Actualidad Nicaragua

Anti-Money Laundering and the Financing of Terrorism Regulations

Act 977

On July 20, the Republic of Nicaragua's National Assembly published Act 977 on the Prevention of Money Laundering, Combating the Financing of Terrorism and the Financing of the Proliferation of weapons of mass destruction (AML/CFT/FP).

The regulation aims to protects the economy and the integrity of the financial system from risks associated with AML/FT/FP. To this end, the provisions set out the following specific measures:

  • Setting up mechanisms designed to strengthen prevention, investigation, pursuit and punishment of AML/CFT/FP crimes
  • The implementation of financial measures adopted by international organizations of which Nicaragua is a member
  • Strengthening of national legislation
  • Reducing the financial and operating capacity of criminal organizations

The most significant points are as follows:

Regulated parties*

Natural and legal persons conducting activities in the capacity of financial institutions, and non-financial activities and professions**  must report to the Financial Analysis Unit (FAU)*** directly and may not argue that discretion is required or use any other diversionary tactic:

  • Financial institutions supervised by the Banking & Other Financial Institutions Authority: banks, financial companies, insurance, reassurance, sureties and insurance broking companies, bonded warehouse companies, securities exchange companies, central securities depositories, stockbrokers, settlement & clearing firms, fund managers, investment firms, pension fund managers, banking agent offices and foreign financial institutions, companies operating under the special regime covered by the General Banking, Non-Banking Financial Institutions and Financial Groups Act.
  • Institutions supervised by the National Microfinance Commission: microfinance intermediaries and microfinance institutions.
  • Institutions supervised by the FAU as to their AML/FT/FP prevention: microfinance institutions that are not regulated by CONAMI, pawn and loan stores, casinos, certain categories of traders and fiduciary service providers, among others.
  • Chartered Accountants

Duties of regulated entities

  • Verification of client's identity and the beneficial owner. This must be done when the service relationship is being set up or, if subsequently, within 10 days of the outset of this relationship, once the Regulated Entity has confirmed that the AML/FT/FP risks are under control and provided that it is necessary in order for the business to be carried out properly.
  • Transparency. Legal persons registered in Nicaragua should file appropriate, accurate and updated information about the beneficial owner and the ownership and control structure.
  • Individual risk assessments. AML/FT/FP risks should be assessed on a case-by-case basis by clients, countries or geographical regions, products, services, transactions, distribution channels and dispatch; the use of ICT, etc. and other factors viewed as relevant; information from national AML/FT/FP assessments must be used. These assessments must have documentary support, be updated regularly and the outcomes subsequently reported to the respective supervisor.
  • ML/FT/FP prevention programs. Regulated entities must set up programs that enable them to manage and mitigate effectively the risks found thanks to national, industry or individual ML/FT/FP risk assessments. These programs should consist of:
    • Know Your Customer (KYC) Due Diligence that is appropriate to the level of risk exposure: intense, simplified or standard; as well as the functions or structures overseeing compliance with these
    • Existing liabilities regarding how measures, monitoring and procedures are implemented
    • Appropriate staff selection procedures and continuous training programs for employees and senior management
    • Independent audit or assessment function to test the effectiveness of the program and its implementation
  • Physical cross-border transfer of money and other monetary instruments. Any natural or legal person, whether Nicaraguan or foreign who comes into or leaves the country carrying money in the form of cash, securities and/or precious metals for a sum equal to or more than USD 10,000.00 or its equivalent in local currency, must declare it on the form provided by the customs authority.

Non-profit organizations

These must meet certain requirements such as making financial transactions through regulated financial channels, applying the "know your beneficial owners and associate Non-profit organizations" rule, having formals accounts for their assets, complying with the requirements for receiving donations, and keeping on file for at least 10 years their annual financial statements and the records of local and international transactions.

Bearer shares

For the purposes of identifying their shareholding and control structure, limited liability companies may not issue bearer shares, nor convert nominative shares into bearer shares.

Finally, the Act introduces a number of amendments**** to the Penal Code regarding ML/FT/FP felonies, lays the groundwork for future regulation in this area and in its Temporary Provision specifies a 12-month period for private companies who have or issue bearer shares and certificates for converting them into nominative shares.

* All natural or legal persons with responsibility for implementing prevention, detection and reporting of activities that might be linked to ML/FT/FP and predicate crimes associated with ML under a Risk-Based Approach (RBA).

** Institution regulated under Act 976 on the Financial Analysis Unit published in the same issue of the State Gazette as Act 977.

*** The list is not exhaustive: Other regulated institutions may be added.

**** Other regulations that are amended: Notarial Law from 1905, the 1914 Trading Law, General Law 561 on Banking & Other Financial Institutions, Law 734 on Bonded Warehouses, General Law 733 on Insurance, Reassurance and Sureties. General Law 698 on Public Records, among others.