged entity must conduct AML screening for adverse media, global sanctions and watchlists, such as OFAC, UN, HMT, EU, DFT, etc. regardless of the client’s risk profile. Moreover, transaction monitoring should be conducted on a regular basis to ensure detection of red flags that could indicate possible money laundering.
Even after the cessation of a business relationship, the obliged entity’s CDD obligations don’t come to an end. Governments oblige firms to maintain the records of information collected from clients for a certain period of time, usually during 5 years after the end of the business relationship (as required in Argentina).
Businesses listed in authorized local/international markets that are subject to requirements on transparency and/or disclosure of information may open an account and operate if they:
- Identify the natural person who will operate the account;
- Deliver a copy of the instrument by which that person is designated for such purposes.
The following factors, taken cumulatively, may also entitle the company to conduct Simplified Due Diligence (SDD) when:
- There is no suspicion of money laundering or terrorism financing;
- The holder does not have another bank account;
- The client is not a PEP;
- The total balance of the account does not exceed 25 minimum wages (approximately $1,800) and the monthly operations in cash do not exceed the equivalent of 4 minimum wages (approximately $288).
There’re also Enhanced Due Diligence (EDD) measures, which involve more rigorous CDD measures applied to high-risk customers.
In cases of medium risk, the company must additionally obtain information relating to:
- The client’s economic activity;
- The origin of the income, funds, and/or assets of the client.
In cases of high risk, the company must additionally obtain some of the following information:
- Evidence that reliably confirms the client’s address;
- Documents demonstrating the origin of the income, funds and/or assets of the client;
- Copy of the minutes of the client’s decision-making body;
- Data resulting from an enhanced AML screening against open sources.
The company conducting CDD can request other data that, in its opinion, ensures proper identification of the client.
Cryptocurrency operations are considered as entailing high money laundering risk. Therefore, the UIF obliges all obliged entities to deliver monthly reports on all cryptocurrency transactions in which they take part.
Red flags can arise due to unusual behaviour by customers and patterns of behaviour that are characteristic of money laundering or terrorist financing.
Below is a list of red flags identified by the FATF that can help financial services identify suspicious activities. While one red flag doesn’t necessarily prove that a client is involved in criminal activities, it may be cause for further monitoring, examining, and reporting the following, where appropriate:
- Size and frequency of transactions;
- Transaction patterns that are irregular, unusual or uncommon;
- The sender or recipient suggest criminal activity;
- The source of funds or wealth, relates to criminal activities;
- Geographical risks.
However, these indicators are neither exhaustive nor applicable in every situation. They are rather indicators which can contribute to identifying suspicious activity that must be reported to the relevant authorities.
Each regulated entity must submit three types of reports:
Report of High Amount Cash Transactions, listing all transactions equal to and exceeding AR $280,000 and stating:
- Identification data of the person who carried out the transaction (operator of the funds), of the person on whose behalf the transaction was carried out (owner of the funds), and of the person for which the funds are intended;
- The type of transaction involved (deposits or withdrawals);
- The date and amount of the transaction.
Report of International Transfers, listing all transactions carried out in a local or foreign currency that involve transfers of funds between accounts located in the country and accounts located abroad. This should state:
- The type of transaction (entry or exit of funds);
- The date, the amount of the transaction;
- The country of origin and destination of the transfer;
- Identification data of the bank of origin and the bank of destination;
- Identification data of the person for which the funds are intended.
Annual Systematic Report (RSA), containing the following information:
- General information (company name, address, activity);
- Information on the company’s structure;
- Accounting information (income, equity);
- Business information (product, distribution);
- Information on types and number of clients.
Businesses must keep their AML policies updated and available to the UIF. They are also obligated to keep the following information for at least 10 years:
- All information requested from the client with regard to their identification, and personal file (the 10-year period starts when the relationship with the client is terminated);
- A registry including all cases in which suspicious transactions were involved;
- All original or certified copies of documents related to the transaction (the 10-year period starts when the transaction was conducted);
- Transaction-related software.
All data must be stored in an electronic format and protected against unauthorized access.
According to Art. 17 of Law 26.683, when businesses detect Money Laundering offenses or suspicious activities, they are obliged to submit a special report to the UIF within 150 calendar days from the operation carried out or attempted.
Additionally, the maximum term to report “events” or “suspicious operations” of terrorist financing will be 48 hours from the operation carried out or attempted, including non-working days and hours for this purpose.
AML fines and penalties
The penalty applicable to individuals and businesses convicted of money laundering crimes varies from two to ten years imprisonment and a fine from two to ten times the amount of the illegal transaction made or intended to be made. In cases when the illegal transaction doesn’t exceed AR$300,000 (approximately $2.700), the penalty gets reduced (six months to three years of imprisonment).
The maximum penalty for failing to comply with the regulatory/administrative AML requirements is a fine of up to 10 times the value of the goods/services or the transaction that the failure concerns. If such value cannot be determined, the maximum fine constitutes AR$100,000 (approximately $900).
Whereas the UIF is mainly entitled to impose administrative fines, courts may subject those engaged in money laundering crimes to the more serious penalties mentioned above.
Argentina continues to propose new regulations to confront money laundering. This includes the UIF’s proposition to include cryptocurrency businesses under AML Laws, which is expected to take place in 2022.
Argentina has demonstrated how dedicated it is to fighting money laundering and terrorist financing. Therefore, businesses operating in this country should ensure they’re compliant with all the relevant and incoming regulations.