Nicaragua

CARIBBEAN FINANCIAL
ACTION TASK FORCE
Mutual Evaluation Report
Anti-Money Laundering and
Combating the Financing of
Terrorism(AML/CFT)
Nicaragua
October 30th, 2009
Nicaragua is a member of the Caribbean Financial Action Task Force (CFATF). This evaluation was
done by the CFATF and the report was adopted by its Council of Ministers on October 30th, 2009, as part
of the third round of mutual evaluations.
© 2009 CFATF. All Rights reserved.
No dissemination, reproduction or translation of this publication may be made without prior written
permission. Requests for permission to further disseminate reproduce or translate all or part of this
document should be obtained from the CFATF Secretariat at CFATF@cfatf.org.
2
Table of Contents
Preface- Information and Methodology used for the evaluation of Nicaragua ..................................... 1
Executive Summary........................................................................................................................... 2
1.
General .........................................................................................................................................10
1.1. General information on Nicaragua .........................................................................................10
1.2. General situation of Money Laundering and Financing of Terrorism......................................13
1.3. Overview of the Financial Sector ...........................................................................................13
1.4. Overview of Designated Non-Financial Business and Professions..........................................17
1.5. Overview of commercial laws and mechanisms governing legal persons and arrangements....18
1.6. Overview of commercial laws and mechanisms governing legal persons and arrangements....19
2.
LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES..........................................25
2.1. Criminalisation of Money Laundering (R.1. and 2) ................................................................25
2.2. Criminalisation of the Financing of Terrorism (SR.II)............................................................34
2.3. Confiscation, freezing and seizing of proceeds of crime (R.3) ................................................37
2.4. Freezing of funds used for financing of terrorism (SR.III)......................................................40
2.5. The Financial Intelligence Unit and its functions (R.26).........................................................43
2.6. Law Enforcement, Prosecution Authorities & Framework (R.27 and 28) ...............................50
2.7. Cross-Border Declaration (SR.IX) .........................................................................................53
3.
PREVENTIVE MEASURES – FINANCIAL INSTITUTIONS.....................................................55
3.1. Risk of Money Laundering or Financing of Terrorism ...........................................................55
3.2. Customer Due Diligence, including enhanced and reduced measures (R.5 to 8) .....................56
3.3. Third parties and introduced business (R.9) ...........................................................................71
3.4. Financial institutions secrecy or confidentiality (R.4):............................................................72
3.5. Record keeping and wire transfer rules (R.10 and SR.VII) .....................................................73
3.6. Monitoring of transactions and relationships (R.11 and 21)....................................................77
3.7. Suspicious Transaction Reports and other reporting (R.13-14, 19, 25 and SR.IV) ..................80
3.8. Internal controls, compliance, audit and foreign branches (R.15 and 22) ................................87
3.9. Shell Banks (R.18) ................................................................................................................91
3.10.
The supervisory and oversight system (R.23, 29, 17 & 25).................................................92
3.11.
Money or value transfer services (SR.VI): .......................................................................107
4.
PREVENTIVE MEASURES – DNFBPs.....................................................................................109
4.1. Customer due diligence; recordkeeping (R.12) (R.5, 6, 8 to 11 & 17)...................................109
4.2. Suspicious Transaction Reporting (R.16) (R.13 to 15, 17 and 21) ........................................110
4.3. Regulation, supervision and monitoring (R.24-25) ...............................................................112
4.4. Other non-financial businesses and professions; Modern secure transactions (R.20).............113
5.
LEGAL PERSONS AND ARRANGEMENTS AND NON-PROFIT ORGANISATIONS ..........114
5.1. Legal Persons – Access to beneficial ownership and control information (R.33)...................114
5.2. Legal arrangements – access to information on beneficial ownership and control (R.34) ......117
5.3. Non-profit organizations (SR.VIII) ......................................................................................117
6.
NATIONAL AND INTERNATIONAL COOPERATION ..........................................................125
6.1. National Cooperation and Coordination (R.31) ....................................................................125
6.2. The Conventions and US Special Resolutions (R.35 and SR.I).............................................126
6.3. Mutual Legal Assistance (R.36-38, SR.V) ...........................................................................129
6.4. Extradition (R.37, 39, SR.V): ..............................................................................................138
6.5. Other Forms of International Cooperation (R.40 SR.V)........................................................142
7.
OTHER ISSUES.........................................................................................................................146
7.1. Resources and Statistics (R.30 and R.32) .............................................................................146
7.2. Other relevant AML/CFT measures or issues.......................................................................146
7.3. General framework for AML/CFT system (see also section 1.1) ..........................................146
Table 1. Ratings of Compliance with FATF Recommendations.......................................................148
Table 2: Recommended Action Plan to Improve the AML/CFT System ..........................................158
Annex 1:
List of abbreviations ................................................................................................169
Annex 2: Details of all bodies met on the on-site mission – .............................................................170
Annex 3: Lists of all laws, regulations and other material received ..............................................172
3
Preface- Information and Methodology used for the evaluation
of Nicaragua
1.
This evaluation of the anti-money laundering (AML) and combating the financing of terrorism
(CFT) regime of Nicaragua was based on the 2003 Forty Recommendations and the 2001 Nine Special
Recommendations on the Financing of Terrorism of the Financial Action Task Force (FATF), and was
drafted using the 2004 AML/CFT Methodology1. The evaluation took account of the laws, regulations
and other material furnished by Nicaragua, as well as the information obtained by the evaluators during
and after the in situ visit held from 5 to 17 October 20082. The evaluation team held meetings with
officials and representatives of all the relevant agencies of the Nicaraguan Government and the private
sector. Annex 2 of this report contains a list of the bodies with which meetings were held.
2.
The evaluation was carried out by the following team of evaluators comprising one member of
the Secretariat and experts from CFATF member countries: Ernesto López, Deputy Executive Director
of the CFATF and coordinator of the evaluation; Lourdes Bermúdez, Attorney in the Financial Analysis
Unit of Panama (legal and FIU evaluator); Luis Arturo Magaňa, Prosecutor in the Chief Prosecutor’s
Office of El Salvador (legal evaluator); Maynor Ambrosio, Financial Analyst in the Superintendency of
Banks of Guatemala (financial evaluator); and Raúl Bulnes, Analyst in the National Banking
Commission of Honduras (financial evaluator).The team would like to express it gratitude to the
Nicaraguan government.
3.
The evaluators reviewed the institutional framework, AML/CFT laws, regulations, guides and
any other norms established to prevent money laundering (ML) and financing of terrorism (FT) through
the financial institutions and the Designated Non-Financial Businesses and Professions (DNFBPs), as
well as studying the capacity, implementation and effectiveness of all these measures.
4.
This report offers a summary of the AML/CFT system in effect in Nicaragua at the date of the in
situ visit or immediately thereafter. It describes and analyses its characteristics, reflecting the levels of
compliance of Nicaragua with the 40+9 FATF Recommendations (Table I) and formulates
recommendations on how the deficiencies identified may be overcome (Table II).
1
As updated February 2008
2
The discussion of this report, originally scheduled for the Plenary of May 2009, was postponed because
the Nicaraguan delegation was unable to attend.
1
Executive Summary
1.
The mutual evaluation report provides a summary of the AML/CFT system in place in Nicaragua
at the time of the on-site visit (October 5th - 17th, 2008) and immediately thereafter. It describes and
analyzes its main features, indicating compliance levels in the country with regard to the FATF 40 +9
Recommendations and puts forward recommendations to rectify the deficiencies identified.
1.
Background Information
2.
Overall since 2008 Nicaragua relies on adequate criminal legislation to combat money
laundering (LD) and terrorist financing (FT) except for serious restrictions on the possibility of adopting
urgent measures in the case of FT, and minor deficiencies in the list of previous crimes of LD. Shortly
after the new Code entered into force, the first investigations and charges took place in the
implementation of the offence under LD, although the effectiveness of the criminal system is still limited
due to lack of financial and human resources.3
3.
The rules AML / CFT applicable to regulated financial sector as well as the supervision
exercised by the government largely incorporate international standards, but the cooperative sector is not
regulated. The Cooperatives, associations and non-profit organizations develop an important volume of
financial services, are beyond all regulation and supervision and are not meeting the minimum AML /
CFT obligations described in the law. The APNFD, meanwhile, are not even considered regulated
institutions (except casinos), although these do not generate such a high risk as unregulated financial
institutions, given their lower level of resources and the limited services offered to the public.
4.
No FUI has been created nor does exist an adequate AML/CFT institutional infrastructure.
Neither is there an integral AML / CFT strategy nor coordination among institutions for the definition of
policies in this area. Training of judges and prosecutors is precarious, and the judicial system lacks the
necessary independence, while recognizing the recent efforts of the authorities to bring training to these
officials. Financial constraints specific to one of the poorest countries of America and the Caribbean lead
to additional complications.
5.
There is no evidence of terrorist financing risks, nor have suspicious transaction reports or
investigations in this direction emerged. The major crimes that generate illicit profits in Nicaragua
appear to be drug-trafficking and corruption. According to authorities, the country's vulnerability to drug
trafficking is a result of geographical position which makes it attractive for the transit of drugs and
money between North and South of the continent, although the volume of cocaine seized is still much
lower than in other Central American countries.
2.
Legal Systems and Related Institutional Measures
6.
A new Penal Code came into force in July 2008, criminalizing money laundering and terrorist
financing very much in line with international requirements, except for some minor deficiencies.
Counterfeiting and piracy were not included as predicate crimes of money laundering and there are
doubts about the possibility of punishing acts of terrorism occurring outside of Nicaraguan territory.
Only financial institutions supervised by the SIBOIF can receive direct sanctions as a legal person, when
they are involved in crimes of ML or FT. For other legal persons, only ancillary sanctions can be
imposed, that is, only if the person responsible (ie the officer of the company) is previously convicted. It
3
At the time of finalizing this report Nicaragua reported that investigations had ____, ___ ___
indictments and sentences. Pursuant to the procedures and the time allowed by CFATF, the assessment
only took into account 4 investigations and 2 indictments.
2
is important to clarify that the crime of ML existed in Nicaragua since 1997, but only applied to drug
money and its autonomy was not clear from the predicate offence, among other deficiencies which were
successfully corrected in the new Penal Code. During that time there was only one conviction for money
laundering against former President Arnoldo Alemán, and it was recently revoked.
7.
In the first six months of validity of the new Code four investigations were opened for money
laundering and two indictments were issued, which indicates that the law is beginning to be deployed
effectively and positive growth is expected in the State's actions to combat this crime. However, at the
time of this assessment there were no convictions for money laundering and it was clear that judges and
prosecutors were unaware of many of the tools available by law to combat this crime effectively. It
requires a major effort in training and coaching to detect and combat organized financial crime, since
until recently the emphasis was almost solely in the pursuit of border money smugglers, which has
resulted in 24 investigations and 16 convictions.
8.
There is a wide range of precautionary measures for LD, under Law 285, which governed this
issue long before the issuance of the new Penal Code. These include the urgent (precautionary) measures
to be adopted in offences related to money laundering, such as embargo or sequestration, retention,
blockage of bank accounts, intervention in legal persons and provisional notation of property. However,
the law enforcement agents are unaware of the existence of these legal mechanisms and in practice have
not used them to combat money laundering.
9.
These precautionary measures are not available for FT. The Code of Criminal Procedure is the
only one which governs and therefore is permitted only after formally opened criminal proceedings, with
authorization granted by the Judge and after notice to the affected party. Nor is there a procedure to
immediately freeze the assets of persons designated by the Security Council of the United Nations (a
situation that has not yet been submitted).
10.
Nicaragua does not have a financial intelligence unit. Since 2004 a bill to establish an FIU has
been presented to the National Assembly, which has been improved but not yet been discussed. The
Financial Analysis Commission (CAF), founded in 1999 as a technical body of the National Council for
Combating Drugs, is the entity responsible for receiving RTS from regulated institutions. It is a collegial
body composed of officials from various state agencies who meet sporadically, thus resulting in a lack of
technical autonomy in decision making. Nor does it rely on any structure, budget or staff. The agency is
not authorized to share financial intelligence with foreign authorities.
11.
In practice, the RTS are analyzed by a National Police Directorate, on instructions from the
Attorney General of the Republic in his capacity as Chairman of the CAF. The Directorate of Police may
take the autonomous decision to close the case or submit it to the CAF. If the Attorney General accepts
the advice of Police, an investigation governed by normal criminal procedure is initiated.
12.
It relies on appropriate investigative techniques for ML, but not for FT. These techniques are
covered in a confusing manner in two separate laws, which have resulted in conflicting interpretations
among members of the judiciary and could cause the invalidation of criminal investigations and
prosecutions in the future. There are no measures to postpone or suspend the arrest of people involved or
the forfeiture of money in cases of ML or FT, to obtain a better result in investigations. In practice, they
have not used the special investigative techniques in use since 1997.
13.
The structure of the investigative agencies is adequate, but not its resources. The National Police,
the Public Ministry and the Attorney General's office did not have the technical and financial resources
to develop effective work against such specialized crimes as ML and FT.
3
14.
There is an obligation to declare income in borders, but not cash outflows exceeding $ 10,000.
Nor is there the possibility to impose administrative penalties for failure to do so. There does exist the
possibility to retain money when suspected of committing a crime, and for that reason, since the second
half of 2004 through to the first half of 2008, U.S. $ 1,454,974 was confiscated at the airport in Managua
and $ 11,734,737 at the borders. So far the authorities make no use of the information contained in the
declaration forms, and there is no coordination between the Customs and other agencies to share it.
3.
Preventive Measures – Financial Institutions
15.
Financial institutions regulated by the SIBOIF have an adequate AML / CFT regulation. The
SIBOIF, based on powers conferred by the general law LD (Act 285 of 1999) and other laws governing
the financial system, has issued mandatory standards that specify the mechanisms for the prevention of
ML and FT for each type of financial institution, largely in keeping with the FATF recommendations.
These are the Banks, Financial, Securities Companies, Insurance and General Bonded Warehouses. The
financial system is relatively small, with the banking sector being larger and more developed so far (U.S.
$ 3,700 billion in assets). In the stock market traded securities worth approximately $ 58 million in three
months. The annual premium of insurance industry is about U.S. $ 78 million and individual premiums
do not exceed $ 200 per year. Most insurance is sold through intermediaries, which are also required to
adopt anti-money laundering controls from the latest Standards of SIBOIF (March 2008).
16.
All financial activities described by the FATF are considered regulated institutions by AML /
CFT, law but associations and cooperatives lack of regulation and control. Act 285 of 1999 and its
Regulatory Decree 74 of 1999 provides some basic requirements (but not enough) on customer
knowledge, record keeping and reporting of suspicious transactions. However, credit unions,
microfinance associations, remittance companies and exchange houses do not know these obligations nor
enforce practical application (except an exchange house). Although CAF is theoretically empowered to
monitor compliance, it does not have the resources nor the knowledge to do so. Nor is there any AML /
CFT regulation specific for these activities. It is urgent that Nicaragua assign this responsibility to
authorities with the technical capacity to regulate and monitor these activities of microfinance and / or
cooperative, some of which offer services similar to those of a bank and manage cash flows similar to
regulated financial institutions by SIBOIF. The largest microfinance association has about 18,000
members, 30 offices and a portfolio of U.S. $ 71.7 million. The largest savings and credit cooperative has
26 branches and a portfolio of approximately $ 30 million. Although these amounts are small compared
with the banking sector, they are also important in the Nicaraguan context, and this fact adversely affects
the status of implementation of preventive measures in the report.
17.
Banking secrecy does not prevent the implementation of FATF recommendations. By court
order banking secrecy can always be lifted. Moreover, in cases of inquiries originating in a ROS, the
Attorney General may obtain financial information directly from the entities supervised by the SIBOIF,
without court order. This does not apply in the case of terrorism financing investigations, or for
information from other regulated institutions, cases in which it is desirable that the Prosecutor could
proceed directly to the source without judicial authorization. The SIBOIF has unrestricted access to
information and documentation it deems appropriate to comply with its supervisory function. In terms of
record keeping in line with the international standards, the institutions regulated by SIBOIF should retain
for five years all information and documentation resulting from its policies, procedures and internal
controls on the Prevention of ML / FT, including correspondence and transactions, so as to enable the
authorities to rebuild the transactional links and serve as evidence in criminal proceedings. However for
institutions not regulated by SIBOIF the obligation to maintain records only cover the client's identity
documents and not transactions, activities, correspondence, analysis of possible suspicious transactions,
and so on. While the Code of Commerce slightly extends this obligation, there is no evidence that
compliance is being implemented and monitored.
4
18.
With respect to electronic transfers in the supervised sector, regulation and its practical
application are appropriate. The legislation requires the SIBOIF obtain, verify and maintain electronic
messages, the sender's details, including name, type and identification number, address, phone number
and account number. Occasionally transfers are received from abroad that do not contain complete
information, in which case the Nicaraguan banks suspend payments while obtaining the missing
information of the sender entity abroad. If not possible, the transfer is returned. However, for institutions
not regulated by the SIBOIF who also provide transfer services there is no requirement on the minimum
information that must obtained and transmitted.
19.
There are many money transfer business that are not monitored by any authority, or have
requirements for creation, recording or performance. Some of them are agents of the large international
transfers and for contractual reasons apply controls in their operations. The credit unions and
microfinance associations also serve to send and receive electronic payments and are theoretically
obligated by Law 285, but do not comply and neither are they supervised. Additionally, there are several
currency exchange businesses and other informal money transfer, whose number is unknown, which are
not subject to regulation or supervision regarding AML / CFT.
20.
In general all the FATF requirements on preventive financial were adequately incorporated in
the latest Standard of SIBOIF. Many of these obligations were already included in previous legislation
but with restrictions, which were corrected in the Standards of March 2008. Regulated institutions appear
to comply reasonably well with the AML / CFT system, although the insurance industry insists that some
of these obligations are excessive in relation to the nature and size of the business. The new Standard
also introduced the obligation to adjust controls according to the risk of each customer, which has proved
a difficult challenge for financial institutions who have applied for successive extensions of the deadline
in order to design appropriate risk matrices.4
21.
The Standard SIBOIF provides for a very comprehensive due diligence on the customer. It
requires identifying and knowing the customer and the final beneficiary before the start of the
relationship5 with detailed requirements depending on whether natural or legal persons. The information
must be verified and updated periodically and revised whenever the customer's activity does not match
their predefined profile. Knowledge of pre-existing customers should also be updated but it supports a
gradual depending on the level of risk. For all controls, enhanced diligence is required where the
customer is considered high risk by the standards of the institution itself, or as high-risk categories listed
in the Standard. These include foreign and domestic PEPs, corresponsal foreign institutions 6 electronic
services like ATMs, Internet banking, telephone service to customers or any other that have no physical
presence of the customer. If in any case the institution is unable to comply with the requirements of
identification and verification, or fails to obtain satisfactory information about the purpose and nature of
the business, the business relationship should end or not be started, as well as an assessment be made
regarding the need to send a report of suspicious transactions. The task of completing the DDC is
delegated to institutions supervised by the SIBOIF and the use of intermediaries is not supported. A
minor deficiency identified in the report is that the regulation of PEPs only requires establishing the
source of "funds" that will enter the financial institution and not the source of their wealth or assets.
4
The new Standard was partially amended in March 2009, five months after the visit and therefore was not included in this
report. However, the evaluators found no changes in the articles relevant to this assessment. Some changes are to extend the
term to define risk matrices for monitoring transactions and remove the requirement to know "the customer's customer”.
5
Except when it comes to insurance for pension plans, provided that the premium is not paid in cash and does not make any
payment to the beneficiary before completing the verification
6
As is common in countries with highly developed financial systems, in Nicaragua banks do not provide correspondent
services to foreign entities. Instead, they go to banks located abroad (usually U.S.) to make their international transactions.
5
22.
The detection, analysis and reporting of operations targeting both the suspicious transactions as
well as simply unusual, covering both ML and FT. The regulated institutions not monitored by the
SIBOIF are required by Act 285 to report to the competent authorities any unusual operation that has no
clear legal basis, without suspecting any illegal activity. While this implicitly satisfies the requirement of
the FATF to report suspected terrorist financing, the team suggested that this requirement be expressly
enshrined in law. Never has a "suspicious transaction report" been presented (RTS) by non-supervised
institutions. Financial institutions regulated by SIBOIF, besides reporting the unusual operations are also
explicitly required to report those they suspect of a connection with money laundering crimes (LD),
financing of terrorism (FT) or any other illegal activity. The reports are sent in sealed envelopes to the
Superintendent, and sent unopened to the CAF, which was identified as a waste of time and an
unnecessary security risk. The institutions supervised by the SIBOIF, especially banks, sending nearly
200 RTS year, a relatively low number given that the system is designed to capture not only suspicious
but also unusual (a lower threshold of suspicion) operations. It was suggested to start enforcing
compliance with this requirement in the non supervised sector and to improve the non-bank regulated
financial sector. It also requires extending the statutory prohibition governing customer alert for non
supervised institutions of SIBOIF, in order that cases of suspected terrorism financing are also covered.
23.
Additionally, banks and other supervised institutions are required to report transactions
exceeding $ 10,000. This information is maintained by SIBOIF in a computer database, but no authority
consults nor makes any use of these reports.
24.
It is required the implementation of a program of internal and external audit for regulated
institutions, not for other regulated institutions. The Standard requires the SIBOIF implement a
"Program of Prevention and Integral System of Prevention and Risk Management of Money, Goods or
Assets, and Terrorist Financing." This should include policies, procedures, internal controls, risk
matrices, monitoring systems and operational plans in order to meet the national legal framework and
allow the entity to prevent, detect and report any suspicious activities. Among other features, entities
must have a ML FT risk-prevention manager (Compliance Officer) and a policy of due diligence to the
knowledge of their employees.
25.
The SIBOIF has some specialized officials but their AML / CFT monitoring should be more
efficient. The SIBOIF visits at least once a year each of the 35 financial institutions protected in
comprehensive inspections in which one to three officials, reviews AML / CFT aspects for 10 or 20 days,
and often draw conclusions shortly after the visit . However, for the institution to inform on the
weaknesses identified and the necessary corrective measures it must wait for completion of the
comprehensive inspection report, which takes too long. In addition, the Superintendency has no
mechanism to follow up on findings from inspections and only during next year's visit verifies if the
institution made the corrections required. The SIBOIF has neither implemented a consolidated
supervision of financial groups for AML / CFT purposes, and officials responsible for overseeing AML /
CFT will need specific training to address the new phase of monitoring of controls based on risk.
26.
It is urgent to create a AML / CFT Legislation and a monitoring scheme for all other regulated
entities The Act 285 and its regulations contain very basic obligations will be supplemented and detailed
by rules tailored to the nature of each activity. The team also recommended to consider assigning the
AML / CFT regulation and supervision of these various entities to the regulator of each of them (for
example, the INFOCOOP oversee the AML/CFT regime of the the financial cooperatives), and leave the
CAF only with jurisdiction over entities that have no specific industry regulator, such as casinos and
bureaux de change, or appoint a separate body to assume this role.
4.
Preventive Measures – Designated Non-Financial Businesses and Professions (DNFBPs)
6
27.
From APNFD categories designated by the FATF, the casinos are only covered by the AML law
in Nicaragua. The same general obligations contained in Law 285, which apply to financial institutions,
are in theory applicable to casinos: customer identification regardless of the amount of your transaction,
maintenance of certain records, detection of unusual transactions and report suspicious transactions to the
CAF. However, only three casinos affiliated to multinational gaming corporations have established some
controls on AML / CFT. The casinos are not subject to licensing or regulation of any kind, and its
operators are totally unaware of their obligations under Act 285. The government has not issued
regulations or guidelines for this sector, nor is there an authority responsible for regulation and
supervision.
28.
There are no statistics on the other APNFD. They all exist to some extent in Nicaragua (except
trust providers), but its relevance may be less in the economic and legal context of Nicaragua. For
example: A) Nicaragua does not have an established industry companies cabinet ( "shell" companies ")
or management services or representation of names (" nominee directorship ") or the like, nor do the tax
conditions and likewise make the country attractive as an offshore center, B) The brokerage market is
fully de-regulated, but the service normally provided by intermediaries ( "realtors") is only meant to
connect buyers and sellers to exchange of a commission, without taking part in the transfer of money, C)
The volume of casino gambling is very small and there are is a maximum of 15 "high rollers" (strong and
habitual gamblers) across Nicaragua, who are easily identifiable, D) Notaries are not acting as
representatives of the customer or make or receive payments on their behalf, only review the legality of
contracts and deeds preserved.
29.
However, this intuitive notion that agents have about the risk inherent in their activity, APNFD
will remain vulnerable to abuse while the authorities do not make a proper study of the topic and create a
regulatory and institutional framework consistent with the characteristics of each sector.
30.
Act No. 285 apparently would allow CAF to oversee all entities that are not monitored by the
SIBOIF, but it is not realistic. The CAF does not have the resources nor the expertise to do this, nor does
it constitue its rationale. Furthermore, no state institution, not even the CAF, has the power to issue
circulars or rules that implement the AML / CFT obligations in the law. Nicaragua under the Act should
consider the reality of these sectors and adopt legislation that meets international standards for different
APNFD in its country.
5.
Personas y Estructuras Jurídicas, y Organizaciones Sin Fines de Lucro (OSFL)
31.
The laws and the precariousness of the Public Business Register does not provide access to
adequate information about the beneficiary owner of legal persons. According to the Commercial Code
and Civil Code it requires a public deed and registration in the Public Registry of Property to form any
partnership with legal personality. Therefore, it is possible to find some information in the registry, in the
deeds kept by public notaries and the company's internal books. However, the registry only has data of
natural persons acting at the time of initial registration, and companies are not obliged to register
fundamental changes as the Board of Directors. Registry information is segmented into different areas of
the country, with very few computer systems to facilitate its consultation. Bearer shares are not
frequently used but they are prescribed by law, and steps have not been taken to understand and reduce
risks inherent in them. The authorities did not provide statistical information on the number and types of
companies registered in the Public Registry of Companies, nor was it possible to determine the number
of companies with bearer shares.
32.
Cooperatives and NPOs register with a government authority, which can monitor and penalize
them. However, such monitoring is very limited and the information is not publicly available, which
prevents leverages data verification of customer due diligence by financial institutions to establish
relationships with NPOs. Cooperatives register with the Nicaraguan Institute of Cooperative
7
INFOCOOP. Associations register with the Department of Registration and Control Associations
Nonprofit (Ministry of Interior) approval of the National Assembly). There are 4.445 nonprofit
organizations registered, of which 3.956 are domestic and 489 foreign, and most of them still maintain
active registration through a mandatory annual payment.
33.
There are legal mechanisms to monitor donations and development activities of nonprofit
organizations. Although there is a legal and institutional framework that could be used to reduce the risk
of terrorist financing through these organizations, this use has not yet been given. Nor has a study been
conducted on the characteristics and dimensions of the nonprofit sector, the degree of exposure to this
risk and to what extent existing rules are adequate to reduce it. In practice, almost all of the fines are for
simple incompliance or delay in formal obligations such as registration of the organization, presentation
of financial statements or proper maintenance of books. The authorities have conducted outreach
activities or awareness to this area specifically for the purpose of the prevention of ML or FT.
6.
National and International Cooperation
34.
Mutual legal assistance to other countries is active and has adequate mechanisms, although it
was not possible to analyze the response times. There are no impediments to assist with money
laundering linked to illegal conduct of a fiscal nature nor a misapplication of the principle of double
jeopardy that could hinder cooperation. In the field of ML, all the powers of the domestic judicial
authorities may be used to request a competent foreign authority, such as raids, taking statements from
witnesses, gathering evidence, documents, records and others which include the domestic legal
framework and Treaties signed by the country.
35.
There are significant potential limitations to cooperate internationally in FT investigations. The
internal order has no clear procedures for international cooperation in cases related to terrorism
financing, unless there is a treaty signed with the requesting country. The Act 285 refers only to crimes
related to the narco and money laundering activity, and within the provisions of the Criminal Procedure
Code is not found to define how to detect, seize or confiscate property linked to FT. The same legal
limitations with respect to measures identified during the domestic investigation in TF cases, would also
prevent providing assistance to other countries for these purposes as well as compliance with the
resolutions of the Security Council of United Nations in freezing terrorist assets.
36.
No policy objectives and priorities for AML / CFT nor a national strategy in this area have been
defined. Domestic cooperation and coordination work reasonably well at the operational level, but not
for policy design. Under the current scheme, the National Council for Combating Drugs, supported by
CAF, is called to lead the creation of national plans and policies to combat these crimes, coordinating
with the authorities linked to the prevention and prosecution. However, key risks and priorities have not
yet been identified, nor have plans, indicators and mechanisms to monitor results been designed. It is
also necessary to modernize the administration and allocation of assets seized. Finally, the lack of an FIU
severely limits the possibility of Nicaragua to cooperate and receive cooperation on financial
intelligence. It is hoped that this mutual evaluation report constitutes an important input for the
authorities in their strategic planning.
7.
Resources and Statistics
37.
In general, all state agencies lack adequate resources for their efforts to prevent and combat ML /
TF. In the executive branch, except for the SIBOIF that derives its income from maintenance fees paid
by financial institutions, not even are there assigned officiales responsible for ensuring compliance with
the preventive system of unregulated financial institutions nor APNFD . This responsibility is formally
assigned to the CAF but since its creation in 1999, CAF has no official nor has the resources to fulfill its
8
functions of analysis of RTS, much less supervision of regulated institutions. Nor does it have the legal
autonomy necessary to perform FIU duties.
38.
The deficiency of technical skills and training is particularly felt in the judicial sector. A little
knowledge of the existing law on ML / TF and the conflicting interpretations that showed judges,
prosecutors and police, for example in terms of precautionary measures, manifest the need for a large
training effort in this sector.
39.
The collection and use of statistics is still insufficient. The small number of MD cases initiated to
date makes the collection of statistics still relatively simple. The information available on mutual legal
assistance requests can not meet response times. The statistics cited by the Police about RTS can not
classify them according to their characteristics or the reported case, known totals, trends and typologies.
In general, there is no system that allows authorities to use available data to review the effectiveness of
its AML / CFT system in a comprehensive manner, nor generate additional data that would be necessary
to understand the situation in certain sectors, to analyze local trends and typologies and to give guidance
to regulated institutions.
9
1.
GENERAL
1.1. General information on Nicaragua
40.
System of Government: Nicaragua is a constitutional, democratic, independent and unitary (not
federal) Republic. It has four independent powers: Legislative, Executive, Judicial and Electoral. The
President, elected by universal suffrage for terms of five years, is Head of State and Government, and
appoints his cabinet autonomously. The legislative power is exercised by a unicameral Legislative
Assembly elected every five years by popular vote (except for one seat reserved for the immediately
preceding President, and one for the most successful opposition candidate in the Presidential elections).
The supreme judicial body is the Supreme Court of Justice, whose members are elected by the
Legislative Assembly for five-year terms. The official language is Spanish.
41.
The country is situated between
the Pacific Ocean to the west and the
Caribbean Sea to the east. It shares its
northern boundary with Honduras and its
southern with Costa Rica. Nicaragua has a
population of 5.6 million and is the
country with the greatest geographical
area in Central America, although its
economy is the second smallest in the
region after Belize.
42.
Managua, the capital, is situated at
an altitude of only 83 metres above sea
level, and has a warm, damp tropical
climate.
43.
History: The Republic of Nicaragua declared its independence from the Kingdom of Spain on
15th September 1821. Its recent history has been marked by civil wars, natural disasters, foreign
intervention and corruption. From 1936 to 1979 it was governed practically by a single family
(Anastasio Somoza and his two sons), and subjected to a dictatorial regime during most of this period.
This regime was overthrown by a leftist revolutionary army which governed from 1979 to 1990. The
government of the Sandinista Popular Revolution brought advances in education, public health and
agricultural property, and developed significant infrastructure projects. Also private banking was
nationalised, foreign investment practically disappeared, and the United States imposed a trade embargo
on the country and promoted a guerrilla movement known as “The Contras”. By the beginning of the
90s “the country had become one of the most indebted and economically unstable in the world” (World
Bank, “Nicaragua Country Brief”, www.worldbank.org).
44.
In 1972 an earthquake destroyed the city of Managua, which has not yet been able to recover
completely, and in 1988 and 1998 hurricanes Joan and Mitch, respectively, wreaked havoc on the
Nicaraguan economy and population. Ex-President Arnoldo Alemán, who governed from 1997 to 2002,
is the only person convicted in Nicaragua for money laundering, although this verdict has recently been
reviewed and is not considered to be final. In January 2007 the Sandinistas returned to power under the
leadership of the present President, Daniel Ortega, who has expressed his interest in maintaining a
market economy within a new human development model, with greater emphasis on reducing poverty
and improving living conditions for the majority of the population.
10
45.
Economy: After the 1990 elections, large inflows of international aid returned to the country,
inflation was controlled, income from workers’ remittances continued to grow and the economy began to
recover. The 1998 hurricane, problems of corruption in the late 90s, and the 2000 bank crisis impeded
this process temporarily. However, since 2001 economic performance has improved significantly and
Nicaragua was one of the first countries to meet the conditions for debt relief under the Heavily Indebted
Poor Countries initiative (HIPC). However, the country still faces great difficulties. Its Human
Development Index places it 110th of 177 nations of the world (UNDP Human Development Report
2007-2008), and, according to UNICEF, in 2007 it was one of the five Latin American countries with the
highest level of illiteracy (33% compared with 10% overall in Latin America). Its per capita GDP is
US$980, one of the lowest in the Western hemisphere, and bears no comparison with the average of
US$5,540 of Latin America and the Caribbean as a whole (World Bank estimates for 2007). According
to the 2005 population census, half of the population lives in poverty and 17% in extreme poverty.
46.
Nicaragua’s exports in 2008 were $1558.4 million dollars, mostly consisting of agricultural
products. Some of the principal industries are food processing, chemicals and petroleum refining and
distribution. According to information from the authorities on the evaluation questionnaire, remittances
from Nicaraguans living abroad amount to approximately US$800 million a year.
47.
Legal System and Legislative Hierarchy: The judicial system is based on civil law and the
Supreme Court has the power to review the administrative acts of the Executive.
48.
The governing legal instruments are, in order of importance: 1- the Political Constitution (the
supreme law to which all others are subordinate; 2 – Constitutional-level Human Rights; 3 – Ordinary
Laws; 4 – Regulations (Decrees); 5 – Circulars, agreements, normativas (standards), administrative
decrees, resolutions. For international treaties signed by the Executive to be incorporated into domestic
law, they must be legislatively enacted.
49.
All the ALM/CFT provisions contained in the New Criminal Code (which criminalizes ML and
FT), in the Code of Criminal Procedure and in Act 285 of 1999, which contains some criminal provisions
and others of an administrative nature, such as the definition of regulated entities, have the status of laws.
The Banking Act and other laws conferring power over the financial system on the SIBOIF are at the
same level.
50.
Immediately after the laws comes Decree 74 of 1999, which contains the regulations for Act
285. Below this are the Resolutions issued by the SIBOIF, such as the “Rules for Money Laundering
and Terrorist Financing Risk Prevention Management” issued in 2008.
51.
The evaluation team found that all the resolutions and “normas” of the SIBOIF mentioned in this
report are legally binding and enforceable, to the extent that they develop the overall obligations imposed
by the Act, by Decree 74 and the other laws applicable to the Superintendency
52.
Transparency, governance and combating corruption. Both events in its recent history and
international comparisons available on Nicaragua show serious deficiencies as regards corruption,
transparency and good government. In 2008 Nicaragua was 134th of 180 countries in the Corruption
Perception Ranking of Transparency International (where 180 is the most corrupt), followed in Latin
America and the Caribbean by only four other countries. In addition, the Global Competitiveness Report
for 2008-2009, published by the World Economic Forum, identifies political instability and corruption as
the two main obstacles to the development of business in Nicaragua. The inefficiency of government
bureaucracy is also emphasised, as can be seen in the following graph:
11
53.
According to information provided by the authorities “the perception of confidence in the system
of criminal justice is the lowest among the State institutions, along with the National Assembly”. This
coincides with indicators used by the World Economic Forum, some of which we show below because of
their relevance as a basis for any solid AML/CFT system.
INDICATOR
Judicial Independence
Public Confidence in Politicians
Transparency in formulation of public policies
Diversion of public funds
Sophistication of financial markets
Cost to business of crime and violence
Cost to business of terrorism
Organised Crime
Ranking of Nicaragua out of 134 countries
131
126
115
111
104
90
78
78
54.
The perception of insufficient judicial independence from the executive shown in this data
coincides with criticisms made by several of the persons interviewed during the evaluation. This
certainly weakens the efficiency of the AML/CFT system, since it makes it vulnerable to being used for
political purposes, or to leniency in the investigation and punishment of laundering of the proceeds of
corruption, which is one of the social ills that the Nicaraguan AML/CFT system should help to combat.
Aware of this, the authorities have expressed their interest in strengthening the judicial sector, beginning
with greater training, specifically in the technical aspects of ML/FT prosecution, the use of investigative
techniques, and inter-agency coordination.
55.
During their review of the report, the authorities requested that the following be emphasized: “by
signing the various international instrument (Vienna, Palermo and Mérida Conventions) the
Government of Nicaragua has committed itself to the criminal prosecution of any person who launders
money derived from the drug trade and other crimes (corruption), and the political will to combat these
scourges takes shape in the various National Commissions and Councils, supported by the entry into
force of countless laws adapted to the legal reality in which we live”.
12
1.2. General situation of Money Laundering and Financing of Terrorism
56.
The geographical location of Nicaragua, in the middle of Central America and with coasts on
both oceans, make it a favoured transit channel for drug trafficking and other forms of trans-national
crime generated to the south and north of the Nicaraguan borders. It also lends itself to the exchange of
drugs for arms. “This reality” the authorities point out “makes Nicaragua vulnerable to money
laundering”.
57.
The problem is worsened by the shortage of technically qualified resources for surveillance of
the sea and land frontiers. The authorities point to the following elements as causes of the increase in
crimes of drug trafficking and related offences:
1.1.
1.2.
1.3.
1.4.
1.5.
1.6.
1.7.
Unpoliced frontier and coastal zones
High index of unemployment and poverty
The interest of the cartels in occupying our country as a route for trafficking
Weak judicial framework
Reduction of technical and military control and detection
Poor economic prospects for the Carib population
Economic profitability of crime
58.
The flow of drug traffic through the Pacific region throughout Latin America has increased fivefold between 2000 and 2007, as indicated by the captures of cocaine consignments coming from the
south. Approximately 10% of the total of the cocaine captured in the region was on Nicaraguan territory
and territorial seas, compared with 50% in Panama and Costa Rica, which have frontiers closest to
Colombia, the principal market of supply for this drug to the United States (figures given by the
authorities on the evaluation questionnaire).
59.
The territory of Nicaragua, rather than being a destination, is a zone of supply, rest, transit and
logistic support for the drug traffic. However, the authorities indicate that within the young population
there is an increase in the consumption of drugs (mainly cocaine, crack and marijuana) which to a large
extent represent what remains from the main shipments heading north. Another of the causes is that
those who provide logistical support for drug trafficking in the country often receive their payment in
kind (drugs), which they subsequently sell on the local market.
60.
No acts of terrorism perpetrated on or from Nicaraguan territory are known, nor are any blatant
threats of it perceived.
1.3. Overview of the Financial Sector
61.
The Nicaraguan financial system is relatively young, and the presently existing banks were
created in1991, since from 1979 to 1990 there was a system of State banking. In that same year the
Superintendency of Banks and Other financial Institutions (SIBOIF) was created as an independent
decentralised agency responsible for the regulation and supervision of the financial system, in
accordance with the guidelines contained in the Act that created it (now Act 364 of 2006 with its
subsequent amendments) and in the respective laws of the sectors it regulates, such as Banks (Act 561 of
2005), Capital Market (587 of 2006) and Insurance (Decree 1727 of 1970, amended by Act227 of 1996).
62.
The financial system in general is relatively small, and the banking sector is so far the larges and
most developed. The capital market is still modest, and is followed by the insurance sector, whose
income derives principally from compulsory vehicle insurance and life policies of little value. A large
part of the population has no access to the banking system and resorts, instead, to credit and loan
cooperatives and the microfinance institutions which are not supervised by the SIBOIF.
13
63.
In the Nicaragual securities market stocks worth about US $58 million are traded every three
months, and daccording to representatives of the sector 95% of them are public debt obligations. The
inflow of new clients is slight, with an average of 15 new clients per month entering the system.
64.
According to representatives of the insurance sector, total annual premiums amount to about US
$78 million, and the highest individual yearly premiums do not exceed US $200, and represent life
policies of no more than US $50,000. Most insurance policies are sold through intermediaries, who have
been required to adopt AML measures only since the issuance of the SIBOIF Rules.
65.
At the present time the SIBOIF is responsible for supervising the following institutions:
8 BANKS
2 FINANCIAL COMPANIES
1 SECOND-TIER BANK
7 REPRESENTATIVE OFFICE
1 STOCK EXCHANGE
1 CENTRAL SECURITIES
6 STOCK LOCATIONS
(5 of which belong to the banks)
4 ISSUERS OF SECURITIES
(which denotes the reduced size of the
capitals market)
- Banco de la Producción, S.A. (BANPRO)
- Banco de Crédito Centroamericano, S.A.(BANCENTRO)
- Banco de América Central, S. A. (BAC)
- Banco de Finanzas, S. A. (BDF)
- Banco CitiBank de Nicaragua, S. A. (CITIBANK)
- Banco Procredit, S. A. (PROCREDIT)
- HSBC Nicaragua, S. A. (HSBC)
- Banco del Exito, S. A. (BANEX)
- Financiera Arrendadora Centroamericana, S. A. (FINARCA)
- Financiera Fama, S. A. (FAMA)
- Financiera Nicaraguense de Inversiones, S. A. (FNI)
- Banco Internacional de Costa Rica, S. A. (BICSA)
- Banco Salvadoreño, S. A. (BANCOSAL)
- Towerbank International Inc. (TOWERBANK)
- Banco General S.A. de la Republica de Panama (BANCO
GENERAL, S.A.)
- Laad Américas, N. V. (LAAD AMERICAS)
- Banco de Desarrollo Econòmico y Social de Venezuela
(BANDES)
- Banco Improsa, S.A.
- Bolsa de Valores de Nicaragua
- Central de Valores de Nicaragua
- CITI VALORES ACCIVAL S.A.
- BACVALORES
- INVERCASA
- INVERNIC
- PROVALORES
- LAFISE VALORES
- CREDIFACTOR
- DELI POLLO S.A.
- Empresa Administradora de Aeropuertos Internacionales (EAAI)
- Club Náutico Cocibolca, S.A.
5 INSURERS
- Instituto Nicaragüense De Seguros Y Reaseguros (INISER)
- Seguros América, S. A.
- Seguros LAFISE, S.A.
- Metropolitana compañía de seguros, S.A.
- Aseguradora Mundial, S.A.
67 INSURANCE BROKERS (companies ad
individuals)
Others:
Sesenta y siete (67) en total
Registro de auditores externos
Centrales de Riesgo Privadas
Peritos Valuadores
Sociedades calificadoras de riesgo
66.
Nicaraguan law includes in its definition of those required to apply AML/CFT measures all those
financial activities which the FATF considers should be covered. However, some of them have no
regulatory entity specialising in their control and supervision, and no ML/CFT regulations have been
14
issued for them. The CAF is empowered to exercise supervision over these entities outside the scope of
the SIBOIF, for the purpose of ensuring compliance with the requirements of Act 285-99. These entities
are:
•
•
•
Savings and Loan Cooperatives
Remittance operators
Bureaux de Change
67.
Act 285 also includes pawn shops (not mandatorily designated by the FFATF) as regulated
entities.
68.
The following table shows details of the prevalence in Nicaragua of the financial activities
included in the FATF definitions:
Financial Activity
(In accordance with FATF
Glossary)
1. Acceptance of deposits
2. Loans
Type of Institution
Number of
Institutions
1. Banks
-Eight Banks (8)
2. Financial institutions
-Two
Financial
institutions (2)
1. Banks
-Eight Banks (8)
Assets
US$
millions
Bound by
AML/CFT
legislation
1 y 2:
1. Yes
1. SIBOIF
2. Yes
2. SIBOIF
1. Yes
1. SIBOIF
2. Yes
2. SIBOIF
3,692.1
Regulation
Supervision AML/CFT
3.
Unknown
2. Financial institutions
-Two
Financial
institutions (2)
3. Microfinance.
31
Registered
Microfinancial
institutions
4.
Unknown
3. Yes
4. Credit Unions
4. Yes
3. Financial Leasing and
factoring
4. Money or securities transfer
5. Issuing and administering
means of payment (eg. credit or
debit cards, checks, travellers
checks, money orders and bank
drafts, electronic money).
6. Guaranties and financial
commitments
7. Negotiation of:
a) Monetary Instruments
(cheques, promissory notes, cd,
etc.);
b) Foreign exchange
c) Instruments of exchange
rate, interest rates and indices
d) transferable securities
e) Negotiation of products and
3. None
Registered at the Ministerio
de Gobernación
4. None for AML
Registered
at
the
INFOCOOP
..
1. Banks
- Approximately 384
credit unions.
1. Eight (8)
1. Yes
1. SIBOIF
2. Non-Banking
2. Unknown
2. Yes
2. None
1. Banks
1. Eight (8)
1. Yes
1. SIBOIF
2. Money Remitters
2. Unknown (but
many)
2. Yes
2. None
-
1. Eight Banks (8)
Yes
SIBOIF
2. Two Financial
institutions (2)
Yes
Cheques
Debit Cards
Credit Cards
Bank Drafts
Letters of Credit
Electronic transfers.
SIBOIF
3. Ten issuers of
Credit Cards (10)
3.
Unknown
Yes
- Insurance companies
- Banks
- Insurance brokers
Five Insurers (5)
Eight Banks (8)
Brokers (67)
$142
Yes
1. Stock locations
1. Six Stock
locations (6)
2.Stock Exchange
2. One Stock
Exchange (1)
SIBOIF
SIBOIF
Yes I
Yes
Yes
SIBOIF
SIBOIF
Yes
SIBOIF
Yes
3. Banks
3. Eight Banks (8)
SIBOIF
Yes
4. Two
15
SIBOIF
futures.
4. Financial institutions
Financial
institutions (2)
5. Central Bank of
Nicaragua
Banks
5. Central Bank (1)
Yes
No (Central Bank)
8. Participation in the emission
of titles and provision of linked
to such emissions.
9. Managing portfolios of
individual and collective
10. Custody and administration
of cash or securities on behalf of
others.
Central Bank of
Nicaragua
Banks
Financial institutions
Central Bank
- Nicaragua Securities
Central
[see above]
[see above]
- One (1)
Yes
SIBOIF
Yes
-Stock Locations
- Six Stock locations
(6)
SIBOIF
-Stock Exchange
Yes
- One Stock
Exchange (1)
- Banks
SIBOIF
Yes
- Eight Banks (8)
11. Other forms of investment,
administration or funds
management on behalf of
others.
- Banks
-Eight Banks (8)
- Administrative
companies and fund
investments
-None
- Representative offices
of Foreign Banks.
-Seven
Representative
offices of
Representation of
Foreign Entities (7)
12. Insurance
Insurance companies
13. Money/Currency Exchange
SIBOIF
SIBOIF
Yes
……
……..
Yes
SIBOIF
Five (5)
Yes
SIBOIF
Banks
Eight Banks(8)
Yes
SIBOIF
Financial institutions
Two Financial
institutions
(2)
Yes
One (1)
Yes
Central Bank of
Nicaragua
SIBOIF
Yes
No
Exchange Houses
None (neither does
registration obligation exist)
Unknown
* The largest bank has total assets of US$1,009,500,000 (a little over one billion).
69.
As mentioned earlier, in addition to the financial sector regulated and monitored by the SIBOIF,
there is a significant market in financial services offered by non-profit organisations (NPOs), which
despite being ALM/CFT regulated entities under Act 285-99, have not been regulated or supervised for
this purpose. These organisations are the 31 “microfinance” associations registered with the Ministry of
Administrative Affairs, and approximately 384 “credit and loan cooperatives”.
70.
The following table shows the significant volume and importance of the six biggest microfinance
associations, especially considering the size of the Nicaraguan economy (names are omitted and replaced
by numbers).
Receivables
Microfinan
ce 1
$71,690,000
Microfinan
ce 2
$31,900,000
Equity
$14,350,000
$8,180,000
$5,082,000
18
5
6
No. of members
Microfinanc Microfinan
e3
ce 4
$23,192,000 $22,465,000
16
Microfinan
ce 5
$21,996,000
Microfinanc
e6
$11,654,598
$8,412,000
$2,242,000
$2,358,598
10
6
8
No. of branches
30
42
16
12
16
16
*(Approx. figs. in USD at the rate of 19.7 Córdobas to the dollar).
71.
Cooperatives are governed by a legal regime different from that of the associations, and are
registered with the Nicaraguan Cooperative Development Institute (INFOCOOP) (a State agency with
representatives of the private cooperatives sector on its board, which is thus of mixed character, public
and private). Representatives of the sector estimate that in Nicaragua there are about 6, 500 registered
cooperatives, comprising almost half a million people. About 50% (3,000 cooperatives) keep their
registration up to date with information on statutes, regulations, board of directors, etc.
72.
Approximately 384 cooperatives are savings and loan cooperatives, and they comprise 70,000
members (“customers”, in banking language).Only savings and loan cooperatives can capture savings,
and only the savings of their members. Nevertheless, the majority of the savings and loan cooperatives
are of an open nature, i.e. any natural or legal person may become a member. The largest of them,
CARUNA, manages a loan portfolio of approximately US $30 million and has a broad menu of financial
services including loans, savings deposits, money remittance, cheque redemption, etc. It has 26 branches
and 300 employees.
73.
It was learned during the visit that INFOCOOP is planning to create a unit to supervise and
monitor cooperatives, but up to the present time there is no system of regulation or control of these
institutions for AML/CFT purposes, despite their being regulated entities under Act 285. According to
information received during the interviews, the internal controls of these cooperatives also take no
account of the risk of being used for ML or FT.
1.4. Overview of Designated Non-Financial Business and Professions
74.
Among the DNFBPs listed in FATF Recommendation 12, only casinos are made subject to the
preventive requirements of Act 285-99 (Article 30). With regard to the remaining types of DNFBP, it
should be noted that in Nicaragua there is no industry devoted to the setting up of off-shore companies,
the sale of shell companies, or nominee directorships, etc. Nevertheless, there is nothing to prevent law
firms offering these services occasionally or habitually.
75.
The CAF stated, subsequent to the mission, that an AML familiarisation process had been
initiated for casinos. They were recently made aware for the first time of the form and instructions
issued by the CAF for STRs.
76.
No licence is needed to operate a casino. It must simply be registered with various authorities.
According to information provided during the visit, there are 51 registered casinos in the whole country.
The agencies with which the casinos must register are the Tourism Institute (INTUR), to obtain a
certificate, the Inland Revenue for taxation, and the National Police which gives them permission after
reviewing the criminal record of the partners, among other formalities.
77.
There are only three large casino companies in the country, affiliated to well-known
multinationals. The remainder are small but very numerous. Casino representatives stated that any overlarge bet is easily detected. There are about 15 “high rollers” in all of Nicaragua, and they are obviously
customers well know to the casinos.
78.
The total daily “drop” (bets received)in the country’s biggest casino does not exceed US $
20,000 and approximately 20% of their income is from slot machines and not tables (tables are
considered higher risk for ML). In the country there are about 11,000 slot machines registered with the
Inland Revenue, and possibly many more unregistered and operating informally. The likelihood of
internet casinos operating from Nicaragua is small, but this activity would not be forbidden or subject to
any prior authorisation.
17
79.
The authorities provided no information on DNFBPs. The following chart displays what little
information was obtained during the visit, and the comments of the evaluation team.
DNFBP according
to FATF R.12
Description
Regulated
Institutions
AML/CFT
Casinos
(with operations
greater than
US$3,000)
Real Estate Agents
- 51 registered casinos (as well as others informal)
- Only police permission is required to operate,
there is no authority which specializes in gambling
YES
a) National Police
b) CAF
NO
a) None
b) None
NO
a) None
b) None
- Total number of notaries ___
- Notaries public only attest, review legality of
contracts and deeds preserved. They do not act
as representatives of the customer or make or
receive payments on their behalf. Any lawyer can
act as a notary
Number of lawyers licensed ___
- There are no services for the sale of preestablished companies type offshore.
NO
a) Supreme Court of
Justice
b) None
NO
a) Supreme Court of
Justice
b) None
Legal independent
professionals
(R.12)
Accountants
(in situations of R.12)
It is not known the existence of this profession in
Nicaragua. To practice law requires professional
attorney’s license.
Number of accountants
- There are no services for the sale of pre-formed
type companies offshore.
NO
NO
a) None
b) None
Stakeholder
Service Providers
(CSP)
This industry does not exist.
It is not known for offering
”shell” companies, registered agents,
nominal directors, etc. This industry does not exist.
NO
a) None
b) None
Trust
Administration
Providers
(TSP)
-The Trust is under a law that has yet to be
approved or regulated.
- Only Banks and credit institutions authorized by
SIBOIF will be allowed to provide these services.
NO
Merchants in
metals or stones
precious stones
(mayor a
US$10,000)
Notaries
(in situations of R.12)
Lawyers
(in situations of
R.12)
- Non-regulated professions.
- It is rare that real estate agents make payments
on behalf of their clients, or receive payments
other than their commission.
- There are no estimates available on the number
of agents.
No information is available
Authorities:
a) Licence or Permit
b) Supervise AML
N/A (not applicable)
N/A (not applicable)
1.5. Overview of commercial laws and mechanisms governing legal persons and
arrangements
80.
The following types of legal persons exist in Nicaragua:
18
•
•
•
•
•
•
Sociedad anónima (corporation). Operates on capital for which the members receive shares in
proportion to their contribution, and their liability is likewise proportionally limited. Shares may
be nominative or bearer. Ownership of bearer shares is transmitted by simple endorsement, with
no need to report the transfer or enter it in the company’s books.
Compaňías limitadas (limited liability company). These are based on a specific sum or
contributed capital
Sociedad colectiva (partnership), in which the partners are jointly and unlimitedly liable for all
legally contracted debts of the company, unless they indicate expressly in the statutes that their
liability is “limited”.
Sociedad en comandita (simple o por acciones – simple or by shares). A managing partner
contributes his labour and is jointly and unlimitedly liable for the company’s debts, while the
other members (comanditarios) are liable only for the amount of their contribution.
Cooperatives. Savings and load (equivalent to “Credit Unions”; service cooperatives agriculture,
etc.
Non-profit organisations (NPOs)
81.
All of these except cooperatives and NPOs are governed by the general precepts of the
Commercial and Civil Codes, and their creation requires public documentation and entry in the Public
Commercial Register maintained by the State.
82.
Cooperatives and NPOs are governed by special laws and both are required to register with a
government authority. For cooperatives this is the Nicaragua Cooperative Development Institute
INFOCOOP, and for associations, the Department of Registration and Control of Non-Profit
Associations of the Ministerio de Gobernación (after authorisation by the Assembly)83.
Banking or financial sociedades anónimas, in addition to being entered in the Public Commercial
Register, must be registered and licensed by the SIBOIF.
84.
The authorities provided no statistical information on the number and type of companies in the
Commercial Register, and it was not possible to determine the number of companies with bearer shares.
However, the evaluation mission was able to inspect the registry’s offices and interview its staff, and this
showed how precarious its resources are.
1.6. Overview of commercial laws and mechanisms governing legal persons and
arrangements
a.
AML/CFT strategies and priorities
85.
From the opinions expressed by the authorities on the evaluation questionnaire and during the
interviews, it may be concluded that the Nicaraguan State uses the AML/CFT system almost exclusively
as an instrument for combating drug trafficking.
86.
Up to the middle of 2008, the offence of money laundering had as its only predicate offences
crimes related to drug trafficking, and the only laundering cases investigated up to now relate to that
offence (except for the case of ex-President Aleman, which has particular characteristics). There will be
need for a great effort in retraining of judges, prosecutors and police, as well as of the private sector
involved in ML/FT prevention, to change this pattern and to make use of the system as a tool for
combating other social ills that seriously affect Nicaragua.
87.
Terrorism and the financing of terrorism, although they are recognised as risks to which it is
necessary to remain alert, including the risk of becoming a place of refuge or transit of funds for terrorist
activities, are not at present considered as a threat to Nicaragua. According to the indicators in the
Global Competitiveness Report of 2008-2009, quoted above, terrorism and organised crime are not
important in comparison with the problems of corruption.
19
88.
Nicaragua is formulating a National Plan for Combating Drugs, which represents the political
and social will of the State to shut off all spaces to national and international consumption, production,
illicit traffic, related offences and money laundering. It is intended as an overall response to the various
problems generated by these activities.
89.
This National Anti-Drug Plan is the machinery on the basis of which the Nicaraguan state will
conduct its actions designed to ensure compliance with Act 285 and the Acts that protect the nation from
the illegal impact of drugs. It will foster the promotion of national and international joint initiatives,
plans and actions. It is the legislative machinery that best brings together the economic, political and
social efforts of all the agencies involved in combating drug activity.
90.
In addition, a National Plan against Terrorism and Related Offences is being implemented in the
framework of the “Central American Integral Cooperation Plan to prevent and counteract terrorism and
related activities”. Its guidelines include strategic actions to strengthen the fight against drug trafficking,
among them the following:
a. Security at the frontiers, ports and airports of the country
b. Strengthening of criminal legislation to permit freezing of financial assets originating
from terrorist groups
c. Efforts to control flows of migration with a view to preventing the entrance of persons
linked to terrorism
d. Cooperation among the various agencies through exchange of information relevant to
preventing and combating terrorism
91.
In their mutual evaluation questionnaire, the authorities stressed that “the State of Nicaragua
reaffirms its resolute and unshakable intention to confront and combat decisively the problem of drugs
and their related and/or connected offences, certain that these must be tackled under principles of shared
responsibility. We must incorporate the actions and the political will of the governments of the
continent, particularly the most powerful and those whose most important role is that of final destination
of drugs, and the most proactive and resolute participation in this effort, by means of anti-drug actions
that are not solely and mainly repressive and coercive, but also economic, social, complementary and
cooperative as well as free of prejudice…It is obvious that there is a lot to be done. There is no lack of
political will; resources, on the other hand, are very scarce and getting steadily scarcer. We are obliged
to devote our limited resources principally to the struggle against poverty, social disintegration, illiteracy,
destitution, malnutrition and hunger, in order to prevent these weaknesses becoming true threats. These
are our priorities”.
92.
All the public officials interviewed expressed a high level of commitment to the combat against
money laundering and financing of terrorism, and to the international cooperation necessary to combat
these phenomena make clear that although no requests for cooperation regarding foreign terrorist
organisations have been received related to foreign terrorist organizations, there would be no obstacle to
provision of such cooperation. It must be added also that in the formal process of consultation with the
members of CFATF, FATF, GAFISUD and other observers prior to this evaluation, no negative
comments regarding the experience of cooperation of Nicaragua with other countries was received.
93.
The authorities also stated: “In 2007 Nicaragua proclaimed its unrestricted and unconditional
undertaking to maintain relations with all the countries of the world, and declared its commitment to and
readiness for a frontal attack on terrorism and organised crime, which are some of the scourges afflicting
the globalised world and giving birth to the crime of money laundering. On 21st November 2007 the
National Technical Committee against Terrorism, comprising various government agencies, signed the
Act of adoption of the First Evaluation Report of the National Plan against Terrorism and Related
Offences, which becomes an important political and operational instrument which describes the actions
of the government of Nicaragua against the phenomenon of terrorism and related crimes”. The evaluators
did not have access to the aforementioned report and action plan.
b.
Institutional framework for combating money laundering and terrorist financing
20
94.
What follows is a short overview of the government and non-governmental ministries, regulatory
and other authorities and other bodies involved in combating money laundering or financing of terrorism.
Ministries and other agencies of the Executive:
95.
Procuraduría General de la República. A functionally independent agency of the Executive
Power, filling the role of State attorney, representing the State before the courts and rendering reports
and opinions on legal issues at the request of public bodies. It also monitors the legality of the acts of
public officials (disciplinary powers) and collaborates in the review of administrative contracting
procedures, to prevent acts of corruption. Until the Ministerio Público was created the Procuraduría
General prosecuted all crimes.
96.
Ministerio de Gobernación. Contributes to the formulation and enforcement of the policies of
the Nicaraguan State in the areas of public order, crime prevention, human rights, migration, disaster
preparedness and assistance. The Minister of Gobernacion is President of the National anti-Narcotics
Council.
97.
National Anti-Narcotics Council. Collegiate body comprising senior officials of various
government agencies, under the presidency of the Ministra de Gobernación. The Council is the State
body responsible for formulating and promoting policies against drug addiction, drug trafficking and
money laundering in the country. Act 285-99 endows it with “functional, financial and administrative
independence”. To manage its activities it has a Secretary General, who is also the main contact for the
CFATF.
98.
Financial Analysis Commission (CAF). Technical body of the National Anti-Narcotics Council
created to prevent unlawful activities related to drug trafficking in Nicaragua.
99.
Although it does not have the characteristics of a financial intelligence unit, the CAF is the body
designated by law to receive and process STRs. It also has power to monitor compliance of regulated
entities not supervised by the SIBOIF with the AML provisions of Act 285-99.
100.
Ministerio de Hacienda y Crédito Público. This is the agency responsible for managing public
finances, defining, supervising and controlling tax policy, defining and planning national and external
debt, administering and supervising the Customs and Excise system, drafting the national budget and
proposing it to the President of the Republic. It also handles and resolves claims for recovery of
expropriated property under the relevant laws.
Criminal justice and law enforcement authorities.
101.
Ministerio Público. Recently created under Act 346 of 2000 as an independent body with
organic, functional and administrative autonomy. It is not part of the Executive Branch of the State and
acts “without subordination to any State body”. The role of the Ministerio Público is to prosecute
crimes, and act in circumstances defined by law to coordinate and provide legal guidance for criminal
investigations, and promote prosecutorial actions on behalf of society and the victims of crime, to
guarantee the right to correct, prompt and efficient administration of justice.
102.
The Ministerio Público is headed by the Fiscal General de la Nación, appointed by the National
Assembly. He is represented by various prosecutors who are responsible for the judicial direction of
criminal investigations, from their initiation until the case comes to court. For investigations, collection
of evidence, raids, provisional measures, etc., they rely on the various criminal investigation departments
of the National Police.
103.
National Police. Article 97 of the Constitution states that the National Police is “an armed force
of civilian character. Its purpose is to ensure internal order, the safety of citizens, prevention and pursuit
21
of crime, and such other duties as the law may assign…it shall be subject to civil authority exercised by
the President of the Republic through the relevant Ministry (Ministerio de Gobernación).
104.
One of the functions of the National Police is to assist the jurisdictional power. In AML/CFT, it
does this through its Drug Investigation and Economic Investigation Directorates, each of which has an
official who represents it at the meetings of the CAF, and a team of officers assigned to investigative
work.
Financial Sector and other Bodies:
105.
SIBOIF: The Superintendency of Banks and Other Financial Institutions is an autonomous
institution of the State, and it was created in 1991. It is responsible for licensing, supervising, monitoring
and controlling the creation and functioning of all banks, branches and banking agencies, public or
private, national or foreign, in the country. It exercises the same functions with respect to intermediaries
in the securities market and insurance companies.
106.
Central Bank. The Central Bank of Nicaragua, although it could play a more active role in the
national structure for ML and FT prevention, only appoints one representative to the CAF, and under Act
285 it is considered a regulated entity for submission of suspicious transaction reports.
107.
There is no regulatory or supervisory body for bureaux de change or remittance houses, even for
purposes of registration and control outside the AML/CFT system.
108.
INFOCOOP. The Nicaraguan Cooperatives Development Institute was created by a December
2007d Act with its own legal personality, and administrative and functional independence. It is the lead
agency in the national policy for protection, promotion and development of cooperatives, and in
regulation, suspension supervision and control of cooperatives. Its main purpose is to foster, promote,
publicise and support the cooperative movement at all levels. Up to now it has exercised no AML/CFT
regulatory or supervisory functions.
109.
Department for Registration and Control of Non-Profit Organisations. This is a central agency of
the Ministerio de Gubernación. It regulates the creation, licensing, functioning and cancellation of civil
and religious legal persons in the country, and keeps a register of these organizations.
110.
The only requirement for the creation of casinos is registration with the local police.
c.
Approach to risk.
111.
Nicaraguan AML/CFT law does not exempt any category of financial institution from
compliance with low-risk maintenance requirements. Nor has there been any suggestion of nonenforcement, or limited enforcement in any sector, of FATF requirements.
112.
Since the issue in March 2008 by the SIBOIF OF new AML/CFT regulations for the regulated
financial system, a requirement has begun to be imposed on these institutions to create risk matrices to
enable them to determine which categories of products, services and customers pose the greatest risks,
and consequently boost CDD and monitoring procedures for those categories. This process is in its early
stages, and the SIBOIF has repeatedly postponed the deadline for operationalising the internal
procedures of the institutions, since it has proved to be a difficult and costly challenge for the financial
system.
113.
The authorities have not carried out a formal analysis to determine which are the economic
sectors most vulnerable to ML/FT, with a view to orienting their prevention and suppression policies, or
to periodically measure the success of such policies. There is anecdotal evidence of concern for the
vulnerability of the bank draft, exchange and money remittance industry, which is without any form of
regulation.
22
d.
Progress since the last mutual evaluation
•
It is recommended that a specific law be adopted to expand the crime of money laundering to
include other serious offences. The offence of money laundering should be adapted to the
parameters set out in Recommendation 1 of the FATF 40 Recommendations.
114.
On 13th November 2007 the National Assembly passed the new Criminal Code, which came
into force on the 9th July 2008. Article 282 of this Code creates the crime of Money Laundering as an
independent offence. The predicate offence is any crime described as serious in the code itself.
•
The creation of a Financial Intelligence Unit was recommended
115.
In Nicaragua it has not been possible to create a Financial Analysis Unit. The institutions
concerned with the problem have taken part in the consultations carried out by the National Assembly on
the Bill for Creation of the FAU proposed by it, and are awaiting its approval.
•
It was also recommended that Financing of Terrorism be criminalised and sanctions specified, as
well as ensuring compliance with the FATF IX Special Recommendations on the financing of
terrorism.
116.
Article 394 of Chapter II of the Criminal Code, Act No. 641, which came into force on the 9th
July 2008, creates the offence of Terrorism, and in Article 395 Financing of Terrorism. Article 397
specifies aggravating circumstances for this offence. Article 398 covers provocation, proposal and
conspiracy to commit terrorist acts and lays down a penalty of which the maximum limit shall be the
minimum limit of the penalty for the crime in question, and the minimum limit for which shall be the
half of the latter.
•
With a view to close collaboration among prosecutors and the national police, frequent joint
training is recommended.
117.
Implementation of the Oral Adversarial System and the New Criminal Code implied joint
training for agencies involved in combating organised crime. For this purpose a post-graduate course
was developed with the participation of Judges, Police, Prosecutors and Procuradores. Joint training has
also been developed on the subjects of Forensic Audit, Criminal Networks and Criminal Analysis
applied to the investigation of Organised Crime.
•
118.
•
Financing of Terrorism should be criminalised as a separate offence and the relevant penalties be
specified.
Article 395 of the Criminal Code describes Financing of Terrorism as an independent offence
Specific regulations for the Insurance and Stock Market sectors
119.
The Superintendency of Banks and Other Financial Institutions has issued regulations for Money
Laundering and Terrorist Financing Prevention applicable to all the industries supervised by it: Banks,
Leasing Companies, Insurance, Securities, Warehouses, Second-Tier Banks, Branches, Financial Groups.
The regulations in force are the Regulations for Management of Prevention of Risks of Laundering of
Money, Properties or Assets; and of Financing of Terrorism (Resolution: CD-SIBOIF-524-1-MAR52008 of the Board of Directors of the SIBOIF). The SIBOIF, to ensure compliance with the AML/CFT
regime to which the supervised institutions are subject, has provided for levying of fines in Article 10 of
the General Regulations for the Imposition of Fines
•
Nicaragua should establish an adequate and operational system of review for regulated persons
who are not under the supervision of the Superintendency.
23
120.
•
No measures have been adopted in this matter.
Coordination and establishment of uniform criteria between the CAF and the Superintendency of
Banks, conducive to an adequate control of STRs received, and particularly how they must be
analysed
121.
At the present time there is no process for analysis of STRs such as might be applied by a
Financial Intelligence Unit, because such a unit does not exist in Nicaragua. The SIBOIF has imposed
obligations on the institutions under its supervision, to secure the confidentiality of STRs
•
Complete the process of designation of compliance officers in regulated entities under the
supervision of the Superintendency of Banks and Other Financial Institutions, and, as soon as
possible in the other regulated entities, issuing the corresponding regulations and creating an
adequate system of supervision for the purpose.
122.
In April 2008 a new set of standards was issued for management of Prevention of Money
Laundering Financing of Terrorism Risks. In this regulation the post of Compliance Officer is given the
title of ML/FT Prevention Manager, and in addition a post of alternate is created, as well as a supporting
system of administration. This new set of regulations also includes the duty of each supervised entity to
create its own ML/FT prevention committee, one of the functions of which is to assess the work of the
ML/FT Manager. It is important to mention that since 2002 (with the previous ML Prevention
regulation) the entities supervised by the SIBOIF have compliance officers, and that this requirement
was strengthened in 2006 with the Compliance Officers Regulation. The new 2008 ML/FT Prevention
regulation, which supersedes the 2002 and 2006 regulations, comprises the principal aspects of these,
while changing the title of the post.
•
Nicaragua should adopt a law to the effect that conviction should not be required to prevent a
person becoming a member of the Board of Directors of an institution, and that the simple
existence of a criminal record should be enough to require such a request to be rejected. In
addition, this rule should be extended to shareholders
123.
Act No. 561 of 2005, the General Law on Banks, Non-Banking Financial Institutions and
Financial Groups, specifically Articles 4 (paragraph 6, sub-paragraphs “c” and “g” and paragraph 7, subparagraph “a”), 113 (sub-paragraph 1) and 164 (second part) sets out clearly the responsibilities of
directors of financial institutions.
•
Laws should be passed both as regards money laundering and financing of terrorism, and the
relevant function should be specified for international collaboration and exchange of information
in this area.
124.
The new Criminal Code criminalises the offences of Money Laundering, in Article 282, and
Financing of Terrorism in Article 395. In addition, as regards treaties and conventions, Nicaragua is a
party to the United Nations International Convention against Trans-National Organised Crime and the
International Convention for the Repression of the Financing of Terrorism, among others. Nicaragua has
also signed an agreement with the government of the Republic of Costa Rica for exchange of financial
Information concerning Money Laundering.
125.
Nicaragua is an active member of the Inter-American Committee against Terrorism (OAS). It
should also be emphasised that by Decree 108-2001, approved on the 26th November 2001 and
published in Gazette 233 of 7th December 2001, Nicaragua created a National Committee for the
implementation of the “Central American Integral Cooperation Plan for Preventing and Counteracting
Terrorism and Related Activities”, the main purpose of which is to advise and support the government of
the Republic in all matters relating to combating terrorism, in the adoption of national and regional
measures, as well as the incorporation into domestic law of international instruments related to the
subject, and the dissemination of the standards contained therein.
24
2.
LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES
2.1. Criminalisation of Money Laundering (R.1. and 2)
2.1.1.
Description and Analysis
126.
Summary: A new criminal code came into effect on the 9th July 2008, and this was seen to
contain the penal requirements for money laundering demanded of States by the Vienna and Palermo
Conventions, in that the legislature recognised the autonomous and independent character of the money
laundering offense from other forms of criminal conduct and its status as a crime with malice
aforethought. However it has not yet been put into practice, nor have there been any convictions or even
charges for the crime of money laundering, although it was criminalised, in its relationship to drug
trafficking, as early as 1997. The authorities informed that there are four investigations undergoing. 7
127.
The underlying offences that have been recognised are those which are punishable with more
than five years imprisonment, which covers all the predicate offences required except two (forgery and
piracy). If the full range of underlying offences recently created is to be applied, there will have to be an
effort of training and criminal policy, since the competent authorities still treat prosecution for money
laundering as if it occurred exclusively as a feature of drug trafficking.
Recommendation 1.
Criminalization of ML
128.
The offence of laundering money, property or assets, specified in Article 282 of the Criminal
Code of the Republic of Nicaragua, describes a wide range of actions that may be constitutive of the
crime of money laundering, whether committed in a personal capacity, as an intermediary or as a
director, partner, representative or employee of a legal entity or a public officer, authority or employee,
with penalties running from five to a maximum of fifteen years imprisonment, depending on special
aggravating circumstances, without prejudice to prosecution for the offence of Organised Crime, Article
283 of the Criminal Code.
129.
In addition, it is considered to be a crime committed with malice aforethought (Article 23 of the
Criminal Code), and extends to those who knowingly, or being in a position to know, engage in the
conduct concerned.
130.
Like other crimes of malice aforethought, domestic law penalises money laundering even when
frustrated or merely attempted, i.e. it need not be consummated in order to be penalised. This is in
conformity with the provisions of the Convention of Vienna, and is embodied in Articles 27 and 28 of
the Criminal Code.
131.
The attempt to commit the offence is also penalised by the legislature in Article 74 of the
Criminal Code, which states that it is the duty of the court to take into account the seriousness of the
action and the culpability of the accused when the sentence is being handed down.
132.
Study of the key terms of the legislation indicate that it has criminalised the various types of
conduct governed by the United Nations Convention against the Traffic in Narcotics and Psychotropic
Substances (1988 Vienna Convention) and the United Nations Convention against Trans-National
Organised Crime (2000 Palermo Convention), which have been covered in Article 282 of the Criminal
Code under the concept of money laundering, thus complying with the physical and material elements of
7
Prior to the discussion of this report by Plenary, the authorities informed that two accusations were
made before the competent Courts. The evaluation team verified that these accusations occurred within
the two months immediately after the on-site visit.
25
the offence required by Article 3(1)(b)&(c) of the Vienna Convention, by considering as examples of the
offence the conversion or transfer, concealment of the nature, origin, location, destination, ownership,
acquisition, possession or use of property or assets derived from criminal or illicit activities for the
purpose of concealing or disguising their unlawful origin, regardless of whether they were committed
inside or outside the country, including association, confabulation, attempt, assistance, facilitation or
advice along with the commission itself, as shown in the following table:
VIENNA & PALERMO
PENAL CODE
Article 3.1 b and c of the Vienna
Convention
Article 282, Laundering of Money, Property and Assets
A person shall be guilty of laundering money, property or assets
who, knowingly or being in a position to know, by himself or
through an intermediary, engages in any of the following activities:
a) Acquires, uses, converts, conceals, transfers, ensures, safeguards,
manages, captures, acts as an intermediary for, sells, taxes, donates,
evades or suppresses obligations, invests, deposits or transfers
money, property or assets, original or substitute, that are the
proceeds of illicit activities or any other act, for the purpose of
hiding or concealing their origin, regardless of whether any of these
acts has occurred inside or outside the country.
b) Hinders in any way the true determination of the nature, origin,
provenance or connections of money, properties, assets, values or
interests arising from illicit activities, or who advises, manages,
finances, organises fictitious companies and businesses, or commits
acts for the purpose of concealing or disguising their unlawful
origin, whether in a single act or by repeated acts related among
themselves, whether they occur within or outside the country.
c) Provides false or incomplete information to or about bank or nonbank financial institutions, insurance, stock market, exchange,
remittance, business or any other enterprise for the purpose of
contracting services, opening accounts, making deposits, obtaining
loans, carrying out transactions or business in property, assets or
other resources, when these derive from or have been obtained from
any illicit activity, for the purpose of concealing or disguising their
unlawful origin.
d) Provides or lends his identification data, the name or title of the
company, enterprise or any other legal entity of which he may be a
partner or shareholder or with which he may have any link, whether
or not it is legally constituted, regardless of the business in which it
engages, for the commission of the offence of laundering of money,
property or assets or acts in any other way as a figurehead or front.
e) Brings into or takes out of the national territory property or assets
derived from unlawful activities, using land, sea, air or any other
customs or migration points in the country
f) Seriously violates the duties of his office to facilitate the activities
described in the above paragraphs.
The abovementioned conduct shall constitute this offence when it is
preceded by those unlawful activities punishable by a maximum
penalty of five or more years of imprisonment. The offence of
laundering money, property or assets is independent of any
predicate offence and shall be prevented, investigated, prosecuted,
sentenced by the competent authorities as such, in accordance with
the unlawful activities from which it may spring, but for which no
criminal action in relation to the preceding unlawful activity shall
The conversion or transfer of property, knowing
that such property is derived
from any offence or offences established in
accordance with subparagraph a) of
this paragraph, or from an act of participation in
such offence or offences, for
the purpose of concealing or disguising the
illicit origin of the property or of
assisting any person who is involved in the
commission of such an offence or
offences to evade the legal consequences of his
actions;
ii) The concealment or disguise of the true
nature, source, location, disposition,
movement, rights with respect to, or ownership
of property, knowing that such
property is derived from an offence or offences
established in accordance with
subparagraph a) of this paragraph or from an act
of participation in such an
offence or offences;
c) Subject to its constitutional principles and the
basic concepts of its legal system:
i) The acquisition, possession or use of property,
knowing, at the time of receipt,
that such property was derived from an offence
or offences established in
accordance with subparagraph a) of this
paragraph or from an act of
participation in such offence or offences;
ii) The possession of equipment or materials or
substances listed in Table I and
Table II, knowing that they are being or are to
be used in or for the illicit
cultivation, production or
iii) Publicly inciting or inducing others, by any
means, to commit any of the offences
established in accordance with this article or to
use narcotic drugs or
psychotropic substances illicitly;
iv) Participation in, association or conspiracy to
commit, attempts to commit and
aiding, abetting, facilitating and counselling the
commission of any of the
offences established in accordance with this
article.
Article 6.1 of the Palermo Convention
(a) (i) The conversion or transfer of property,
knowing that such property is
26
the proceeds of crime, for the purpose of
concealing or disguising the illicit
origin of the property or of helping any
person who is involved in the
commission of the predicate offence to evade
the legal consequences of his or
her action;
(ii) The concealment or disguise of the true
nature, source, location,
disposition, movement or ownership of or
rights with respect to property,
knowing that such property is the proceeds of
crime;
(b) Subject to the basic concepts of its legal
system:
(i) The acquisition, possession or use of
property, knowing, at the time of
receipt, that such property is the proceeds of
crime;
(ii) Participation in, association with or
conspiracy to commit, attempts to
commit and aiding, abetting, facilitating and
counselling the commission of
any of the offences established in accordance
with this article.
be required. Proof of its links with the preceding offence shall be
sufficient for prosecution.
These activities shall be punishable by five to seven years
imprisonment and disqualification for the same period from the
exercise of the profession, office, or post, and a fine of from one to
three times the value of the money, properties or assets in question.
Article 283
Aggravating circumstances
When the unlawful activities preceding the offences embodied in
this Chapter are linked to or derived from offences concerning
narcotics, psychotropic and other controlled substances or other
crimes committed by a member of a national or international
organised criminal group or gang, except when the offence of
organised crime is included in the charge, fines shall be imposed of
three to six times the value of the money, property or assets in
question and imprisonment for from seven to fifteen years, and
disqualification for the same period from the exercise of the
profession, post or office.
The same penalty shall be imposed on anyone who knowingly or
being in a position to know, receives or makes use of money,
property or assets or any financial resource derived from any illicit
act embodied in the previous article for the financing of political
activities.
The terms of imprisonment prescribed in this Chapter shall be
increased by up to one-third when the abovementioned offences are
committed by a manager, partner, representative or employee of a
legal entity, or a public official authority or employee.
133.
It should be noted that if money laundering is related to or derives from offences related to
narcotic, psychotropic and other controlled substances or other crimes committed by a member of a
national or international organised criminal group or gang, except when the offence of organised crime is
included in the charge, fines shall be imposed of three to six times the value of the money, property or
assets in question and imprisonment of from seven to fifteen years, and disqualification for the same
period from the exercise of profession, post or office.
134.
Furthermore, various types of conduct related to criminal liability, i.e. to persons who participate
in the commission of the crimes, are regulated in the Title Two of the Sole Chapter of the Criminal Code,
including Articles 41 to 45, which covers all the forms of commission of the crime embodied in Vienna
and Palermo, except for conspiracy and incitement, which are covered in Article 31 of the Criminal
Code. However, incitement and conspiracy to commit the offence of money laundering are not
penalised. According to the final paragraph of the said article, they are penalised only in the cases
expressly provided in the law, and the law does not make mention of incitement or conspiracy in the
context of money laundering offenses. See Article 282.
135.
The perpetrators of the offence may be direct, intellectual, intermediary or co-perpetrators.
Inciters, necessary co-operators and accomplices are considered to be participants in it. In the case of
offences that require the perpetrator to possess a particular quality entailing a special duty, a participant
not possessing such a quality shall be liable to a reduced penalty, the maximum limit of which shall be
the lower limit of the penalty incurred by the perpetrator, and the minimum limit of which shall be half
of the latter.
136.
Direct perpetrators shall be considered to be those who commit the offence alone; intellectual
perpetrators, those who, without intervening directly in the commission of the act, plan, organise and
27
direct it; co-perpetrators, those who jointly carry out the offence, and intermediaries, those who commit
the offence through another who acts as instrument.
137.
For the purposes of the penalty, those persons shall be considered to be perpetrators who directly
induce another or others to commit the act, and those who cooperate in its commission by means of an
act without which it would not have occurred. Accomplices are those who with malice aforethought
provide any prior or simultaneous assistance in the commission of the act, provided they do not fall
under the previous two articles.
138.
Finally, among the various ways of committing the crime of money laundering, there is also the
role of intermediaries. Those who commit crimes while acting as representative of a legal person, or in
any post in its management, are personally and criminally liable. Likewise, such officials are criminally
and personally liable in cases when they are used as instruments (material perpetrators) to commit a
crime planned by another (intellectual perpetrator
Assets laundered
139.
As regards the range of effects generated by or derived from the crime, Article 282 of the
Criminal Code establishes as material elements falling under the illegal act, money, property or assets,
securities or other resources, original or derived, that are the proceeds of unlawful activities, including all
types of property used for the commission of the offence.
140.
Article 2(h) of Act 285 defines property as “Assets of any type, corporeal or incorporeal,
moveable or immovable, tangible or intangible, and the legal documents or instruments which confer
ownership and other rights to such assets”.
141.
Sub-paragraph “n” defines the product or products as follows: “Property directly or indirectly
obtained or derived from the commission of a crime of illicit trafficking or related offences”.
142.
Therefore, the offence of Laundering of Money, Properties or Assets extends to all kinds of
property, regardless of its value, that is directly or indirectly related to its commission, as required by the
FATF Recommendations. This is confirmed by the provisions of the first paragraph of Article 112 of the
Criminal Code, on confiscation understood as the loss of property in favour of the State of Nicaragua, as
follows: “Any penalty imposed for an intentional offence, or one committed through imprudence or
error, can carry with it the loss of the effects derived from it, or of property acquired with the value of
such effects, the instruments with which it was committed or which were intended for its commission, or
the profits derived from the criminal offence, whatever transformation they may have undergone. Both
shall be confiscated unless they belong to a third party acting in good faith who is not guilty of the
offence and who has acquired them legally”. Note that property involved in illicit trade, such as
firearms, are included in the second sub-paragraph.
143.
Evidence for criminal origin of property (c.1.2.1): With regard to property related to the
commission of the offence of money laundering, the latter is an independent offence since it does not
require evidence of a criminal prosecution for the predicate offence, and it is sufficient to prove its link
with the criminal activity from which the property has been derived. See the penultimate sub-paragraph
of Article 282 of the Criminal Code.
144.
Articles 282 and 112 of the Criminal Code stipulate that if the property is directly or indirectly
related to the commission of unlawful acts, whether or not they have been used, or if they are the product
of the proceeds of the criminal offence, the competent authority may order, as an additional penalty, the
loss of the property (confiscation) in favour of the State.
145.
Article 215 of the Code of Criminal Procedure stipulates in addition the seizure and detention of
items related to the offence, items subject to confiscation and those which may serve as evidence,
without distinction of the type of items or property but taking account only of the need to preserve them
for purposes of the trial. If necessary the judge may be asked for an order for sequestration (occupation).
28
146.
Therefore, it is not necessary for a person to have been convicted of a predicate offence in order
to make a direct or indirect link with a ML offense. It is nevertheless necessary for a person accused of
money laundering to be convicted in order for such property to be confiscated, since confiscation is an
accessory penalty to the principal penalty of imprisonment.
Underlying offences
147.
For the determination of predicate offences for money laundering, Nicaragua opted for setting a
threshold. Under Article 282 of the Criminal Code, “previous illicit activities shall be considered to be
those with a maximum penalty of five or more years imprisonment”. As can be seen in the following
table, the twenty categories of offences required by the FATF recommendations are considered money
laundering predicate offences in Nicaraguan law, except for forgery, the maximum penalty for which is
four years, and counterfeiting of products, the maximum penalty for which is three years.
20 CATEGORIES OF
DESIGNATED BY FATF
OFFENCES NICARAGUA - penalty range. Only considered
“serious crime”, and therefore predicate of ML, if
the upper threshold equals or exceeds five years.
Participation in an organised criminal from 5 to 15 years imprisonment
group and extortion
(Articles 228 and 393 of the Criminal Code)*
Terrorism, including financing of terrorism 15 to 20 years imprisonment
(articles 394, 395)
Traffic in human beings and traffic in 5 to 10 years imprisonment
migrants
(articles 346, 318)
Sexual exploitation including sexual 4 to 10 years imprisonment
exploitation of minors
(article 175)
Illicit traffic in narcotics and psychotropic 5 to 20 years imprisonment
substances
(article 359)
Illicit traffic in arms
2 to 6 years imprisonment
(article 402)
Illicit traffic in stolen and other types of 3 to 7 years imprisonment
goods
(articles 226, 227, 299)
Bribery and Corruption
3 to 12 years imprisonment
(articles 445, 446, 451)
Fraud
5 to 10 years imprisonment
(article 454)
Counterfeiting of currency
3 to 6 years imprisonment
(article 291)
Falsification and counterfeiting of 6 months to 3 years imprisonment
(articles 247, 248)
products
Environmental crime
2 to 5 years imprisonment
(articles 366, 367)
Homicide, Grievous Bodily Harm
3 to 30 years imprisonment
(articles 138, 153)
Kidnapping, false imprisonment and 3 to 15 years imprisonment
hostage taking
(articles 163, 164, 396)
Robbery
2 to 7 years imprisonment
(articles 220, 222, 223, 224)
Smuggling
4 to 8 years imprisonment
(article 308)
Extortion
2 to 5 years imprisonment
(article 228)
Counterfeiting (forgery)
1 to 4 years imprisonment
(articles 282, 285)
Piracy
5 to 8 years imprisonment
29
(article 328)
Insider trading, market rigging
1 to 5 years and 3 to 8 years imprisonment
respectively (articles 267, 268)
*All the articles referenced in this table are articles of the Criminal Code.
148.
Article 282 of the Criminal Code describes as predicate offences giving rise to money laundering
those offences punishable by penalties superior to five years imprisonment, which are also those
considered serious offences in Article 49 (a) of the Criminal Code.
149.
Despite the above, if the full range of predicate offences recently introduced in the new Criminal
Code are to be applied, there will be need for a serious effort of training and a review of criminal policy,
since during the interviews, it became clear that the competent authorities still treat the combat against
money laundering as if it related solely to the drug traffic.
150.
The underlying offences are considered to be predicate to money laundering by Article 282 of
the Criminal Code, which provides for the punishment of those guilty of money laundering both within
and outside the Republic of Nicaragua.
151.
The principle of universality embodied in Article 16 of the Criminal Code signifies that
Nicaraguan criminal law shall be applicable also to Nicaraguans or foreigners who commit money
laundering outside the national territory.
152.
Therefore the Nicaraguan courts may take cognisance of illegal acts committed in another
jurisdiction always provided they are constitutive of money laundering, or incur a penalty of which the
maximum limit shall exceed five years imprisonment.
Autonomy, Self-laundering and Ancillary offenses
153.
Nicaraguan law expressly stipulates the independence of the offence of money laundering as a
multi-offensive crime, i.e. that a person who commits the crime of money laundering may be prosecuted
and convicted for the predicate offence, without this being considered double jeopardy, but rather the
recognition of the need for such conviction and the seriousness of the economic and social impact of
money laundering.
154.
Thus, Article 282, paragraph 2 of the Criminal Code stipulates: “The offence of money
laundering is independent of its predicate offence and shall be prevented, investigated, prosecuted or
sentenced by the competent authorities as such, with regard to the illicit activities from which it may
proceed, and for which no previous criminal prosecution for the predicate offence need be demonstrated.
Its prosecution requires only proof of its link with the crime that preceded it”.
155.
With respect to ancillary Offences, Article 31 of the Criminal Code recognises incitement and
conspiracy to commit a crime, but in its final paragraph it states that “incitement and conspiracy to
commit a crime are penalized only in the special cases expressly specified in the law”.
156.
After reviewing Chapter XVII of the Criminal Code, which covers Money Laundering, Goods or
Assets, there is no express mention of proposition or conspiracy to commit money laundering. However
it is considered a cause of aggravation in ML when the funding will come from "offences which are
undertaken by members of organized criminal group”. For its part, the offence of Organized Crime
(Article 393 of Criminal Code) criminalizes conspiracy to commit any felony with economic benefits,
which can occur in real competition with money laundering. This complies with the essence of "criminal
association" mentioned in the evaluation criterion C.1.7
157.
With respect to an act committed overseas in a country where it does not constitute an offence,
this is expressly covered in Article 14, which refers to the Principle of Personality, as follows:
“Nicaraguan criminal laws are applicable to acts considered by them to be criminal, even if committed
outside the territory, always provided that the guilty parties are Nicaraguans or foreigners who have
30
acquired Nicaraguan nationality subsequent to the commission of the offence and provided the following
conditions apply: a) That the act is penalised in the place of commission… b) That the victim, injured
party or the representative of the State brings a charge before the Nicaraguan courts… c) That the
offender has not been acquitted, amnestied or pardoned or has not completed his sentence abroad. If it is
only partially completed, this shall be taken into account for the purpose of reducing proportionately any
penalty he may incur. In the case of a pardon, this must meet the requirements of the special law”.
158.
Therefore, in view of the above, the State of Nicaragua could not execute or exercise any public
criminal action against those conducts which do not constitute offences in the country where they were
committed.
Recommendation 2.
159.
The first paragraph of the text criminalising Money Laundering reads as follows: “Any person
who knowingly, or being in a position to know, alone or through an intermediary, engages in any of the
following activities… shall be guilty of money laundering”.
160.
This means that the conduct constitutive of the offence includes not only the direct perpetrator
but also includes a concept of indirect or potential guilt, by requiring a person to have the minimal
knowledge or suspicion that his conduct may be criminal.
161.
With respect to the mental Element of the ML offence, the offence of money laundering is
recognised as a stand-alone offence independent of any charge for a preceding crime, it being sufficient
for purposes of a prosecution to prove its link with the unlawful activity from which it derives.
Additionally, the legal system gives the judge the liberty to appreciate the evidence according to the
principles of “good judgment”. From this it follows that the law (Article 232 quoted above) allows
intention or purpose to be assessed, depending on the objective circumstances of the case, that is to say
through evidence.However, there have been no judicial decisions yet in which this theoretical possibility
is put in practice.
162.
With respect to liability of Legal Persons, it is worth mentioning that Article 8 of the Criminal
Code stipulates that the penalty does not go beyond the person of the individual convicted. Article 45 of
the Criminal Code embodies the concept of acting on behalf of another, as follows: “A person who,
acting as director, manager in fact or by right, or as an organ of a legal person or in the name of, or in
legal or voluntary representation of another, performs an act which, except in so far as it derives from the
function of its author, may constitute a crime or offence under the relevant provisions, shall be personally
liable in accordance with such provisions, even though he lacks the conditions, qualities or relations
required, in the definition of the offence, of an active perpetrator, if such circumstances exist in the entity
or person in whose name or on whose behalf he acts”.
163.
Article 113 of the Criminal Code includes penalties to be imposed in cases in which legal
persons are involved in activities related to the crime of money laundering. However, these are not
independent but accessory to the penalty, which means that if there is no conviction for the employee of
the legal person, the legal person cannot be sanctioned.
164.
There are measures to be implemented in cases where legal persons are involved in activities
related to money laundering, but these only follow as an accessory consequence to the main penalty of
imprisonment imposed on the employee or director of the legal person. This means that intervention,
closure, dissolution, suspension and other measures are in fact provided for, but they may only be
imposed after a conviction (Article 113 of the Criminal Code).
165.
Likewise, civil liability exists, i.e. the person guilty of a crime automatically incurs the duty to
repair the civil damage occasioned by it (Article 114 of the Criminal Code). However, damage to an
identified third party must be demonstrated, something that would not be applicable to money
laundering. Also, like the previous measures, this is accessory and cannot stand alone.
31
166.
About the dissuasive character of sanctions, the evaluation team made an overall analysis and
study of the sentences of imprisonment provided for money laundering, as well as the special
aggravating circumstances, in comparison with the penalties provided for other crimes considered
relevant in view of the seriousness of the act or the legal asset that they safeguard.
167.
In this regard the study focused on fundamental principles, values and rights internationally
recognised, such as the principle of Constitutional Supremacy, Judicial Regularity (compatibility or
uniformity of laws with one another), the Principle of Proportionality, the Principle of Human Dignity,
among others, as well as the social reinsertion and readaptation objectives of sentences of imprisonment
and the right of measurement of penalties. The following observations apply to this study:
168.
The Constitution of the Republic of Nicaragua considers prison sentences from the point of view
that they should not be imposed for purposes of State vengeance against persons found guilty of a crime.
In this regard, the Constitution of the Republic recognises the only purpose of punishment as being
rehabilitation, social reinsertion and re-education of the persons convicted.
169.
This principle is enshrined in Article 39 of the Constitution, which states: “In Nicaragua the
penitentiary system is humanitarian and its basic objective is the transformation of the detained person to
reintegrate him into society. In its progressive system it promotes family unity, health, educational and
cultural self-improvement, and paid productive occupation for the detained person. The nature of
punishment is re-educational”.
170.
Article 36 of the Constitution also states: “Every person has the right to respect for his physical,
psychic and moral integrity. No one shall be subjected to torture or to cruel, inhuman or degrading
procedures, punishments or treatment. Violation of this right is a crime and shall be punished by law.
171.
The principles of human dignity and justice are recognised in Article 5 of the Constitution. In
the light of the above it is evident that the objective of the Constitution has at no time been to consider
punishments as perpetual, i.e. that they should be in accord with the abovementioned principles, that is,
proportionality, human dignity and above all constitutional supremacy. This is borne out in Article 67 of
the Criminal Code, which refers to the principle of human dignity as that which determines the scope of
prison sentences, which must never be imposed as cruel or degrading methods.
172.
On these premises and upon studying the various penalties imposed for different offences, it is
considered that the penalties imposed on money laundering are consonant with those fundamental
international principles, in that they are proportional to the seriousness of the offence, to the means used,
and to the legal asset that is being safeguarded. It should be mentioned in this regard that crimes
impinging on life range from ten to thirty years imprisonment, obviously on account of the legal asset
that is being protected.
173.
Those forms of conduct which injure legal assets such as public health, state security and other
legal assets of a similar (diffuse) kind incur penalties between five and twenty years imprisonment. All
other offences such as counterfeiting, piracy, robbery, incur between three and seven years
imprisonment. Article 282 of the Criminal Code imposes imprisonment from five to seven years on the
basic offence of money laundering. Under Article 283 of the Code, the offence with special aggravating
circumstances is punishable by seven to fifteen years imprisonment.
174.
It is therefore considered that the penalty imposed on money laundering falls within the criteria
of reasonableness, because it is effective, proportional and dissuasive, and in addition meets the principle
of general prevention and that of special prevention which is inherent in the penalties when the offence is
considered serious and the term of five years is increased.
Main findings.
R.1
32
175.
Act 285, in force from 1997 to the middle of this year, criminalised money laundering and
related activities, but during its period of validity there were no convictions for that offence.
176.
This casts doubt on the capacity of the Republic of Nicaragua to prevent, detect and investigate
money laundering, particularly at the present moment when the country has undergone an important
amendment to the crime as recognised, which embraces a series of very complex actions.
177.
The authorities stated that 24 cases of smuggling (of cash), criminalised in Act 42, the
Contraband and Customs Fraud Act, have been investigated, with 16 convictions. The authorities
consider that this is a manifestation of Money Laundering that should be taken into consideration when
the effectiveness of the AML/CFT system is being analysed. However, this crime does not embody the
objective and subjective elements required by the FATF for money laundering. Consequently the
essential criterion for criminalisation of the acts established by the FATF as constituting money
laundering has not been met, since although the Nicaraguan authorities have made it comparable to the
crime of smuggling, this did not penalise the acts to which FATF Recommendation 1 refers, regardless
of the name by which the offence is called.
178.
The recent criminalisation of money laundering is indicative of the efforts made by the State of
Nicaragua, taking account as it does of the physical and material elements of the offence, as well as the
other components required by the Vienna and Palermo Conventions and by CAFTF.
179.
Despite the fact that the law includes the concept of simultaneous prosecution for the predicate
offence and for money laundering, it was learned that up to the present no one has been convicted for a
predicate offence and for money laundering under its status as an independent crime, since the Criminal
Code enshrining its independent character and the predicate offences giving rise to it, has only recently
been put into effect. For this reason no evidence was discovered of charges or precedents in this regard.8
180.
Conspiracy to commit crimes can be punished only where expressly provided for and the LD
should be included among them. However, it is considered to be adequate grounds for aggravation of LD
when the funds come from "offences which are undertaken by organized criminal group member," plus
the offence of Organized Crime.
181.
No concrete charges or convictions were provided to show that knowledge, intention or purpose,
required by the Vienna and Palermo Conventions in Money Laundering crimes, are inferred from
objective circumstances of the case, i.e. in accordance with the evidence.
182.
The courts requested training to disseminate awareness of the crime of money laundering, since
there is lack of knowledge of the legislation. This was confirmed by the on-site visits carried out. An
intense effort of training is therefore recommended, including workshops and dissemination among law
enforcement authorities of knowledge about money laundering. This training should include magistrates,
police, the Ministerio Público and the Procuraduría, because of the lack of uniformity of approach and
the lack of awareness of procedures to be followed, the regulations to be applied and the assessment of
objective and subjective elements required by the offence.
R.2
183.
There have been no convictions in which knowledge, intention or purpose, required by the
Vienna and Palermo conventions in the offence of money laundering, were inferred from objective
circumstances of the case, that is to say, inconformity with the evidence. However, this is theoretically
permitted by the criminal law. Only four investigations for money laundering have been launched, and
there have so far been no indictments.9
8
The two accusations (indictments) subsequently provided by the authorities greatly address the doubts of the evaluation team
in this regard.
9
The two accusations received later aim at inferring the intention based on objective circumstances of the case.
33
184.
Sanctions of legal persons only occur as accessory penalties to a sanction previously imposed on
a natural person.
2.1.2.
Recommendations and Comments
185.
The Criminal Code should be amended to include counterfeiting and piracy of products as
predicate offences for money laundering.
186.
It would be convenient to include ML in the list of offences that can be penalised under
incitement and conspiracy.
187.
Criminal or administrative sanctions should be made applicable to legal persons involved in
money laundering, independently (not ancillary) to the criminal responsibility of the physical persons.
2.1.3.
R.1
Compliance with Recommendations 1 and 2
Rating
Summary of factors underlying rating
LC
• Piracy and forgery are not predicate offenses of ML
• Already there are 2 charges but no convictions before the Judiciary for the
crime of Money Laundering (only four investigations so far) despite the
absence of a crime of Money Laundering since 1997 (as amended and
expanded in 2008).
• The only convictions have been for smuggling of cash, which the
authorities put on an equal footing with money laundering, because of the
way in which the cash is transported without being declared. Nevertheless
this offence does not possess the elements required by the Vienna and
Palermo Conventions to be considered money laundering.
• Law enforcement personnel have not received the necessary training in
money laundering, they are unaware of the legal tools in existence and
they harbour diverse and contrary interpretations.
R.2
PC
• Except for institutions regulated by SIBOIF, there is no criminal liability
or liability of any other kind for legal persons in money laundering.
Penalties can only be imposed on the legal person as ancillary to the
penalties imposed on a physical person.
• It has not been possible to determine whether the objective circumstances
of the case will be assessed as required by the Vienna and Palermo
Conventions, for lack of formal charges in which they have been applied.
2.2. Criminalisation of the Financing of Terrorism (SR.II)
2.2.1.
Description and Analysis
188.
Summary: Chapter II of the Criminal Code recognises and penalises the financing of terrorism,
of terrorist organisations, and acts of terrorism, with a minimum penalty of fifteen years imprisonment
and a maximum of twenty years imprisonment, which may be increased by up to one-third in specific
aggravating circumstances embodied in the same Chapter. Under the threshold criterion, this range of
offences are considered predicate offences for money laundering because of their character of serious
offences. This complies formally with the international conventions on the issue, but there is no
evidence of its practical application and there are limitations on the operational capacity of the competent
authorities.
Criminalisation of Financing of Terrorism
34
189.
A study of Article 395 of the Criminal Code and Article 2 of the International Convention for the
Suppression of the Financing of Terrorism, in which financing of terrorism is criminalised, shows that
the description is in conformity with the elements set out in international law. The Code deals with
financing of terrorism as follows: “Any person who generates, collects, captures, channels, deposits,
transfers, hands over, insures, manages, safeguards, acts as an intermediary for, lends, provides or passes
over funds or assets from lawful or unlawful sources for use in the commission of any terrorist act or
deed described in the previous article or in any other way finances it or finances a terrorist organisation
without taking part in its performance, or if it is not finally consummated, shall be liable to a penalty of
fifteen to twenty years imprisonment. The penalty shall be increased by one-third, in its lower and upper
limits, when the offence is committed through the financial system or by a partner, director, manager,
administrator, guardian, external or internal auditor, representative or employee of a public entity or by a
public authority officer or employee”.
190.
For greater clarity concerning the acts that may be sanctioned as financing of terrorism, the
previous article states specifically that such acts must be intended to finance terrorist acts or deeds
described in Article 392 of the Criminal Code, that is to say the Article governing terrorism as such,
which criminalises the actions as follows: “Anyone who acts in the service of or in collaboration with
armed gangs, organisations or groups, using explosives, toxic substances, weapons, fire, flood, or any
other act of massive destruction, commits acts against persons, property, public services and means of
transport, for the purpose of producing alarm, fear or terror in the population or in a group or segment of
it, disturbing constitutional order, severely disturbing public order or causing panic in the country, shall
be liable to a penalty of fifteen to twenty years imprisonment.
191.
It may be concluded from the above that both offences include providing or collecting funds
with the intention of using them to commit a terrorist act, any other act intended to cause death or injury
to a person, when the intention of the act is to produce alarm, fear or terror in the population or a
segment of it, to force a government or an international organisation to perform an act or refrain from
performing an act.
192.
In principle, it is also possible to conclude that within the offence of terrorism an action
intending to force a government or an international organisation to perform an act or refrain from
performing it is not criminalised. Nevertheless, a close analysis of the descriptive elements of the
offence as described indicates that it refers to the carrying out of acts against persons, property, public
services and means of transport, tending to disturb, inter alia, constitutional order, which indicates that
even if it is not expressly mentioned, as required by Article 2 of the abovementioned Convention, the
fact of forcing a government to perform or omit to perform an act, must be understood that such an
action is an attack on the constitutional Republic of Nicaragua, if the terrorist action is intended to force
a government officer or institution to perform an act contrary to the powers and procedures conferred by
the Constitution. This section therefore falls within the scope of the offence in question.
193.
The criminalisation of terrorist financing is also extended to any person who intentionally offers
or collects funds, directly or indirectly, to commit a terrorist act, by a terrorist organisation or by an
individual terrorist, and to funds or assets from lawful sources.
194.
Likewise, financing of terrorism does not require the funds to be used or intended to be used for
the commission of terrorist acts, and includes financing a terrorist organisation in any way without taking
part in the commission of the terrorist act, whether or not it is eventually consummated.
195.
The Criminal Code makes an attempt to commit the crime an offence, since in Articles 27, 28,
73 and 74 of the general part of the Criminal Code attempts, even frustrated, are penalised. The law
therefore applies regardless of whether the crime of financing of terrorism is finally consummated or not.
Likewise, Article 398 penalises provocation, incitement and conspiracy to commit terrorist acts, and in
its general part it sanctions, as various forms of committing the offences, the different types of
involvement, i.e. as direct perpetrator, intellectual, intermediary or co-participating perpetrators. There
are other types of participation such as inducers, necessary co-operators, and accomplices, described as
35
such in Articles 41 to 45. Articles 47 et seqq. of the same Criminal Code cover the penalties for these
types of involvement.
196.
Article 282 of the Criminal Code describes as predicate offences to money laundering those
offences punishable with a sentence of or in excess of five years imprisonment, that is to say those that
are considered serious offences within the meaning of Article 49 (a) of the Criminal Code. Among those
considered to be serious offences is financing of terrorism, since it incurs fifteen to twenty years
imprisonment.
197.
The offence of financing of terrorism cannot be prosecuted in accordance with the principle of
universality established in Article16 of the Criminal Code, when the act is committed outside the
jurisdiction of the territory of Nicaragua, but this requires an interpretation that has not yet been tested in
court:
198.
Article 16 of the Criminal Code governs offences in which the Nicaraguan State may take legal
action through the application of the principle of universality to crimes committed outside Nicaraguan
territory, which include terrorism, but not financing of terrorism: " Nicaraguan Criminal laws also apply
to Nicaraguans or foreigners who have committed some of the following offences outside national
territory a) terrorism, (...) n) Any other offence may be prosecuted in Nicaragua, according to
international instruments ratified by the country. "
199.
The Judges competent in the subject on the lack of inclusion of FT, when terrorism is part of the
list, argued during consultations that the Chapter in which both offences appear bears the heading
Chapter II of Title XVI, “Terrorism”, thereby conferring the right to take cognisance of all criminal
conduct falling under that title, i.e. all together, including terrorism, financing of terrorism and all the
other offences included in it.
200.
It should be noted that Nicaragua has signed and ratified the International Convention for the
Suppression of the Financing of Terrorism of 1999 and that the Nicaraguan Penal Code defines the crime
of FT to comply with the elements required by the Convention. Therefore, a broad interpretation of
Article 16 of the Criminal Code would argue that acts of terrorist financing committed abroad, being
penalized in the 1999 Convention in Nicaragua are also penalized under the principle of universality in
the Code Criminal. The assessment team accepted this position, but as there have been no corroborative
cases, recommended that terrorist financing shall be specifically listed in Article 16.
201.
With respect to the mental element (malicious intention) in the offense of FT. Although terrorist
financing is considered a crime only when committed wilfully, under Article 22 and 395 of the Criminal
Code, so far there are no specific charges or convictions to verify that knowledge, intent or purpose may
be inferred from objective factual circumstances, ie it was not possible to assess the appreciation of the
evidence tending to prove that aspect of the crime. This is because the criminal provision entered in force
recently.
202.
The Chapter of the Criminal Code that deals with crimes related to terrorism does not envisage
civil or administrative penalties for legal persons, because the respective offence is not specifically set
out. See criterion 2.3
203.
This is confirmed by the content of Article 395, which states: “Any person who generates,
collects, captures, channels, deposits, transfers, hands over, insures, manages, safeguards, acts as an
intermediary for, lends, provides or passes over funds or assets from licit or illicit sources for use in the
commission of any terrorist act or deed described in the previous article or in any other way finances it or
finances a terrorist organisation without taking part in its performance, or if it is not finally
consummated, shall be liable to a penalty of fifteen to twenty years imprisonment. The penalty shall be
increased by one-third, in its lower and upper limits, when the offence is committed through the financial
system or by a partner, director, manager, administrator, guardian, external or internal author,
representative or employee of a public entity or by a public authority, officer or employee.
36
204.
It is therefore considered that the penalty imposed on financing of terrorism falls within the
criteria of reasonableness, because it is effective, proportional and dissuasive, and in addition meets the
principle of general prevention and that of special prevention which is inherent in them when the offence
is considered serious and the term of five years is increased. Likewise, there is an analysis of the active
perpetrator of the offence, the way it was committed, as well as the legal asset safeguarded and the
damage that might result. The result of comparison of these circumstances with other offences of equal
magnitude is that the penalties are proportional and effective, and also in keeping with the principles,
values and rights enshrined in the Constitution of the Republic of Nicaragua. See criterion 2.5
Main Findings:
205.
No statistical data was seen to indicate the effectiveness of investigation of, or charges for,
financing of terrorism, partly because the law only recently came into force.
206.
There are no statistical data which might help to assess the capacity of the Nicaraguan authorities
to prosecute and convict a person for the offence of financing of terrorism and the same offence as a
predicate offence for money laundering. For this reason its effectiveness is limited by its recent
applicability.
207.
The law enforcement authorities have little knowledge in the area of financing of terrorism, and
training initiatives in this sphere are therefore recommended.
2.2.2.
Recommendations and Comments
208.
Express provision should be included in Article 16 of the Criminal Code to enable financing of
terrorism to be prosecuted in Nicaraguan jurisdiction regardless of whether the act took place inside or
outside Nicaraguan territory.
209.
There should be administrative or civil sanctions for legal persons involved in the offence of
financing of terrorism.
2.2.3.
Rating
SR.II
LC
Compliance with Special Recommendation II
Summary of factors underlying rating
- Except for regulated institutions of SIBOIF, no mechanisms were
discovered through which administrative or civil sanctions could be imposed
on legal persons linked to financing of terrorism.
- The Criminal Law empowers authorities to prosecute and sanction the
offence of TF when the act occurs outside Nicaraguan territory, but the
power is not explicit and there are still no cases to support this interpretation
2.3. Confiscation, freezing and seizing of proceeds of crime (R.3)
2.3.1.
Description and Analysis
210.
Summary: Act 285, the Law on Narcotics, Psychotropic and Other Controlled Substances,
Laundering of Money and Assets Derived from Unlawful Activities, governs the urgent (precautionary)
measures to be adopted in offences related to money laundering, such as embargo or sequestration,
retention, blockage of bank accounts, intervention in legal persons and provisional notation of property.
However, the law enforcement agents are unaware of the existence of these legal mechanisms and in
practice have not used them to combat money laundering.
Confiscation and property of corresponding value
211.
The Criminal Code recognises confiscation as an accessory penalty to the penalty of
imprisonment, in order that the persons convicted for crimes envisaged in the Criminal Code, including
37
money laundering, shall be permanently deprived of ownership of the proceeds of this criminal activity,
whether they derive directly from such activity, have been acquired with the proceeds of the activity, or
have been the instrumentalities of the offence or its proceeds, regardless of what transformations they
may have undergone. Such assets become the property of the State of Nicaragua under Article 112 of
the Criminal Code.
212.
Confiscation of property derived from proceeds of crime is subsumed by the provisions of
Article 112 of the Criminal Code, which makes the profits derived from criminal acts, whatever
transformations such assets may have undergone, subject to confiscation.
213.
An exception to this are assets which have been acquired by third parties acting in good faith.
This is set out in the final part of the first paragraph of Article 112 of the Criminal Code, as follows: “all
of these shall be confiscated, unless they are the property of a third person acting in good faith who is not
responsible for the offence and who has acquired them lawfully”.
Provisional Measures
214.
Article 167.2 of the Criminal Code specifies the provisional measures to be adopted solely if a
formal charge has been laid before the competent courts, for the purpose of securing property related to
the commission of offences of money laundering and financing of terrorism, as follows:
a) The deposit an adequate economic surety, not beyond means of compliance, by the accused
person himself or by another, in the form of money, securities, guarantee by two or more suitable
persons, or physical guarantees;
b) Preventive annotation in the Public Register, as a guarantee for possible later liability;
c) Freezing of bank accounts and of share and security certificates;
d) Preventive embargo or sequestration, and
e) Judicial intervention in a company.
215.
In cases in which a charge has not been laid against a person, that is to say during an
investigation for money laundering, urgent provisional measures may be taken under Article 75 of Act
285, such as embargo or sequestration, retention, freezing of bank accounts, intervention in companies
and preventive annotations of property. This is not the case in investigations into financing of terrorism,
since the procedure for this is subject to the provisions of the Code of Criminal Procedure, which
according to the law enforcement authorities does not envisage these types of provisional or
precautionary measures. See criterion SR.III.1.
216.
Ex Parte Application for Provisional Measures (c.3.3):During the investigation of money
laundering offences, urgent provisional measures may taken as follows: embargo or sequestration,
retention, freezing of bank accounts, intervention in legal persons and preventive annotation of property.
In such cases it is not necessary to notify the affected party or his representatives of the measure in
advance, since they are adopted as a matter of urgency to prevent downstream consequences of the
offence.
217.
The above does not apply to the offence of financing of terrorism, since this is governed by the
Code of Criminal Procedure, which does not allow adoption of provisional measures, that is to say
measures of an urgent nature during an investigation; their adoption is admitted and can take place only
during the course of a trial and by authority of the judge hearing the case. It is also expressly stipulated
that at the moment such measures as freezing of funds are adopted, the affected party must be notified.
See criteria 3.2 and SR.III.2.
218.
Article 113 of the Criminal Code empowers the National Police, in the investigation of any
crime, to demand any kind of information for the purpose of collecting all the elements that might be
useful for the corresponding criminal prosecution. This includes demanding any type of information for
the purpose of identifying and tracing property subject to confiscation or related to the crime, Article 4 of
the National Police Act 228-196.
38
219.
Both Act 285 and the Criminal Code guarantee the ownership rights of purchasers acting in good
faith who have had no connection with the commission of the offences.
220.
Article 87 of Act 285 recognises the right of ownership over property belonging to third parties
purchasing property, objects or securities in good faith, always provided complicity in the commission of
offences related to money laundering cannot be imputed to them. It also imposes on them the burden of
proving that such property was lawfully acquired. Likewise, Article 112 of the Criminal Code
safeguards this right of third parties who are not involved in the offence and who have acquired the
property lawfully.
221.
Article 282 (a) and (b) of the Criminal Code, which recognises the crime of money laundering,
reads as follows: “a) Acquires, uses, converts, conceals, transfers, ensures, safeguards, manages,
captures, acts as an intermediary for, sells, taxes, donates, evades or suppresses obligations, invests,
deposits or transfers money, property or assets, original or derived, that are the proceeds of illicit
activities, or any other act for the purpose of hiding or concealing their origin, regardless of whether any
of these acts has occurred inside or outside the country… b) Hinders in any way the true determination of
the nature, origin, provenance or connections of money, properties, assets, values or interests arising
from illicit activities, or who advises, manages, finances, organises fictitious companies and businesses,
or commits acts for the purpose of concealing or disguising their unlawful origin, whether in a single act
or by repeated acts related among themselves, whether they occur within or outside the country”.
222.
From this it follows that the acts and contracts implied by these activities are not only subject to
a charge of money laundering, but in addition the criminal law possesses, as part of its intrinsic
properties, the facility to declare invalid this type of contract within the framework of a prosecution,
without this implying a declaration of nullity by the civil or commercial law, since from the gist of the
article quoted above, the securing of property subject to confiscation may be inferred, without the State
being at risk of losing the right to confiscate the property that is the proceeds of unlawful activity, with
the exception of cases of purchasers acting in good faith, who in any case must prove that the property in
question was acquired lawfully.
Additional Elements
223.
Article 393, final part, of the Criminal Code penalises as a crime membership in an organised
criminal group, national or international, for the purpose of committing serious offences. Likewise,
Article 112 of the Criminal Code makes provision for the loss of property used by this criminal
organisation or which is the proceeds of the crimes it commits. See criterion 3.1
2.3.2.
Recommendations and Comments
224.
Effective mechanisms should be created (freezing) to secure funds, property or rights intended
for terrorist financing, since no urgent measures are envisaged in the Code of Criminal Procedure.
225.
Law enforcement personnel should be trained on the possibilities already existing in the law for
the use of property freezing. It must be emphasised that the judges are unaware of the application of
these measures because they have not received any requests for it from the Ministerio Público or the
National Police. Act 285, in which money laundering is criminalised, contains provisions for cautionary
measures such as freezing of assets, but no statistical data were obtained showing these measures have
been put into effect, although the law has been in force since 1997.
226.
A minimum degree of consensus concerning the adoption of provisional measures for money
laundering and terrorist financing cases should be encouraged among law enforcement personnel,
magistrates, Procuraduria, Ministerio Público and Police.
227.
The relevant law enforcement personnel should be made aware of, and trained in, the scope and
application of Act 285, since although money laundering was criminalised in the Criminal Code, its
procedure is subject to the Code of Criminal Procedure, in which, according to information from the
39
authorities, the validity and procedure for provisional measures is not recognised, and there is uncertainty
among the agencies concerned regarding the applicability of standards and procedures laid down in Act
285.
228.
It is recommended that the provisions of Article 246 of the Code of Criminal Procedure, by
which any District Judge of the Criminal Chamber is empowered to authorise investigative acts that limit
constitutional rights, including bank secrecy and the right to privacy, be put into effect. It is surprising
that everyone working in the area of justice and law enforcement was unaware of the existence of these
measures although they have been in force since 2002.
229.
It must be pointed out, in response to comments by the Nicaraguan authorities, that on this issue
article 211 of the Code of Criminal Procedure does not apply, since it is used solely to obtain information
protected by bank secrecy (not for provisional measures) and within an ongoing trial, not as part of the
pre-trial (police) investigation. Article 246, on the other hand, would allow the police to enforce
appropriate provisional measures, both for money laundering and financing of terrorism, before
prosecution and subject to confirmation by a judge within a maximum of 24 hours. Nevertheless, the
authorities interviewed maintained that they are unable to apply measures of this kind, which shows that
Article 246 is never applied.
2.3.3.
R.3
Compliance with Recommendation 3
Rating
Summary of factors underlying rating
PC
• Some operators of justice are not aware of existing legal mechanisms that
would enable them to adopt a wide range of pre-protective measures (before the
start of the trial stage) and interim (after the prosecution) in cases of ML.
• Only two cases were found to indicate the adoption of freezing of funds, assets
or rights in relation to Money Laundering, Goods and Assets although they
have been in force since 1997.
2.4. Freezing of funds used for financing of terrorism (SR.III)
2.4.1.
Description and Analysis
230.
Summary: Article 395 of the Criminal Code penalises the financing of terrorism, making
its investigation and prosecution subject to the regulatory framework established by Act 406-2001, the
Code of Criminal Procedure. However, in the latter no effective procedures are created for freezing
terrorist funds or other assets in keeping with Resolutions 1267 and 1373.
Freezing Assets under S/Res/1267 and 1373
231.
Freezing of bank accounts, share certificates and securities is permissible only if a person is
charged with a crime, i.e. within a criminal prosecution as part of which it is decided whether the
measure may be adopted. In this regard, if funds or assets directly or indirectly related to persons
involved with Al-Qaida are detected, measures for freezing of bank accounts, property or assets may not
be adopted, since the law enforcement authorities are not empowered by law to adopt them as urgent
measures. This applies to the National Police, the Ministerio Público or the Procuraduría General de la
República, as the case may be. Article 167 of the Code of Criminal Procedure grants this power solely to
a judge hearing a specific criminal case, and that judge is required to inform the parties involved in the
case, and particularly the person affected by the measure.
232.
Likewise, it is not possible to freeze without delay and without informing the parties involved
the property or rights directly or indirectly related to persons mentioned in UN Security Council
Resolution 1373, since the criminal procedure does not include urgent measures by means of which such
funds might be efficiently frozen. See criterion III.1.
40
233.
Within Nicaraguan jurisdiction measures for freezing of funds related to terrorism or financing
of terrorism may not be taken, for reasons set out in the previous criteria. Their adoption would therefore
be null and void since freezing is not expressly included in the law.
234.
Extension of c.III.1-III.3 to funds or assets controlled by designated persons (c.III.4):In this case,
in particular, freezing of funds or rights related to persons involved directly or indirectly with terrorist
organisations, with financing of terrorism, or persons designated as terrorists, could not take place, for
lack of legislative framework regulating such procedure, without a charge having been laid for the
corresponding offence. See previous criteria.
Communication to the Financial Sector
235.
When legal actions or mechanisms for use in cases of detection of funds directly or indirectly
related to terrorist type activities are put into effect, it has been confirmed that there exists no effective
system of communication to the financial sector concerning the actions involved in freezing such funds,
for lack of the required legal procedure, as mentioned in the previous criteria, since the financial system
is not constrained by law to freeze such funds urgently and without delay.
236.
No documents, information, instructions or guides on the procedure to be followed with
regulated entities or institutions relating to freezing of funds were discovered, owing to the non-existence
of relevant laws.
237.
With regard to the prompt unfreezing of funds of persons no longer included on the lists issued
by the Security Council, there is no suitable procedure for freezing such funds, let alone unfreezing them.
There is therefore no suitable procedure for monitoring or reviewing such freezing measures, since the
measure itself may not be taken.
238.
Likewise, the financial institutions and the law enforcement and judicial agencies have no
mechanisms for unfreezing assets or rights relating to persons who were erroneously designated in any of
the terrorist categories.
239.
There is no procedure to use the frozen funds for basic needs (c. III.9).
240.
There is no procedure for review of the provisional measure by a court, since no provisional
measures exist (c. SR.III.10)
241.
With respect to freezing in other Circumstances it should be pointed out here that freezing of
funds or other assets related to terrorism is permitted as a provisional measure in the respective criminal
prosecution process, under Article 167 of the Code of Criminal Procedure. See criterion SR.III.1
242.
Confiscation (loss of the property in favour of the State, in accordance with Nicaraguan law)
applies to such property as is derived from or is related directly or indirectly to illegal activities
constituting terrorism or financing of terrorism. Article 112 of the Criminal Code stipulates this in these
words: “Any penalty imposed for a crime of malice, misdemeanour or transgression shall entail the loss
of the proceeds thereof, or of property acquired with the said proceeds, the instrumentalities with which
the crime was committed or which were intended for its commission, or the profits derived from the
offence, whatever transformations they may have undergone. All the above shall be confiscated, unless
they belong to a third party acting in good faith who is not responsible for the offence and who has
acquired them lawfully.”
Bona Fide Third Parties
243.
Similarly, the final part of the first paragraph of Article 112 of the Criminal Code recognises the
right of ownership of those persons who have acquired property or objects in good faith, provided such
person has no relationship with the unlawful activities from which they derive, and has acquired them
lawfully. See criterion 3.5
41
244.
The laws of Nicaragua set out no procedures on how to go about freezing funds related to
terrorist activities in any of their manifestations. Therefore the State would be unable to sanction or take
punitive actions against institutions in which such funds were discovered, for lack of laws governing the
process.
Additional elements:
245.
There are no legal procedures for adopting the best practices. Neither there is a law decreeing the
loss of property related to terrorist activities in all their manifestations. However such property may be
confiscated if there is a criminal conviction by a court, according to Article 112 of the Criminal Code,
and provided the link between the property and the unlawful activities concerned has been demonstrated.
Main findings:
246.
Act 285 provides for measures such as freezing of funds during a money laundering
investigation. However, the same does not apply to financing of terrorism, since it is governed by
different laws, so much so that in cases of urgent necessity the transfer of funds could not be prevented
nor could the disposal of funds, property or rights related to this offence. This makes the national
authorities vulnerable, since they are unable to secure, as a matter of urgency, funds that are subject to
confiscation, and what is even worse, funds that may be directly related to terrorism.
247.
When legal actions or mechanisms for use in cases of detection of funds directly or indirectly
related to terrorist type activities are put into effect, it has been confirmed that there exists no effective
system of communication to the financial sector concerning the actions involved in freezing such funds,
for lack of the required legal procedure, as mentioned in the previous criteria, since the financial system
is not constrained by law to freeze such funds urgently and without delay. Therefore there are no
effective systems to enable the financial system and regulated entities to undertake actions related to the
freezing of funds or assets intended for the financing of terrorism.
248.
It must be mentioned that the Nicaraguan authorities explained how of the lists of presumed
terrorists are dealt with for purposes of detecting funds in the financial system. Nevertheless, the
procedure adopted is not effective nor can it produce the expected results, since the institutions involved
lack legal powers and responsibilities in the matter of prompt freezing.
249.
It is recommended that greater attention be paid to the provisions of Article 246 of the Code of
Criminal Procedure, which empowers any District Judge of the Criminal Chamber to authorise
investigative acts that limit constitutional rights, including bank secrecy and the right to privacy. Despite
this, the belief exists among all law enforcement and judicial personnel that such measures do not exist,
although the Code of Criminal Procedure came into effect in 2002.
2.4.2.
Recommendations and Comments
250.
Freezing of assets as a matter of urgency in FT cases should be included in the Code of Criminal
Procedure.
251.
There should be procedures for freezing (and unfreezing) funds in accordance with UN
Resolutions 1267 and 1373.
2.4.3.
SR.III
Compliance with Special Recommendation III
Rating
Summary of factors underlying rating
NC
• There are no effective laws or procedures for freezing terrorist funds or other
assets of persons designated by the UN Security Council pursuant to Resolution
1267
• The competent authorities affirmed that the provisional measures apparently
granted by law can not be put into practice for ML and TF.
42
• Although the law allows the freezing of funds during the prosecution for the
offence of Terrorist Financing, by resorting to ordinary criminal procedure, the
law enforcement officials do not believe that this is applicable or expedited and
in many cases are unaware of these powers (see R.3).
• There are no appropriate measures for effective monitoring of the obligations
inherent in Special Recommendation III, concerning freezing of funds related to
financing of terrorism.
2.5. The Financial Intelligence Unit and its functions (R.26)
2.5.1.
Description and Analysis
252.
Summary: Nicaragua does not have a financial intelligence unit, and this recognised by the
authorities. Since 2004 a Bill for the creation of an FIU has been before the National Assembly. It has
undergone some improvement but has not yet been debated for the first time. STRs are received by the
Financial Analysis Commission (CAF), created in 1999 as a technical unit of the National Anti-Narcotics
Council. This is a collegiate body comprising officers belonging to various State agencies. It meets only
sporadically and lacks structure, budget and its own staff. It is not empowered to share financial
intelligence information with foreign authorities.
253.
In practice, the task of receiving and analysing STRs is delegated to the Economic Investigations
Directorate of the National Police, on instructions from the Fiscal General de la República (Chief State
Prosecutor), in his capacity as President of the CAF. This Police Directorate may decide autonomously
to close the case or submit it to the CAF with confirmation of their suspicions. In the latter case the
Fiscal General, on receiving the police opinion, exercises his overall competence to decide that there has
been an offence and officially launches a preliminary investigation governed by criminal procedures.10
Authority responsible for receiving and analysing STRs.
254.
Executive Decree No.285 of 15th April 1999 created the Financial Analysis Commission (CAF)
as a technical unit of the National Anti-Narcotics Council, made up of officials belonging to the different
state agencies. These are: the Fiscal General de la República de Nicaragua, who presides: a specialist
from the Narcotics Investigation Directorate and one from the Economic Investigations Directorate of
the National Police. The National Council also appoints a specialist in banking law from a list of three
candidates put forward by the Superintendency of Banks; an administrator or economist from a list of
three proposed by the Central Bank and an auditor from a list of three proposed by the Central Bank (at
the time of the evaluation the latter two posts on the Commission were still awaiting confirmation).
255.
The National Anti-Narcotics Council, on which the CAF depends for its budget, and to which it
is required to submit reports on the results of its operations, is also a collegiate organisation comprising
senior officials from various organs of government, and presided over by the Minister for Public
Administration (Ministra de Gobernación). The Council is the State body responsible for developing and
promoting policies to combat drug addiction, drug trafficking and money laundering in the country. The
law confers on it “functional, financial and administrative autonomy”.
256.
Article 24 of Act 285 stipulates that “the Financial Analysis Commission shall be attached to the
National Council (National Anti-Narcotics Council) which shall allocate in its budget resources to ensure
10
According to the authorities, some months after the evaluation visit initial steps were taken for the creation of a team of
technicians coordinated by the Secretariat of the Financial analysis commission (CAF) to carry out tasks (presumably analysis of
reports) assigned to them by the CAF. This team would be composed of officials of the SIBOIF, the Ministerio Público and the
Economic and Narcotics Investigation Directorates of the National Police. This untimely information was not taken into
account as part of the report, since for that purpose it would be necessary to observe in situ the characteristics of the new
technical team, its resources, expertise, technical capacity and efficiency, the independence of its members vis–a-vis their
institutions of origin, etc. However, the evaluators recognise the efforts the authorities are making with this initiative.
43
the material and technical support required for the fulfilment of its mandate”. Nevertheless, up to the
present time the CAF has no structure, staff or budget of its own.
257.
The CAF began to meet regularly only recently. Act No. 285-1999 assigns the following
functions to the CAF (Article 27). “The Financial Analysis Commission shall have the following
functions:
a) Collect from public agencies all financial information from both government and private
institutions, relating to commercial transactions which bear some relationship to the
laundering of the proceeds of drug trafficking.
b) Detect any activity related to the laundering of money and assets derived from the unlawful
activities mentioned in this Act which pose a risk to the national financial system and to the
security of the nation, its stability and public order.
c) Investigate and analyse possible techniques and methods used in the laundering of money
and assets and its many manifestations.
d) Keep the Executive Secretariat of the National Council continually informed of the result of
its work.
e) Coordinate with the Executive Secretariat of the National Council the drafting of periodic
reports for the attention of the President of the Republic and of the National Council.
f) Propose to the National Council the legislative reforms it considers necessary to counteract
these activities.
g) Coordinate actions with other authorities to achieve the stated objectives and provide all
collaboration that may be required by the National Council, the Procuraduría General de
Justicia and the judicial authorities, without prejudice to the provisions of Article 29
of the present Act.
h) All other duties that may be assigned to it by Law.”
258.
As regards the scope of the CAF’s functions, the authorities indicate that all the AML provisions
of Act 285-1999 are being applied tacitly to financing of terrorism, since the new Criminal Code
recognises FTj as a predicate offence for ML. The evaluation team consider this interpretation
problematic, in that the abovementioned Act defines the functions of the CAF solely in relation to
“laundering of money and assets derived from unlawful activities referred to in this Act” (article 27 b),
and the latter does not include offences such as financing of terrorism with property of lawful origin.
259.
Also, the CAF’s power to collect information from public agencies is expressly limited to
commercial transactions “which may be linked to laundering of proceeds of drug trafficking” (Article 27
(a) of Act 2859).this restricts even more its capacities in a key aspect for any institution that seeks to
perform financial intelligence functions, i.e. access to information from other government bodies.
260.
Note also that the abovementioned article 27 (a) does not allow the CAF to request information
directly from regulated entities, but that it must depend on the information that other public agencies can
provide.
261.
Owing to its lack of infrastructure, budget and staff since its creation in 1999, the CAF has
delegated to the Economic Investigations Directorate of the National Police the task of processing the
STRs sent to it by the regulated entities. The CAF receives STRs from banks and other financial
institutions through the SIBOIF, in sealed and confidential envelopes. The SIBOIF receives these
envelopes and forwards them unopened to the Fiscal General in his capacity as President of the CAF. He
in turn takes note of the report, keeps it in his files and sends a copy to the Economic Investigations
Directorate of the National Police, with the instruction to determine whether there is merit for the
opening of a formal investigation.
262.
The Economic Investigations Directorate, lacking adequate resources and training, performs, in
this phase, a task of analysis and intelligence which does not form part of the preliminary investigation
governed by the Code of Criminal Procedure. For this purpose it uses the sources of information to
which it normally has access (set out in detail below under criterion 26.3). If at this stage additional
44
information protected by bank secrecy or any other rule of confidentiality is required, it is the Fiscal
General who must request it. If the Economic Investigations Directorate of the National Police
concludes that there are sufficient grounds for opening a formal criminal investigation, it presents its
conclusions to a meeting of the CAF and the Fiscal General takes the corresponding decision. If there is
not sufficient suspicion, the police file the STR directly.
263.
For the analysis of STRs, the Economic Investigations Directorate’s analysts have the I2
software for graphic display of the information in the files they handle.
264.
They are entities regulated by the SIBOIF: banks, financial institutions and financial deposit
stores. Of these, only banks have sent RTS
265.
The other regulated entities listed in Decree 285-1999 are required to send their reports directly
to the CAF (not through the SIBOIF). They are: savings and loan cooperatives, traders in foreign
exchange or bureaux de change, credit card issuers, pawn shops and casinos. However, only one
remittance company has sent STRs. The evaluation team was informed about the recent approval by the
CAF of a form for submission of STRs and the corresponding set of instructions for the regulated entities
not supervised by the SIBOIF. However, the companies with whom the team held interviews had still no
knowledge of this form, and in some cases were unaware of any duty to report to the CAF.
266.
In 1994 a Bill for the creation of a Financial Analysis Unit was put before the National
Assembly of Nicaragua. In 2005 this bill was sent to the Production, Economics and Budgetary
Committee of the Legislative Assembly for its opinion. This Committee sought the opinion on the bill of
various entities involved, such as: the Ministerio Público (MP), the Superintendency of Banks and Other
Financial Institutions (SIBOIF), the Association of Private Banks and the Ministry of Finance and Public
Credit (Ministerio de Hacienda y Crédito Público - MHCP). Each of the institutions consulted submitted
its contributions and suggestions on the Bill. However, it has not yet been debated and at the present
time the conclusions of the Production, Economics and Budgetary Committee of the Legislative
Assembly are awaited.
Guidance for Financial Institutions on method of reporting:
267.
The CAF issues no guidelines or directives to the financial institutions or other regulated entities
on the STR forms, the right way to report or on the quality of those reports. It would be desirable for the
CAF to submit information to the SIBOIF on the quality of the STRS and the most common mistakes
made by the entities under the supervision of the SIBOIF, to enable it to use this information in its work
of supervising and guiding the regulated institutions.
268.
SIBOIF should clarify that it has issued guidelines, guidelines and instructions on the ROS to
entities under its supervision, through the following instruments: 1) Circular: DS-DL-0975-0605/VMUV dated June 17, 2005 (since repealed) and 2) Schedule 4 of the Standard PLD / FT dated
March 5, 2008 (in force)
Prompt access to information
269.
Article 27 a) of Act 285-1999 stipulates that the CAF may collect from public agencies all
financial information from both government and private institutions, relating to commercial transactions
which bear some relationship to the laundering of the proceeds of drug trafficking. This limitation to d
both rug trafficking comes from the previous wording of the money laundering law, and is inadequate. It
is to be hoped that these inconsistencies will be rectified in the law that will create the FIU in Nicaragua.
270.
The CAF receives STRS from banks and other financial institutions through the SIBOIF, in
sealed and confidential envelopes. The SIBOIF receives these envelopes and immediately forwards
them unopened to the CAF.
45
271.
The CAF has no resources or information systems of its own. It is the Economic Investigations
Directorate of the National Police that maintains a register (on Microsoft Access) of the basic
information on each STR. For the analysis of these reports, the police have access to their regular
sources of information including, in particular, the following:
•
•
•
•
•
Real estate property register
Office of the Mayor of Managua
Immigration
Directorate of Revenue
Commercial Register
272.
The Economic Investigation Directorate of the National Police supplied the following statistical
information on STRs sent by regulated institutions:
STRs SUBMITTED BY ENTITIES THAT ARE SUPERVISED BY SIBOIF
YEAR:
STRs:
Investigations launched by
Prosecutors’ Office based on
STRs
2002
3
0
2003
11
0
2004
51
0
2005
74
0
2006
104
0
2007
190
0
2008
137
4
TOTAL:
570
4
STRs submitted by multinational money remitter to the CAF:
YEAR
REPORTS
2004
45
2005
145
2006
231
2007
297
2008
158
TOTAL
876
273.
STRs from remittance companies and financial institutions supervised by the Superintendency of
Banks and Other Financial Institutions (SIBOIF) both provided by the Economic Investigations
Directorate of the National Police show that as the years go by the number of reports received increases.
Nevertheless figures are not available for cases analysed by the CAF, nor the result of these analyses, i.e.
the number of reports found to be with merit and which gave rise to investigation, and those without
merit.
274.
The information provided by the Economic Investigations Directorate of the Police shows the
small number of money laundering investigations in which use was made of information in STRs. (only
four cases since 2005).These are not even cases arising out of STRs, and of the four ML cases none has
so far led to an indictment
Year
Cases
Before
2004
2004
1
ML investigations in which an STR has been used
Persons
Money
Other
Convictions
Investigated Laundering Offences
1
1
1
5
7
2
3
4
Observation
1
dep.
46
Guatemala 2
USA
2005
4
4
4
4
2006
5
12
5
4
1C/Pending
2007
6
14
1
5
2
4C/Pending
2008
5
4
3
2
2
3C/Pending
26
42
7
19
17
9C/Pending
TOTAL
* Data as of July 31, 2008 ** Other offenses are drug trafficking, embezzlement and racketeering.
275.
The authorities expect that in the near future the investigations will increase and be more
successful thanks to recent changes made to the offence, such as clarification of the autonomy of the
crime and the extension to previous crimes other than drug trafficking.
Obtaining additional information from the person reporting
276.
The Economic Investigations Directorate of the National Police sends the request for additional
financial information to the Fiscal General de la República, President of the CAF, who in turn forwards
the request to the SIBOIF, so that the latter may undertake to request the financial information from a
specific financial institution or from all its supervised institutions.
277.
The financial institutions send the additional information to the SIBOIF, which forwards it to the
Fiscal General de la República as President of the CAF.
278.
The following table shows the frequency with which the National Police have requested
information from regulated entities, through the President of the CAF (the Fiscal General), as input into
an investigation. The data do not necessarily refer to investigations arising out of an STR, nor to ML or
FT cases. However, they show that there is no obstacle to the CAF obtaining information from regulated
entities, and that the system may be used to support action against other offences.
YEAR
2005
2006
2007
2008
TOTAL
REQUESTS by Directorate of
Drugs Investigations
10
9
0
5
24
REQUESTS by Directorate of
Economic Investigations
1
8
1
3
13
TOTAL
11
17
1
8
37
Disclosure of Information to National Authorities
279.
The law does not indicate what the CAF must do if it concludes that an STR or other information
may be related to possible money laundering. It simply stipulates that its officers “may submit
information relating to the offence of laundering of money and/or assets derived from unlawful activities
to the competent judicial authorities”. In practice, since the President of the CAF is the Fiscal General de
la República, when the Commission foresees that a report submitted for its consideration by the
Economic Investigations Directorate of the National Police has merit for the opening of an investigation
by reason of presumed money laundering, the Fiscal sends the file to the Economic Investigations
Directorate of the National Police so that it may open the criminal investigation in coordination with the
instructing officers of the Fiscal General and of the Ministerio Público.
280.
As regards money laundering and financing of terrorism, Act 285-1999, as explained earlier, has
not yet been amended to broaden the powers of the CAF and bring them in line with the offences as
described in the Criminal Code at present in force. The authorities state that all the provisions of the Act,
including those that define the functions of the CAF, have been tacitly applied to Financing of Terrorism
since the Criminal code was amended to include this crime as a predicate offence for money laundering.
The evaluation team does not share this interpretation. Although the title of the Act was amended to read
47
“and other unlawful activities”, the internal wording of the Act in which the CAF’s functions were set
out was not amended. Articles 23 to 27 of Act 285-1999, which are those creating the CAF and
assigning its functions, refer clearly and exclusively to Laundering of Money derived from drug
trafficking and related activities.
Operational Independence
281.
The CAF does not have the structure, staff or budget to enable it to carry out fully and
autonomously the functions assigned to it by Act 285-1999. It depends on the budget allocated to it by
the National Anti-Narcotics Council, which is composed of various Ministers of State, the Procurador
General de Justicia, and the Heads of the National Police and the Army.
282.
The evaluating team was informed of the recent approval of economic resources, for the first
time, to empower the CAF and endow it with physical installations, staff and equipment to enable it to
initiate operations. The result is that better use will certainly be made of the information which the
financial institutions are submitting to the CAF, until a true FIU is created. However, there is so far
insufficient information to enable the evaluators to decide whether the staff that will be assigned to the
CAF will have enough independence to perform, without interference by other authorities, functions
such as the analysis of STRs and the many other sources of information which under the law will be
within their reach. It is also unclear, under the present arrangements, who will be responsible for
deciding whether a case deserves or not to be sent to the competent judicial authorities for further action
by them.
283.
Whatever staff may be assigned to the CAF, under the law its decisions are taken by a collegiate
body composed of officers from various State institutions, for example the Fiscal General and the
Minister of Public Administration, the latter being responsible for the political agenda of the Executive.
This necessarily reduces the independence which R.26 demands and which any FIU needs for the taking
of technical decisions.
Protection of Information in the custody of FIU
284.
The originals of the STRs are held in the office of the Executive Secretariat of the Fiscal
General, while the copies are in the custody of the Economic Investigations Directorate of the National
Police. These documents are kept in ordinary filing cabinets, locked and with the ordinary measures of
physical security of the offices of these two agencies (they are not open to the public but for the rest of
the staff of the institution they are.) Both the fact that the STRs are copied and the fact that they have to
be sent through a third agency (SIBOIF) constitute unnecessary security risks.
285.
The Economic Investigations Directorate of the National Police copies all information in the
STRS into a simple database designed by computer staff of the Directorate itself. This information is
held on a server situated in the Directorate.
286.
The evaluation team considers that forwarding STRs through the SIBOIF also poses an
unnecessary security risk, since the present role of the SIBOIF as intermediary adds no value to the
system. The risk of including a third agency would perhaps be justifiable if it made the processing of the
information more efficient. For example, if the STRs were transmitted using the electronic
communication infrastructure the SIBOIF already has with other institutions for other purposes, the risk
of physical handling of documents would be eliminated and the incorporation of the reports in the data
bases of the CAF or a future FIU would be facilitated. The authorities indicated that there is a mediumterm plan to do this. For now, the SIBOIF has established measures for receiving and forwarding the
STRs securely and confidentially.
287.
For the analysis of the RTS, the staff responsible for analysis within the Directorate of
Economic Research has the program or technological tool of I2 to graph the information held as part of
the files handled.
48
Publication of Periodic Reports
288.
Act 25-1995 states that the CAF “shall coordinate with the Executive Secretariat of the National
Council in drafting periodic reports for the attention of the President of the Republic and the President of
the National Council” (Article 27 e).
289.
The Commission does not publish periodic reports with statistical data, typologies and trends or
information on its work. It also does not prepare reports referred to in the previous paragraph.
Membership in Egmont Group
290.
The Republic of Nicaragua does not yet have a Financial Intelligence Unit as required by the
definition, the Declaration of Objectives and the minimum principles laid down by the Egmont Group for
this type of agency.
2.5.2.
Recommendations and Comments
291.
Create a Financial Intelligence Unit (FIU) in keeping with the principles of FATF
Recommendation 26 and the 10 corresponding criteria regarding evaluation methodology.
292.
Appoint all members of the CAF (except the auditor to be nominated by the Association of
Accountants) and increase the frequency and number of meetings of that Commission.
293.
Until the FIU is created, the CAF must have physical premises to operate securely, suitable staff
appointed exclusively to it, operational independence and the other resources that will enable it to meet
the technical requirements of the functions assigned to it by Act 285-1999.
294.
Issue guidelines and instructions to the financial institutions and other regulated entities, as well
as to the Superintendency of Banks and Other Financial Institutions and other supervisory and control
bodies that may be created in future, on trends or patterns of money laundering and financing terrorism
that have been detected, as well as on the quality of STRs and other aspects relevant to the process of
submission of STRs.
295.
Explore alternatives to avoid the security risks arising out of the existence of copies of the STRs
in the hands of various entities (Fiscalía and Police), and to avoid these reports having to pass through
many state bodies before arriving at their destination.
296.
It is recommended as soon as the FIU is created and begins work, it should consider joining the
Egmont Group.
2.5.3.
R.26
Compliance with Recommendation 26
Rating
Summary of factors relevant to s.25 underlying the overall rating
NC
•
•
•
•
Nicaragua does not have a financial intelligence unit and the Bill to create it
has been before the Assembly for four years without being debated
The CAF is legally empowered to carry out certain functions regarding
reception and analysis of information on operations giving rise to suspicions
of money laundering submitted by the regulated institutions, but this does not
make it an FIU. In practice the CAF does not exercise these functions
because it has no structure, staff or budget of its own.
The Act does not unequivocally mandate the CAF to forward to the judicial
authorities all the cases in which a high level of suspicion of commission of
an offence has been confirmed.
The CAF does not have operational independence because its decisions are
taken by a group of officials belonging to various state bodies.
49
•
The analysis of the STRs is delegated to the Economic Investigations
Directorate of the National Police, which does not have adequate information
or resources for this kind of task, and this is reflected in the fact that a tiny
percentage of STRs is used in criminal investigations.
•
The CAF is not empowered by law to exchange information with foreign
FIUs
One of the members of the CAF is an auditor nominated by the Association
of Accountants. This situation would allow an inconvenient influence of the
private sector in the management of information as critical as the STRs.
•
2.6. Law Enforcement, Prosecution Authorities & Framework (R.27 and 28)
2.6.1.
Description and Analysis
297.
Summary: Investigative techniques and law enforcement authorities for money laundering and
financing of terrorism are set out in Act 285 and the Code of Criminal Procedure. The competent
agencies are the National Police, the Ministerio Público and the Procuraduría General de la República, as
well as the Judiciary, within the limits of competence established in the investigation.
298.
Regarding authorities designated for investigation of money laundering, Act 285 confers
exclusive authority to intervene on the National Police, the Procuraduria, and the Courts. The Code of
Criminal Procedure also includes the Ministerio Público, i.e. the Fiscal General ( Articles 88, et seqq.)
This applies to investigations of money laundering as well as financing of terrorism.
299.
Among the investigative mechanisms there does not exist the possibility to postpone the
prosecution, for example, with the objective of gathering further evidence or to trace good and people.
300.
Article 55 of the Code of Criminal Procedure recognises the Principle of Opportunity and, in
sub-paragraph 2, waiver of prosecution of a person identified as having committed a crime. This
principle is developed in Article 59 1) of the Code of Criminal Procedure, which includes the methods
and cases in which it may be applied: “Participation in the offence to which the principle of opportunity
is applied shall be less than that of which it facilitates the prosecution, or the related offence in which
prosecution is waived shall be less serious than that of which it facilitates the prosecution or the
continuation or perpetration of which it prevents, and provided the accused person collaborates
effectively with the investigation, provides essential information to avoid the continuation of the offence
or the perpetration of others, and helps to clarify the offence being investigated or other related
offences”.
301.
This means that when a person being investigated for money laundering is able to provide
effective collaboration in the investigation and helps to clarify the occurrence or others connected with it,
among other cases, the Fiscal General de la República has the exclusive power to suspend or postpone
the arrest of that person and the confiscation of the effects related to the commission of the offence,
making this suspension or postponement dependent on the contribution made to the investigation of the
crime of money laundering. Prior authorisation of the competent judge is required. Apart from the
circumstance of effective collaboration of the guilty party with the forces of justice, no measures
intended to postpone prosecution exist or have been considered, for example while better evidence is
being collected or while property and persons are being traced (as required by criterion 27.2 of the
methodology).
302.
In addition, the authorities expressed doubts as to the validity of the Principle of Opportunity in
actions against money laundering and terrorism, since the injured party in these crimes is the State of
Nicaragua, and in such cases Article 55 of the Code of Criminal Procedure states that “the Principle of
Opportunity shall not apply to crimes against the State”.
303.
Article 2 (o) of Act 285 envisages controlled delivery as a technique to be used to enable
unlawful or suspicious elements to leave or enter the territory of the Republic of Nicaragua for the
50
purpose of identifying the persons and property involved in the commission of a crime of money
laundering. This power is conferred on the Procurador General by Article 94.
304.
The Code of Criminal Procedure, for its part, regulates, from Article 210 onwards, the question
of evidence, including wiretapping and interception of written, telegraphic and electronic
communications.
305.
Additional Element – Use of Special Investigative Techniques for ML/FT Techniques. These
special investigative techniques are permitted in the laws mentioned above. However, no specific cases
were discovered in which they were applied or in which they were satisfactorily used in cases of money
laundering and financing of terrorism, although Act 285 and the Code of Criminal Procedure have been
in force since 1997 and 2002 respectively.
306.
Additional Element – Specialised Investigation Groups & Conducting Multi-National
Cooperative Investigations. The National Police Force has an Economic Investigations Directorate to
investigate crimes relating to money laundering. This Directorate has powers at the national level and at
the same time is represented in four regions of the country.
307.
A Specialised Unit against Corruption and Organised Crime has been created in the Ministerio
Público, to be responsible for prosecution of money laundering and financing of terrorism. It has five
prosecutors in the main office and sixteen liaison prosecutors, one for each Department and the
autonomous regions that make up the national territory, giving a total of twenty-one prosecutors.
308.
Additional Element—Review of ML & FT Trends by Law Enforcement Authorities. There is no
authority responsible for or competent to provide feedback on money laundering and terrorist financing
trends to the law enforcement authorities, such as the Procuraduría General, the Ministerio Público, the
National Police and the Judges.
309.
Article 113 of the Code of Criminal Procedure empowers the National Police to demand any
kind of information in the investigations they are carrying out. Likewise, Article 230 of the Code of
Criminal Procedure empowers the police to demand reports from any public or private person or agency,
concerning criminal investigation, as well as to carry out searches, raids and inspections.
310.
Article 76 of Act 285 provides authority for obtaining financial information by means of a court
order, on persons linked to money laundering. This is not the case with investigations into financing of
terrorism, because this is governed by different laws and provisional measures of this kind are not
authorised by the Code of Criminal Procedure. See SR.III.1
311.
As mentioned above, the National Police and the Fiscalía General are responsible for
investigation of any crime. They therefore have the power to collect any type of evidence to be used in
money laundering and terrorist financing prosecutions. This power is conferred to enable them to carry
out any act of investigation conducive to clarification of the occurrences, see 28.1
Resources, Suitability, Integrity and Training.
312.
The law enforcement agencies, including the National Police, the Ministerio Público and the
Procuraduría General, have adequate organisational structure as laid down in the Organic Law of the
National Police, the Organic Law of the Procuraduría General de la República and the Organic Law of
the Ministerio Público.
313.
These agencies have specialised units for combating money laundering and the financing of
terrorism. The National PoliceForce has a Judicial Support Directorate, an Economic Investigations
Directorate and a Special Operations Directorate.
314.
As regards the Ministerio Público, an Anti-Organised Crime Unit has been created.
Procuraduría General de la República also has a Specialised Unit against Organised Crime.
The
51
315.
However, these agencies do not possess sufficient technical and economic resources to operate
effectively against money laundering and financing of terrorism.
316.
The examiners did not receive statistical data on the annual budget of each of the departments of
the State responsible for law enforcement in ML/FT matters, nor the budget allocated to each of the
units.
317.
There is no civil service career regime to guarantee public officials greater job stability under
changes of government Some State agencies such as the Central Bank and the SIBOIF have a special
labour regime of one with greater legal autonomy vis-à-vis the executive, which enables them to keep
trained staff longer
318.
The recruitment of procuradores is done by means of a competition promoted by the Procurador
General de la República, following a public announcement in which the qualification required and the
tests to be undergone are described. The selection process is governed by principles of equality, merit
and capability, in order to ensure that the posts are occupied by qualified professionals. Examinations are
held to evaluate the necessary theoretical and practical abilities.
319.
A similar procedure exists for appointment of prosecutors, who are responsible for directing
criminal investigations and bringing cases to court.
320.
No information was obtained on the disciplinary regime for public officials or on the controls
and sanctions to which they are subject in the discharge of their duties.
321.
But statistics have been provided training received by operators of justice, they relate only to
members of the National Police, is increasingly clear that little or limited outreach and training in money
laundering and terrorist financing.
322.
This has been confirmed in field visits, to demonstrate to operators the need for international
cooperation to carry out training and outreach on Money Laundering and Financing of Terrorism,
lacking, as are financial resources or qualified staff in the field.
Main findings.
323.
These special investigative techniques are apparently permitted in the laws mentioned above.
However, no specific cases were discovered in which they were applied or in which they were
satisfactorily used in cases of money laundering and financing of terrorism, although Act 285 and the
Code of Criminal Procedure have been in force since 1997 and 2002 respectively. The authorities
themselves are of the opinion that the Principle of Opportunity would not be applicable in the
prosecution of ML and TF offenses.
324.
The fact that the crime of money laundering has been incorporated in the new Criminal Code,
when before it was governed by Act 285, leads to serious doubts regarding the use of investigative
techniques envisaged the Code of Criminal Procedure, in view of possible repercussions as regards the
principle of legality.
325.
Investigative techniques are governed by Act 285 and the Code of Criminal Procedure. As a
result a diversity of opinion has arisen among law enforcement personnel regarding their application and
effectiveness. This may give rise to invalidity of investigations and failure of prosecutions for money
laundering and financing of terrorism.
326.
It is recommended that greater attention be paid to the provisions of Article 246 of the Code of
Criminal Procedure, through which the legislature empowers any District Judge of the Criminal Chamber
to authorise acts of investigation that limit constitutional rights, including bank secrecy and the right to
privacy. Nevertheless, the impression exists among all law enforcement personnel that such measures do
not exist, although the Code of Criminal Procedure has been in force since 2002.
52
327.
The above was made clear when the law enforcement personnel requested this evaluation team
to arrange intensive training in this area, since resources are lacking at the present time.
2.6.2.
Recommendations and Comments
328.
Measures should be considered for suspending prosecution, for example while better evidence is
being collected or property and persons are being traced, even without any need for the person
investigated to be linked to a programme of collaboration with justice.
329.
It is recommended that efforts be made to spread awareness among law enforcement staff, for
example training sessions, workshops and conferences, on the scope of application of criminal and
prosecutorial rules and special laws, with reference to money laundering and financing of terrorism.
330.
An authority should be designated to provide feedback on ML and FT trends for law
enforcement authorities.
331.
The law enforcement authorities should be provided with laws or mechanisms to make possible
the urgent freezing of funds related to FT.
2.6.3.
Compliance with Recommendations 27 and 28
Rating
Summary of factors relevant to s2.6 underlying the overall rating
R.27
PC
- The law enforcement authorities have appropriate investigative techniques in
the matter of money laundering, but not financing of terrorism.
- There are no mechanisms that allow postponing or suspending the arrest of
persons involved in neither the seizure of money, ML nor TF, to obtain a better
result in the investigations.
- There are multiple criteria among law enforcement and judiciary officials about
the possibility to apply special investigative techniques, and this could cause
nullifications of investigations and the failure of penal procedures related with
ML/FT.
- Except in the framework of effective collaboration by the accused during an
investigation, measures for postponing prosecution, for example while better
evidence is being obtained or property and persons are being traced, do not exist,
nor have any been considered.
- There are no specific cases of investigation or prosecution in which
investigative techniques in force since 1997 have been employed, and their level
of effectiveness cannot therefore be assessed.
- The law enforcement and judiciary authorities have not received adequate
training in relation to ML. They are unaware of the procedural tools available to
them in the law, and have multiple contradictory interpretations of it.
R.28
PC
- Suitable legal tools and powers exist for securing evidence in money laundering
but not financing of terrorism investigations.
- No actual cases were encountered in which investigative measures were seen to
have been applied, or in which collection of evidence took place in investigations
into money laundering and financing of terrorism
2.7. Cross-Border Declaration (SR.IX)
2.7.1.
Description and Analysis
53
332.
Summary: Summary: Cash, securities, precious objects and metals exceeding US $10,000 in
value, or the equivalent in other currencies, must be declared (Article 28 of Act 285-1999). However,
the rule does not apply to money leaving the country. The team confirmed that a form is required from
travellers on entry. Administrative sanctions cannot be applied for non-compliance, but the money may
be impounded when a crime is suspected. Up to now the authorities have not made use of the
information on the forms.
333.
The Directorate General of Customs Services (DGA) is responsible for ensuring compliance
with these provisions at the land, sea and air customs posts. The DGA, on detecting that smuggling of
goods or undeclared cash has taken place at the frontier, checks, together with the National Police, their
origin, destination and consignee and passes the case to the investigative authorities of the Ministerio
Público as a possible case of contraband. The authorities, however, did not provide a copy of the
respective legal or regulatory provision.
334.
According to information from the DGA, from the second half of 2004 to the first half of 2008
US $1,454,574 in undeclared cash was impounded at the Managua airport.
335.
The National Police is the agency which, in practice, has discovered the greatest number of
persons, foreign and national, trying to bring in money without declaring it. The following table shows
the seizures effected by the police throughout the country, under suspicion of money smuggling.
Money seized by the National Police between 2004 and 2008, which was entering the territory
without being declared.
Period
Cases
Persons investigated
Persons convicted
Amount in US$
2004
2005
2006
2007
2008
Total
2
2
5
12
3
24
7
3
7
20
3
40
4
3
3
6
16
245,940
1,505,607
2,841,220
6,946,360
195,610
11,734,737
336.
According to the questionnaire submitted by the authorities, the information obtained belongs to
the DGA and it is not required to give it to other agencies such as the CAF. However, there are plans to
create mechanisms to obtain such information and process it for ML and FT prevention purposes. The
information on the forms is also not registered on data bases, and it is not known whether any use is
made of it.
337.
Nicaragua is a member of the CA-4, which is a forum for collaboration and coordination among
Central American immigration departments. However, we were not informed of any specific procedures
or actions for, say, notifying the customs authorities of a country from which money comes and
cooperating to establish its source, destination and purpose, as required by methodology criterion IX 12.
338.
There is no law allowing administrative sanctions to be imposed for non-compliance with this
provision. The seizures and confiscation of undeclared money, take place as a consequence of suspicion
of smuggling, not as an administrative penalty for non-declaration. Furthermore, the final paragraph of
Article 28 of Act 285-99, which was repealed by the new 2008 Criminal Code, specified that “for
purposes of proof, the omission of this declaration shall be considered to be evidence, and its falsification
shall constitute the offence referred to in Article 474 of the Criminal Code (false declaration on a public
document). Now that this provision, which was of great help in obtaining convictions for “contraband in
cash”, has been repealed, it is very likely that the authorities will have trouble getting the same results. It
is to be hoped that with the broadening of the definition of money laundering in the new Criminal Code,
the bringing of money in or out of the country in suspicious circumstances may be investigated and
prosecuted, as it expressly mentions “whoever introduce or take out from the national territory goods or
54
assets proceeding from illicit activities, utilizing the customs or immigration posts, terrestrial, maritime
or aerial, or any other place of the country” (article 282, literal e of the Penal Code).
2.7.2.
339.
Recommendations and comments
Require declaration of money and securities on departure from the country, not just on entry.
340.
Issue rules and procedures to enable the customs authorities to impose administrative sanctions
for non-compliance with the cross-boundary cash transport declaration requirement, and for false or
inaccurate declarations.
341.
Computerise the cash declaration information, share it and coordinate with other national
competent authorities for ML and FT prevention.
342.
Develop mechanisms to enable the DGA to exchange with counterpart agencies abroad
information on suspicious movement of cash, securities or precious stones.
343.
The monitoring, follow-up and detection capability of the customs authorities at frontier posts
should be strengthened, taking account of risk criteria and using intelligence information to enable them
to prioritise their operations more efficiently.
344.
It is suggested that the initiatives for training the staff of the Directorate General of Customs
Services working in the field of money laundering and terrorist financing prevention should be
continued.
2.7.3.
SR.IX
Compliance with SR.IX
Rating
Summary of factors relevant to s.2.7 underlying the overall rating
PC
• There is no obligation to declare cash and securities out of the country
(only upon entry).
• There are no provisions or procedures allowing the imposition of
administrative sanctions for failure to declare.
• There is no use of information gathered from the statements, nor is there
adequate coordination between the Directorate General of Customs and
other relevant agencies on risk management policies and AML / CFT.
3.
PREVENTIVE MEASURES – FINANCIAL INSTITUTIONS
3.1. Risk of Money Laundering or Financing of Terrorism
345.
The legislation in force in Nicaragua (Act 285 and its Regulations) makes no mention of a
possible gradation of controls according to the risk of money laundering or terrorist financing. However
the law empowers the Superintendency of Banks and Other Financial Institutions to issue the Rules and
regulations necessary for compliance with the provisions of the Act. On this basis, since 2002 the
SIBOIF issued Rules for Prevention of Money Laundering and Terrorist Financing Risk Prevention
Management. Then in 2006 it issued Rules for compliance Officers and finally, in April 2008 it issued
the current “Rules for the Management of Money Laundering and Terrorist Financing Risk Prevention”.
The latter is quite complete, it incorporates (and repeals) all the former regulations and includes in its
precepts management of money laundering and terrorist financing risks. These Rules require institutions
55
to have an overall system of policies and controls designed to adequately identify the risks, requires them
to increase their controls when the risk is greater, and allows them to reduce them when it is less, without
disregarding the minimal parameters imposed by the FATF.
Legal Status of the Rules issued by the SIBOIF.
346.
The second paragraph of Article 36 of Act No. 285 stipulates that: “The Board of Directors of
the Superintendency of Banks, has supreme authority, shall be responsible for ensuring the strengthening
and solvency of the national financial system and shall have the power to issue the necessary Rules and
regulations for compliance with the provisions of this Act. It is also empowered to order the necessary
inspections”. In addition, article 10-5 of the Law of the SIBOIF (Act 316 and its reforms) gives it the
authority to “Issue general regulations to guarantee that the capital of financial institutions is of licit
origin and to prevent the laundering of money and other assets within the financial sector and the
associated sectors”.
347.
The evaluation team found that all the resolutions and “normas” of the SIBOIF mentioned in this
report have the status of Regulations as this term is used in the FATF methodology because they develop
the obligations contained in the Act 285, the Decree 74, the SIBOIF’s Act and other legislation
applicable to the SIBOIF. These “Normas” (herein translated as Rules) are issued by the SIBOIF on the
basis of specific regulatory powers granted by the legislature, they are legally binding and enforceable,
and the sanctions that have been imposed on financial institutions for violation of the Rules are sufficient
evidence of their enforceability.
348.
The AML/CFT Rules of March 2008 which were in force at the time of the visit were amended
by a Resolution of March 2009, five months after the visit. According to the authorities the main purpose
of the reform is to clarify some sections and to extend the deadline for the finalization of risk-based
profiles. The evaluators conducted a cursory review of the regulations and did not find any changes that
could materially affect their view of the country’s compliance with the FATF recommendations. Some
formal changes identified are noted in footnotes across Section 3 of the report, where applicable.
However, the findings in this report are based only on the AML/CFT Rules of March 2008.
Customer Due Diligence and Record Keeping
3.2. Customer Due Diligence, including enhanced and reduced measures (R.5 to 8)
3.2.1.
Description and Analysis
349.
Articles 30 and 31 of Act 285 set out a list of regulated financial institutions and activities that
fall within the spectrum of financial activities indicated by the FATF, but which up to the time of the
evaluation had not received any instructions from the competent authority (Financial Analysis
Commission, CAF) on the duties imposed by Act 285. It was learned from the interviews held with
some of these institutions that they were unaware of this Act and of the application of this
Recommendation. These institutions, mentioned in the Act but which so far do not apply it, are the
following: savings and loan cooperatives, businesses engaged in the sale of foreign currency or Bureaux
de Change, microfinance banks, remittance houses, credit card operators, and pawnbrokers.
350.
The current “Rules for the Management of Money Laundering and Terrorist Financing Risk
Prevention”, is applicable to all entities under the SIBOIF’s supervision and control (banks, finance
companies, stockbrokers, insurance companies and bonded warehouses). As a result of the recent issue
of this document, there is phasing process in the application of some of its provisions. There are
exceptions and particular circumstances for each institution according to the nature of their business.
351.
It is important to note that there is an appeal on the grounds of unconstitutionality before the
Supreme Court of Justice concerning the recently issued Rules of the SIBOIF. But this has not
prevented the Rules from remaining in force until the Supreme Court hands down a formal decision,
56
which in practice could take several months or even years. It is also important to note that the appeal
was supported, at least partially, by some of the Judges of the Court, who will be responsible for
deciding its validity. This has given rise to uncertainty concerning the survival of the preventative
regime and has delayed the investment that certain financial institutions must make to comply with it.
352.
As far as permitting financial institutions to hold anonymous or accounts under fictitious names
is concerned, it must be pointed out that in Nicaragua, Article 2 of Act 285 stipulates: “The Financial
Institutions must hold nominative accounts for customers; they may not hold anonymous accounts nor
accounts under fictitious or imprecise names”.
353.
Article 8 (e) (i) of the SIBOIF Rules stipulates that the supervised entity must not initiate,
establish, accept, maintain, execute or develop: “Accounts or business relations that are anonymous, or
under fictitious or imprecise names, or accounts which are enciphered or encoded; or which in any way
do not appear under the name of the person-customer to whom they belong”. Also, Article 6 (i) of the
SIBOIF Rules stipulates that it is the responsibility of the Board of Directors of the supervised entities to
ensure that: “Only nominative accounts are held, and anonymous accounts or transactions, or ones
which appear under fictitious or imprecise names, or are coded or enciphered (…)”.
354.
On the basis of the information obtained during the interviews with the supervisory authorities
and institutions in the financial system, the evaluating team concluded that the prohibition on anonymous
and numbered accounts is complied with in practice.
When customer due diligence must be performed (CDD)
a) CDD when business relations are established
355.
The Financial Institutions under the supervision of the Superintendency of Banks (see table
included in section >> of this report), are those which have developed customer due diligence measures
including identification of the customer, documents to be required, verification of the information and
documentation presented by the customer, development of an overall profile of the customer, and
developing matrices for the risk classification of their customers. As far as the other regulated financial
institutions mentioned in Act 285 are concerned, these have only developed basic forms for customer
identification. It is important to mention that it is the Superintendency of Banks and Other Financial
Institutions that is responsible for verification of compliance with the regulations in force concerning the
application of due diligence for knowledge of the customer in the system supervised. The other financial
institutions have not been verified for compliance with the regulations in force.
356.
Paragraph 2 of Article 32 of Act 285 stipulates: “Financial Institutions must verify by accurate
means, the identity, representation, domicile, legal capacity, occupation and commercial objectives of
persons, whether they are habitual or occasional customers”. Likewise, Article 35 of Act 285 stipulates:
“For purposes of the provisions of Article 32 and 33 of this Act, banks and financial institutions, whether
state or private, shall develop forms containing at least: a) identity, signature and address of the person
who physically carries out the transaction b) identity and address of the person in whose name the
transaction is performed c) the identity and address of the beneficiary of the transaction or the person for
whom it is intended, when such exists d) the identity of accounts affected by the transaction, if there are
any e) the type of transaction concerned, such as deposits, withdrawals, exchange of money, cheque
cashing, purchase of certified cheques or cashier’s cheques or payment orders or any other payments or
transfers made through the banking and financial institution.”
357.
The SIBOIF Rules, applicable only to institutions subject to control and supervision of the
Superintendency of Banks and Other Financial Institutions, stipulates that each supervised entity,
depending on its specificity and its risk profile within the industry in which it operates, must put into
effect its own policies, procedures and internal controls for the development of adequate and ongoing
policies of customer due diligence.
57
358.
Article 8 (c) of the SIBOIF Rules stipulates: “It is the non-delegatable responsibility of each
supervised entity, in developing its CDD, to adequately identify, verify, know and monitor all its habitual
customers, including co-owners, representatives, signature holders and final beneficiaries of these;
whether they are natural or legal persons, nationals or foreigners, as well as to maintain in the customers’
files proof of the verification performed on the information obtained. As regards customers who are
simply casual customers and not recurrent ones, non-permanent and who pose a low ML/FT risk, or
other persons who may intervene such as agents, the supervised entity shall at least identify them, taking
note of the name, number and type of identity document, and taking sight of the respective legal, official,
unexpired, viable and unimpugnable documents in accordance with the laws governing the matter”.
359.
At the initiation of a contractual relationship with a natural person, the supervised entity must,
under Article 9 b) of the SIBOIF Rules, request of the customer: (…) the original of the legal, official,
unexpired, reliable and unimpugnable identification document in accordance with the laws governing the
matter (…) For legal persons, sub-paragraph c) of the same Article stipulates: “The supervised entity
must obtain up-to-date documentation and evidence of its legal constitution and its entry in the relevant
register, according to the activity in which it engages, its domicile, the names of its owners or majority or
significant shareholders, directors, trustees (where applicable) or other persons authorised to represent,
sign or act on behalf of the customer, or to deal on its behalf with the supervised entity, which must be
satisfied as to the ownership and control structure of the customer. Depending on the nature of these
documents they must be reviewed by the respective legal section of the supervised entity”.
360.
For the process of identification, the supervised entity must develop forms, physical or
electronic, which must contain the following minimum information: full name, number and type of legal,
official, unexpired, reliable identification document, a signature matching that on the identity document,
address and telephone; this information must be obtained for the person who physically performs the
transaction, and for the person on whose behalf the transaction is performed, the beneficiary of the
transaction or the person for whom it is intended. It is important to point out that the evaluation team
had access to the forms that the (interviewed) banking institutions have designed as part of their
customer due diligence and that it was possible to conclude that they obtain the minimum information
required. The forms to which access was obtained do not enquire expressly if the person is acting on his
own behalf or on behalf of another.
361.
The supervised entities, as part of the know your customer due diligence, must include policies,
procedures and requirements for verifying, prior to or in the course of the commercial relationship, by
means of legal documents, information from pertinent and reliable sources, the real existence, identity,
representation, domicile, legal capacity, commercial purpose, objective of the operation and the origin of
the funds to be used. In the interviews held in the supervised system, the evaluating team was informed
that there is no public or private system that can be consulted to verify whether the natural or legal
person exists. Some of the procedures that are used are consultation by telephone calls, in situ visits,
commercial and bank references. It is important to emphasise that it takes approximately five days to
obtain a certification from the commercial register.
362.
In addition to the forms designed by each supervised entity, the SIBOIF Rules stipulate in
Article 12 “The supervised entity shall structure, adopt and keep up to date a “overall customer profile
(PIC)” which it shall fill out for its habitual customers (natural or legal persons, nationals or foreigners)
with whom it establishes contractual business relationships; including their co-owners, representatives
and signature holders (…)” Annexe 2 of the SIBOIF Rules sets out the format for the overall customer
profile for individual and legal persons, depending on the industry to which the supervised entity
belongs. The supervised entities interviewed state that the PIC enables them to know the customer, his
main activity, the purpose of the relationship and the origin of the funds to be used.
363.
Subsequent to the collection of all the information on the client on the forms designed by the
supervised institutions and those indicated in the SIBOIF Rules for the development of an overall
customer profile, this information must be fed into a matrix for evaluation of the level of risk posed by
the customer who is initiating a contractual relationship with a supervised institution, in the interest of
better due diligence.
58
b)
CDD when there are Casual Transactions greater than US$10,000
364.
Act 285 establishes the same customer due diligence (CDD) obligations: “Whether customers be
habitual or casual” (Article 32). Separately, Article 8 c) of the SIBOIF Rules stipulates: “(…)As
regards customers who are simply casual customers and not recurrent ones, non-permanent and who
pose a low ML/FT risk, or other persons who may intervene such as gestores, the supervised entity shall
at least identify them, taking note of the name, number and type of identity document, and taking sight of
the respective legal, official, unexpired, viable and unimpugnable documents in accordance with the
laws governing the matter”. In Nicaragua, therefore, there are no CDD requirements which are only
applied beyond a specific threshold.
c) CDD when funds are being transferred
365.
Act 285 sets no specific requirement for transfers of funds, but it does require CDD to be applied
on all transactions of any kind, occasional or habitual, regardless of their amount. This necessarily
includes all transfers or funds. The most specific means for complying with Special Recommendation
VII against the financing of terrorism have been established by the SIBOIF in its AML/CFT Rules,
compliance with which is mandatory for all the financial institutions under its supervision. Noncompliance with these regulations, including the requirements for transfers of funds, incurs the sanctions
described in the section of this report corresponding to R.17.
366.
Article 21 of the SIBOIF Rules calls for a “Know Your Wire Transfers” policy, paragraph a) of
which stipulates: “In the case of domestic or international wire transfers of funds and remittances,
whether habitual or occasional, the supervised entity when it is acting as originator, intermediary or
beneficiary, shall i) include in the wire transfer forms and related messages, throughout the chain of
payments, the exact, precise and valid information on the sender (name, type and number of
identification, address, telephone and account number) ii) make sure that the above information is
maintained with the transfer and messages throughout the entire cycle of payments iii) thoroughly
examine the transfers of funds that do not contain complete information on the sender, or refuse to
receive them.” In the interview held with ASOBANP (Association of Private Banks of Nicaragua), it
was stated that the difficulties they had in this area related to the information on the sender, owing to the
fact that many of the remitters abroad were undocumented immigrants and did not give an exact or true
name or identification document. In addition, it is important to point out that the SIBOIF Rules do not
set a threshold for transfers of funds, which means that all transfers must be examined regardless of the
amount.
d) CDD when a transaction is considered to be Suspicious
367.
No transactions are exempt from CDD. Besides, when in the course of the relationship with a
customer one of his transactions or activities presents unusual characteristics, the institution is obliged to
carry out an analysis to determine whether it should be reported as suspicious. This analysis includes a
process of due diligence (additional to that carried out prior to the initiation of the relationship). Article
28 b) of the SIBOIF Rules stipulates: “b) when the conclusions reached by the supervised entity on the
basis of the documented examination, scrutiny or analysis of transactions, operations or activities
detected as having similar characteristics to or falingl within those referred to in Article 26 a) and/or
those embodied in Annexe 3 on Warning Signs and Indicators of the Present Rules, and the customer
does not furnish a clear and reasonable, documented, legal, financial, economic or commercial
foundation, explanation and justification for them; or, even if the above is furnished, the institution
should in any way presume, suspect, have reasons to suspect, have evidence, knows or should know that
the funds are derived from or are intended for an unlawful activity or for ML/FT, regardless of whether
they fall within any warning signal or indicator; the supervised entity must i) classify the said activity as
a suspicious operation ii) immediately submit a Suspicious Transaction Report (STR) to the competent
authority in accordance with the law.
e) Doubts about the suitability and veracity of the information
59
368.
Article 11 p) of the SIBOIF Rules states that when the supervised institution is unable to identify
and verify information on its existing or potential customers, or is unable to obtain the necessary
information on the purpose and nature of the commercial relationship, it must bring the said relationship
to an end or not initiate it. It is also within the discretion of the supervised entity whether it should
submit a Suspicious Transaction Report.
Identification measures and verification sources
369.
Regulated institutions enumerated in Act No.285 are legally required to verify by accurate means
the identity, representation, domicile, legal capacity, occupation and commercial purpose of persons,
whether habitual or occasional customers. Each regulated entity also has the obligation to develop forms
for collecting information on persons who physically carry out the transaction, those on whose behalf
they do so, as well as of the beneficiary of the transaction or the person for whom it was intended. It is
important to emphasise that at the date of the evaluation it was learned that only the institutions
supervised by the SIBOIF comply with this obligation. This is because the supervised institutions have
an additional set of Rules issued by the SIBOIF, compliance with which is the subject of verification. In
the interviews held with the supervised entities, the latter indicated that they have been sanctioned for
non-compliance with the provisions of the Standard. In addition, the other regulated entities not
supervised by the SIBOIF have no acquaintance with this law (Act No.285 and its regulations) and stated
in the interviews with the evaluating team that the competent authority (Financial Analysis Commission
– CAF) has not yet approached them, but that for their part they are willing to comply with the
regulations in force. 11
370.
In the interviews carried out by the evaluation team with the sectors that are unionised and that
are regulated entities under Act No.285, the latter stated that although they are unacquainted with the Act
the internal controls they apply include identification of customers at the moment of initiating a
contractual relationship
371.
The SIBOIF Rules also include a list of documents that the supervised entity must demand when
it initiates a contractual relationship with its customers, whether natural or legal persons. In the case of
natural persons the documents required include the identity card for residents in the country, residence
permit and/or passport for nationals not resident in the country, resident’s certificate for resident
foreigners, passport with unexpired entry stamp for non-resident foreigners, passport or identity card for
non-resident foreigners from a member country of the CA-4 (Guatemala, Honduras, Salvador and
Nicaragua are the members of the CA-4), identity card or official document issued by the competent
national authority for foreigners who are members of representations or organisations with diplomatic
status.
372.
Legal persons must supply the following documentation: official certification of inscription in
the relevant Register to certify their respective legal personality in accordance with the law, a photocopy
of the official diary in which the creation of the legal person is entered, when applicable; Articles of
Association and Statutes duly entered in the respective Register, a document accrediting the powers,
mandate or representative capacity of one person on behalf of another, whether the latter is natural or
legal, certification of the minutes of the Board of Directors showing the granting of powers to represent a
company or entity, official certification of the minute, letter of appointment and/or assumption of office
of a public official responsible for a State agency, licences and/or permits or equivalent documents,
unexpired and issued by the competent public registers, document or RUC (single tax register) card,
certification of the minutes showing the membership of the current Board of Directors of the legal
person, financial statement and its annexes, bank, commercial or personal letters of reference. All
documents issued abroad and/or in a foreign language must be duly translated into Spanish and
authenticated by the corresponding authorities, according to law.
11 Subsequent to the evaluation visit, the CAF stated that it has just begun to make contact with casinos and other regulated entities, to familiarize them with their
obligations under Act 285-99 and with the STR form
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373.
Article 11 of the SIBOIF Rules stipulates that the information and documentation supplied by
the client at the beginning of a contractual relationship must be subjected to verification to confirm its
validity, the true existence and identity of the customers; for this purpose internal databases and external
ones to which access is available must be used, as well as publicly available lists provided by a
competent authority or international bodies, of natural as well as legal persons known as money
launderers, terrorists or financiers of terrorism, or for links with organised crime. Verification in situ
must be carried out to confirm the existence of customers who are legal persons.
374.
The databases to which the supervised entities have access are the Central Risk Database (credit
bureau), internal databases, OFAC lists and other lists of terrorists and other lists provided by the head
office, in the case of regional financial groups.
375.
For legal persons, the supervised entities must obtain documentation and evidence of the names
of their owners or majority or significant shareholders, directors, trustees or other persons exercising
control over the customer, as well as identification of the persons authorised to represent, sign or act on
behalf of the customer. They must also obtain the constitutive document of the legal person duly entered
in the respective Register, and documentary accreditation of the power, mandate or representational
capacity of one person with regard to another (natural or legal).
376.
As regards Trusts, according to the interviews carried out with banking institutions and the
SIBOIF, at the present time this product does not exist, because it must be authorised by a special law. It
is important to indicate that Article 54 of Act No.561 stipulates that only banks can carry out operations
of confidence, within which sub-paragraph 8 includes “Acting as trustee for trusts set up under special
laws, always provided that in these operations the bank does not undertake to pay fixed or determined
incomes nor to devolve the entirety of the capital in trust”. In addition, the team was informed that if the
representative of a trust set up abroad should approach a bank, this capacity could not be recognised.
377.
Article 33 of Act No.285 stipulates that every financial institution must adopt measures to obtain
and store all information on the true identity of the persons on whose behalf a new bank account is
opened or a financial transaction is performed. Likewise, Article 35 of the Act makes it mandatory for
the regulated institutions to design forms which include as a minimum the identity and address of the
person on whose behalf the transaction is being performed. The SIBOIF Rules also stipulate that the
supervised entities must design forms which shall include general information on the beneficiary of the
transaction or the person to whom it was intended. From the forms supplied to the evaluation team, it
was observed that the identification of the final beneficiary is not included.
378.
For insurance companies, Article 64 a) of the SIBOIF Rules states: “Operators in the insurance
markets are exempted from the general principle of the duty of prior identification and verification of the
beneficiary of the policy before or during the life of the contract. For purposes of such identification and
verification, the beneficiary of the policy shall be considered to be the person designated on the policy by
the insured person, contracting person or subscriber, as beneficiary of the rights of indemnity conferred
by that document”. The verification may be performed afterwards, always provided that the
identification and verification be completed before any payment is made to the beneficiary under the
policy, or prior to the date on which the beneficiary may exercise rights created or acquired under the
policy.
Acting on behalf of another person
379.
Among the verification measures which the supervised institutions must implement is that of
checking whether the customer is acting on behalf of another person or not, and the legal capacity in
which the customer is acting. It is important to note that only in Sections 4.12 to 4.13.7 of the format of
the overall customer profile designed by the SIBOIF for bonded warehouses is the question included:
“For the purposes of this application, are you acting solely on behalf of the institution described above”.
It was noted that on the forms supplied to the evaluating team by the supervised institutions, one
institution on its form entitled “Enhanced CDD Questionnaire – Natural Person”, applicable to high risk
61
customers, the question is included “Is the customer acting on behalf of third parties”. This derives from
the provision in Article 18 c) of the SIBOIF Rules, which stipulates “c) determine whether the high risk
customer of the supervised institution is acting on behalf of third parties”. This indicates that the
supervised institutions place greater emphasis on these questions when the customer is a high risk one.
Taking reasonable measures
380.
Determining the credentials and structure of the customer: To determine the credentials and
structure of the customer the supervised institution must obtain information to make it possible to find
out what its structure is (constituent document), who are its majority shareholders, as well its legal
representative. This is laid down in Article 9 c) of the SIBOIF Rules: “c) in the case of a customer who
is a legal person, the supervised institution must obtain up-to-date documentation and evidence on its
legal constitution and its entry in the relevant register, according to the business in which it is engaged,
its domicile, the names of its owners or majority or significant shareholders, directors, trustees (when
applicable), or other persons exercising control over the customer; as well as identification of the
persons authorised to represent, sign or act on behalf of the customer or to conduct relations on its
behalf with the supervised entity, which must verify the credentials and control structure of the customer,
these documents, depending on their nature, must be reviewed by the respective legal branch of the
supervised institution”. (emphasis in the original)
381.
Determining who are the natural persons who control the customer: When the supervised
institution must determine who the natural persons are who in the final instance own or control the
customer, as well as those who exercise control over legal persons, Article 11 a) of the SIBOIF Rules
stipulates that when the customer information is obtained, it must be verified and retained in order to
determine the true identity of the owners or the majority or significant shareholders of the legal person,
as well as its legal representatives and the persons authorised to sign for the account or accounts which
may be opened, and for doing business.
382.
Customers classified as high risk must undergo more exhaustive or rigorous procedures and
controls, i.e. enhanced due diligence for knowledge of the customer. Apart from determining the true
identity of the owners or the majority or significant shareholders, legal representatives and persons
authorised to sign for one or several accounts or to do business, this enhanced procedure must be applied
under Article 16 j) of the SIBOIF Rules to: “(…) i) persons exercising real control over its operations,
assets, properties and businesses in general ii) principal shareholders/partners, persons authorised to
sign, or other persons who exercise significant control over the company iii) partners and other persons
exercising ownership control in the case of Sociedades Colectivas and Comanditarias iv) controlling
persons when other companies or trusts exercise control over the company”.
383.
The forms designed by the banking institutions include a section where the client must indicate
the purpose and nature of the relationship. It is important to note that this aspect was also set out in the
rule “CD-SIBOIF-197-2-MAR01-2002”, which was repealed. At present this obligation is laid down in
Article 8 d) of the SIBOIF Rules: “d) the supervised institution at the moment of opening an account or
at the initiation of the commercial relationship with the customer, must obtain adequate information on:
i) the origin of the funds and assets to be managed ii) the purpose and nature of the relationship iii) the
expected monthly volume of business. (Emphasis in the original)
Ongoing Due Diligence.
384.
The supervised institutions must periodically update the information submitted by the customer
at the beginning of the contractual relationship, and these updates must be entered on the file, together
with the date on which they were done. The SIBOIF Rules stipulate that customer due diligence must be
applied to commercial relationships and transactions carried out by the customers, and include
monitoring, which must be performed in an ongoing, permanent manner, and shall include the
maintenance and periodic updating of the information.
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385.
Updating of information shall be done in accordance with the customer’s risk profile. For low
risk customers it shall be done every four years; for medium risk customers every three years and for
high risk customers annually. It is important to point out that this obligation exists since the issue of the
SIBOIF Rules, i.e. since March 2008. Prior to that regulation CD-SIBOIF-197-2-MAR01-2002, which
was repealed, only made it obligatory for the supervised institutions to keep the customer information
up-to-date.
386.
Article 6 p) of the SIBOIF Rules stipulates that it is the responsibility of the Board of Directors
“p) provide for adequate specialised systems of monitoring for prompt detection of unusual and/or
suspicious operations, in keeping with the technology used for the provision of its services”. (emphasis
in the original). The Rules provide for phased application of this obligation, and the supervised entity
has twelve months to put it into effect. 12
387.
In the interviews, the supervised entities informed the evaluation team that following the duty
imposed by the SIBOIF Rules regarding monitoring systems, they are at present strengthening such
systems, as well as policies, procedures, controls, warning parameters and risk levels, to help monitor the
movements of customers’ business. It is important to mention that the Rules for ML Prevention issued in
2002, and repealed when the new Rules entered in force, already required the monitoring of customers
and compliance with this obligation was supervised and verified by the SIBOIF. Some of the institutions
interviewed also stated that they have monitoring systems bought from providers of this type of service.
388.
In addition Article 26 a) of the SIBOIF Rules stipulates that the monitoring performed by the
supervised institution must: “a) (…) detect and pay particular attention to all activities, transactions or
operations that may be uncharacteristically complex, unusual, large, atypical, incongruent,
disproportionate or inconsistent, or which have no apparent legal or commercial basis, or are
inconsistent with the economic and transactional profile declared by the customer. This obligation
applies both to transactions carried out and those simply proposed, whether or not they may give rise to
ML/FT suspicion, as well as to periodic individual transactions and patterns of multiple transactions
displaying one or more of the abovementioned characteristics or which fall within and/or coincide with
the warning signals and indicators in Annexe 3 of these Rules.”
Higher/Lower Risk Customers
389.
The SIBOIF Rules require due diligence for knowledge of the customer including the
management of different risk levels for each of them, depending on how the supervised institution
classifies them under the risk matrix that it must put into effect. This obligation applies solely to
institutions supervised by the Superintendency of Banks and Other Financial Institutions, and not to
other regulated institutions.
390.
Article 8 b) of the SIBOIF Rules stipulates: “b) CDD policy shall be applied differentially in
accordance with the ML/FT sensitivity and level of risk determined by each supervised institution
according to its own classification matrix and in accordance with circumstances and risk factors. High
risk requires enhanced CDD, medium or normal risk standard CDD and low risk simplified CDD”.
(emphasis in the original)
391.
Enhanced CDD must be applied to high risk customers, and includes the duty of the supervised
institution to have more rigorous, deeper, demanding and exhaustive procedures, policies and measures,
in order to obtain information to enable it to have better knowledge of the customer. This measure is
applicable to both potential and existing customers. Regarding existing customers the Rules provide for
12 The Rules were partially amended by a Resolution of March 2009, five months after the visit, and during the drafting of this report the evaluators had no
knowledge of the new text. According to the authorities, among the amendments is the extension to 31 December 2009 of the deadline for putting in place a riskadapted monitoring system for detection of unusual and suspicious transactions.
63
phased application of this obligation, and the supervised entity has twelve months (until about April
2009) to put it into effect.
392.
With regard to risk matrices, each supervised institution must develop its own matrix or matrices
for assessing the money laundering and terrorist financing risk, including all areas of operation,
customers, products and services. The result of this evaluation must enable the institution to categorise
the customer by level of risk, the due diligence to be applied and the monitoring under which the
customer must be held. It is important to point out that the development of these matrices may be phased
and Article 81 of the SIBOIF Rules gives the supervised entities nine months (until about December
2009) to implement them.
393.
Article 15 b) of the SIBOIF Rules stipulates that: “Without prejudice to those that may be
additionally included and placed in these categories in accordance with ML/FT risk classification
matrices of each supervised institution, or under instructions from another authority with competence in
the field, or in accordance with international ML/FT prevention practices, the following shall be
considered among risk factors: High Risk Customers; High Risk Products, and/or Geographical Areas.”
(emphasis in the original)
394.
As indicated in the previous paragraph the SIBOIF Rules provides supervised institutions with a
list of customers, products, services, accounts, distribution channels, countries, jurisdictions and
geographical areas which may be considered high risk. In addition Annexe 1 of the Rules embodies
general concepts for better application and interpretation of the regulations, including the concept of
PEP, private banking, etc.
395.
For customers, products, distribution channels and geographical areas considered at high risk of
money laundering and terrorist financing, the supervised institution must apply more exhaustive and
rigorous procedures and controls. For this purpose Article 16 a) to ñ) of the SIBOIF Rules provides a
series of measures to be applied to this type of customer.
396.
The design of risk matrices that each supervised institution must possess for risk classification
will enable it to determine whether a customer is high, medium or low risk. If the customer is classified
as low risk, the supervised institution may apply simplified procedures and controls, i.e. reduced due
diligence. It is important to point out that Article 17 b) stipulates that the institution may only simplify
the CDD when its risk matrix establishes that there is a low risk for the customer with whom a
contractual relationship is being opened, or with an existing customer. It is important to point out that
the development of these matrices may be phased and Article 81 of the SIBOIF Rules gives the
supervised entities nine months.13
397.
Furthermore, Article 17 d) stipulates: “d) (…) the supervised institution may apply simplified
CDD to the following types of customers, among others: i) institutions supervised by the
Superintendency ii) Sociedades Anónimas quoted on the stock market and which must by law meet
disclosure requirements iii) Nicaraguan State and Municipal Agencies iv) non-recurring and low risk
occasional customers”.
398.
Article 66 of the SIBOIF Rules allows institutions in the insurance market to apply simplified
CDD solely in the following cases: “i) policies with annual premiums of US$1,000 or less, or the
equivalent in national or any other currency ii) legally compulsory motor vehicle insurance iii) policies
for pension and retirement plans, always provided there is no redemption clause and the policy may not
be used as collateral”. To comply with the provisions of this Article, it will be enough for the customer
to fill out the application, indicating his name, the number and type of identification document, always
provided that he is the person who is taking out the policy.
399.
In Nicaragua, under the SIBOIF Rules, financial institutions are permitted to apply simplified or
reduced CDD measures to customers resident in another country, if they meet the criteria to be classified
13 This deadline was extended to December 2009 by a resolution of March 2009 (subsequent to the visit).
64
as low risk. However, any customer that has activities or resides in countries or jurisdictions which are
considered by international bodies specialised in the field to be non-cooperative in combating money
laundering and financing terrorism, and/or tax havens of high banking secrecy; or countries with low or
poor legislation about AML/CFT. In these cases enhanced due diligence measures shall be applied to the
customer.
400.
Simplified CDD shall be applied solely when the customer or his operations have been
determined to be low risk in accordance with the risk matrix. In cases where suspicion of money
laundering or where there is a higher risk, the supervised institution must classify this customer as a high
risk customer and apply enhanced CDD. In addition, Article 28 of the SIBOIF Rules stipulates that
when the supervised institution presumes, suspects, has reason to suspect or possesses evidence, knows
or ought to know, that the funds derive from or are intended for an unlawful activity, that institution must
immediately submit a Suspicious Operation Report to the competent authority.
401.
Supervised institutions are allowed to apply due diligence measures in a graduated fashion, i.e.
depending on whether the risk, on the basis of the risk matrices to be implemented by each institution, is
high, medium or low. In addition, for each CDD measure there are guidelines that the supervised
institutions must follow. For enhanced CDD, which is for high risk customers, the SIBOIF Rules
provide an ample list of which persons, products, services, accounts, countries, geographical areas must
be included as high risk customers, regardless of the fact that this has to be established through the risk
matrices. In addition Annexe 3 of the Rules provides a list of warning signals and indicators for each
sector supervised, which are meant to be analysed in combination with other indicators, factors, criteria
or information available, to determine whether the operations in question are suspicious transaction
linked to ML or FT andk must be reported to the competent authorities.
Timing of Verification of Identity
402.
Article 11 of the SIBOIF Rules stipulates that “CDD must include policies, procedures and
requirements for verifying, prior to or in the course of setting up the usual commercial relationship, by
means of legal, reliable and unimpunable documents and other information and relevant and reliable
sources: the true existence, identity, representation, domicile, legal capacity, business objectives, the
purpose of the operation and the origin of the funds to be used. For occasional customers that are not
recurrent, not permanent and of low ML/FT risk, or other persons who intervene such as gestores, the
supervised institution must at least verify their identity.” It is important to point out that this shall be the
CDD measure to be applied depending on the risk classification of the customers. To verify the
information the supervised institutions use their own sources, credit bureaus, and make telephone calls,
on site visits to the premises indicated by the customer. The results of this verification shall be placed on
the customer file. The supervised institutions do not have private external sources of data that they can
consult for general information on the person with whom they wish to initiate a commercial relationship.
403.
The SIBOIF Rules stipulate that it is the responsibility of the Board of Directors of each
supervised institution to determine, through their policies and procedures, the exceptional cases in which,
in order not to interrupt the flow of business or the development of their commercial activity, they may
complete the identification of the customer subsequent to the establishment of a business relationship.
These policies must be included in the Money Laundering and Terrorist Financing Prevention Manual, in
a clear and specific form, and the minimum time limit for carrying out the subsequent verification must
be set out.
404.
In addition, Article 11 g) of the SIBOIF Rules stipulates: “Only in exceptional cases expressly
envisaged in the policies and procedures approved by its Board of Directors pursuant to Article 6 l) of
these regulations may the supervised institution complete identification of the customer subsequent to the
establishment of a new commercial relationship. It is the responsible of each institution to determine
which cases shall be considered exceptional in accordance with their respective ML/FT risk level
matrices”.
65
405.
Insurance companies are exempted from the obligation to identify and verify the customer at the
moment of initiating a contractual relationship, in the case of policies for pension and retirement plans,
payment of the premium as long as such payment is not in cash, and when relationships that are not face
to face are established. Verification may be done subsequently when payment is made to the beneficiary
indicated in the policy or prior to the date on which the beneficiary may exercise rights acquired under
the policy.
406.
When the supervised institution is unable to comply with the requirements for identification and
verification of existing customers, as well as potential customers, or to obtain necessary information on
the purpose and nature of the business relationship, it must bring this relationship to an end or refrain
from initiating it. It must also consider, at its discretion, sending a Suspicious Transaction Report (STR)
to the competent authority. It is important to note that in the interviews with banking institutions, they
stated that when they are unable to obtain the necessary information on the customer or consider that a
customer is high risk for the bank, they do not initiate a business relationship with that customer. In
addition there are institutions which are under instructions from their head offices to refuse to open
accounts for customers from specific countries.
407.
As indicated in the previous paragraph a supervised institution that is unable to comply with the
requirements for identification and verification of existing customers, or to obtain necessary information
on the purpose and nature of the business relationship, must put an end to that relationship. It must also
consider submitting, at its own discretion, Suspicious Transaction Report (STR) to the competent
authority.
408.
Article 8 e) of the SIBOIF Rules states: “e) The supervised institution must not initiate, establish,
accept, maintain, execute or develop: iii) any commercial relationship or transaction with high risk
customers who, even applying the provision of Articles 6 l) and 11 g) of these regulations, do not supply
the full information required for ascertaining his identity, the purpose of the relationship and the specific
justification of the origin of the funds or assets managed or to be used”.
Pre-Existing Customers
409.
It is important to mention that each supervised institution must ensure that its records of existing
customers are up-to-date. It must also carry out periodic reviews, with particular attention to one or
various significant transactions or when there is a significant change in the way in which the account or
transactions are handled. In the interviews held with the supervised institutions they said that in order to
apply their risk matrices to all their existing customers they need more time, since the SIBOIF Rules
gives them a time limit of only twelve months to comply with this obligation. They will therefore ask
the Superintendency of Banks and Other Financial Institutions for an extension of time.
410.
Article 8 h) of the SIBOIF Rules stipulates: “Each supervised institution shall determine the
scope of CDD procedures for existing customers, according to the importance and ML/FT risk level
under the risk classification matrix which they must previously develop and document, with particular
attention to relationships and accounts where the identity of the customer or the final beneficiary is not
duly established, or verified, or is not transparent.”14
411.
The risk posed by all the existing clients must be measured through the matrices that each
supervised institution must implement. This will determine the degree of due diligence to be applied.
When the matrix shows the client to be high risk, the supervised institution must apply enhanced CDD.
Article 16 ñ) of the SIBOIF Rules stipulates: “Enhanced CDD measures for high risk clients shall be
applied as follows: (…) for customers already existing on the date of entry into force of these
regulations, within a period of no more than twelve months, in concordance with the period set out in
Article 12 e) without prejudice to the ongoing monitoring to which such customers must be subject”.
14 The ML/FT Prevention Rules were recently amended (March 2009) and the deadline for compliance with the Risk Matrix requirement was extended to December
31 2009
66
412.
Act No.285passed in 1999, prohibits the opening of anonymous accounts, as well as accounts
under fictitious or imprecise names. In addition, according to information provided by the
Superintendency of Banks and Other Financial Institutions, the majority of the banking institutions
belong to a regional financial group, which requires them to apply stricter rules in the opening of
accounts. In addition, each regional group has its own regulation, which must be applied by the
supervised entities belonging to that group.
PEPs
413.
Despite the effort made by the Superintendency of Banks and Other Financial Institutions
(SIBOIF) to issue Rules for supervised entities, for identifying and applying enhanced due diligence to
foreign and national PEPs, this has not been done for all the other financial activities indicated by FATF.
414.
The institutions supervised by the SIBOIF state that the procedures indicated in
Recommendation 5 enable them to establish whether the persons with whom they are establishing a
commercial relationship are politically exposed persons (PEPs) or if they are close relatives, associates,
and/or close collaborators. One of the measures that must be taken with respect to PEPs and any other
high-risk customers is that “the contractual relation, transaction or link with the client must be approved
by an officer of high managerial ranking or from the board of directors” (Art. 16-f of the Rules), thereby
satisfying the requirement of criterion 6.2 of the methodology.
415.
Apart from the Rules issued by the SIBOIF, there is no legislation and/or regulation requiring
risk management or the application of appropriate due diligence measures for this type of customer.
Although it appears in the SIBOIF Rules, each supervised institution must design risk matrices for the
categorisation of risk level for each customer and for the type of due diligence measure to be applied.
The regulations were only recently issued and provide for phased application of the provisions in it. This
means that the supervised institution has until the beginning of 2009 to put the obligation into effect and
begin to apply their risk matrices. In the interviews with the financial sector, the institutions stated that
they had difficulty in applying these matrices and were considering requesting an extension of time for
their application. Previously the SIBOIF had issued a set of regulations entitled Rules for the Prevention
of Laundering of Money and other Assets, which was repealed. It classified as high risk customers those
whose balances were above US$15,000 and who were representatives of foreign governments holding
accounts.
416.
Article 15 of the SIBOIF Rules states that enhanced, reinforced, improved, amplified or
intensified due diligence is the set of policies, procedures and differentiated measures of internal controls
that are reasonably more rigorous, penetrating, demanding and exhaustive which the regulated entities
must apply to customers classified as high risk. In addition, Article 15 b) i.d) and i.i) classifies as high
risk customers:
(…) “i.d – Politically Exposed Persons (PEP) including close relatives, associates and close
collaborators of such persons (…) (…) “i.i – Well-know public persons (PNP) (…)
417.
For the correct classification of high risk customers, Annex 1 of the SIBOIF Rules sets out
definitions, including the following: “Politically Exposed Persons (PEP)s: Any natural person identified
at the beginning or in the course of the contractual relationship who acts or has acted as a high level
public official, in his own country or abroad. This includes his closest relatives, persons closely
associated with him, his closest collaborators and also those persons who occupy top level positions, in
any commercial company, business or other entity which was organised by or for the benefit or as the
property of a high level public official or because they are associated with such entity, and those with
whom he publicly maintains financial or commercial relations. In addition, among PEPs are included
political parties and organisations and embassies or diplomatic or consular representations”; “High
Level Public Official: This is understood to include those persons, elected or not, who hold or who have
been in occupied prominent public posts in their own country or abroad in the executive, legislative,
electoral, judicial, municipal, administrative, diplomatic, military or police sphere; as well as prominent
figures in political parties; or senior executives of companies belonging to this State. This definition
67
does not include middle or lower level individuals in the abovementioned spheres”; “Close Relatives of
a High Level Public Official: This category comprises parents, siblings, spouse, children and childrenin-law, such persons and any person with whom they maintain permanent or de facto relations of
affinity.”; “Person closely associated to a High Level Public Official: Any person who is known to
maintain a close relationship with a high level public official or legal person in which such official has a
position of administrative control or is a shareholder, or any kind of economic interest. This includes
persons who are in a position to conduct significant financial transactions in the country and/or abroad
for the benefit of the high level official”; “Close Collaborators: These are persons who, without being
high level officials, are known to have a close link to a PEP, including those who are in a position to
conduct significant financial transactions in the country or abroad for the benefit of such official”;
“Well-known Public Persons: All those natural persons who because of their present or past political
position or their present public or private connotation or position, whether economic, social, or of any
other nature, are in a position to influence or obtain treatment or favour in the application of or
compliance with requirements of due diligence which in normal conditions of equality with other persons
who do not have or have not had these characteristics, they would not be able to obtain in their
commercial or business relationship with the supervised institutions of the financial system”.
418.
The SIBOIF Rules is being challenged in the Supreme Court on the grounds of
unconstitutionality. This challenge claims, inter alia, that classifying all politically exposed persons –
PEPs – as high risk customers violates their individual guarantees, political and social rights, right to free
enterprise and other rights guaranteed by the Constitution of Nicaragua.
419.
In the meeting held with the Justices of the Supreme Court, we were informed that they have six
months to decide on the constitutionality or otherwise of the Rules (this period concluded in December
2008 but, as of March 2009 no decision had been taken). Also, the team was informed that the
preliminary view of the justices was that at least some sections of the regulations (Rules) would be
declared unconstitutional. In the interviews with financial institutions other than banks it was noted that
some unions/associations are not in agreement with the regulations because they believe that it is not
realistic to apply many of these obligations to non-banking institutions.
420.
To determine the source of funds of Politically Exposed Persons, the institutions must comply
with the requirements set out in the SIBOIF Rules, which up to the time of the evaluation was the only
set of regulations existing and applicable to institutions under the supervision of the Superintendency of
Banks and Other Financial Institutions. There is an appeal against these regulations on the grounds of
unconstitutionality, in which a decision is awaited.
421.
Among the enhanced due diligence measures for high risk clients such as PEPs, Article 16 e) of
the SIBOIF Rules stipulates: “Apply the necessary measures to justify, prove and document the origin of
the funds, assets or goods deposited by the customer, which are part of the transaction or which are used
for payment of operations with the institution”. In this regulation the obligation is to establish the source
of funds of the customer, but not the source of wealth as required by criterion 6.3 of the methodology for
foreign PEPs.
422.
Articles 15 and 16 of the SIBOIF Rules classifies Politically Exposed Persons (PEPs) as high
risk customers to whom enhanced due diligence must be applied.
423.
It is important to note that the SIBOIF Rules refer to national PEPs. Annexe 1 of the document
states: “Politically Exposed Persons (PEPs): Any natural person identified at the start or in the course of
the contractual relationship, who is acting or has acted as a high level public official, in his own country
or abroad. Well-known Public Persons are: all those natural persons who by virtue of their present or
former political position, or of their present public or private connotation or position, whether economic
or of any other nature, are in a position to influence or obtain treatment or favours in compliance with
the requirements and application of due diligence measures which, in normal conditions or on a par with
other persons who do not or have not possessed these characteristics, they would not be able to obtain in
their commercial or business relationships with the institutions in the supervised financial system”
68
(emphasis in the original). The measures laid down in Recommendations 5 and 6.1 to 6.4 must be
applied to such persons.
424.
Additional element- Local PEPS, Mérida Convention: The Nicaraguan Parliament approved the
United Nations Convention against Corruption in Decree A. N. No. 3474 published in Gazette No. 214
of the 4th November 2005, and it was ratified in Decree 102-4-2005 published in Gazette No. 245 of
20th December 2005. The instrument of ratification was deposited on the 15th February 2006.
Cross-Border Correspondent Accounts and Similar Relationships
425.
It is important to mention that it emerged from the interviews held by the evaluating team with
the banking sector and the Superintendency of Banks and Other Financial Institutions that in Nicaragua
banks do not provide correspondent services. Furthermore, the SIBOIF Rules classify correspondent
banking and/or a correspondent relationship as a high risk product or service. Also, in the interest of
further understanding, Article 20 of the Rules sets out a series of obligations on “know your
correspondent relationships” to be followed by the supervised institutions.
426.
The SIBOIF Rules stipulate that when a supervised institution provides or receives
correspondent services it must verify that the client institution has a physical presence in the country
where it is constituted, and must possess information on its commercial activity, its licence to operate,
the quality of its supervision, its reputation, its anti-money laundering and anti-terrorist financing
prevention programmes, legal background, and the ML/FT risk control measures it has adopted.
427.
Given that correspondent services are classified as high risk, enhanced due diligence measures
that must be applied by the supervised institutions include requiring a money laundering and terrorist
financing prevention programme, and evaluating the sufficiency and efficiency of the corresponding
manual.
428.
Any contractual relationship entered into with customers classified as high risk, as well as their
transactions, must be approved by a senior manager or by the Board of Directors of the supervised
institution. It is also important to note that Article 6 k), Responsibilities of the Board of Directors,
stipulates that: “(…) the higher the risk posed by the customer, the more senior must be the Official of
the supervised institution who approves or authorises the relationship and/or transaction and/or the
product or service to be derived from the relationship”.
429.
Sub-paragraph b) iii) of the SIBOIF Rules states: “Obtain, assess and record complete
information on the client financial institution regarding its commercial activity, its licence to operate, the
quality of the official supervision to which it is subject, its reputation, and the sufficiency and efficiency
of its ML/FT prevention programmes, the record of legal and/or regulatory actions to which it has been
subject, and the responsibilities with regard to ML/FT control that each client financial institution has
assumed” (emphasis in the original)
430.
It is important to note, regarding Payable-Through Accounts for the use of third-party customers
of the corresponding institution, that Nicaraguan banks do not provide correspondent services. Despite
this, however, the SIBOIF Rules, Article 20 b) state: “Determine whether the client financial institution
offers its correspondent services to other financial institutions, identify these and ensure that they have a
physical presence, licence to operate and ML/FT prevention programmes.” In addition, as a
supplementary element in the policy, the supervised institution must develop the “know your customer”
policy. 15
Misuse of New Technology and Non face-to-face relationships.
15 According to the authorities, this requirement to know your customer’s customer was deleted in the March 2009 amendment, subsequent to the visit.
69
431.
It is important to note that the SIBOIF Rules lays down certain obligations for compliance with
this Recommendation that must be followed by the supervised institutions. This obligation does not
appear in any other regulations, present or past.
432.
One of the duties laid down in these Rules is the responsibility of the Board of Directors of the
supervised institutions to formulate and implement, in the ML/FT prevention manual, internal procedures
and controls to evaluate ML/FT risk, when the institution launches new products requiring the use of
new technology, and when these technologies favour anonymity, do not require, or minimise, physical
contact with the final beneficiaries.
433.
In addition, among the distribution channels classified as high risk by the SIBOIF Rules are
internet banking or online branches, telephone banking, automatic cash machines and any business or
transaction that is not face to face or which does not require the physical presence of both parties. For
these types of transactions the institution must develop an enhanced CDD measure, as laid down in
Article 16 h) of the SIBOIF Rules: “h) adopt measures to prevent the improper use of technological
advances that might increase ML/FT risk in the provision of the services offered by the supervised
institution and which facilitate anonymity because of lack of physical contact or which are not face to
face with the person or persons who effectively are carrying out such operations, transactions or other
business relationships.”
434.
The systems and technological tools used by the financial institutions for classifying ML/FT risk
must be in harmony with the technology that is being used for provision of its products and services, in
order to enable prompt detection of unusual and suspicious operations.
435.
Article 25 of the SIBOIF Rules stipulates that in the development of its ML/FT risk evaluation
procedures and services, and in their risk matrices, with regard to new products or services, the
technology to be used and the distribution channels, the supervised institution must pay particular
attention to: “i) products and services that use technologies conducive to relations that are not face to
face, which favour anonymity and/or which do not require or minimise physical contact with the
beneficiaries ii) services or beneficiaries using agents, intermediaries or other similar distribution
channels”.
3.2.2.
Recommendations and Comments
436.
Mechanisms and regulations should be established to ensure that institutions included in Act
No.285 but not supervised by the SIBOIF comply with the obligations arising from that Act. The
SIBOIF Rules embody most of the aspects of the FATF recommendations, but it applies only to
institutions supervised and monitored by the SIBOIF.
437.
Regulations for the financial institutions that don’t fall under the oversight of SIBOIF (like
financial cooperatives) should include measures to prevent and repress financing of terrorism.
438.
Eliminate the uncertainty prevailing on the permanence of the SIBOIF Rules, by prompt
resolution of the constitutional appeal at present before the Supreme Court.
439.
Consider the possibility of assigning AML/CFT supervision of the financial institutions not
falling under the SIBOIF to the respective regulatory bodies of each of them and assign to the CAF only
those which lack a specific regulatory agency.
440.
For institutions that are not under the supervision of the SIBOIF, risk management procedures
should be required as well as enhanced CDD, including determination of the origin of the funds and
approval of all commercial relationships by senior staff when a customer is classified as PEP.
441.
Amend the Rules of the SIBOIF to require that financial institutions establish the source of
wealth of foreign PEPs, and not only the source of funds.
70
442.
The requirements of Recommendations 7 and 8 should be applied to all regulated institutions and
not solely to one sector.
3.2.3.
R.5
Compliance with Recommendations 5 to 8
Rating
Summary of factors underlying rating
PC
•
•
R.6
PC
•
Because of its phased application the SIBOIF Rules is not yet fully in force
and the degree to which it is applied by the financial institutions could not be
determined with certainty
•
The constitutionality of the SIBOIF Rules is being challenged before the
Supreme Court and this has given rise to uncertainty among the regulated
institutions regarding the permanence of the preventive regime
•
The enhanced CDD requirements for high risk customers are laid down in
the SIBOIF Rules, which is applicable only to financial institutions under the
SIBOIF
Financial institutions are required to establish only the source of funds of
foreign PEPs, and not the source of wealth.
•
R.7
PC
•
•
R.8
PC
Many of the regulated institutions under Act No.285 have not yet been
regulated or supervised and are not applying the requirements of the said Act
(among them are financial cooperatives and microfinance institutions, which
handle a very high volume of resources)
There are no regulations governing prevention of financing of terrorism
•
The existing regulation requiring financial institutions to collect sufficient
information on the institutions with which they maintain correspondent
relationships, and assess their AML/CFT controls to determine whether these
are adequate and effective, as well as to obtain approval of senior management
before establishing new correspondent relationships, applies only to
institutions under the supervision of the SIBOIF
Application of these Rules by the regulated institutions has not so far been
total, since their application is phased and the institutions state that they need
more time than is allowed by the Rules
The risk posed by non face to face relationships or transactions is regulated
only for the institutions subject to supervision and inspection by the SIBOIF
3.3. Third parties and introduced business (R.9)
3.3.1.
Description and Analysis
443.
Summary: Article 8 (c) of the SIBOIF Rules stipulates: “It is the non-delegatable responsibility
of each supervised entity, in developing its CDD, to adequately identify, verify, know and monitor all its
habitual clients, including co-owners, representatives, signature holders and final beneficiaries of these;
whether they are natural or legal persons, nationals or foreigners, as well as to maintain in the
customers’ files proof of the verification performed on the information obtained.” (emphasis in the
original). Therefore the supervised institutions must carry out CDD themselves and not delegate it to
anyone else. On the other hand, Act 285 does not state that only regulated entities may carry out CDD,
but gives them the freedom to contract third parties to perform it. In the interviews that the evaluation
team held with various regulated institutions, we were informed that they do not use intermediaries to
perform CDD.
444.
For regulated institutions not supervised by the Superintendency of Banks and Other Financial
Institutions, there is no regulation whatsoever to comply with FATF Recommendation 9. In practice,
institutions do not resort to third parties to fulfil their CDD requirements.
71
3.3.2.
Recommendations and Comments
445.
Regulations should be issued on the use of third parties for customer due diligence and on
customers presented by another institution, requiring CDD to be applied in any contractual relationship,
or else make the obligation non-delegatable as in the case of financial institutions governed by the
SIBOIF.
3.3.3.
R.9
Compliance with Recommendation 9
Rating
Summary of factors underlying rating
PC
•
Although the institutions under the SIBOIF have a regulation stating that the
development of CDD may not be delegated, there is no such regulation for
other financial institutions. In practice however these do not make use of third
parties for CDD
3.4. Financial institutions secrecy or confidentiality (R.4):
3.4.1.
Description and Analysis
446.
Bank secrecy is not an obstacle for the supervision of financial institutions or for collection of
information on money laundering and terrorist financing. Normally bank secrecy may be lifted upon
Court Order, but the Fiscal General may obtain financial information directly without any need for a
Court Order in cases of investigations generated by an STR. However, this power does not specifically
apply to investigations on the financing of terrorism.
447.
The competent judicial bodies have the power to lift secrecy in the course of a formal
investigation into any offence, including money laundering and financing of terrorism. Article 211 of
the Code of Criminal Procedures stipulates that: “The judge may require competent financial institutions
or any financial institution, public or private, to produce information on financial transactions under their
control. An order concerning financial information shall be made solely on the express and wellgrounded request of the Fiscal General de la República or the Director General of the National Police,
and once a trial has begun… Secrecy rules shall not impede the issue of the Court Order”.
448.
In practice, when a police investigation unit needs to obtain information protected by bank
secrecy, the Prosecutor in charge of the case prepares a reasoned request which is sent to the judge
through the Fiscal General. In the opinion of officials of the Ministerio Público and the police, this
procedure enables information to be obtained in a reasonable period of time. However there are no
figures on the number of such requests and the time taken, and the evaluating team is therefore not
entirely persuaded of the effectiveness of these procedures.
449.
In addition to the formal mechanisms for lifting secrecy, the team was informed of an example
of positive collaboration by the financial institutions with the competent authorities.
450.
Likewise, there are legal mechanisms to enable financial supervisory authorities to obtain
unrestricted access to information and documents necessary for their work. The mission was able to
ascertain this both from interviews with financial institutions and the examination of samples of
supervision files. In fact, Act No.561 stipulates that one of the functions of the Superintendent is to “(…)
9. Collect from banks, non-banking financial institutions and financial groups, in confidence, the reports
and information necessary to verify the state of their finances and to determine their compliance with the
laws, regulations and provisions to which they are subject”.
451.
With regard to the specific issue of money laundering, Article 34 of Act 285 states expressly that
“Legal provisions concerning bank secrecy shall not impede investigation of the crime of laundering of
money and assets; the information must be requested officially by the competent judge or at the request
of the Procuraduría General de Justicia”. This is echoed in Article 35 of the SIBOIF Rules for ML/FT
72
Risk Management: “Upon a request from the Superintendency or any other competent authority, the
supervised institution shall make available all information and documentation referred to in the present
regulations, which must be forwarded without delay and without any secrecy restrictions, in reasonable
time depending on the complexity and volume of the information requested”.
452.
In addition, during a preliminary investigation arising out of an STR (long before a formal
criminal investigation is initiated), the CAF may also obtain information from the regulated institutions,
both the reporting institution and others. These requests are made by the Fiscal General in his capacity
as President of the CAF, and are channelled through the Superintendency of Banks.
“The Financial Analysis Commission shall collect all necessary information through the
Superintendency of Banks and Other Financial Institutions (…)” (Article 16, Regulations of
Act No.285).
“With regard to operations referred to in Article 36 of the Act, financial institutions must
immediately inform the Superintendency of Banks, which shall in turn inform the Financial
Analysis Commission (…)” (Article 22, Regulations of Act No.285)
453.
However, it is not clear that this applies also to preliminary investigations into potential cases of
financing of terrorism, since this procedure is embodied in Act 285 of 1999 on Money Laundering, and
the 2008 Criminal Code which criminalised financing of terrorism did not amend the sections relating to
the suspicious transaction reporting requirement, nor the CAF’s power of access to financial information,
such powers being restricted solely to money laundering.
3.4.2.
Recommendations and Comments
454.
The power of the Fiscal General (as President of the CAF) to obtain confidential information
without any need for a Court Order in the case of money laundering STRs should be explicitly extended
to financing of terrorism.
455.
A method should be established for control of the orders for information sent by judges to the
financial institutions on the request of the Ministerio Público, and an office designated to be responsible
for such control.
456.
Consider allowing the Fiscal General legal access to information also from financial institutions
that are not under supervision of the SIBOIF, without having to obtain a court order for this.
3.4.3.
R.4
Compliance with Recommendation 4
Rating
Summary of factors underlying rating
LC
•
The powers of the Fiscal General (as President of the CAF) to obtain
information without the need for a Court Order in the follow up to a STR
does not apply to financing of terrorism.
3.5. Record keeping and wire transfer rules (R.10 and SR.VII)
3.5.1.
Description and Analysis
457.
Summary: The record keeping requirement is sufficiently broad for the institutions controlled by
the SIBOIF, as they are set out in the SIBOIF Rules. Under Act 285 on Money Laundering, the other
groups of regulated institutions are also required to keep records for the same period of five years. But
this refers only to customer identification (there is no mention of keeping records of correspondence,
transactions or any other documentation).
458.
As regards transfers, the banks and other institutions under the SIBOIF are subject to regulations
in accordance with SR.VII. However, there are many money handling businesses that remain outside
this regulatory framework.
73
Requirement to keep records
459.
Institutions under the SIBOIF must adopt measures to record, conserve and duly safeguard, on
physical and/or magnetic supports, all information and documentation derived from the application of
their internal ML/FT prevention procedures and controls, for a period of five years from the date on
which relations, transactions and/or accounts with the customer are terminated. The information must be
adequate to enable the individual transactions or accounts to be reconstructed, and to enable them to be
used as evidence in possible criminal proceedings.
460.
The minimum information that must be retained is as follows (Article 34 of the Rules):
•
•
•
•
•
•
•
•
The overall customer file and profile and all supporting documents
Identification data and address of the customer, representative, intermediary and beneficiary
Records of accounts and commercial correspondence
Date, type and number of account used in transactions
Type and amount of money used in transactions
Where applicable, reports and statistics on STRs, including the related analysis
Where applicable, cash transaction reports and statistics
Statistics on ML/FT related investigations or enquiries
461.
These requirements of the SIBOIF Rules are not applicable to other regulated institutions. For
them, Article 33 of Act 285 of 1999 simply states that they must “adopt measures to obtain and conserve
all information on the true identity of the persons in whose benefit a new bank account is opened or a
financial transaction carried out, and the records must be kept for five years after the conclusion of the
operation”.
462.
The Commercial Code also has an apparently broader requirement applicable to any business
person. According to Article 46, they must retain “Books, telegrams and correspondence on their
business in general throughout the entire duration of the latter and for ten years following liquidation of
all their businesses and commercial dependencies”. However, neither the requirement of Act 285 nor
that of the Commercial Code is supervised by the authority, except the institutions supervised by the
SIBOIF.
463.
From Article 34 of Act 285 mentioned above, it may be assumed that the information and
documents that must be retained for five years (on physical or magnetic supports) is all the information
derived from the application of their AML/CFT policies, and includes all the customer identification data
and the history of their transactions, and the correspondence exchanged.
464.
information in the possession of regulated entities under Act 282-99 is available to the competent
judicial authorities, as explained in the section on bank secrecy. Article 17 of the Regulations of Act 285
(Decree 74 of 1999) stipulates that “The competent judicial authority, in the respective criminal
prosecution, may request information from the banking or financial institutions on cases of which it has
cognisance or at the request of the Procuraduría General de la República, within the respective criminal
proceedings.” The Code of Criminal Procedure, Article 211, also states that “The judge may request
competent financial authorities or any financial institution, public or private, to produce information on
financial transactions in their possession”.
465.
Article 35 of the SIBOIF Rules stipulates that “The supervised institution shall make available
all information and documentation to which the present regulations refer, which must be forwarded
without delay and without any reservation of secrecy, within a reasonable time depending on the
complexity and volume of the information required.” The Superintendency may impose penalties in
cases of unjustified delay.
466.
No information was obtained on measures to ensure that the information is available in a timely
manner for the competent authority as regards institutions not supervised by the SIBOIF.
74
RE. VII Electronic transfers
467.
Regarding wire transfers, Article 21 of the PLC/FT Rules embodies a “Know Your Electronic
Money Transfer” policy which applies to domestic or international transfers, whether habitual or
occasional, and requires the supervised institution, regardless of the amount of the transfer, to:
1. Include in the wire transfer forms and related messages, throughout the chain of payment, exact
precise and valid information on the sender (name, type and number of identification, address,
telephone and account number)
2. Ensure that the above information is retained with the transfer and message throughout the
entire cycle of payment
3. Apply the most meticulous examination to transfer of funds which do not have complete
information on the sender, or refuse to receive them
468.
The Rules which were in force since 2002 until the new Rules of 2008 were issued, embodied
similar requirements (articles 14, 15 & 16), except that it provided no guidance for the institutions as to
what to do on receiving transfers with incomplete information (c.VII.5) nor did it require them to ensure
that the information was maintained throughout the chain of payment (c. VII.4). According to the
authorities, there were no great problems in compliance with these requirements over these six years, and
it may therefore be assumed that the additional requirements in the new 2008 Rules have already been
fully implemented by the institutions
469.
In addition to the banking institutions supervised by the SIBOIF, there are many money transfer
businesses that are considered regulated entities by Act 285, but which are not supervised by any
authority and are under no requirements regarding constitution, registration or operations. Some of them
are agents of the biggest international money transfer companies such as Western Union (which has the
greatest market share) and because of this link they are contractually obligated to maintain a certain level
of formality in their operations. However, not even the transfers in which these agents participate
comply with the requirement for sending, throughout the chain of payment, complete information on the
originator. According to statements by several of them, the only data that they receive with each transfer
from abroad is the name of the sender, the transaction code and the city from which it comes. The
complete address of the sender is not included, nor are any of the alternatives embodied in Criterion
VII.1, i.e. identification number, account number or date of birth of the client/user.
470.
According to the money transfer agencies, the above is a common limitation on the agencies of
these big companies engaged in transfers to other countries in the world, since it supposedly derives from
the privacy rules of the main countries in which the transfers originate.
471.
In addition to the giro and money transfer businesses, the savings and loan cooperatives and the
microfinance organisations include in their services national and international despatch and receipt of
wire payments. These entities, which handle volumes of resources that are of considerable importance in
the Nicaraguan economy, are subject to no AML/CFT regulation or supervision
472.
The PLA/FT Rules require supervised institutions which make wire transfers to include all
necessary information on the originator of the wire transfer. Verification of this information is an
additional element of know your customer policy.
473.
The supervised institutions that make wire transfers are required to include all the information on
the originator of domestic or international transfers.
474.
When financial institutions act as originator, beneficiary or intermediary in the payment of
transfers they are required to adopt measures to ensure that the information on the originator of the
transfer is transmitted along with the transaction. When the information on the originator is not included
75
in the transfer, the supervised institutions must ensure that they comply with enhanced controls regarding
the management of the transaction, or refuse to perform the transaction (Article 21 of the Rules).
475.
Several of the banks interviewed stated that they had no difficulty in including information in
their possession in wire transfers. On the other hand, from time to time they receive from abroad
transfers that are not accompanied by all the information, and this has caused problems for them in
complying with this aspect of Nicaraguan regulations. In such cases payment is suspended while direct
approaches are made to the sending institution abroad to obtain the information that is lacking and if this
is not possible, the transfer is usually sent back.
476.
Risk Based Procedures for Transfers Not Accompanied by Originator Information. The PLD/FT
Rules define wire transfers as a high risk operation to which, therefore, enhanced due diligence must be
applied, whether the transfers are domestic or international, habitual or occasional. In addition, the Rules
embody a list of warning signals that the institutions must take note of, including “wire transfers in
which the information on the originator, or the person on whose behalf the transaction is being
performed, was not provided in or with the transfer, and the inclusion of such data was expected and
would permit clear identification of the said transactions.”
Supervision and Enforcement of Sanctions on RE.VII
477.
There is no supervision of regulated entities not under the supervision of the SIBOIF, such as
money transfer agencies. For the formal financial sector, Recommendation 4 (19) (i) of the Money
Laundering Risk Supervision Manual of the Superintendency of Banks shows that this aspect is taken
into account during on site inspections.
478.
The mission had access to reports of on site inspection by the Superintendency of Banks. From
these it was discovered that, as regards non-compliance with know your customer policies, several
financial institutions were penalised with fines of up to US$10,000 for not keeping their customer
identification records adequately updated. This shows that there are deficiencies in compliance with this
requirement, and that the SIBOIF is taking the necessary corrective measures.
479.
Article 164 (second part) of Act 561 (Banking Act), describes the sanctions to be imposed on
natural and legal persons failing to comply with money laundering and terrorist financing prevention
requirements, including requirements related to wire transfers not meeting the obligation to report
unusual transaction or operations to the competent authority. In such cases the financial institution shall
be penalised with a fine of five thousand to sixty thousand fine units, depending on the seriousness of the
case.16 Each unit equals one US dollar.
480.
Article 26 of the Regulations of Act 285, for its part, stipulates that regulated institutions in
violation of Article 32 and 33 of the Act shall be fined 50% and 100%, respectively, of the value of the
financial transaction performed. These fines are potentially applicable also to money transfer agencies
not supervised by the SIBOIF, but there is no authority to exercise such supervision. Only one money
transfer institution has submitted Suspicious Transaction Reports to the CAF.
481.
At the time of the visit to the Superintendency of Banks the number of administrative sanctions
imposed on supervised institutions in the area of ML/FT prevention from 2004 up to March 2008 was 43
(forty-three). It is unknown whether any of these sanctions was specifically for non-compliance with due
diligence requirements in money transfers.
482.
Additional element: elimination of thresholds. Supervised financial institutions that perform wire
transfers are required to include the information on the originator of domestic or international transfers,
regardless of the amount.
16
This is supplemented by Art.10 of the SIBOIF General Rules for Imposition of fines. The amounts of
the fines provided for in this were amended in 2008, subsequent to the evaluation visit.
76
3.5.2.
Recommendations and Comments
483.
R.10: For regulated institutions not supervised by the SIBOIF the record keeping requirement
should be broadened to include information and documentation on transactions and activities of the
customer, correspondence, analysis of possible suspect transactions, etc. (not only documentation on the
customer’s true identity).
484.
SR.VII: The requirement for including complete information on the originator of a transfer
should be extended to money transfer operators, savings cooperatives (credit unions) and microfinance
associations which are outside the regulatory framework of the SIBOIF.
485.
The informal remittance businesses should be required to register with some authority and
implement all AML/CFT prevention measures.
486.
A state agency should be designated to be responsible for the AML/CFT regulation and
supervision of money transfer businesses, savings cooperatives and microfinance associations.
3.5.3.
R.10
Compliance with Recommendation 10 and Special Recommendation VII
Rating
Summary of factors underlying rating
PC
• The regulated institutions not under the supervision of the SIBOIF are unaware
of their obligations under Act 285 as regards keeping records on money
laundering and they are not supervised. Among them are credit and loan
cooperatives, casinos, pawnshops, Bureaux de Change and money remittance
operators
• The requirement of Act 285 (for the remainder of the regulated institutions)
refers only to keeping information on the identification of the customer, and
does not include the customer’s transactions, correspondence and later activities
SR.VII
PC
• Informal money transfer operators, financial cooperatives (credit unions or
savings and loans), and microfinance associations are not subject to any
regulation for electronic transfers.
Unusual and Suspicious Transactions
3.6. Monitoring of transactions and relationships (R.11 and 21)
3.6.1.
Description and Analysis
487.
Summary: The requirement for monitoring unusual operations is embodied in Article 7 of Act
285, and is applicable to all regulated entities, and in greater detail in Article 28 of the ML/FT Prevention
Rules of the SIBOIF, which is applicable solely to the institutions under its supervision. These
regulations lay down guidelines for detection and analysis and mechanisms for reporting operations.
They define unusual and/or suspicious operations, how they are to be handled, when they are analysed
and the form and content of the analysis, as well as the information to be submitted by the institutions in
the respective report. All supporting information of the analysis and the suspicious transaction report
must be available to the authorities for no less than five years. There is no indication that this
requirement is being complied with in the sectors not supervised by the SIBOIF.
Detection and examination of unusual transactions
488.
Act 285 imposes an obligation on all regulated institutions to pay “particular attention to
transactions, whether completed or not, that are complex, unusual or large, and to all unusual patterns of
77
transactions and periodic transactions that have no apparent legal justification”. There is no control in
this area for institutions not supervised by SIBOIF.
489.
For financial institutions supervised by the SIBOIF, Article 26 a) of the ML/FT Prevention Rules
sets out the monitoring requirement in the following terms:
“a) The supervised institution must detect and pay particular attention to all activities,
transactions or operations that are unusually complex, out of the ordinary, large, atypical,
incongruent, disproportionate or inconsistent, or which have no apparent legal or commercial
justification, or which are out of keeping with the economic and transactional profile declared
by the customer. This obligation applies both to completed transactions and transactions that
are simply intended, whether or not they give rise to ML/FT suspicions, as well as to individual,
periodic transactions and patterns of multiple transactions that display one or several of the
abovementioned characteristics, or fall within and/or reflect the warning signals and indicators
in Annexe 3 of these Rules.”
490.
The form for reporting suspicious transactions requires the institution to report whether the
transaction was simply attempted, without completion, and the General Police maintains this statistic.
491.
Annexe No.3 includes a very full list of warning signals and indicators and emphasises once
again that the supervised institutions must detect and pay particular attention to operations and/or
behaviours described therein, in combination with other signals, factors and criteria, to determine
whether they constitute operations that may be suspected of linkage with ML/FT risks. The Rules point
out that these warning signals must not be considered suspicious in themselves, but rather must be
analysed in order to discern suspicious operations and generate the respective STRs, bearing in mind that
in many cases unusual operations detected are duly clarified by the institution and the customer, and do
not reach the point of being suspicious.
492.
The Annexe on warning signals is organised as follows: first, those that may be considered
common and general for all supervised institutions, then those that are applicable mainly to banks and
financial intermediation institutions, then those relating to insurance companies, followed by those
applicable to securities or stock market institutions, and finally those applicable to bonded warehouses as
auxiliary credit activities.
493.
Article 26 b) of the Rules stipulates that when unusual activities, transactions or operations are
detected or become known, an analysis must be undertaken and completed within a maximum period of
45 days from the date of detection or the moment on which the operation became known, to confirm or
eliminate the need to report it as a suspicious transaction. A written record of this process must be kept
and the SIBOIF supervises compliance with it during its inspection visits. The evaluation mission was
informed that no difficulties have been encountered in complying with this obligation.
494.
As was discussed in Section 3.5 on record keeping, the institutions under the supervision of the
SIBOIF have very detailed and complete requirements to meet in this area. The same is not true for the
remainder of the regulated institutions, since the provisions of Act 285 and its Regulation Decree require
them only to “obtain and keep all the information on the true identity of persons” and says nothing about
keeping the supporting documents of a suspicious transaction analysis.
Attention to countries that are not complying with FATF recommendations
495.
Article 15 b) of the SIBOIF Rules stipulates that without prejudice to factors that must be
considered high risk under the ML/FT risk matrices of each supervised institution, “Countries,
jurisdictions and/or geographical areas of high risk” must be taken into consideration. Subsequently the
Rules define this category clearly as follows:
• “iv.a – Those considered by FATF-type specialised bodies as non-cooperative, or whose ML/FT
risk prevention systems are considered to be nonexistent or if they exist, not effectively applied.
78
• iv.b - Those considered by UN-type international bodies as collaborators with international
terrorism
• iv.c – Those considered to be worthy of special attention because of their high incidence of
production, and/or traffic and/or consumption of illicit drugs
• iv.d – Those considered by international bodies working to combat ML/FT and/or in favour of
international transparency; such as off-shore financial centres, tax havens, with a high level of
bank and tax secrecy, or a high level or perception of public corruption
• iv.e – Those which have been sanctioned by international bodies or included in lists for special
attention because of the high ML/FT risk they represent
• iv.f – Geographical areas within the country itself, when public information exists from official
institutions that they are frequently used for transit or transfer of illicit drugs, illegal immigrants
or any other form of traffic in persons, smuggling of goods, or smuggling or illegal transfer of
cash
• iv.g – Those identified by the supervised institution itself as meriting special attention on the
basis of its experience with them, or by the history of monitored transactions involving them, or
by the presence of strong indicators of public corruption, among others.”
496.
In addition Articles 4 H) and Article 15 b) I) i.k), iv) of the SIBOIF Rules lay down parameters
for when the supervised institutions need to implement the SIPAR ML/FT at the level of a financial
group constituted in Nicaragua, including all its branches, subsidiaries and offices of representation
abroad. If the legal or regulatory requirements or rules of other countries where any member of the
financial group operates are different from those in Nicaragua, the member of the said group must apply
the stricter regulations in accordance with international rules.
497.
Article No.16 of the Rules stipulates that enhanced control measures must be applied to
customers, countries and situations considered to be high risk. Inter alia, it requires the institutions “to
exercise intensified and more exhaustive ongoing vigilance and monitoring on accounts, transactions and
commercial relationships”. In addition, the Rules stipulate that warning signals that must be analysed to
determine whether they are suspicious and report them as such must include the following:
•
“3. – Consecutive transactions within a short period of time, by means of wire transfers to places
that give rise to specific concerns, for example countries, jurisdictions or territories designated or
classified by national authorities or by the FATF as non-cooperative or posing a high risk.
•
4. – Commercial relations with persons from countries which do not apply the FATF
recommendations or do so insufficiently”.
498.
Though it is not sufficiently clear in the Rules, No.3 above informs the financial institutions of
the possibility that the SIBOIF may classify a country as giving rise to concern, non-cooperative or high
risk. In this case the financial institutions would be required to apply enhanced controls in any
transaction related to that country. Up to the present moment SIBOIF has not made use of this
possibility.
499.
In addition, every supervised institution constituted in Nicaragua must implement an overall
ML/FT prevention system, at the level of the financial group, including all its branches, subsidiaries and
offices of representation abroad. When the legal and regulatory conditions, rules and practices for
ML/FT of other countries are different from those of Nicaragua, the member of the group concerned
must apply the strictest of the measures of the various jurisdictions in accordance with international
rules, and also when in another country application of SIPART ML/FT is prohibited or impeded, this
situation must be communicated without delay to the Head Office and the Superintendency.
3.6.2.
Recommendations and Comments
500.
R.11. Compliance with the monitoring requirements embodied in Act 285 should be demanded
of all money remittance companies, financial cooperatives, Bureaux de Change and other financial
activities not supervised by the SIBOIF.
79
501.
The monitoring obligations of institutions not supervised by the SIBOIF should be set out in
greater details and guidelines should be provided for the various regulated institutions on how to apply
them, in accordance with the nature of their business.
502.
The provision of Act 285 and its Regulatory Decree on conservation of documents and
information should be broadened beyond the simple conservation of “information on the true identity of
persons” to include supporting documents of the suspicious transaction analysis.
503.
R.21. The same control over operations with high risk countries should be applied to financial
institutions not under SIBOIF supervision.
3.6.3.
Compliance with Recommendations 11 and 21
Rating
Summary of factors underlying rating
R.11
PC
• The monitoring requirement is not being complied with by the majority of
money remittance companies, microcredit institutions, financial cooperatives,
Bureaux de Change, and other financial activities not supervised by the SIBOIF,
as well as by any of the DNFPBs
• There is no general regulation or obligation in Act 285 for institutions not
supervised by the SIBOIF, nor guidelines for the various regulated institutions
on how to apply it in accordance with the nature of their business
• The provisions of Act 285 and its Regulations do not require conservation of
supporting documents of suspicious transactions analyses
R.21
PC
• The measures for high risk countries are applied solely to supervised financial
institutions, and do not include the other (and very numerous) financial
activities such as microcredit bodies, financial cooperatives and remittance
companies.
3.7. Suspicious Transaction Reports and other reporting (R.13-14, 19, 25 and SR.IV)
3.7.1.
Description and Analysis 17
504.
Summary: The financial institutions supervised by the SIBOIF are subject to very complete
Rules on ML and FT suspicious transaction reporting, which require them to carefully analysis every
unusual operation and, if they find no reasonable explanation or for any reason suspect a link with
ML/FT or another unlawful activity, report it to the competent authority. The regulated institutions to
which the SIBOIF Rules do not apply must report any unusual operation which has no apparent legal
basis, without the need to suspect unlawful activity. The non-supervised institutions have never
submitted an STR.
Obligation to report suspicious transactions (STRs)
505.
Article 37 of Act 285 stipulates that: “The banking and financial institutions shall pay particular
attention to complex, unusual or large transactions, whether completed or not, and all inhabitual
patterns of transactions and periodic transactions which have no apparent legal basis”. Article 22 of
the Regulations to the Law (Decree 79-99), for its part, stipulates: “With respect to operations referred
to in Article 37 of the Act, financial institutions must inform the Superintendency of Banks immediately,
and the Superintendency in turn will forward the report to the Financial Analysis Commission. In the
case of institutions not supervised by the Superintendency of Banks the information mentioned above
shall be submitted to the Financial Analysis Commission”.
17
The description of the system for reporting suspicious transactions in S.3.7 is integrally linked with the
description of the FIU in S.2.5 and the two texts need to be complementary and not duplicative.
80
506.
Article 22 of the Regulations for Act 285 (Decree No.74-99) stipulates that “With respect to
operations referred to in Article 37 of the Act, financial institutions must inform the Superintendency of
Banks immediately, and the Superintendency in turn will forward the report to the Financial Analysis
Commission. In the case of institutions not supervised by the Supterintendency of Banks the information
mentioned above shall be submitted to the Financial Analysis Commission”.
507.
Article 28 b) of the ML/FT Prevention Rules requires supervised financial institutions, when
they detect transactions that might be considered unusual and/or suspicious, once these operations have
been classified as such, to immediately submit a suspicious transaction report (STR) to the competent
authority, in this case the CAF, since Nicaragua does not yet have a Financial Intelligence Unit.
508.
The reports are sent in sealed envelopes to the Superintendency, which forwards them unopened
to the CAF which, in the opinion of the evaluators and the majority of the institutions interviewed,
constitutes a waste of time and a security risk for the information.
509.
It is important to point out that the requirement for submitting reports on unusual or suspicious
operations “immediately” once they are detected by a supervised institution does not clash with the
provisions of Article 26 b) of the Rules, which refers to a period of 45 days, since the latter is not a time
limit for reporting, but rather the maximum time that the institution may delay in analysing a warning
signal and taking a decision to disregard it or report it if it is suspicious. In other words once a financial
institution concludes that the transaction is suspicious (for which it has a maximum of 45 days), it must
report it immediately.
510.
The SIBOIF has recently begun to apply more rigorous supervision to compliance with the
requirement for detection, analysis and reporting of unusual or suspicious transactions, and it does it at
least once a year per institution. In the random sample of inspection visit reports that the evaluation team
was able to examine, it was evident that the SIBOIF pays attention to the cases that it finds suspicious for
which the financial institution has not filed a report. The SIBOIF then requires a thorough reexamination of the case. However, it was also observed that the Superintendency takes too much time
(several months) to send to financial institutions the final report of the visit and the corresponding
sanction.
511.
According to information provided by the SIBOIF, the total number of reports from 2000 to
2008 was 538 STRs, and at present slightly fewer than 200 reports per year are being received. Although
the size of the Nicaraguan financial sector is modest, the number of STRs seems low taking into account
that to make a report, a specific suspicion of ML or FT is not required; the suspicion of some kind of
unlawful activity (suspicious operation) or that the financial institution has not been able to find
reasonable justification for the operation (unusual operation), is sufficient.
512.
The number of STRs has been slowly increasing and there are still many institutions that do not
report, including some of those supervised by the SIBOIF. The following statistics show that all the
banks report actively, but the authorities should evaluate the reasons for the lack of reports from the
stock market sector. According to opinions expressed during the interviews, this could be due to poor
ALM/CFT training in this sector.
81
UNUSUAL AND/OR SUSPICIOUS TRANSACTION REPORTS (STRs)
To December 31 2008 (source SIBOIF)
a) Total:
•
•
•
•
Banking Institutions
Finance Companies
Insurance Companies
Bonded Warehouses
536
24
9
1
YEAR
2002
2003
2004
2005
2006
2007
2008
TOTAL:
STRs
3
11
51
74
104
190
137
570
b) Reports by each Institution
Type of Institution
BANKS
FINANCE
COMPANIES
INSURANCE
COMPANIES
SECURITIES
MARKET
BONDED
WAREHOUSES
SECOND-TIER
BANKS
OFFICES
OF
REPRESENTATION
Name of
Institution
2002
2003
2004
2005
2006
2007
2008
TOTAL
BY
INSTITUTION
TOTAL BY
CATEGORY
X
X
X
X
X
X
X
X
2
0
1
0
0
0
0
0
2
0
0
1
0
0
0
8
5
5
7
4
0
0
0
29
16
10
22
6
1
12
4
0
31
36
16
2
1
9
2
0
29
74
39
16
0
22
0
0
17
28
18
6
7
20
2
0
109
157
110
37
10
65
11
37
X
X
X
0
0
0
0
0
0
0
0
0
0
2
0
0
3
0
0
7
0
1
3
2
1
19
4
24
X
X
X
X
X
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
2
0
2
0
0
2
0
1
0
0
0
0
1
0
0
4
0
4
1
0
9
X
X
X
X
X
X
X
X
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
X
X
X
X
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
X
0
0
0
0
0
0
0
0
X
X
X
X
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
536
0
1
0
0
82
Total of Institutions
X
X
X
35
STRs per
year
0
0
0
0
0
0
3
11
0
0
0
51
0
0
0
74
0
0
0
104
0
0
0
190
0
0
0
0
0
0
105
Total of STRs
570
513.
In addition, the biggest money transfer company has sent directly to the CAF (for it is not
supervised by the SIBOIF) more than 800 operations that depart from the parameters of normality
established by that company. This is the only institution or regulated entity outside of the control of the
SIBOIF that has submitted STRs. The lack of reports from the credit unions (savings and loans or
financial cooperatives) and from the microfinance associations are grounds for concern, given the high
volume of resources that some of them handle, and the broad range of services that they provide to their
associates.
514.
All the financial institutions supervised by the SIBOIF that were interviewed agreed that once
the SIBOIF Rules are implemented 100%, the number of suspicious transactions detected will increase
and their quality will improve significantly, since the new Rules are not only more demanding in their
control procedures, but they also make it possible to concentrate efforts on the areas of greatest risk. Up
to the present, however, it may be affirmed that the quality and relevance of the STRs is low. Although
there are deficiencies in other areas of the AML/CFT system which prevent good use being made of the
STRs, the fact that no formal criminal investigation has arisen from these reports is equally worrying to
the reporting institutions and the authorities.
Suspicions of terrorist financing
515.
Although the crime of financing of terrorism is one of the predicate offences for money
laundering (since its lowest penalty is more than five years imprisonment), no regulation with the force
of law has expressly established the obligation to report suspicions of terrorist financing. In Nicaragua
this obligation is derived from the provisions of Act 285, which makes it mandatory to report unusual
transactions without apparent legal basis even when there is no suspicion of the commission of any
specific offence. This is in agreement with the possibility observed at the foot of the page of criterion
IV.1 on the FATF Evaluation Methodology, according to which “systems based on the reporting of
unusual transactions (instead of suspicious transactions) are equally satisfactory”. Additionally, the
Standard of SIBOIF expressly regulates the reporting of suspicions of FT for their supervised (art. 26 C0
and 28 c)).
516.
In practice all the prevention work set out in the ML/FT Prevention Rules for Financial
Institutions supervised by the SIBOIF is aimed at two risks: money laundering and financing of
terrorism. In addition, the warning signals set out in Annexe 3 of the Rules referred to situations and
patterns that are characteristic of terrorism and its financing. Up to the present time no report on possible
financing of terrorism has been generated.
517.
There are no reporting thresholds. Article 28 d) of the ML/FT Prevention Rules stipulates that:
“The supervised institutions shall present the STR regardless of the amount, the nature or type of
customer concerned. The submission of an STR to the competent authority does not constitute the report
of a crime, but rather basic information for subsequent analysis and financial investigation by the
competent authority designated in the relevant legislation.”
518.
Attempted transactions must also be reported. Article 28 f) of the ML/FT Prevention Rules
clearly states that “All suspicious operations must be reported, including operations attempted but not
consummated”. During the interviews with the regulated institutions it was learned, besides, that this is
the normal practice.
83
519.
There is no requirement to report unusual operations which, upon analysis, are explicable solely
by tax or fiscal considerations (c.13.4, c.IV.2). Although tax fraud is a crime in Nicaragua under certain
conditions, it is punishable only by imprisonment from six months to three years. Therefore it is not
considered to be a predicate offence for money laundering (because for this it would require to be
punishable by at least five years imprisonment).
520.
Additional Element - STRs on suspicion of any offence. The definition of suspicious transaction
contained in the ML/FT Prevention Rules is not restricted to ML and FT offences, but requires financial
institutions to report suspicion of any “illicit” operation. In fact, Article 26 c) defines as suspicious,
among others, operations “which for any reason have no apparent economic basis or lawful justification
or objective which leads the supervised entity to assume or have objective reason to suspect, after
carrying out the appropriate scrutiny and review, that such activity or operation is derived from, and/or is
linked to and/or is intended for unlawful activities, or to ML/FT; or is in any manner intended to evade
the laws and regulations applied thereto”.
521.
This provision does not apply to financial institutions not supervised by the SIBOIF. However,
the general obligation to report unusual transactions embodied in Act 285 and in its Regulations also
makes no reference to suspicion of no particular offence. In these cases, it is mandatory to report any
unusual operation, which following the respective examination, “has no apparent legal basis” (Article 37
of Act 285).
R.14. Legal Protection and Confidenciality
522.
Article 73 of Act 285 adequately protects persons who submit a report in good faith.
“Article 73. Exemption from civil and/or criminal liability. Communications in good faith of
information obtained and supplied by persons, employees or officials of the financial
commission, in the course of their work and submitted in compliance with the procedures laid
down in this Act and its Regulations, shall not constitute violation of the restrictions on
disclosure of information that may exist as a result of contract or legal or regulatory provisions
and shall not imply any kind of liability for regulated persons.
523.
For the institutions under the SIBOIF, Article 28 d) of the ML/FT Prevention Rules adds that
“The submission of an STR to the competent authority shall not constitute a report of a crime, but simply
basic information for subsequent financial analysis and investigation on the part of the competent
authority designated in the appropriate law, as the case may be.”
524.
Warning a customer about an STR is forbidden. Article 24 of the Regulations of Act 285
(Decree No.74-99), which applies to all regulated institutions, stipulates that “Financial institutions 18
and the Superintendency of Banks shall keep confidential the identity of the employees and officials who
have provided the relevant information”. This provision, however, does not clearly include the cases in
which the information is related with a possible financing of terrorism or crimes other than money
laundering.
525.
This prohibition is set out more specifically, for the regulated financial sector, in Article 164
(second part) of Act 561 (The Banking Act) as follows: “The Director, manager, official, Compliance
Officer or any other employee of the institution who divulges or informs the customer that his
transaction is being analysed or considered for a possible money laundering suspicious transaction
report or informs him that such a report has been submitted, shall be punished with a fine equivalent to
between four and eight times his monthly salary. In the case of Directors, the fine shall be between ten
and fifty thousand fine units. This shall be without prejudice to dismissal from office if the offence is
repeated”. Here, too, there is an unfortunate omission to mention information on financing of terrorism.
Although in practice the regulated entities assume that the prohibition extends to all types of reporting or
18
It should be remembered that Act 285-99 classifies as “financial institutions” for AML/CFT purposes
all regulated entities, not only those supervised by the SIBOIF.
84
information supplied to the competent authorities, the law should be more precise in order to avoid
lacunae that could hinder future compliance.
526.
Article 29 e) of the ML/FT Prevention Rules (for institutions supervised by SIBOIF) stipulates
that “The procedures and the handling of any STR and related information shall be of limited access and
must ensure the strictest confidentiality and security. No supervised institution, director, executive,
official, employee or agent related to it may notify, divulge or inform in any manner, whether directly or
indirectly, persons who are not authorised by law of detection, examination or analysis of
unusual/suspicious operations, or of the issuance, submission and content of an STR”.
527.
According to comments received from the financial institutions, a satisfactory level of
confidence in the reporting mechanism by the financial institution and the officials responsible has been
achieved. Good practices have also been established, such as that the STR form does not identify to third
parties the person who is submitting it, since the Compliance Officer’s signature is coded. However
there exists some apprehension among the financial institutions concerning the possibility that the future
FIU would not have sufficient technical independence and might be subject to political influence.
Reporting of transactions above a threshold
528.
Act 285 (art.28) sets a requirement for the banks to report transactions above US$10,000.
529.
Articles 30 and 33 of the SIBOIF Rules extends the scope of this obligation to all regulated
institutions (not just banks), clarifies the handling of fractioned operations, gives very precise rules for
exempting certain customers, and sets out in detail the procedure for sending reports en bloc, by secure
electronic channels, within the first ten days of the calendar month following the month in which the
transaction took place.
530.
The information is kept by the SIBOIF in a computerized database and it can be efficiently
shared with competent authorities, by request. The information is also forwarded to the CAF. La SIBOIF
keeps data to indicate the number, amount and source of reports received, but the authorities do not
consult this, nor give any use to the present system. Although this is not one of the elements to be rated,
we know of no authority that analyses the reports of cash transactions. It is to be hoped that when the
Nicaragua FIU is created this information will be used proactively.
Feedback and Guidelines.
531.
There are guidelines on the form of reporting but no feedback concerning the quality of the
suspicious transactions reports sent by the financial institutions. According to comments by the
Nicaraguan financial institutions and information provided by the authorities, the regulated institutions
have been given no feedback as regards the quality and usefulness of the reports they submit. This is
attributed principally to the fact that there is no FIU to analyse this information from a technical
standpoint and which is directly interested in the improvement of its quality. At present the real users of
the STRs in practice is the Economic Investigation Unit of the police to whom the CAF delegates the
preliminary analysis of the STRs. Nevertheless, as stated in Section 2.5 of this report, the use which the
police, and the CAF as a whole, are able to make of these reports is minimal, and does not correspond to
the characteristics of financial intelligence.
532.
As regards guidelines on how to make suspicious transaction reports, there was in fact evidence
of much detailed work by the SIBOIF (but not for the other regulated institutions). In fact, in addition to
setting out clearly the procedure to be followed for submission of STRs, Annexe No.3 of the ML/FT
Prevention Rules provides a careful list of warning signals that the institutions must heed in the design of
their suspicious operations monitoring and detection systems. The Rules, in addition, are flexible
because the Annexes, compliance with which is mandatory, may be modified, supplemented or replaced
by the Superintendent of Banks without a new document being issued, which would require the approval
of the Board of Directors of the SIBOIF.
85
3.7.2.
Recommendations and Comments
533.
R.13: The necessary institutional and regulatory measures should be taken to ensure that the
financial institutions not supervised by the SIBOIF comply with their suspicious transaction reporting
obligations.
534.
R.13: The SIBOIF should speed up the conclusion of its inspection reports in order to be able to
act more promptly and severely when failure to comply with unusual and suspect operation reports is
discovered, particularly in the public banking sector.
535.
R.13: Compliance with the reporting requirement by non-bank institutions supervised by the
SIBOIF should be strengthened.
536.
R.13: It is suggested that the STRs from institutions supervised by the SIBOIF be sent by secure
electronic means to avoid waste of time and loss of information.
537.
R.14: The prohibition to warn a customer and other people applicable to institutions
unsupervised by SIBOIF, when a suspicious transaction report on that customer is made, should be
updated to include explicitly cases related with terrorist financing.
538.
R.25: The CAF, while no FIU exists, must provide the reporting institutions with appropriate
feedback to enable them to improve the quality of their reports and to be abreast of the most relevant
trends and typologies.
539.
SR.IV: It is suggested that the requirement for reporting transactions in which there is a
suspicion of financing of terrorism be set out expressly in the law and not just implicit in the reporting of
unusual transactions (however, this does not affect the categorisation of SR.IV).
3.7.3. Compliance with Recommendations 13, 14, 19 and 25 (criterion 25.2) and
SR.IV
R.13
Rating
Summary of factors underlying rating
PC
•
•
•
•
There are adequate regulations for regulated entities supervised by the SIBOIF
but compliance on the part of sectors other than the banking sector is minimal
The financial institutions not supervised by SIBOIF do not comply with their
ML and FT suspicious transactions reporting obligations
The Superintendency is not sufficiently rapid and severe when it detects some
omission in sending reports of unusual or suspicious transactions during its
inspections.
There is no requirement for reporting unusual transactions which, when
analysed, are explained solely by fiscal or tax considerations
•
The quality of STRs is still defective
The provisions which prohibit individuals from alerting a client or third
parties not supervised by SIBOIF on information given to the authorities, does
not explicitly mention cases with information related to terrorist financing.
R.14
PC
•
R.19
C
[compliant]
R.25
PC
[With regard to guidelines and feedback for suspicious transaction reporting,
under criterion c.25.2, compliance is partial. R.25 has other components
evaluated throughout this report]
SR.IV
PC
•
The deficiencies identified in Recommendation 13 also affect compliance
with Special Recommendation IV
86
Internal controls and other measures
3.8. Internal controls, compliance, audit and foreign branches (R.15 and 22)
3.8.1.
Description and Analysis
540.
Summary: The Decree containing the Regulations for Act 285 stipulates that financial
institutions must have control mechanisms to maintain up-to-date information on the transactions of their
customers, with particular attention to those that are not in keeping with their economic activity or with
their previous transactions. It is important to point out that for institutions not supervised by the SIBOIF
there is no “know your employees” requirement, nor are they required to have auditing mechanisms to
verify compliance with Act 285 and the Decree.
541.
On the other hand, for regulated institutions supervised by the SIBOIF, there are Rules for
Money Laundering and Financing of Terrorism Risk Prevention Management, which includes a series of
requirements, among them: the “know your employee” policy, the appointment of an ML/FT Risk
Prevention Manager (Compliance Officer) and the implementation of an internal and external audit
programme, among others.
Internal Controls
•
ML/FT Prevention Manual.
542.
Under Act 285 regulated institutions are not required to develop an ML/FT Prevention Manual
including internal procedures, policies and controls to prevent money laundering and financing of
terrorism. On the other hand, for institutions supervised by the SIBOIF, that requirement exists in
Article 4 of the SIBOIF Rules, which requires them to “formulate, adopt, implement and develop
efficiently and effectively prevention programme or an overall system of prevention and risk
management for money laundering and financing of terrorism, (…)”
543.
This programme for prevention or overall system of prevention and management of risk of
money laundering and financing of terrorism, also known as the ML/FT Prevention Manual, must
include policies, procedures, internal controls, risk matrices, monitoring systems and operational plans,
which must be manadatory and adapted to the national legal framework, as well as resolutions,
instructions and directives from the SIBOIF. It must also represent an integrative and all-encompassing
approach, to enable the institution to prevent, detect and report suspicious activities.
544.
As regards making the ML/FT Prevention Manual known to officials and employees of the
supervised institution, Article 4 f) of the SIBOIF Rules stipulates that: “The supervised institution shall
keep all its managers, officials and employees generally informed and trained on their respective SIPAR
ML/FT; and, particularly and specifically, those working in areas or who are in charge of products
which, by virtue of their profile, necessity, links or impact, are more vulnerable to these risks. This
information and training, general or special as the case may be, must be applied to all levels of the
institution” (emphasis in the original). In interviews with the evaluation team the supervised institutions
stated that the training carried out under this Manual is entered on the employee’s file. Some institutions
stated that staff recently appointed are trained on all aspects of ML/FT, and then are given an
examination to assess the knowledge acquired.
545.
Appointment of Compliance Officer- Act 285 does not include the concept of a Compliance
Officer for regulated institutions, and therefore some of them do not have such a post in their
organisational structure. Some institutions, such as Bureaux de Change, interviewed by the evaluation
team have appointed on their own initiative a Compliance Officer and an alternate. On the other hand,
the institutions supervised the SIBOIF have had such a post since 2002, and this was reinforced in 2006
with the issuance of the Rules Concerning Compliance Officers. The requirement of previous years was
incorporated and strengthened in the SIBOIF Rules in force since 10th April 2008. Since that time the
post is called “ML/FT Prevention Manager”. The document sets out, among other aspects, the
appointment, functions of the post, professional profile, incompatibilities, and duties.
87
546.
According to the SIBOIF Rules the appointment of the ML/FT Prevention Manager takes place
by means of an agreement of the Board of Directors, duly entered in the minutes of the meeting
concerned. It is a fully administrative post, with senior managerial rank in the administrative structure of
the supervised institution. The Superintendent of Banks is informed of the appointment, with submission
of a series of documents including certification of the appointment, curriculum vitae, notarial declaration,
a notarised photocopy of the official identity document, notarised photocopy of the respective academic
degree and a photocopy of the documentation showing ML and FT training undergone.
547.
It was apparent from interviews the evaluation team held with some ML/FT Prevention
Managers and senior staff in various institutions that senior management is providing the support
necessary for efficient discharge of their duties. The knowledge these officers had of the laws, and their
interest in preventing the institution from being affected by or involved in money laundering matters or
falling under administrative sanctions by the supervisory body, was also evident.
548.
Among the duties of the ML/FT Prevention Manager derived from the SIBOIF Rules are, among
others, submitting periodic reports to the Board of Directors and the Prevention Committee; following up
the implementation of recommendations issued by the supervisory bodies, internal and external auditors;
participating in the development and implementation of training programmes, and analysing and
documenting unusual and/or suspicious operations detected in order to evaluate and determine whether
an STR is to submitted.
549.
It is important to point out that for the banking institutions, the ML/FT Prevention Manager
performs these functions exclusively and cannot hold any other post in the institution. With regard to the
other institutions supervised by the SIBOIF (insurance companies, bonded warehouses, stock market
agents), the duties of the ML/FT Prevention Manager may be performed by an official who
simultaneously fills another post in the same institution, always provided the following requirements are
observed: a) that the institution has a staff of fewer than 50 employees at the national level, b) that the
other post and functions do not represent a hindrance to the effective work of the ML/FT Prevention
Manager, c) that the official does not fall within the incompatibilities established for such post.
550.
In addition, Article 46 of the SIBOIF Rules stipulates that: “The banks and leasing companies
must establish and provide a supporting administrative structure for the work of the ML/FT Prevention
Manager, with the staff and resources necessary for adequate implementation of the SIPAR ML/FT,
including conditions conducive to an atmosphere of privacy and confidentiality in the handling of
information”. It is important to point out that the ML/FT Prevention Managers stated that they have all
the support of their Boards of Directors and of all the departments of the institution.
551.
Act No.285 does not require regulated entities to maintain an independent internal auditing
function to verify compliance with the regulations in force and controls established for the institution for
the prevention of money laundering and financing of terrorism.
552.
In the case of the institutions under supervision by the SIBOIF, Article 57 of the SIBOIF Rules
stipulates: “The supervised institution must implement a programme of internal and external auditing
that ensures an independent review of compliance, effectiveness and efficiency of the SIPAR ML/FT, and
conduct such audit at least once a year, in all its areas of operation, including branches, subsidiaries,
affiliates, offices of representation and other members of its financial group that operate within the
country, and outside it when the latter is the case” (emphasis in the original).
553.
It is important to emphasis that in the interviews with some regulated entities, the internal auditor
of the institution was present, and they indicated to us that the issues of money laundering and financing
of terrorism are included in the annual internal audit, and that verification of these subjects is carried out
each time a particular area is assessed, and that anything discovered in these evaluations is made known
to the person audited and to the Board of Directors.
554.
The techniques and procedures used by the Internal Audit Unit for the assessment of ML/FT
risks must be contained in the Internal Audit Manual, and must be in accordance with the laws in force,
88
the SIBOIF regulations, any instructions issued by the Superintendent, and with international auditing
Rules. In addition, the SIBOIF Rules set out minimum guidelines for the evaluations of the internal
audit.
555.
External auditors must be independent of the supervised institution, and must be duly registered
in the SIBOIF. In addition, the contract concluded between the supervised institution and the external
audit must include assessment of ML/FT risks. In addition, the SIBOIF Rules lay down minimum
guidelines, and the supervised institution must ensure that the external audit follows these guidelines.
556.
Article 21 of the Regulations for Act 285 states that financial institutions must develop training
plans for their officials and employees. In the interviews which the evaluating team held with the
various regulated institutions it emerged that not all the sectors comply with this requirement, because of
their poor knowledge of it, as well as of the subject in general. Besides, the Financial Analysis
Commission (CAF) lacks the staff for verifying compliance with this obligation in the regulated
institutions.
557.
For the institutions supervised by the Superintendency of Banks and Other Financial Institutions
the requirement exists to adopt, develop, finance and implement an institutional programme of training
with a view to promoting awareness in the area of ML/FT prevention and detection. This programme is
under the supervision of the SIBOIF and non-compliance incurs administrative sanctions.
558.
Article 53 of the SIBOIF Rules sets out minimum elements that the institutional training
programme must contain, including training for employees and officials, as well as specialised training
for ML/FT Prevention Manager. It is important to emphasise that the training received by the staff of the
institution is entered on the file of the individuals concerned.
559.
Furthermore, the supervised institutions must keep up-to-date statistics, records and controls on
the implementation and development of their training programmes, for a minimum period of five years.
560.
For recruitment of staff the supervised institutions require presentation of a number of items,
including identity cards, curriculum vitae, police record, proof of previous jobs, personal and
professional letters of reference, documents attesting academic and work background. In addition, some
institutions have a system known as “know your employee”. It is also common practice to verify the
information submitted by the applicant, and this verification includes, inter alia, telephone calls, on-site
visits and personal interviews.
561.
Only the SIBOIF Rules set out measures to ensure exacting rules for employee recruitment.
Article 19 states that “The supervised institution, including the human resources and security
department, must formulate and implement a policy of “know your employee” which must be part of the
programme of recruitment and selection of newly appointed permanent and temporary staff, to ensure
a high level of integrity, professionalism and training in personnel” (emphasis in the original).
562.
With the information submitted by the employee at the moment of recruitment, the institution
must create a profile which must be upgraded periodically and also whenever the staff member assumes
new responsibilities and responsibilities with a higher ML/FT risk level. In addition, the institution must
have measures available to help it to detect possible changes in the lifestyle of an employee or a lifestyle
that is not in keeping with his declared economic condition.
563.
Article 43 b) of the SIBOIF Rules states that the ML/FT Prevention Manager’s post must have
the following characteristics: “(…) b) Endowed with the administrative, functional and technical
authority and independence to ensure adequate and effective management and implementation of the
SIPAR ML/FT, in coordination with those responsible for the various strategic business or technical
support and operational units. All departments of the supervised institution must afford the ML/FT
Prevention Manager immediate and effective support and collaboration for the discharge of his duties.
(…)” (emphasis in the original)
89
564.
As mentioned above, Act 285 does not embody the concept of Compliance Officer for the other
regulated entities (not supervised by the SIBOIF).
Foreign Branches and Subsidiaries abroad.
565.
According to information supplied by the Superintendency of Banks and Other Financial
Institutions, in Nicaragua there are six regional and one local financial group. There are also certain
entities supervised by SIBIOF in Nicaragua that are not part of any local financial group, but part of
international financial groups. On the other hand, local banks in Nicaragua do not have foreign
branches.
566.
Article 126 of Act No. 561 states that for a bank licensed to operate on Nicaraguan territory to
open a foreign or national branch, it must inform the SIBOIF at least sixty days in advance. In addition,
the opening of a branch abroad requires prior authorisation by the Superintendent of Banks.
567.
In addition, sub-paragraph h) of the SIBOIF Rules states that the supervised institutions must
implement the SIPAR ML/FT (Integral System for Prevention and Management of ML/FT Risks) at the
level of the financial group constituted in Nicaragua, including all branches, subsidiaries, and offices of
representation abroad. In such cases, if the legal and regulatory requirements, Rules and practices for
ML/FT prevention of other countries where any member of the financial group operates are different
from those in Nicaragua, the member of the said group must apply the stricter measures of the
jurisdictions in accordance with international Rules.
568.
In the case of branches of foreign banks established in Nicaragua, Article 13 of Act 561 states
that: Banks constituted abroad which obtain a licence to function in accordance with this Act shall be
considered to be domiciled in Nicaragua for all legal purposes, in the corresponding location, in
accordance with the general rules, and shall be subject to the laws of the Republic and may not have
recourse to diplomatic channels in any case related to their operations in the country (emphasis in the
original). This means that the branches of foreign banks are subject to SIBOIF supervision, and therefore
to all the SIBOIF’s regulations, which are mandatory for them.
569.
Article 59 c) (ML/FT Risk Management) of the SIBOIF Rules, Title II, Chapter I, Financial
Groups and Consolidated ML/FT Risk Management, states that: “c) when any member of the financial
group operates in another country in which the legal and/or regulatory requirements for the prevention
and detection of ML/FT differ from those established in Nicaragua, such member must apply the strictest
of the measures existing in the various jurisdictions in accordance with international standards. If the
legal requirements of other countries where any member of the group operates prohibit or impede the
application of SIPAR ML/FT (Integral System for Prevention and Management of ML/FT Risks) such
situation must be communicated without delay to the controlling institution or the coordinator
responsible for the group and to the Superintendency (emphasis in the original)
570.
In Nicaragua there are seven financial groups and they are subject to consolidated supervision by
the SIBOIF. In addition, the Rules recently issued by the SIBOIF stipulate that the institutions belonging
to a financial group must apply consolidated ML/FT risk management at the group level. It should be
mentioned that the SIBOIF has not yet begun to carry out consolidated supervision of the financial
groups. At the date of the visit of the evaluating team to Nicaragua, supervision was carried out
individually, i.e. for each supervised institution.
3.8.2.
Recommendations and Comments
571.
The regulated institutions (according to Law 285) that are not under the supervision of the
SIBOIF, should be subject to the obligations derived from FATF Recs. 15 and 22.
572.
Regulations should be issued requiring the other financial institutions to establish internal
procedures, policies and controls to prevent ML/FT, and these should be made known to all their
officials and employees; to include a post of Compliance Officer in their administrative structures; and to
90
have external and internal audits to verify compliance with the anti-ML/FT regulations. In addition, that
they should have procedures to ensure that their employees maintain a high level of integrity.
573.
Regulations should be issued to ensure that all sectors that have branches and subsidiaries should
observe ML/FT measures and that there should be effective supervision by both the host country and the
home country.
574.
SIBOIF should have procedures for consolidated supervision of financial groups, since the
regulations in force give it the power to do so.
3.8.3.
R.15
Compliance with Recommendations 15 and 22
Rating
Summary of factors underlying rating
PC
For institutions regulated by Act 285 which are not supervised by the SIBOIF
there are no requirements to:
•
Develop internal procedures, policies and controls to prevent ML/FT and to
make these known to their employees
•
Appoint a Compliance Officer
•
•
R.22
PC
•
•
Have internal and external audit to verify compliance with ML/FT
obligations
Have procedures for investigation of background to ensure high Rules in
recruitment
The obligations derived from Recommendation 22 apply only to institutions
supervised by the SIBOIF
The SIBOIF has not yet applied consolidated supervision to financial groups
3.9. Shell Banks (R.18)
3.9.1.
Description and Analysis
575.
Summary: In Nicaragua the creation of banks is governed by the General Law on Banks, NonBank Financial Institutions and Financial Groups, which sets various conditions for a sociedad anónima
to become a bank. In addition to the abovementioned Act, the SIBOIF has issued specific regulations on
the requirement for setting up banks, financial companies, branches of foreign banks and offices of
representation, and these regulations do not allow shell banks to be licensed.
576.
It is important to mention that in Nicaragua there are no criminal sanctions for those natural or
legal persons who perform financial intermediacy without being licensed by the supervisory body. On
the other hand, the SIBOIF may impose administrative sanctions, and this is stated in its Article 167
“Persons who without being duly authorised carry out operations for which this Act requires prior
authorisation, shall be administratively penalised by the Superintendent of Banks with a fine of from ten
thousand to one hundred thousand fine units, and shall not be permitted to continue engaging in such
operations”
577.
It is not possible to establish Shell Banks in Nicaragua. For a bank to be organised in Nicaragua
it first must constitute or organise itself as a sociedad anónima. This is required by the Commercial
Code and the other laws applicable to the situation. Then, under Act No.561, it must make an
application to the Superintendency of Banks, fulfilling a series of requirements established in Article 4 of
the abovementioned Act.
578.
To verify that the bank making the application, or a branch of a foreign bank, has a physical
presence and that it is not a bank only on paper, Article 7.6 of Act No.561 stipulates that “6) Verification
by the Superintendent that the bank has, inter alia, adequate physical installations and technological
91
platform, as well as the necessary contracts, insurance, manuals and regulations. All of the above must
be in conformity with the regulations that may be issued by the Board of Directors of the
Superintendency for the purpose”.
579.
The SIBOIF must verify that the information and documentation submitted by the applicant bank
meets all the requirements. If so it shall grant the licence within a maximum period of fifteen days from
the date of submission of the application. Otherwise it shall acquaint the interested party of the
requirements omitted. It is important to point out that a licence to operate as a bank must be published in
the Official Gazette.
580.
On the other hand it is important to note that there are only administrative sanctions (from ten
thousand to one hundred thousand fine units), for those natural or legal persons who carry out operations
indicated in Act No.561 without being duly licensed to do so. There are no criminal penalties nor is
there any recognised crime of illegal financial intermediation. In any case, such institutions would not be
able to act internationally as shell banks because they would not have the licence of the SIBOIF nor
access to the Nicaraguan payment system, and the formal financial institutions would not be able to
provide them with correspondent services.
581.
Correspondent relationships with Shell Banks are not possible. The SIBOIF Rules stipulates that
when the supervised institution provides or receives correspondent services it must verify that the client
institution has a physical presence in the country where it is constituted, licensed, managed and
regulated. In addition it must refrain from establishing or continuing correspondent relations with
fictitious financial institutions or financial institutions constituted and licensed in a jurisdiction that is not
under an effective supervision regime.
582.
Supervised institutions must obtain, assess and record information on the financial institution
with which they establish correspondent relationships, for the purpose of ensuring that the institution is
not fictitious. In addition the supervised institution must determine if the client financial institution
offers correspondent services to other financial institutions, and must identify these and ensure that they
have a physical presence, are licensed to operate and have ML/FT prevention programmes.
3.9.2.
Recommendations and Comments
583.
Nicaraguan law does not allow granting of licences to shell banks. In addition, the SIBOIF
requires supervised institutions which provide or receive correspondent services to verify that the
institution has a physical presence in the country in which it was constituted, and in addition must refrain
from establishing or continuing correspondent relations with fictitious financial institutions or those
constituted and licensed in a jurisdiction in which they do not have a physical presence.
3.9.3.
R.18
Compliance with Recommendation 18
Rating
Summary of factors underlying rating
C
[compliant]
Regulation, supervision, guidance, monitoring and sanctions
3.10. The supervisory and oversight system (R.23, 29, 17 & 25)
3.10.1. Description and Analysis
Context:
584.
The laws and regulations in force state that the Financial Analysis Commission (CAF) is the
body responsible for verifying in any pubic or private institution whether it is complying with the
procedures laid down in Act No.285. It is important to emphasis that at the time of the visit of the
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evaluating team the CAF had not performed any verification of compliance with this Act, because it does
not have staff or resources to do its work.
585.
Articles 30 and 31 of Act No.285 state that financial institutions are the following:
a) Banking Institutions, Leasing Companies, Credit Auxiliaries, the Stock Market, authorised
by the Superintendency of Banks and Other Financial Institutions and supervised, in
conformity with the Banking Act, by that body.
b) Savings and Loan Cooperatives
c) Stoc broking companies, with regard to purchase and sale of securities
d) Intermediation institutions for sale of currency or Bureaux de Change
e) Institutions that carry out or implement activities related to or similar to banking operations
proper
f) Systematic substantial cheque operations
g) Operations of the same nature, in the sale or redemption of travellers’ cheques or postal
orders
h) Systematic or substantial transfer of funds, either by wire or by any other means that may be
used
i) Credit cards
j) Pawn shops
k) Casinos
l) Any others classified as such by the Financial Analysis Commission
586.
The SIBOIF, as the supervisory body, is responsible for monitoring ML/FT compliance in the
institutions under its supervision. For this purpose the SIBOIF has issued specific sets of instructions. In
the other regulated entities, for example the cooperatives, for which the regulatory body is INFOCOOP,
ML/FT is still not verified, because this body was only recently created and has not yet issued any
specific regulations in the matter, nor has it made any approach to the CAF. The remaining regulated
entities such as microfinance institutions only have associations that represent them in the manner of
unions, but are not regulatory bodies.
R.23. Regulation and Supervision.
•
Superintendency of Banks and Other Financial Institutions
587.
Article 2 of Act No. 316 stipulates that “The Superintendency is responsible for authorising,
supervising, monitoring and controlling the constitution and functioning of all banks, branches and
banking agencies that operate in the country whether they are state or private, national or foreign
institutions, (…) The Superintendency shall also authorise, supervise, monitor and control the nonbanking financial institutions that operate with public resources in terms of the General Law on Banks
(for non-bank financial institutions and financial groups). The Superintendency shall also authorise,
supervise, monitor and control non-bank financial institutions whose functioning it is required to
supervise by special laws. The Superintendent shall exercise supervision, monitoring and control of
financial groups in a consolidated fashion (…)”
588.
Among the functions of the SIBOIF under Act 316 are:
•
“Supervising, inspecting, monitoring and controlling the functioning of all institutions
within its sphere of action”
•
“Ensuring compliance with the requirements to which the supervised, inspected, monitored
and controlled institutions are subject under the present law (…) and imposing
administrative penalties for non-compliance with the said laws and regulations”
•
“Dictating the Rules and regulations necessary for compliance with the objectives of this
Act”
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589.
The supreme body of the Superintendency of Banks and Other Financial Institutions is the Board
of Directors, consisting of the President of the Central Bank, the Superintendent and Deputy
Superintendent, and four members with their respective alternates appointed by the President of the
Republic in consultation with the private sector and confirmed by the National Assembly.
590.
According to information supplied by the SIBOIF, it has under its supervision 35 institutions,
established as follows:
Type of Institution
No of Institutions
Banks
8
Leasing Companies
2
Insurance Companies
5
Securities Market
8
Bonded Warehouses
4
Second-Tier Banks
1
Offices of Representation
7
Total of Institutions
35
591.
The second paragraph of Article 36 of Act No. 285 stipulates that: “The Board of Directors of
the Superintendency of Banks, has supreme authority, shall be responsible for ensuring the strengthening
and solvency of the national financial system and shall have the power to issue the necessary Rules and
regulations for compliance with the provisions of this Act. It is also empowered to order the necessary
inspections” (emphasis in the original). In addition, article 10-5 of the Law of the SIBOIF (Act 316 and
its reforms) gives it the authority to “Issue general regulations to guarantee that the capital of financial
institutions is of licit origin and to prevent the laundering of money and other assets within the financial
sector and the associated sectors”.
592.
Therefore the Board of Directors of the Superintendency of Banks and Other Financial
Institutions has approved the issuance of several Rules dealing with AML/CFT which are applicable to
all the institutions under its authority, regulation, supervision, monitoring and control. The last of these
Rules was issued in 2008 and is called “Rules for the Management of the Prevention of Risks of ML and
FT”. It repeals the two previous Rules and incorporates and updates all their dispositions. As stated
earlier (Sec. 3.1), the 2008 Rules were partially amended by a Resolution of March 2009, five months
after the visit.
593.
The purpose of these Rules is to lay down the requirements, guidelines and basic minimum
aspects of the measures that the supervised institutions composing the Nicaraguan financial system must
adopt, implement, upgrade and improve, under their own initiative and responsibility in accordance with
the nature of the industry and market in which each one of them operates and in keeping with the level of
risk of their respective structures, customers, business, products, services, channels of distribution and
the jurisdictions in which they operate; to manage, prevent and mitigate the risk of being used knowingly
or unknowingly, locally or abroad for the laundering of money, property or assets; and for the financing
of terrorism, hereinafter abbreviated to ML/FT.
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594.
It is important to mention that these Rules were approved by the Board of Directors of the
SIBOIF on the 5th March 2008 and published in the Official Gazette on the 4th, 7th, 8th, 9th and 10th of
April 2008 [Translator’s Note: The beginning of this sentence is missing] is being challenged before the
Supreme Court for alleged unconstitutionality. The evaluating team consulted the judges of the court,
who indicated that no final pronouncement has been made on the matter, and that the time limit for a
decision will end in December 2008. The Justices thought that some of the aspects of the Rules could be
unconstitutional but they had not yet decided whether the entire Rules would be declared
unconstitutional or only some aspects.
595.
When the SIBOIF Rules came into effect, the following provisions were repealed:
a) The Rules for Laundering of Money and Other Assets (Resolution CDSIBOIF- 197-2MAR01-2002) published in the Official Gazette No. 71 of 18th April 2002, and its subsequent
amendments; with the exception of its Chapter 6 and its respective Annexe which shall
remain provisionally in force until the end of the period mentioned in Article 81 a) of the
present Rules as regards the automatic submission of cash transaction reports.
b) The rules concerning Compliance Officers (Resolution CD-SIBOIF-422-1-MAY23-2006),
published in the Official Gazette No.117 of 16th June 2006.
c) Article 16 k) 4 of the Rules for Control and Internal Audit (Resolution CD-SIB-155-3APR26-2001) published in the Official Gazette Nos.116 and 118 of 20th and 22nd June 2001
respectively
d) Any other provision or instruction issued by the Superintendency in the form of rules,
resolutions and circulars that may be in contradiction to the present Rules
596.
In accordance with the Rules it issued, the SIBOIF itself created within its structure the Money
Laundering Prevention Unit, as a branch of the legal Directorate, with the following functions, among
others:
•
To coordinate the specific follow up of the implementation of and compliance with
regulations in force in the area of ML
•
Act as a liaison for receiving and providing information to the Financial Analysis
Commission (CAF)
•
To be the counterpart of the Compliance Officers of the supervised institutions in money
laundering matters
•
To submit to the Superintendent proposals for rules, circulars or guidelines for preventing
money laundering
597.
As has been seen, the SIBOIF has issued Rules for the prevention of money laundering and
financing of terrorism for the institutions under its supervision, which are subject to verification and
administrative sanctions for failure to comply.
598.
Inspections by the SIBOIF of supervised institutions are annual, and are carried out without
previous notification to the institutions to be inspected. It is important to note that, from information
provided by the SIBOIF, it takes about ten to twenty working days to carry out an on-site ML/FT
inspection, depending on the size and type of the institution being inspected.
599.
For inspections of banking institutions there is an inspection manual which dates from 2004.
According to the SIBOIF it is being brought up to date. No inspection manual exists for the other
supervised institutions.
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600.
It is important to note that the inspections of supervised institutions are thorough. One group of
inspectors carries out the financial part and another smaller group the part concerning ML; this depends
on the type of institution: for banking institutions it is three staff members, supported by two other
persons from the group doing the financial inspection, when the latter finish their work. For insurance
companies, stock broking agencies and bonded warehouses, the inspection is carried out by one person
supported by other inspectors when these finish their task or in the course of the inspection. Reports on
the inspections into ML/FT aspects are completed five days after the inspection, but are not sent to the
supervised institutions until the inspection on the financial aspects is complete, which takes
approximately three months.
601.
From the information provided by the SIBOIF to the evaluating team it was learned that the
findings of the on-site inspections set out in the reports three months after the conclusion of the
inspection had not been sent to the financial institution inspected. Furthermore, the findings of the
inspections are not followed up to check if the institutions have made the necessary corrections; this is
observed and evaluated in the following year when a new inspection is performed.
•
Instituto Nicaragüense de Fomento Cooperativo (Cooperative Development Institute)
602.
Article 113 of Act No.499, the General Cooperatives Law; states that “The Nicaraguan
Cooperative Development Institute is hereby created, the title of which may be abbreviated as
INFOCOOP (…) INFOCOOP is constituted with its own legal personality, with administrative and
functional independence, and its principal purpose is to be the governing body of national cooperative
protection, promotion and development policy. In addition to the regulation, suspension, supervision
and control of cooperatives, its main objective shall be to promote, foster, publicise and support the
cooperative movement at all levels”
603.
In addition, among the contributions and functions of INFOCOOP under Act No. 499 is: “To
ensure that the cooperatives comply with legal provisions and cooperative principles as regards their
correct management, and for this it may carry out inspections or audits whenever it deems necessary”
604.
Information provided by INFOCOOP indicated that previously the Ministry of Labour was
responsible for registering cooperatives, and that according to information which it had handed over, the
INFOCOOP knew of the existence of 245 savings and loan cooperatives, of which at present 110 are
inactive, 89 have updated their information and the rest had not registered or there had been no contact
with them. In addition, 68 new cooperatives have registered.
605.
As regards the application of the provisions of Act No.285, INFOCOOP stated that they had no
knowledge of the provisions of that Act and that they had had no contact with the Financial Analysis
Commission (CAF).
606.
They were also informed that there are plans creating within the structure of INFOCOOP a unit
for reforming laws or issuing Rules and regulations. This is planned for next year (2009) and it is
expected that the subject of money laundering will be included.
•
Other Institutions
607.
It is important to note that the other institutions that carry on financial activities have no
regulatory or supervisory body.
608.
In the case of microfinance institutions, these are grouped only at the union level. The
organisation to which they belong is called the Nicaraguan Association of Microfinance Institutions –
ASOMIF. In the interview held with one microfinance institution, we learned that they are unaware of
present Nicaraguan regulations on the subject of money laundering and that they had not been contacted
by the body responsible for ensuring compliance with these regulations.
96
609.
Among the services that this type of institution is at present providing are the granting of loans,
the provision of wage advances, payment of national and international remittances, payment of basic
services, currency exchange, sale of insurance, and payments to pensioners. Its activity report up to 2007
indicates that it has 77,421 clients, and according to information provided by its authorities its working
capital was acquired through donations from institutions devoted to these types of activities, in view of
the fact that it obtained its legal personality as a non-governmental organisation.
610.
The number of remittance companies established in Nicaragua is unknown. We learned from the
interview with one of them, which is the only one that submits to the CAF reports on transactions in
excess of US$10,000 and suspect transaction reports, that its market share varies from 35 to 38%, and
that it has no regulatory body and needs no specific licence to operate in the country. On the other hand,
it informed us that for approximately five years it has had a compliance officer and a programme to
detect unusual operations. It has also put into effect a form which the customers must fill out when they
are recurrent customers.
611.
With respect to Casas de Cambio (exchange businesses), their number is unknown and there is
no regulation of this activity. Two of them send information to the Central Bank on a voluntary basis,
about their foreign exchange transactions. During the interview with one of them it confirmed that there
is no authority charged with regulating or supervising it, that the average transaction with physical
persons is US$200 per customer, that most of its customers are legal persons and its shareholders (those
of the Casa de Cambio) have an ownership interest in about 10% of them. They also have smaller clients
who are professional currency dealers or casas de cambio themselves, to whom it imposes a limit of
US$2,000 per day. This casa de cambio has created its own customer identification form. It is important
to note that the professional dealers have associated themselves into a union entitled Federation of
Money Exchange Workers of Nicaragua – FETRACAMNIC -, which issues a carnet to identify them and
attest their membership in the union.
612.
Designation of Competent Authority (c.23.2): The Superintendency of Banks and Other
Financial Institutions is the only supervisory body that verifies compliance with money laundering
regulations in the institutions under its supervision and inspection. From 2004 to 2008 it has imposed 44
administrative sanctions for non-compliance with ML/FT regulations. As regards the rest of the regulated
entities, article 15 of the decree embodying the regulations for Act 285-99 empowers the CAF to
“verify...whether procedures established in the ACT [Act 285-99] are being complied with”. Up to the
time of the visit, it had not exercised these powers, nor did it have the resources to do so.
Suitability (fit and proper criteria).
613.
It is important to mention that only the SIBOIF has established any regulation to prevent
criminals or their associates obtaining or being beneficiaries of a significant or majority participation in
or possessing an administrative function within a supervised institution.
614.
Article 4 6. of Act No. 561 stipulates that: “6. In addition, each one of the shareholders who
possess either individually or jointly with their related parties, a proportion of 5% or more of the capital
must comply with the following requirements: Solvency: possess net consolidated worth equivalent to the
proposed investment and, when it is reduced to a lower figure, inform the Superintendent of the fact as
soon as possible. Integrity: that there are no serious or repeated malicious or negligent conducts that
may pose a risk for the stability of the institution that is proposed to be established or the security of its
depositors”.
615.
In addition, paragraphs c) and g) of the same Article state: “c) If participation by him in
activities related to drug trafficking and related offences, money laundering or financing of terrorism
has been judicially proved g) If he cannot prove the lawful origin of the funds used to acquire the shares
(emphasis in the original)
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616.
Article 29 8. of Act No. 561 stipulates that: The following may not be members of the Board of
Directors of a bank: 8. Those who have been convicted of crimes of malice that incur penalties that are
more than correctional.
617.
Also, Article 3 d) of the Rules for Requirements for the Constitution of Banks, Leasing
Companies, Branches of Foreign Banks and Offices of Representation stipulates that: “For the purpose
of verifying compliance with the provisions of numbers. 3, 4, 6 and 7 of Article 4 of the General Law on
Banks, each of the holders of 5% of the shares of the proposed institution as well as the members of the
Board of Directors and the main management team (Chief Executive Officer, General Manager,
Assistant Managers of departments and Internal Auditor) must present, as the case may be, the following
information and documentation: (…)
(…) vi. Judicial and/or police record issued by the corresponding national agencies in the case of
persons domiciled in Nicaragua and by the foreign competent body in the case of persons not
domiciled in Nicaragua or natural persons resident in Nicaragua who have been resident abroad in
the previous fifteen years (…)
(…) viii. Declaration before a notary public that he has not been involved in any of the situations
described in numbers 1, 5, 6, 7 and 8 of Article 29 of the General Law on Banks. For Directors: A
declaration before a notary public that they are not under any of the impediments of the said Article
29(…)
618.
In the case of insurance companies, Article 54 f) of Decree Law No.1727 (General Law on
Insurance Institutions) only states that: “Impediments to becoming a Director (…) f) Those who have
been convicted of robbery, fraud, embezzlement, malversation of funds or any other crime against
property, with the exception of those who have been convicted for delitos culposos (crimes of
negligence). The same impediment shall be applicable to the appointment of managers and legal
representatives.
619.
For stock broking companies, Article 37 e) of Act No. 587 (The Capital Market Act) stipulates:
“e) That all its directors, managers and senior officials shall be of recognised moral solvency, ample
capacity and experience; they must submit certification of their appointment, adding the detailed
curriculum of each of them, and that none has been convicted of offences against property or public trust
(…)”
620.
On the knowledge and integrity that must be possessed by Directors and senior management of
financial institutions, the Rules for requirements of honesty and competence of Directors, General
Manager and/or Chief Executive and Internal Auditor approved by the Board of Directors of the SIBOIF
and published in Official Gazette of 9th July 2008 states in its Article 2 that “The purpose of this
regulation is to lay down the general criteria and requirements for information enabling the honesty and
competence of staff required by law to occupy the post to be assessed; as well as the time limits for the
submission of such information. This is in order to enable the Superintendent to declare null and void
any election or appointment that does not comply with the abovementioned requirements, in accordance
with the powers conferred on him by the law.”
621.
Article 5 of the same Rules adds that a person cannot be shareholder, partner, investor or
beneficiary of an investment in a financial institution, if it cannot demonstrate the legitimate origin of his
funds, or if it there is judicial evidence of participation in activities related with narcotrafic or ML/FT.
Application of Prudential Regulations to AML/CFT
•
Licensing and authorisation -
622.
The Superintendency of Banks and Other Financial Institutions is one of the agencies that grants
operating licences for the institutions under its supervision.
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623.
Banks, branches of foreign banks, offices of representation and leasing companies must apply
for a licence to the Superintendency of Banks and Other Financial Institutions, and the application must
contain the documentation required and comply with the provisions of Article 4 of Act No. 561.
624.
For insurance companies, Article 8 of Decree Law No. 1727 stipulates that “Persons wishing to
obtain a licence to engage in insurance or reinsurance in the country must submit an application in
duplicate to the Superintendent of Banks including in the application: full name, civil status, nationality,
profession or office and domicile of the persons applying, the type of business that they wish to set up, its
name, the branch or branches of insurance in which they plan to operate and the name and address of
the actuary or actuaries to whom they will entrust the formulation of the technical basis for future
insurance contracts. The application must be accompanied by three copies of the draft Articles of
Association and Statutes of the business. It must also be accompanied by an explanation of the economic
reasons justifying the establishment of the institution proposed and a forecast of its capitalisation”
625.
For stock broking agencies, Article 6 of Act No. 587 states that: “The Board of Directors of the
Superintendency shall be responsible for (…) a) Authorising the formation of: stock market companies,
clearing and liquidation companies, investment management companies and credit rating companies
(…)”
626.
In the case of cooperatives, Article 114 b) of Act No. 499 stipulates that INFOCOOP shall: “b)
Authorise and certify the formation and functioning of cooperatives in accordance with the law”.
627.
The remainder of the financial institutions classified as regulated institutions by Act 285 have no
regulatory, licensing or supervisory body over them.
•
ML/FT Risk Management –
628.
Only institutions supervised by SIBOIF have a specific set of regulations for ML/FT risk
management. Article 2 a) of the SIBOIF Rules stipulates that a) The purpose of these regulations is to
set down the requirements, guidelines and basic and minimum aspects of the measures which the
supervised institutions constituting the financial system of Nicaragua must adopt, implement, update and
improve, under their own initiative and responsibility, in accordance with the nature of the industry and
the market in which each of them operates, and in keeping with the level of risk of their respective
structures, customers, businesses, products, services, distribution channels and the jurisdictions in which
they operate; to manage, prevent and mitigate the risk of being used, knowingly or unknowingly, locally
or abroad, for the laundering of money, property or assets; and for financing of terrorism, hereinafter
ML/FT”. It should be emphasised once more that these Rules were only recently issued and that it is
expected that their implementation will be gradual. In addition, compliance with them is verified by
SIBOIF and there are administrative sanctions for failure to comply.
•
Ongoing and consolidated supervision –
629.
Under Act 316 the SIBOIF is responsible for supervising, inspecting, monitoring and controlling
the functioning of all the entities within its field of action, and these inspections must take place at least
yearly. Furthermore, the result of the inspections shall be sent in writing to the Board of Directors and
the General Manager. The SIBOIF must also issue to the supervised institutions the necessary
instructions for remedying the deficiencies and irregularities that may be discovered and adopt whatever
measures are in its power to impose administrative sanctions and correct any violations that may have
been committed.
630.
It is important to note that although the regulations in force require consolidated supervision, the
SIBOIF has stated that it is not yet applied, but it is in the process of designing the necessary manuals to
put it in practice. This requirement is set out in Article 137 of Act 561, as follows: “It is the
responsibility of the Superintendent to exercise consolidated supervision over financial groups
constituted in the Republic of Nicaragua, and their components, even when some of these may be under
the supervision of another national authority or, if that authority is foreign, in accordance with the
99
conventions signed for the purpose. The Superintendency of Banks shall act as coordinator of the
supervisory activities at the national level on the financial group and its members based in the Republic
of Nicaragua and their branches and subsidiaries abroad in accordance with cooperation treaties signed
for the purpose, and all other supervisory bodies in the country shall offer the Superintendent of Banks
all collaboration and information he may require to carry out his functions. Consolidated supervision of
financial groups is the application by the Superintendency of Banks of the monitoring, supervision, and
imposition of the prudential laws and regulations to all aspects of the business conducted the component
entities of a financial group (…)”
631.
The other regulated institutions are not under ongoing ML/FT supervision by a supervisory
body, since in many cases the institutions do not have such a supervisory body, or if they do, it has no
knowledge of the issue of ML/FT.
Licensing or Registration of Value Transfer Services
632.
Money transfer companies (remittance companies) and Bureaux de Change in Nicaragua have no
regulatory of licensing body, nor do they have to register for purposes of control. They are registered
only in the commercial register, like any other company wishing to operate in Nicaragua. It is also
important to note that no institution has knowledge of how many of these businesses are established or
the market share of each of them.
633.
In addition to the money transfer companies, banks, cooperatives and microfinance institutions
receive and pay remittances and therefore these types of institutions also have a share in the remittance
market. The remittance companies and the banks are the only institutions that submit suspicious
transaction reports on this kind of transaction to the CAF.
634.
Bureaux de Change, since they engage in exchange operations, are required by the Rules for
Exchange Operations issued by the Board of Directors of the Central Bank of Nicaragua to report daily
operations equal to or in excess US$10,000, and there are forms for the purpose.
635.
In addition to the Bureaux de Change there are also “cambistas”, professional currency dealers
who are also not regulated. It is important to note that these persons have formed themselves into a
union entitled Federation of Money Exchange Workers of Nicaragua – FETRACAMNIC -, which issues
a carnet to identify them and attest their membership in the union.
636.
Monitoring and Supervision of Value Transfer/Exchange Services (c.23.6): Money transfer
companies (remittance companies), Bureaux de Change and “cambistas” are not regulated, monitored or
supervised by any agency. In addition, only one remittance agency has sent 876 STRs to the CAF, and
has collaborated by providing it with information whenever it requires. It is important to indicate that in
the interviews held with one remittance company and one Bureau de Change, we were informed that
they are willing to be regulated by a supervisory body, and to work more closely with the CAF in ML
matters.
637.
No other financial institution classified as regulated entity by Act No. 285, except for those
under the supervision of this SIBOIF and the cooperatives, has a supervisory agency to regulate or
license them, nor are they subject to ML/FT supervision.
Rec.25.
Guidelines
638.
The SIBOIF is the only competent authority that has issued guidelines to assist supervised
institutions to develop and implement specific controls for ML/FT prevention in their institutions. For
this purpose it has issued the Rules for Management of the Prevention Risks of Laundering of Money,
Property or Assets and Financing of Terrorism. These Rules contain, among other things, due diligence
for knowledge of the customer, other complementary measures for this, matrices for ML/FT risk
evaluation, monitoring and reporting, record keeping and conservation, internal and external audit, and a
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glossary of general terminology for the application of the Rules, warning signals and indicators, STR and
CTR formats, and instructions for submission of these.
639.
The SIBOIF has also sent circulars to the supervised institutions to inform them about STR
statistics, documentation of ML/FT risks, instructions to be observed in performing their functions, and
reinforcements of prevention measures.
Rec.29.
Power for Supervisors
640.
The only financial institutions of which the supervisor has powers of supervision, regulation and
sanction in ML/FT matters are those under the supervision of the SIBOIF. Of the other institutions,
some do not have any regulatory body and others do, but the regulatory body does not extend its
supervision to ML/FT matters.
641.
Act No. 316 confers on the SIBOIF the power to: “Supervise, inspect, monitor and control the
functioning of all the entities within its field of competence”. In addition, the Act makes the SIBOIF
responsible for “Ensuring compliance with the requirements imposed by this Act on the supervised,
inspected, monitored and controlled entities (…)”. These types of inspections must be carried out at least
yearly.
642.
Regarding the supervision of foreign branches and subsidiaries, Article 137 of Act 561
stipulates: “(…) The Superintendency of Banks shall act as coordinator of the supervisory activities at
the national level over the financial group and its members constituted in the Republic of Nicaragua and
its branches and subsidiaries abroad in accordance with cooperation conventions signed for the purpose,
and all other supervisory bodies in the country shall lend the Superintendent of Banks all collaboration
and information that he may require for the exercise of his functions (…)”.
643.
Act No.587 states that it is one of the responsibilities of the SIBOIF “To authorise the setting up
and functioning of stock market agencies and the stockbrokers who operate within it, to regulate and
supervise stock market operations and ensure compliance with this Act, and the rules of the Board of
Directors of the Superintendency and the regulations issued by the Stock Exchange of which they are
members, without prejudice to the powers of the Superintendent” (emphasis in the original). Article 212,
Prevention of Money Laundering, of the Act states: “The Superintendency, in consultation with the
bodies competent in the field, shall issue general rules which must be followed by the natural and legal
persons regulated by this Act (…)”
644.
As regards insurance companies, Decree Law No.1727 states that the Superintendent “Directly
or through the members of the staff of the Superintendency, shall control and govern the management of
insurance companies, ensure that they abide by the provisions of this Law, its regulations, resolutions
and instructions, and shall have the power to carry out visits of inspection in the offices of the companies
(…)”.
645.
To ensure compliance with ML/FT regulations, to which the supervised entities are subject, the
SIBOIF envisages the imposition of fines, and this is embodied in Article 10 of the General Rules on
Imposition of Fines.
646.
Part 10 of Act No.316 reads as follows: “Regularly inspect the institutions under its supervision,
monitor, and carry out surveys and other necessary verifications through the staff of the Superintendency
of those duly contracted for the purpose. In this case the personnel is required to observe bank secrecy,
under pain of civil and criminal liability. These inspections, surveys and verifications shall be carried
out at least once a year, and may be carried out without prior warning to the institutions inspected.”
647.
For purposes of inspection of the supervised institutions, the SIBOIF has a risk supervision
manual produced in 2004, which, at the date of the visit of the evaluation team, was being brought up to
date in accordance with the new regulations in force. It is important to mention that this supervision
manual is intended solely for evaluation of banks. ML/FT inspections are annual, and they take ten to
101
twenty working days, depending on the size of the institution. In the course of the inspection
observations are submitted to the supervised entities which must reply to them before the team of
inspectors leaves the institution. Within five working days of the conclusion of the inspection the
inspectors prepare a report on the evaluation, which must be sent to the supervised entity together with
financial evaluation.
648.
It is important to point out that the SIBOIF in the information it supplied to the evaluation team,
stated that there was a report on a banking institution which had been completed three months
previously, and which showed serious deficiencies and had not been sent to the evaluated institution
because what is sent to the supervised institution is a general report in which financial and ML/FT issues
are included, but the financial evaluation had not yet been completed. It is evident from this that the
reports are not timely as far as correction of detected deficiencies is concerned.
649.
With regard to deficiencies detected during an evaluation, these are set out in a report which is
sent to the supervised entity for the purpose of enabling it to take the necessary corrective actions. It is
important to point out that the observations made by the SIBOIF regarding deficiencies detected are not
promptly followed up, owing to the shortage of staff for the purpose; instead this takes place at the
following inspection, i.e. one year later. 5.7% of the SIBOIF staff is assigned to ML/FT prevention, as
can be seen from the following table:
SIBOIF Department
# of Employees Comments
assigned
to
ML/FT
prevention
ML Prevention Unit
2
In addition, in every on-site inspection one
Audit Risk inspector provides support in the
Banks and Leasing Companies
3
review of the effectiveness of the auditing
Department
function in the ML/FT prevention
programme of the supervised entity
Insurance Department
1
Securities Department
1
Warehouse Department
1
These three D.T.I. inspectors in addition to
carrying out the full inspection of
Information
Technology
technological risk, lends support to the
3
Directorate (D.T.I.)
review of the monitoring systems in each
inspection process of the ML/FT Prevention
Programmes
Total
11
Total of SIBOIF staff
190
Percentage of staff in ML/FT Prevention
5.7%
650.
The SIBOIF states that during the inspections the supervised institutions do not have recourse to
confidentiality of information, and have no kind of problem with supplying the information. In addition,
Article 19.9 of Act No.316 states that: It is the responsibility of the Superintendent and the ViceSuperintendent “Collect from banks, non-banking financial institutions and financial groups,
confidentially, the reports necessary to demonstrate the state of their finances and determine their
compliance with the laws, regulations and provisions to which they are subject. All documentation and
information referred to in the previous paragraph that is demanded by the Superintendent shall be
submitted by the banks without recourse to reservations of any kind” (emphasis in the original)
102
651.
On bank secrecy, Article 113 of Act No. 561 states: “Banks and other regulated institutions shall
not provide reports of the passive operations carried out with their clients except, as the case may be, to
their legal representatives or those who have power to withdraw the funds or to intervene in the operation
in question, except when this is expressly authorised by the customer or when the judicial authority
requests it by virtue of a trial in process, by written order referring to the trial in which the depositor,
saver or subscriber is involved. The following are exempt from these provisions: 1. The requirements
which the Superintendent of Banks may impose in the matter. Furthermore, the Superintendent is
empowered to process information concerning money laundering as provided by law and international
treaties.” (emphasis in the original)
652.
Furthermore, Article 35 of the SIBOIF Rules stipulates that: “At the request of the
Superintendency or any other competent authority, the supervised institution shall make available all
information and documentation referred to in these Rules, which must be handed over without delay and
without any claim of confidentiality, in a reasonable period of time depending on the complexity and
volume of the information required”
653.
The SIBOIF is the only supervisory body that possesses dissuasive powers over the supervised
institutions. These are applied when the supervised institutions show evidence of weaknesses in their
ML/FT Prevention Programmes, and when there is delay in the submission of information. According to
figures provided by the SIBOIF, from 2004 to 2008 forty-four administrative sanctions were imposed on
supervised institutions.
654.
Article 3, numeral 7 of Act No.316 reads: “Ensure compliance by the supervised, inspected,
monitored and controlled institutions with the requirements to which they are subject under this Act, the
Law for the deposit guarantee system, the Organic Law of the Central Bank of Nicaragua and the
regulations derived from them; and impose administrative sanctions for non-compliance with such laws
and regulations” (emphasis in the original). In addition Paragraph 11 of the same Article reads: “(…)
order the dismissal of the Directors and officials of the institutions under its supervision for irregularities
committed in the exercise of their functions under this Act, without prejudice to any corresponding civil
or criminal liabilities”.
Rec. 17
Sanctions
655.
Article 26 of the Regulations of Act No.285 embodies sanctions only with reference to Article
32 (Identification of Customers) and Article 33 (Record Keeping). It states: “Financial institutions
which violate Article 32 of the Act shall incur a fine of 50% (fifty percent) of the value of the financial
transaction. For non-compliance with Article 33 of the Act, they shall incur a fine of 100% (one hundred
percent) of the transaction.” It is important to point out that this power is conferred on the CAF, as the
competent authority, but that up to the date of the evaluation the CAF had not imposed any sanctions on
any institution. The reason for this is that the CAF does not have the staff to verify compliance with Act
No.285 and its regulations by financial institutions.
656.
The only institution that has imposed sanctions for non-compliance with the regulations in force
is the SIBOIF, which issues specific rules for ML/FT compliance. Act No.316 gives SIBOIF the duty to
impose administrative sanctions for non-compliance with laws and rules in force, including the Rules for
the Management of Prevention of Risks of Laundering of Money, Properties and Assets and Financing of
Terrorism.
657.
One of the administrative sanctions that the SIBOIF can impose is indicated in the second
paragraph of Article 164 of Act No. 561, as follows: “The financial institution shall be penalised with a
fine of five thousand to sixty thousand fine units, depending on the seriousness of the case, when it
increases its legal, operational and reputational risks by: 1) Failing to develop a money laundering
prevention programme. 2) Failing to comply with the obligation to report to the competent authority, in
accordance with the law, unusual operations or transactions giving rise to suspicions of money
laundering. The director, manager, official, compliance officer or any other employee of the institution
who divulges or informs the customer that his transaction is being analysed or considered for a possible
103
suspicious transaction report concerning money laundering, or discloses to him that such report has
been made, shall be penalised with a fine equivalent to four to eight times his monthly salary. In the
case of directors, the fine shall between ten thousand and fifty thousand fine units. The above is without
prejudice to dismissal from the post if the violation is repeated.
658.
In addition to the powers indicated in the previous paragraph, SIBOIF has General Rules for
Imposition of Fines, issued on 14th February 2006, and applicable to banks, non-banking financial
institutions, companies holding shares in financial groups and second-tier banking institutions. Article
10 of these Rules sets out the violations and the range of fine units to be applied by the SIBOIF for noncompliance with money laundering prevention.
659.
As regards the Securities Market, Articles 183 and 184 of Act No.587 states that it is the
responsibility of the Superintendent to impose sanctions and determine the scale of violations. These
violations include non-compliance with both the provisions of the Act and the provisions of the SIBOIF
Rules.
660.
For the Securities Market, Article 93 of Decree Law 1727 stipulates: “Any violation of the
provisions of this Law for which no specific penalty is indicated in it, shall incur a fine of FIVE
HUNDRED TO TEN THOUSAND CÓRDOBAS (c$500 TO C$10,000). Violations of this Law or of
instructions or regulations of the Superintendent, issued by the latter by virtue of his powers under the
Law shall incur the same fines”
661.
It is important to note that there is no regulation giving the supervisory body or competent
authority power to revoke, restrict or suspend, as the case may be, the licence of a financial institution.
662.
As regards criminal penalties, the final Article of Act No.614 states that whoever commits the
offence of money laundering shall incur a penalty of five to seven years imprisonment and special
disqualification for an equal period from the exercise of his profession, office or post, and a fine of one
to three times the value of the money, property or assets in question.
663.
The Financial Analysis Commission (CAF) is the competent authority for imposition of the
sanctions established for ML/FT in Act 285 and its Regulations, but at the date of the evaluation the CAF
authorities indicated to the team of evaluators that no sanction had been imposed between 2004 and
2008. On the other hand, under the rules issued by its Board of Directors, the SIBOIF has the power to
impose administrative sanctions on institutions under its supervision. It is important to emphasis that
there is no supervisory body other than the SIBOIF empowered to sanction financial entities in ML/FT
matters.
664.
The only sanctions that exist apply to directors, managers, officials, and the compliance officer
of banks. These sanctions apply to divulging information to the customer when this information is being
analysed for consideration as a suspicious transaction. This is laid down in the second paragraph of
Article 164 of Act No.561 “(…) the director, manager, official, compliance officer or any other
employee of the institution who divulges or informs the customer that his transaction is being analysed
or considered for possible suspicious transaction report in the area of money laundering, or informs him
that such a report has been submitted, shall incur a fine equivalent to between four and eight times his
monthly salary. In the case of directors, the fine shall be between ten thousand and fifty thousand fine
units. The above is without prejudice to dismissal from the post should the offence be repeated.
665.
Also, Article 10.4 and 5 of the General Rules for Imposition of Fines read as follows: “4. Any
person who occupies any of the following posts: manager, official, compliance officer or any other post
in the institution, who divulges or informs a customer that his transaction is being analysed or
considered for a possible suspicious transaction report, or who informs him that such a report has been
submitted. Amount: between four and eight monthly salaries of the person involved in the breach of
trust, in accordance with the abovementioned categories. 5. In cases where the person occupies the
position of Director and divulges or informs the client that his transaction is being analysed or
104
considered for a possible suspicious transaction report or informs him that such a report has been
submitted. Amount: thirty thousand to fifty thousand fine units” (emphasis in the original)
666.
The administrative sanctions imposed by the SIBOIF under the regulations in force are
expressed in fine units. Article 159 of Act No.561 states that the value of each “fine unit” shall be the
equivalent in national currency of one United States dollar, at the official rate of exchange established
by the Central Bank of Nicaragua in force on the date of the imposition of the sanction.
667.
The second paragraph of Article 164 of Act No.561 sets out the range of sanctions as follows:
“The financial institution shall incur a fine of five thousand to sixty thousand fine units, depending on the
seriousness of the case (…)” Also Article 10 of the General Rules for Imposition of Fines develops the
content of Article 164 of Act No. 561, setting out a series of situations for which banking institutions
may incur fines, as well as the range of fines to be imposed.
668.
According to information supplied by the SIBOIF, from 2004 to 2008 it imposed 44 fines for
non-compliance with AML/CFT requirements, totalling C$354,857.95 (Córdobas, the national currency
of Nicaragua) and US$194,151.00 (United States Dollars). It is important to indicate that this
information does not include the type of institution on which the fine was imposed nor the motive,
reason or non-compliance for which it was imposed.
Año
Year
2004
2005
2006
2007
2008
Resolución del
Superintendent’s
Superintendente
Resolution
Fecha
Date ofde
Resolución
Resolution
Institution
Entidad
SIB-OIF-XII-117-2004
SIB-OIF-XIII-003-2005
OSB-008-2005
OSB-012-2005
OSB-023-2005
OSB-045-2005
OSB-046-2005
OSB-049-2005
OSB-050-2005
OSB-002-2006
OSB-003-2006
OSB-005-2006
OSB-075-2006
OSB-088-2006
OSB-101-2006
OSB-006-2007
OSB-007-2007
OSB-008-2007
OSB-009-2007
OSB-010-2007
OSB-011-2007
OSB-012-2007
OSB-013-2007
OSB-014-2007
OSB-088-2007
OSB-090-2007
OSB-092-2007
OSB-093-2007
OSB-094-2007
OSB-095-2007
OSB-103-2007
OSB-104-2007
OSB-108-2007
OSB-109-2007
OSB-111-2007
OSB-112-2007
OSB-005-2008
OSB-006-2008
OSB-011-2008
OSB-012-2008
OSB-013-2008
OSB-014-2008
OSB-017-2008
OSB-034-2008
03/11/2004
14/01/2005
25/04/2005
13/05/2005
29/08/2005
13/11/2005
16/11/2005
06/12/2005
15/12/2005
24/01/2006
24/01/2006
07/02/2006
23/08/2006
02/10/2006
22/11/2006
19/01/2007
19/01/2007
19/01/2007
19/01/2007
19/01/2007
19/012007
19/01/2007
19/01/2007
19/01/2007
01/06/2007
12/06/2007
08/08/2007
08/08/2007
24/09/2007
26/09/2007
05/10/2007
08/10/2007
06/11/2007
09/11/2007
26/11/2007
29/11/2007
31/01/2008
04/02/2008
08/02/2008
18/02/2008
29/02/2008
04/03/2008
04/03/2008
05/08/2008
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Monto
AmountdeoflaSanction
Sanción
Córdobas
Dollars
Córdobas
Dólares
5,000.00
5,000.00
8,000.00
40,000.00
40,000.00
40,000.00
8,000.00
8,000.00
40,000.00
16,000.00
16,000.00
16,000.00
25,000.00
8,893.75
8,964.20
Total
defines
multas
Total
por año
per year
1
8
6
1,000.00
1,000.00
550.00
10,000.00
10,000.00
10,000.00
550.00
550.00
10,000.00
35,000.00
20,000.00
10,500.00
500.00
10,000.00
10,000.00
10,000.00
10,000.00
10,000.00
10,000.00
21
5,000.00
10,000.00
3,000.00
10,001.00
10,000.00
10,000.00
10,000.00
8
25,000.00
C$ 354,857.95
1,500.00
10,000.00
$194,151.00
44
669.
In the case of insurance companies, the range of sanctions is set out in Article 93 of Decree Law
1727, which states: “(…) shall be incur a fine of FIVE HUNDRED TO TEN THOUSAND CÓRDOBAS
105
(C$500.00 a C$10,000.00). Violations of this Law or of instructions or regulations of the
Superintendent, issued by the latter by virtue of his powers under the Law, shall incur the same fines”
670.
In the case of the Securities Market, the regulations are not explicit as regards the range of the
sanctions to be applied for non-compliance in ML/FT matters.
3.10.2. Recommendations and Comments
671.
A scale for proportionate and dissuasive sanctions for non-compliance with Act No.285 and its
Regulations should be issued.
672.
Fines for directors, managers, officials and compliance officers, as responsible for the
application of ML/FT rules, should be considered.
673.
Regulations should be issued to give the competent authority or the supervisory bodies power to
revoke, restrict or suspend licences of financial institutions which re-offend in non-compliance with their
duties under the ML/FT regulations in force.
674.
Financial institutions should be made subject to effective ML/FT supervision by the competent
authority or the supervisory or regulatory body.
675.
The CAF should be provided with the human, financial and technical resources to enable it to
carry out supervision over the financial institutions, to verify compliance with ML/FT rules in force.
676.
Regulations should be issued to prevent criminals or their associates obtaining or becoming
beneficiaries of a significant or majority part of, or occupying administrative functions within, a financial
institution.
677.
There should be a body to regulate, license and supervise money transfer firms and Bureaux de
Change.
678.
Guidelines should be issued to help financial institutions to implement and comply with
requirements of ML/FT rules. For example, typologies, warning signals, instructions, etc.
679.
Steps should be taken to ensure that the reports on SIBOIF inspections are sent in a timely
fashion to supervised institutions to enable them to correct the deficiencies detected.
680.
The number of persons responsible for SIBOIF inspections, as well as for following up the
deficiencies detected in these inspections, should be increased.
3.10.3. Compliance with Recommendations 23, 29, 17 & 25
R.17
Rati
ng
Summary of factors relevant to s.3.10 underlying the general rating
PC
•
•
•
•
Administrative sanctions set out in Act No.285 for institutions that are not
under supervision of SIBOIF have not been effective; the competent authority
has not applied any sanctions. In addition, the sanctions are not proportional
or dissuasive.
Only the SIBOIF, as regulatory body, has imposed sanctions on the
institutions under its supervision.
The sanctions that the SIBOIF can impose on directors, managers, officials
and compliance officers, according to Act 561 (art. 164) and its “General
Rules for the Imposition of Fines” (art. 10) are only for tipping of the
customer about a suspicious transaction report.
No range has been established for sanctions for non-compliance with
provisions of Act No.285
106
R.23
PC
•
There is no regulation conferring on the supervisory body the power to
revoke, restrict or suspend the licences of financial institutions
•
Only institutions supervised by the SIBOIF are subject to ML/FT supervision
•
The SIBOIF as supervisory body carries out inspections to verify compliance
with ML/FT rules
The Financial Analysis Commission – CAF – does not have the staff,
technical equipment or resources to regulate and supervise all institutions not
covered by the SIBOIF
The CAF, as competent authority, has not carried out any verification in the
financial institutions to determine compliance with obligations imposed by the
Act
Regulation to prevent criminals or their associates obtaining or being
beneficiaries of a significant or majority control or carrying out an
administrative function in a supervised entity exists only for the institutions
under the supervision of the SIBOIF
There is no regulation requiring licensing or registration of remittance
companies and Bureaux de Change, nor are they subject to supervision and/or
monitoring by any regulatory or supervisory entity
The SIBOIF has not carried out consolidated supervision of financial groups
•
•
•
•
•
R.25
PC
•
•
R.29
PC
Only the SIBOIF has issued guidelines to help financial institutions and other
regulated entities to strengthen their ML/FT measures
No study of ML and FT techniques or typologies specific to Nicaragua has
been carried out
•
The CAF has power to verify compliance with the obligations imposed by Act
No. 285, but has not exercised them because of the shortage of human and
technical resources
•
Only the SIBOIF has supervised, regulated and imposed sanctions in the area
of ML/FT
There is no timely follow up of the deficiencies detected by SIBOIF
inspections, during its ongoing program of in-situ and extra-situ oversight.
Reports are not sent in timely fashion to the supervised institution; they are
forwarded up to three months after the conclusion of the inspection
The SIBOF has limited staff for inspecting supervised institutions and for
following up on deficiencies discovered
•
•
•
3.11. Money or value transfer services (SR.VI):
3.11.1. Description and Analysis
681.
Under Article 341 (c) of Act 285-99 money transfer businesses are regulated entities. But they
are not required to register, nor are they regulated or supervised by any authority.
682.
There is no registration or licensing requirement for transfer firms, nor any authority regulating
them for ML prevention or any other purpose. As regards institutions not supervised by the SIBOIF, the
CAF, according to article 15 (b) of Act 285-99, may “verify whether the procedures established in the
Act are being complied with in any public or private institution”. Up to the time of the visit the CAF had
taken no steps in this regard.
683.
Unlike purchase and sale of foreign currency, for which registration with the Central Bank is
required, the money transfer business is completely unregulated. Anecdotal information received by the
107
Central Bank19 suggests that the savings and loan cooperatives and the microfinance associations are
becoming active in this market. No estimates are available on the volume of resources or the number of
businesses engaged in this activity, but it is presumed that they are considerable, given the great
importance to the Nicaraguan economy of workers’ remittances.
684.
The FATF Recommendations are not applied in this sector. Act 285-99 and its Regulations
establish certain general ML prevention requirements for regulated entities, including money transfer
operations. These are: Customer identification, record keeping, transaction monitoring and suspicious
transaction reporting, training, and confidentiality (within the limits explained in Section 3 of this
report). The only business that apparently complies with these regulations is the exclusive agent of one
of the big money-transfer multinationals.
685.
There is no supervision of compliance with controls embodied in Article 26 of Act 285-99, nor
any requirement to keep a list of agents. Furthermore, neither the CAF nor any other authority is
empowered to apply the Act 285-99 regulations in the sectors not covered by the SIBOIF.
686.
The sanctions (c.VI.5) provided for in Article 26 of Act 285-99 for all regulated entities, extend
only to knowing the customer and safekeeping of documentation. As mentioned above, compliance with
the law has never been monitored, still less have any sanctions been imposed. Furthermore, although the
CAF is responsible for verifying compliance (art. 15 b), there is no law or decree setting out the
procedure for imposition of sanctions.
3.11.2. Recommendations and comments
687.
Make it mandatory for money transfer businesses to register with some government agency with
the capacity to manage this information.
688.
Issue a regulation empowering the CAF or an agency with the necessary expertise to issue
regulations and guidelines for money transfer operators, and to impose the penalties for non-compliance
embodied in Act 285-99.
689.
While the above takes place, the CAF should start raising awareness and overseeing compliance
of ML controls by money transfer businesses, making use of the limited powers that it has in this respect.
3.11.3. Compliance with Special Recommendation VI
SR.VI
Rating
Summary of factors underlying rating
NC
• The money transfer companies are obligated by AML legislation, but are not
regulated or supervised by any authority.
• There is no obligation to obtain a license or at least register.
• Only the largest remittance company, which is an agent of a multinational, has
established CDD measures and reports suspicious transactions to the CAF.
There are other companies with significant activity for international transfers
(eg microfinance) that do not implement controls to prevent the ML / TF.
• The authorities do not know the number of businesses operating in Nicaragua,
or its agents, or the amount of resources they manage.
19 Nevertheless, there was only one person registered up to the time of the visit.
108
4.
PREVENTIVE MEASURES – DNFBPS
4.1. Customer due diligence; recordkeeping (R.12) (R.5, 6, 8 to 11 & 17)
4.1.1.
Description and Analysis
690.
With regard to this measure only Article 31 f) of Act No.285 refers to CASINOS as another
financial institution and as an entity classed with designated non-financial businesses and professions
required to comply with the ML/FT Prevention Rules.
Casinos:
691.
CDD Measures for DNFBPs in Set Circumstances (Applying c.5.1-5.18 in R.5 to DNFBP)
(c.12.1): Although casinos are included in the Act, Nicaragua has taken no steps to implement rules for
their control and supervision. The authorities themselves of the casino which was visited expressed their
desire to have a control and supervision body, in view of the proliferation of businesses with the same
purpose and their ignorance as to which authority they should send information concerning ML and FT
prevention.
692.
Casinos are required to report cash operations in excess of US$10,000, a figure higher than that
of USD/€ 3,000, established for casinos in the interpretative note to Recommendations 5, 12 and 16.
693.
At the moment of the visit, no casino had complied with the requirement to submit a report to the
Superintendency of Banks, far less an STR. This is due to the complete ignorance of the existence of an
Act requiring them to make this type of report and comply with an ML/FT prevention programme. It is
important to note that the Superintendency of Banks has a Unit that performs certain legal control
functions but neither this Unit nor the Financial Analysis Commission is making the necessary
arrangements with the casinos which operate in Nicaragua to inform them concerning compliance with
suspicious and cash transaction reports, or of the other obligations to which they are subject as regulated
institutions.
694.
The institutions with which the casinos register in order to operate are: The Tourism Institute
(INTUR) to obtain the certificate, the Directorate General of Revenue for tax purposes and the National
Police, which grants them permission to operate once they have complied with sixteen requirements,
among them identification and verification of partners, police records, etc.
695.
According to information provided at the time of the visit, 51 casinos are registered to operate in
Nicaragua. No evidence was found of their having undergone training in ML/FT prevention nor of any
particular set of regulations governing these activities.
Real Estate promotion activities or real estate dealing.
696.
There are no regulations governing these businesses. What exists is an association of 39 real
estate agents, grouped under a law passed in 2007 by the Legislative Assembly of Nicaragua.
Dealing in metals and precious stones
697.
Dealing in metals and precious stones is considered a designated non-financial business and
profession (DNFBP) and it would be desirable for specific regulations to be issued to govern this sector
in ML/FT matters.
698.
It is important to mention that during the visit it was not possible to discover whether there exists
or not in Nicaragua any public or private entity to check how many businesses are engaged in dealing in
metals and precious stones, far less any documentary evidence that they have undergone specific antimoney laundering and anti-financing of terrorism training or verification. It would be desirable for
specific regulations to be issued to regulate this sector in ML and FT matters.
109
Professional services (Lawyers, Public Accountants and Auditors):
699.
Lawyers, Notaries, independent Accountants are considered designated non-financial businesses
and professions – DNFBPs – and it would be desirable for specific ML/CFT prevention rules to be
issued for this sector.
Other Comments on Designated Non-Financial Businesses and Professions (DNFBPs):
700.
None of the abovementioned DNFBPs has submitted suspicious transaction reports. It is
important that there should be contact by the CAF and the Superintendency of Banks with these sectors
to inform them of this and the other obligations applicable to them.
4.1.2.
Recommendations and Comments
701.
Except casinos, which are already obligated, all other categories of DNFBPs should be included
for under the law for prevention of ML / TF.
702.
Issue the necessary regulations, sectioned, so that NPNFD comply with the FATF
Recommendations
703.
Designate a competent authority and adequate resources for the regulation and supervision of
these obligations.
704.
Prepare statistics showing the proportion of the financial system represented by each of the
NPNFD with a view to giving priority to those representing the greatest risk.
4.1.3.
R.12
Compliance with Recommendation 12
Rating
Summary of factors relevant to s.4.1 underlying overall rating
NC
• The casinos are the only DNFBP subject to compliance with anti-money
legislation and they have failed to comply.
• There are no regulations or competent authority for any DNFBPs in AML/CFT
matters.
4.2. Suspicious Transaction Reporting (R.16) (R.13 to 15, 17 and 21)
4.2.1.
Description and Analysis
705.
Act 285 includes casinos as regulated entities. No other activity designated by the FATF as a
DNFBPs has been included by Nicaragua in its money laundering and terrorist financing prevention
regime.
706.
Casinos are subject to the obligations included in Act 285. However, since they are not
institutions supervised by SIBOIF, casinos are not subject to the detailed provisions of the ML/FT
Prevention Rules. Therefore the same deficiencies mentioned with respect to the financial institutions
that are not under the supervision of the SIBOIF (i.e. microfinance institutions) may be assumed to apply
to these DNFBPs as well. The following should be remembered:
a. They are not subject to regulation and supervision by any authority for ALM/CFT
compliance.
b. They do not comply with ALM/CFT obligations such as detection and reporting of unusual
or suspicious transactions. In fact, it was clear from the interviews that they are not even
aware of the existence of these requirements of Act 285.
110
707.
Act 285 requires reporting to the CAF of operations that are complex, unusual or large in
comparison with habitual patterns. It also requires reporting of transactions that for any reason give rise
to suspicion of being linked to money laundering or financing of terrorism.
708.
Under the ML/FT Law (285-99) and its Regulations, prevention includes money laundering and
terrorist financing risks, and in both cases suspicious transaction reports must be made, when the
respective analysis so indicates, to the Financial Analysis Commission for investigation.
709.
According to the authorities, no report to the Financial Analysis Commission (CAF) for terrorist
financing exists.
710.
Article 22 f) of the Regulations to Act 285 stipulates that all suspicious operations must be
reported, including operations attempted but not consummated, regardless of their amount, the nature of
the operation or the type of customer in question.
711.
When the institution in any way presumes, suspects, has reason to suspect, possesses evidence,
knows or should know that the funds come from or are intended for an unlawful activity or money
laundering and FT, regardless of the fact that they do not fall within any warning signal or indicator, it
shall: a) identify and classify the said activity and immediately submit a suspicious transaction report
(STR) to the competent authority. This requirement applies also to DNFBPs.
712.
Act 285 exempts from civil and/or criminal liability by persons, employees and officials of the
CAF, for communications obtained and provided in good faith to competent authorities. This provision
is also applicable to DNFBPs.
713.
The director, manager, official, compliance officer or any other employee of the institution who
divulges or informs the customer that his transaction is being analysed or considered for possible
suspicious transaction reporting for money laundering shall incur a fine of between four and eight times
his monthly salary. This provision applies also to DNFBPs.
714.
The supervised institutions and the Superintendency of Banks shall maintain confidentiality and
secrecy regarding the identity of employees and of officials who have provided information. This
obligation is applicable also to DNFBPs.
4.2.2.
715.
Recommendations and Comments
Regulate and monitor the implementation of the obligations AML / CTF of casinos.
716.
Include as obligated all other categories of NPNFD under recommendations 12 and 16 of the
FATF.
717.
Designate an authority responsible for licensing or registration, regulation, supervision and
punishment of the individual categories of NPNFD.
718.
Take the necessary steps to include the minimum requirements for establishing NPNFD
Recommendations 13-15 and 21 and apply them appropriately to these.
719.
The CAF, in partnership with other relevant authorities, should make an effort to raise awareness
among NPNFD to educate them about their obligations.
4.2.3.
R.16
Compliance with Recommendations 16
Rating
Summary of factors relevant to s.4.2 underlying general overall rating
NC
• There is no compliance with suspicious transaction report requirements in
the DNFBP sector
111
• Casinos are the only category of DNFBPs included in the AML Act.
• There has not been any practical implementation of the law, not even in the
casino sector.
4.3. Regulation, supervision and monitoring (R.24-25)
4.3.1.
Description and Analysis
720.
Act 285-99 (article 28) would apparently allow the CAF to exercise some monitoring of
compliance with AML requirements over all the regulated entities other than the financial institutions
covered by the SIBOIF. However, such monitoring has never taken place. No agency, including the
CAF, has enough authority to further develop the legal obligations of DNFBPs via regulations or other
enforceable means.
721.
As explained earlier, casinos are the only DNFBP included among regulated entities in the law.
The granting of operating licences for casinos in Nicaragua does not include a suitability test by the
authorities, except for a judicial background check of the owners conducted by the Police.
722.
The casinos already in operation are visited occasionally by officers of a specialised division of
the police. These officers check compliance with procedures to ensure that the casino pays the State the
royalties due to it, and check certain consumer protection measures, but they have no technical
knowledge of the operation of a casino, and far less are they concerned with preventing ML/FT in these
businesses.
723.
The representatives of the larger casinos with whom the team held interviews stated that it would
be of benefit to the country and to their business if there were stricter rules to clean up the market and
thus avoid competition from small gambling businesses that puts the reputation of the industry at risk
and generates money laundering vulnerabilities.
724.
Despite the existence of a law which describes and requires the formulation, adoption,
implementation and development of a money laundering and terrorist financing risk prevention
programme for this type of business, there is no regulation or supervision by the control authorities.
725.
Legally established casinos receive a certificate from INTUR (the Tourism Institute); and they
receive a licence to operate, once they have complied with 11 requirements of the National Police,
through the Economic Investigations Directorate.
726.
At the date of the evaluation the other categories considered as DNFBPs (by the FATF) were not
subject to any AML/CFT regulation or supervision by a competent authority in Nicaragua.
727.
No guidelines have been issued to DNFBPs and in addition, those interviewed were unaware of
the existence of the suspicious transaction reporting requirement. The CAF told the evaluation team that
it is preparing a draft of a form to enable them to begin to make their reports.20
4.3.2.
Recommendations and Comments
728.
Nicaragua should take all necessary steps to ensure that DNFBPs are regulated within the
ML/FT Prevention regime, by passing a law to include all the international obligations in this sector.
The rules should guarantee inclusion of the minimum requirements for DNFBPs described in
Recommendations 24 and 25, and apply them adequately and efficiently to the sector.
20 Subsequent to the evaluation visit, the CAF stated that it has just begun to make contact with casinos and other regulated entities, to familiarise them with their
obligations under Act 285-99 and with the STR form.
112
4.3.3.
R.24
Compliance with Recommendations 24 and 25 (criterion 24.1, DNFBP)
Rating
Summary of factors relevant to s.4.3 underlying general overall rating
NC
•
•
R.25
PC
There is no supervision of the DNFBP sector, including casinos which
are the only DNFBP category that is subject to AML obligations.
No sanctions are applied to the DNFBP sector, including casinos
•
There is no training programme for the DNFBP sector including
casinos.
•
No authority or supervisory body apart from the SIBOIF has issued
guidelines to help financial institutions and other regulated entities to
strengthen their ML/FT procedures
•
No study of ML and FT techniques and typologies specific to
Nicaragua has ever been carried out
4.4. Other non-financial businesses and professions; Modern secure transactions (R.20)
4.4.1.
Description and Analysis
729.
Act 285 considers pawnshops as regulated entities. They therefore should comply with the
general obligations set out in this Act and its Regulatory Decree, which were described in Section 3 of
this report.
730.
The same shortcomings mentioned with regard to institutions not under SIBOIF supervision are
attributable to pawnshops. Nevertheless, pursuant to previous FATF decisions on this matter, the fact
that the Law includes a new category of regulated institutions is sufficient for Recommendation 20 to be
considered as complied with, because in it the countries are only urged to “consider” the broadening of
the list of regulated institutions. Unlike what occurs with the DNFBPs which are bound by obligations
in FATF Recommendations, the lack of supervision and practical implementation of anti-money
laundering requirements by the pawnshops in Nicaragua does not put them outside the meaning of this
recommendation.
731.
The Nicaraguan economy is still heavily biased towards agriculture and livestock, and based on
the use of cash. Very few people have credit cards, the use of banks is limited and the financial system is
only just beginning to benefit from foreign investment, since after the nationalisations of the 80s the
banks remained for many years under the control of the State. The possibility of carrying out
transactions and payments for public services by internet is still very limited. The Central Bank stated
that at present the time taken in clearing houses for cheques is T+3 (3 working days).
732.
It was learned that the banks have been trying for years, without any concrete results, to reach an
agreement to connect their ATM networks together and allow their clients to use the machines of any
other bank by paying a tariff, which would broaden the limited coverage of this system in the national
territory.
4.4.2.
Recommendations and Comments
733.
Greater efforts should be made to reduce the use of cash in the economy and modernise financial
transactions.
734.
It is suggested that an authority be designated to regulate and control pawnshops and other
regulated entities that may be designated as such in the future, with a view to ensuring that they comply
effectively with AML/CFT obligations. An anti-money laundering regulation should be issued in
accordance with the nature of their business (this does not affect the listing).
113
4.4.3.
R.20
Compliance with Recommendation 20
Rating
Summary of factors underlying rating
LC
The authorities did not provide adequate information on measures to reduce
the use of cash and modernise financial transactions
5.
LEGAL PERSONS AND ARRANGEMENTS AND NON-PROFIT
ORGANISATIONS
5.1. Legal Persons – Access to beneficial ownership and control information (R.33)
5.1.1.
Description and Analysis
735.
Summary: There is partial information on legal persons in the Public Register of Property, in the
records maintained by notaries public and in the internal books of the companies. Nevertheless, this
information is not kept up-to-date nor is it possible to discover with any accuracy the beneficial owner of
a company, especially in the case of bearer shares, which are allowed though not frequently used. All
companies must be entered in the Property Register, a body which does not keep information centralised
at the national level, but rather segmented by geographical zones of the country, and which makes very
limited use of computer systems to facilitate consultation . The Register contains only the data on
natural persons who occupy senior positions in the company at the moment of its registration, and
changes in the Board of Directors are not entered in the Register.
Creation of Legal Persons
736.
The Nicaraguan Commercial Code authorises the formation of the following types of companies:
sociedades anónimas (limited liability stock company or corporation), with nominative or bearer shares,
sociedades colectivas (general partnership) sociedades en nombre colectivo (company in collective
name), sociedades en comandita simple (company in simple silent partnership, or limited partnership),
and sociedades en comandita por acciones (Company in silent partnership by stock, also known as
Limited Partnership with Shares).
737.
The authority responsible for the registration of these companies, entitled Property Registry
Authority, does not keep the information centralised at the national level nor up to date information on
directors and senior office holders of the companies.
738.
Even when the information is accessible to the public, the evaluation team learned that a large
part of the historical record of the data is in ledgers, and that they are in the process of being
microfilmed. Microfilm documents do not permit advanced searches by text or by identity data. The
Property Registration authority needs to be modernised, to provide a better service to users, i.e.
authorities and public.
739.
The process for the creation of a sociedad anónima and obtaining legal personality is as follows:
the Articles of Association are legalised by a notary then it is entered in the Property Register.
740.
In order to be valid the documents of the sociedad anónima must contain information on the
identity and domicile of its partners, its company name, the purpose of the business and its address, the
designation of persons responsible for the management or the Board of Directors, and the legal
representative, the frequency and means of convocation and holding of extraordinary general meetings,
the amount of capital, with value ascribed to contributions in kind, or of the way in which this valuation
must be done, the number, type and value of shares, whether they are nominative or bearer shares or
both; whether the nominative shares can be converted into bearer shares and vice versa, the time limit
114
and means for payment of subscribed capital, the particular advantages and rights reserved for founding
partners, the life of the company and other requirements set out in Nicaraguan commercial law.
741.
Notaries are required to retain all documentation on their transactions and the judicial authorities
have full right of access to any information that they need from them in the course of an investigation.
Notarial work can be done by any qualified attorney, and in such cases, they are subject to Act No.105 of
24th July 1990, the law governing notarial matters in Nicaragua. However, not all attorneys provide
such services.
742.
A notary is required to provide a notarial service on request unless he has just cause to refuse, or
unless it falls within the reasons for denial or suspension provided in the law, for example when the
client provides him with a draft to be put into legal form, and the client refuses to have it clarified for due
comprehensibility; and in all cases where the acts or contracts, in whole or in part, are contrary to the
law, to morality and to good practice, i.e. when they are unlawful.
743.
Notaries are the only persons authorised to legalise a public document for entry into the Registry
Authority for the purpose of obtaining legal personality. Notaries are not required to obtain, verify and
keep records of the final beneficiary and the person in control of legal persons, only of the
documentation for the notarial transaction and the copies of identity documents of natural persons,
requested for the purpose of authentication of their signature.
Access to beneficial ownership and control information
744.
On the request of an authority or another interested party in the country, the Property
Registration Authority issues certificates attesting to the existence of, and the data held on, legal persons.
This certification takes a few days to be issued and contains the information that is available, but not kept
up to date, because of the lack of any requirement for updating information such as changes in the
Directors and senior staff of companies by the authority.
745.
Information available in the Property and Real Estate Registration Authority of Nicaragua are:
data on conveyance of control of real estate and other rights to immovable property, registration of
commercial companies and other commercial acts and contracts.
746.
The system described above provides the competent authorities with some basic information on
legal persons, but the lack of updating of the information and the precarious nature of the information
systems do not ensure that the information is prompt and accurate. Nor are there any legal requirements
for disclosure of the beneficial owner of legal persons.
747.
No evidence was found of the existence of controls over the issue of bearer shares in Sociedades
Anónimas, different from those applied for other types of companies. Nevertheless, it is clear that their
use is very limited and that most registered companies are not constituted on the basis of bearer shares.
However, the authorities were unable to provide any statistics about companies that are registered.
748.
Commercial companies must keep a register of nominative and bearer shares, showing:
1. Names of subscribers and an indication of the number of their shares or temporary stock certificates
they possess
2. The payment made for each share or certificate
3. The number and value of remunerative shares, and the names of their owners
4. Transfer of nominative shares or certificates and remunerative shares
5. Details of nominative shares converted to bearer shares and the corresponding certificates issued
(Article 37 of the Commercial Code)
749.
Article 38 of the Commercial Code adds that in the case of bearer shares, the counterfoils in the
possession of companies must contain a completely identical facsimile with respective signatures and
seals.
115
750.
Additional Element – Access by financial institutions to information on beneficial ownership.
The financial institutions of the Republic of Nicaragua have access to information held by the Property
Registration Authority on companies, since it is public. Nevertheless, for reasons already explained, this
information does not make it possible to identify and verify the identity of, and information on, the
beneficial owner or person who controls legal persons. The majority of the financial institutions
interviewed stated that they had never had occasion to accept as a customer a company with bearer
shares.
5.1.2.
Recommendations and Comments
751.
The Property Registration Authority should be modernised and its procedures computerised, to
streamline consultation by users and issue of certificates, and better security should be provided for the
historical information that it holds in its records.
752.
It is suggested that information held by the Register should be centralised at the national level
and not independently for each Department of the country. This would simplify access to data on
companies from any geographical location in the country and without delays for the authorities and the
public.
753.
Regarding bearer shares, the country should take steps to enable speedy location of reliable
information on beneficial ownership. For example, each company issuing bearer shares should have a
single representative of the holders of bearer shares, domiciled in Nicaragua and required to keep a
register of transfers or such shares.
5.1.3.
R.33
Compliance with Recommendation 33
Rating
Summary of factors underlying rating
NC
•
•
•
•
•
Although there is mandatory registration for legal persons, and some
requirements for identification and verification by notaries who revise
company contracts, companies are not required to update information when
there are changes in ownership or control
The issue of bearer shares is permitted, and it is very difficult to determine
the identity and confirm information on the beneficial owner or person who
controls companies
Information on legal persons held by the Nicaraguan Property Registration
Authority does not permit precise identification of the beneficial owner or
the person controlling legal persons, especially in the case of the few
companies that issue bearer shares
Although there is mandatory registration for legal persons, and some
requirements for identification and verification by notaries who revise
company contracts, companies are not required to update information when
there are changes in ownership or control
The lack of centralised information and of an adequate technological
platform in the public Property Register limits and delays consultation of
information by users and the expeditious issue of certificates for both the
public and private sectors. It also restricts verification of data by financial
institutions for compliance with CDD requirements
116
5.2. Legal arrangements – access to information on beneficial ownership and control
(R.34)
5.2.1.
Description and Analysis
754.
Nicaraguan law does not recognise Trusts (or similar concepts) nor do any exist in practice. The
banking law anticipates the future creation of this type of arrangement, which cannot be used until
another law specifically drafted for the purpose is passed.
755.
There is no evidence of the use in Nicaragua of the concept of the Trust, or of any similar
arrangement. Nor is there any knowledge of professional service companies offering Trusts set up abroad
as part of its portfolio. As indicated in Section 3.2.1 of this report, the regulations applicable to any trust
created abroad which requested services in Nicaragua, would make it mandatory for local institutions to
identify all the participants in the trust. None of the interviewees informed to have customers of this type.
756.
With respect to access to information on beneficial ownership, it must be said again, institution
of the Trust (or similar institutions) does not exist in the Republic of Nicaragua. The evaluating team
was informed of the existence in the Economics Commission of the National Assembly of a Bill to create
Banking Trusts, which will regulate Trusts an make banking institutions the only trustees possible.
However, it is not known whether this Bill has provisions to guarantee timely access to reliable
information on all the persons involved in a Trust, including the person controlling it or the beneficial
owner.
757.
Additional Element – Access to information by financial institutions. As yet there exist in
Nicaragua no Trusts on which financial institutions need to obtain information as part of customer due
diligence. At the present time Nicaraguan banks do not provide Trust accounts. The Association of
Private Banks and the SIBOIF [and the authorities] stated that although the banking law mentions this
type of service, it cannot be provided until another law is passed specifically for that purpose.
5.2.2.
Recommendations and Comments
758.
If the law authorising Trusts is passed, measures should be taken to ensure access by the
authorities to adequate and timely information on the beneficial owners and all parties involved in this
type of contract. Some of these measures are suggested in the OECD 2001 report entitled “Behind the
Corporate Veil: Using Corporate Entities for Illicit Purposes”.
5.2.3.
R.34
Compliance with Recommendation 34
Rating
Summary of factors underlying rating
n/a
[Not applicable – Trusts (and similar arrangements) do not exist and are not
recognized in Nicaragua]
5.3. Non-profit organizations (SR.VIII)
5.3.1.
Description and Analysis
759.
Summary: In the Republic of Nicaragua there are a large number of non-profit organisations
(NPO), the majority of which are active, and which receive important donations from abroad. The law
sets out the requirements and procedures for their constitution, authorisation, functioning and dissolution.
The Minister for Public Administration, through the Department for Registration and Control of
Associations, holds up-to-date official information on active and inactive non-profit organisations,
receives information on their financial condition and may carry out supervisions of these organisations if
any irregularity or failure to comply with the Act is perceived.
760.
Although there is a legal and institutional framework that could be used to reduce the risk of
financing of terrorism through these organisations, it has not yet been put to use. Nor has any study been
117
carried out on the characteristics and dimensions of the non-profit sector, their level of risk of being used
for terrorist financing, and the extent to which the regulations in force are adequate to reduce that risk.
Regulation of NPOs.
761.
Act 147 of 19th March 1992, entitled “Law on Non-Profit Legal Persons”, governs the
constitution, licensing, functioning and dissolution of non-profit associations, foundations, federations
and confederations, whether civil or religious, which have legal personality once they meet the
requirements laid down in that Act (Articles 1 and 2).
762.
Article 6 of the abovementioned Act states “Legal personalities shall be granted and revoked by
Decree of the National Assembly. The respective Decrees, as well as the Statutes of the associations,
shall be published in the Official Gazette. The Statutes shall, in addition, be entered in the corresponding
Register”. In addition, Article 16 of Act No.147 of 1992 stipulates that “Ministries, Government
Agencies and Public Registers which are legally required to process documents referring to legal persons
included in this Act, shall not process them if it is not proved that they are entered in the Register of
Non-Profit Legal Persons of the Ministry of Public Administration and they have presented their
registration number”.
763.
The information required for setting up an NPO, and which is kept in the Register managed by
the Ministry of Public Administration, is set out in detail below in the analysis of essential criterion
VIII.3.3.
764.
There are legal mechanisms for official control of donations to and development of the activities
of non-profit organisations. Nevertheless, the authorities have not carried out any disclosure or
awareness-raising activities for this sector, with the specific purpose of preventing financing of terrorism.
It would be desirable for manuals or guidelines of best practices to be adopted to avoid improper use of
these organisations for money laundering and financing of terrorism.
765.
There is no Supervision or monitoring of the NPOs that represent a significant part of the
resources of this sector or of their international activities. On entry of non-profit organisations in the
Registration and Control of Associations Department of the Ministerio de Gobernación (Ministry of
Public Administration), that authority assigns a perpetual number to the organisations and opens an
administrative file in which is held the following financial information: overall financial statement, profit
and loss statement, trial balance, and details of donations, which must be presented annually pursuant to
Article 13 of Act 147.
766.
They are also required to register four books: the general journal, the general ledger, the record
of minutes and the ledger of partners; show the certification of election of the Board of Directors, the list
of accredited members with speaking and voting rights in the General Assembly, a list of the Board of
Directors with the legally required information on them, address and home telephone number. The
persons mainly responsible for the institutions are thereby identified.
767.
Part of the supervision exercised by the Department of Registration and Control of Associations
is verification of compliance of the non-profit organisations with their purposes, as required by the
approved Statutes of the organisation. This requirement is set out in Act 147-1992, referred to above;
however, there are no details as to how this monitoring of compliance is carried out by that Department.
768.
The information mentioned in the previous section is not available to the public, and this, for
regulated entities which establish accounts or business relationships with non-profit organisations, affects
the process of customer due diligence or the direct verification of information. Only the non-profit
organisation itself can obtain certificates issued by the Department for Registration and Control of
Associations of the Ministry of Public Administration, for the purpose of identifying itself to third
parties. The administrative, investigative and judicial authorities can in fact obtain certification on the
registration and licensing or may request that information directly from the NPO.
118
Sanctions
769.
The Department for Registration and Control of Associations of the Ministry of Public
Administration may impose on institutions governed by Act No.147 of 1992 the following administrative
penalties:
a) A fine of up to five thousand córdobas (approximately US$55.46 to US$277.30) in the case of
violation of rules for making annual reports to the Department for Registration and Control of
Associations on the following financial documents and reports: General financial statement, profit
and loss statement, trial balance and detail of donations.
b) Intervention, for the period of time that is strictly necessary, to resolve irregularities that might be
occasioned by non-compliance with the requirement for timely presentation of financial statements,
or if the offence is repeated (Article 22).
770.
Article 23 of Act 147 of 1992 embodies the right of appeal to the Minister of Public
Administration against the decision of the Department for Registration and Control of Associations
referred to in the previous article.
771.
The National Assembly may revoke the legal personality of Associations, Foundations,
Federations and Confederations subject to this Act when any of the above causes arises:
a) When it is used for the commission of unlawful acts
b) When it is used to disturb public order
c) If the number of members of the Association falls below the legal minimum
d) For engaging in activities inconsistent with the purposes for which it was constituted
e) For impeding the supervision and monitoring of the Department for Registration and Control
of Associations, after the measures set out in Article 22 have previously been applied
f) When a revocation is agreed by its supreme body in accordance with its Statutes
772.
Article 25 states: “When a legal personality is revoked, the property and shares belonging to the
Association will be disposed of, after liquidation, as provided in the constitutive act or in its Statutes. If
no provision for this purpose has been made they will become the property of the State”.
773.
For failure to comply or late compliance with the formal obligations of registration of the
organisation, presentation of financial statements and adequate maintenance of books, the Act provides
for the imposition of fines of between one thousand and five thousand Córdobas (US$277.50). In
practice almost all the sanctions imposed are for these reasons. The authorities have not provided
statistics to show the imposition of any corrective measures for the improper use of any NPO for
purposes other than those set out in its Statutes.
No
Entities
198
399
131
of
SANCTIONS IMPOSED ON NPOs
(JANUARY 2007 TO JUNE 2008)
Reason for Penalty
Total fines
Late registration
Late submission of financial statements
Misuse or loss of books
TOTAL:
C$ 334,500
C$ 1,004,850
C$161,000
C$ 1,500,350
Licensing or Registration of NPOs and availability of information
119
774.
Regarding the official procedure for licensing non-profit organisations, the persons interested in
obtaining legal personality shall present to the Secretary of the National Assembly an application and
Statement of Purposes, signed by one or several representatives, accompanied by evidence of public
registration of its constitution, with two copies (Article 7 of Act 147 of 1992).
775.
The Public Record of the constitution must contain the following information:
a) Nature, objectives, purpose and title of the institution being constituted, as well as the name,
address and other legally required information on its members and founders
b) Headquarters of the Association and locations where its activity is carried on
c) The name of its representative or representatives
d) The duration of the life of the legal person (Article 8)
776.
In the Republic of Nicaragua there are 4,445 non-profit organisations, 3,956 of which are
national and 489 foreign. Under Act 147 of 2002 non-profit organisations covered by that Law have the
following obligations:
a) To submit their Statutes to the Department for Registration and Control of Associations of the
Ministry of Public Administration within thirty days from the publication in the Official Gazette
of the Decree of the National Assembly granting legal personality.
b) To submit to the Secretariat of the National Assembly, together with the documents described
in Article 7 of the Act, two copies of the entry in the Public Register or two certified copies of
the minutes in which the Statutes of the Association, Foundation, Federation or Confederation
were approved.
c) To register in the Register of Non-Profit Legal Persons of the Ministry of Public
Administration within fifteen days of the date of publication of the Decree granting legal
personality.
d) Associations, Foundations, Federations and Confederations shall maintain a Minute Book, a
Ledger of Members, an Accounts Ledger and shall comply with all the other requirements set
out in the regulations to the Act. All books shall bear the seal and initials of the responsible
official of the Department for Registration and Control of Associations of the Ministry of Public
Administration.
e) To comply with the legal requirements established for donations coming from abroad and
inform the Directorate of Associations of the Ministry of Public Administration and the Ministry
of External Cooperation on the donations received.
f) To submit to the Ministry of Public Administration the accounting balances at the end of the
fiscal year.
g) To comply with all the provisions of this Act, its Regulations and Statutes (Article 13).
777.
The State body responsible for requiring and monitoring compliance with the provisions of Act
No.147 of 1992 is the Department for Registration and Control of Associations of the Ministerio de
Gubernación (Ministry of Public Administration) (Article 14).
778.
Article 19 of Act 147 of 1992 states that “Associations, Foundations, Federations and
Confederations which possess legal personality granted abroad and wish to carry out or are carrying out
activities in Nicaragua, must, to be licensed, submit the relevant documents to the Department for
Registration and Control of Associations of the Ministry of Public Administration, which shall determine
whether their nature and objectives correspond to the requirements of this Act, in order to effect the
corresponding registration. Once licensed they must comply with this Act and all the laws of the
Republic.”
120
779.
Regarding foreign legal persons operating in the country in accordance with international
Treaties, Conventions, Agreements and Protocols shall be governed by these instruments (Article 20).
Registration with the Directorate for Registration and Control of Associations of the Ministry of Public
Administration entails compliance with all the legal requirements concerning donations from abroad,
including the requirement to inform the Directorate on the donations received.
780.
The Department for Registration and Control of Associations requires for registration of national
entities, the following:
1. A letter addressed to the Director of the Department requesting registration and allocation of
the perpetual number, including address, telephone number, email and fax of the entity.
2. Copy of the Gazette where the Decree of the National Assembly granting legal personality
was published (original and two copies).
3. Public record of the constitution of the entity (three copies duly legalised by a notary public,
stamped and initialled on both sides of each sheet).
4. Statutes (three copies duly legalised by a notary public). These may be omitted if they are
already in the constitutive document.
5. A photocopy of the statement of purposes and a brief historical account of the entity.
6. A list of the Board of Directors with names, functions, address, telephone number, identity
card numbers and originals of signatures.
7. List of members of the entity with speaking and voting rights in the General Assembly, with
names and identity card numbers.
8. Four books: two books of minutes, one general journal and one general ledger.
9. Payment of the corresponding fee into a bank account in the name of the Ministry of Public
Administration
781.
Requirements for foreign entities are:
1. A letter addressed to the Director of the Department requesting registration and allocation of
the perpetual number, including address, telephone number, email and fax of the entity.
2. Documents proving legal existence and registration pursuant to the laws of the country of
origin.
3. Documents governing the internal functioning of the entity (Statutes).
4. Powers of Legal Representative in Nicaragua.
5. Three books: Minutes, General Journal and General Ledger
6. Payment of the respective fee into a bank account in the name of the Ministry of Public
Administration.
7. Portfolio of projects.
782.
The table below shows the number of NPOs according to their different categories and type of
activity, based on information maintained by the Department of Registry and Control of Associations of
the Ministry of Gobernación:
121
783.
There is a total of 4,594 associations registered, and the majority are of a social nature (1,463),
religious (1,042) and unions (921). There are 31 NPOs registered that are dedicated to financial activities
(“microfinancieras”).
Clasificación Por Tipo de Asociación
1463
1500
1042
921
1000
500
177
4
5
7
4
133
97
73
5
8
5 33 1
27
30 16
1
5 19 16
128
124 98
32
2
1
3
6 19 26
5
6
6
40
6
0
784.
In addition to the associations registered with the Ministry of Gobernación, there are the
Cooperatives, which are governed by a different legal regime and must register with the INFOCOOP (a
mixed government-private institution). According to estimates by officials from the cooperative sector,
there are approximately 6,500 cooperatives registered in Nicaragua, grouping almost half a million
people. Approximately 50% (3,000 cooperatives) maintain their registration current with information on
their statutes, internal regulations, board of directors, etc.
785.
At the time of the visit the team was informed that the INFOCOOP has plans to create a Unit for
supervision and oversight, but there has not been any regulation or supervision of these institutions for
AML/CFT purposes, even though the financial cooperatives are considered reporting institutions by the
Act 285 (because of their engagement in financial activities). Based on information obtained during the
interviews, the internal controls applied by these cooperatives do not take into consideration the risk of
being misused for the commission of ML or FT.
Recordkeeping on NPO, and access by competent authorities
786.
Act 147 of 1992 does not specify any minimum period for retention of records, and it is not
known whether there is any other law containing a supplementary provision to this effect. Under Act 147
of 1992 non-profit organisations must keep available to the authorities their Minute Books, their Ledger
of Members, their Accounts Ledgers, and their lists of donations, as well as supporting information and
documentation on their operations and activities.
122
787.
Failure to comply with the requirements of Act 147 of 1992 incurs administrative penalties,
without prejudice to imposition of criminal penalties for misuse of funds or other causes constituting
unlawful activities. The fines imposed are signs of the effort being made by the authorities to enforce
compliance with these formal requirements.
788.
The Department for Registration and Control of Associations of the Ministry of Public
Administration is empowered by Act 147 of 1992 to obtain financial information and information on all
the operations engaged in by non-profit organisations. In addition, the Ministerio Público and the
National Police, specifically, are empowered to obtain this information by reason of any investigation
officially launched or at the request of a party, under the provisions of Act 346 “Organic Law of the
Ministerio Público” of 2nd May 2000, Act 228 “National Police Act” approved on 23rd August 1996 and
the Code of Criminal Procedure of the Republic of Nicaragua.
789.
The above was confirmed by the events observed during the evaluation visit, and widely
publicised by the media, concerning criminal investigations and raids on the offices of some non-profit
organisations. From this it is apparent that the judicial authorities have ample powers of access to
information, documents, computers and other elements they may consider relevant to the course of an
investigation, including coercive measures.
Domestic cooperation and coordination
790.
With respect to cooperation, coordination and exchange of information among local authorities
on NPOs suspected of possible financing of terrorism, the cooperation mechanisms described in Section
6 of this report are also available for these cases. Nevertheless, it is not known whether there are official
coordination and cooperation channels for information exchanged on non-profit organisations, in the
specific case of organisations that might have given rise to concern for possible financing of terrorism.
Fortunately, up to now there has been nothing to give rise to concerns of this kind. The evaluation team
does not anticipate greater problems in the future for exchange of this type of information and
coordination of actions, since there is a high degree of concentration of information on the NPOs within
the Ministry of Public Administration, and that Ministry plays a preponderant role in the coordination of
the law enforcement authorities such as the Criminal Investigation Police (Policía Judicial).
791.
The Department for Registration and Control of Associations of the Ministry of Public
Administration issues certificates attesting to the licensing and existence of non-profit organisations as
well as other information on the organisations, in accordance with the request made by the public body
requesting the information.
792.
The Department for Registration and Control of Associations of the Ministry of Public
Administration, as well as the judicial and investigative authorities, have full power of access to
information on the administration and management of resources by non-profit organisations (see analysis
of c.VIII.4).
793.
The same legal mechanisms exist as those for rapid exchange of information among competent
authorities responsible for preventing, detecting or prosecuting the offences of money laundering and
financing of terrorism (see Section 6), are applicable for provisional measures and coordination in
investigation of NPOs suspected of being manipulated for financing of terrorism.
794.
No specific contact points or procedures for response to foreign requests for information on an
NPO in particular have been designated. The Directorate of Registration and Control of Associations is
not empowered to provide information directly to foreign authorities. Under the law, when investigative
or judicial authorities of another State are carrying out investigations into money laundering or financing
of terrorism and these authorities request the cooperation of Nicaragua, the central authorities of the
country (Ministerio Público or Fiscalía General de la República de Nicaragua), once the formalities for
Legal Assistance are completed, may provide information and/or documentation on the existence or
operations of non-profit organisations based in Nicaragua.
123
5.3.2.
Recommendations and Comments
795.
Nicaragua should carry out a study on the characteristics and dimensions of the non-profit sector,
its level of exposure to risk of being used for financing of terrorism, and to what extent the regulations in
force are adequate for reducing that risk.
796.
Efforts should be made to inform and raise awareness in the NPO sector on risks and preventive
measures in this area.
797.
Make better use of (and possibly increase) the resources of the Department for Registration and
Control of Associations of the Ministry of Public Administration to monitor compliance with the
substantive obligations of the biggest and internationally most active NPOs, not simply for penalising
late renewal of registration or other formal violations.
798.
Make it possible for the public and foreign authorities to have access to information on NPOs
held in the Ministry of Public Administration (as is the case for commercial companies), particularly
with regard to the objectives and activities of the organisations, and the identity of the persons who
exercise control over them, including senior staff, members of the Board of Directors and confidential
posts.
799.
Establish a requirement for detailed record-keeping on international and domestic operations and
money transfer.
800.
Create channels for rapid coordination of activities and exchange of information among national
authorities to enable them to take quick action in the case of suspected FT through an NPO.
801.
Designate specific contact points and procedures for response to foreign requests for information
on a particular NPO.
802.
Consider the possibility of increasing the staff assigned to monitoring and supervision of nonprofit organisations, because of the large number of such entities registered.
803.
Train staff of the Department for Registration and Control of Associations in prevention and
detection of the use of NPOs in money laundering and/or terrorist financing operations.
804.
Adopt regulations or guidelines to prevent money laundering and financing of terrorism for
NPOs.
5.3.3.
SR.
VIII
Compliance with Special Recommendation VIII
Rating
Summary of factors underlying rating
PC
• There has been no evaluation on the characteristics and dimensions of the nonprofit sector, the extent of their exposure to the risk of being used for terrorist
financing and to what extent existing rules are adequate to reduce that risk.
• Although there is a centralized registry of NPOs, access to information is
restricted and only allowed to public bodies, judicial authorities and NPOs
themselves (not to individuals who could use this information as part of their
monitoring and due diligence AML / CFT).
• The country does not conduct effective oversight of law enforcement on the
part of NPOs or exercises control to prevent their use in terrorist financing
activities. Corrective actions seem aimed mainly to collect fines for the late
update of the registry.
124
6.
NATIONAL AND INTERNATIONAL COOPERATION
6.1. National Cooperation and Coordination (R.31)
6.1.1.
Description and Analysis
805.
Although the Financial Analysis Commission (CAF) is a high level multi-disciplinary body
comprising representatives of institutions playing an outstanding role in the national anti-money
laundering and combating financing of terrorism system, the Commission does not meet regularly and
for lack of a budget, staff and physical space to operate since its creation in 1999, it is unable to fully
perform its tasks in the field of domestic cooperation and coordination.
806.
Under Act 285 of 1999, the machinery for coordination and cooperation in the strategic plan for
anti-ML and FT policies is through the Financial Analysis Commission.
807.
This Commission does not fulfil its functions completely, to a great extent because of the lack of
budget, staff, operational structure and physical space for doing the work required by Act No. 285 of
1999. In addition, its high level members meet only occasionally.
808.
At the operational level, the evaluation team was able to observe that there is coordination
between the Economic Investigations Directorate of the National Police, the Ministerio Público and the
Procuraduría General; however, it would be desirable for cooperation to be coordinated with the judicial
organ in order that the judicial officers responsible for prosecutions may be become acquainted with the
latest trends, techniques and patterns of money laundering and financing of terrorism, as well as
investigative techniques and other aspects relevant to money laundering and terrorist financing.
809.
In the same context, security and intelligence bodies maintain constant communication and
working coordination among the various national investigative areas and with their counterparts in other
countries.
810.
Profiles were created of people presumed to have links with money laundering and related
offences and files were opened on persons linked to the different manifestations of organised crime.
811.
The National Police and the Army have developed a coordination protocol for exchange of
information with the intelligence services.
812.
The Directorate General of Immigration has established interagency protocols with the
Nicaraguan Army, the National Police and the National Prison Service for cooperation and mutual help
in carrying out patrols and joint operations in the land and sea frontier areas, for the purpose of detecting
traffic in migrants, traffic in persons, the drug traffic and related offences.
813.
Additional element – Mechanisms for consultation among competent authorities and regulated
entities. The CAF does not provide the SIBOIF, the other supervision and control agencies, the other
AML/CFT administrative authorities, the law enforcement agencies, or the regulated institutions with
statistical data on the results of its work or any information on trends, techniques or patterns of money
laundering and/or financing of terrorism that may have been detected.
814.
The SIBOIF maintains more direct contact with its regulated institutions, consults informally and
through formal circulars addressed to all the institutions, and organises discussion seminars with them.
The drafts of regulations prepared by the SIBOIF are usually submitted to a period of consultation and
commentary by the private sector before they are issued.
815.
Statistics (R.32): There is no specific statistical data on national cooperation and coordination.
125
6.1.2.
Recommendations and Comments
816.
More frequent CAF meetings and meetings of the National Council Against Drugs (CNDLCD)
to deal with matters concerning definition and follow up the action plan and policy of the country to
combat these offences.
817.
Periodic interaction and coordination between the CAF and authorities related to prevention and
prosecution of these offences.
818.
Define AML/CFT policy objectives and a national strategy with an identification of risks,
priorities and performance indicators, and monitor the results.
6.1.3.
R.31
Compliance with Recommendation 31
Rating
Summary of factors underlying rating
PC
The CAF only began to meet recently and does not do so regularly.
The CAF does not fully carry out its functions in the area of formulation of
public policies against money laundering and terrorist financing, or of
coordination in combating these two offences.
6.2. The Conventions and US Special Resolutions (R.35 and SR.I)
6.2.1.
Description and Analysis
819.
The Republic of Nicaragua has signed and ratified the main international instruments for
combating transnational organised crime, drug trafficking, money laundering and financing of terrorism.
However, the country is still to carry out a review of these instruments and adopt internal measures for
their full implementation.
820.
Nicaragua has signed and ratified the following international legal instruments: the United
Nations Convention against the Illicit Traffic in Narcotics and Psychotropic Substances, the United
Nations International Convention for the Suppression of the Financing of Terrorism, the United Nations
Convention against Transnational Organised Crime, the Inter-American Convention against Corruption,
the Inter-American Convention on Mutual Legal Assistance in Criminal Matters, and the Central
American Convention for the Prevention and Repression of Money Laundering Related to the Illicit
Traffic of Drugs and Related Offences.
Implementation of the Conventions
821.
Nicaragua is signatory to the Vienna and Palermo Conventions, as well as the United Nations
Convention for the Suppression of the Financing of Terrorism. All the international legal instruments
indicated constitute Laws of the Republic and the country has deposited the corresponding instruments of
ratification with the United Nations Secretariat.
822.
The United Nations Convention for combating the financing of terrorism was approved by the
country in Decree AN 3287, published in Official Gazette No.92 on the 20th May 2002, and ratified by
Decree 79’2002 published in Official Gazette No.172 of the 11th September 2002.
823.
The Vienna Convention was adopted in all its parts and incorporated into Nicaraguan domestic
law by Act No.285, the Penal Code and the Code of Criminal Procedure.
824.
Financing of terrorism is criminalised in the Criminal Code of the Republic of Nicaragua. This
offence matches the parameters laid down in the matter by the 1999 United Nations International
Convention for the Suppression of the Financing of Terrorism (articles 2 to 18).
126
825.
Act No.285-1999 refers only to money laundering, not to the financing of terrorism. For
prevention of the financing of terrorism, the Superintendency of Banks and other Financial Institutions
(SIBOIF) of the Republic of Nicaragua has issued regulations designed to prevent the use of the financial
sector under its supervision for money laundering and terrorist financing operations. The country needs
to issue a legal instrument establishing measures for preventing terrorist financing and money laundering
as defined in the present Criminal Code of the Republic of Nicaragua. Likewise, laws should be passed
applicable to the other regulated non-bank and commercial financial institutions of the country with a
view to ensuring that they comply with Article 18 of the UN International Convention for the
Suppression of the Financing of Terrorism, particularly a body of rules permitting, where necessary, the
adoption of supervision methods including, for example, the establishment of a system of licensing for
all money transfer agencies (Article 18.2 of the UN International Convention for the Suppression of the
Financing of Terrorism).
826.
With respect to the Palermo Convention (Articles 5-7, 10-16, 18-20, 24-27, 29-31 & 34), Money
laundering and financing of terrorism are penalised by the Criminal Code of Nicaragua (Article 228) in
keeping with the parameters set out in the Palermo Convention against Transnational Organised Crime,
Articles 5 and 6 (see sections 1, 2.1, and 2.2 of this report).
827.
Act No. 285 of 1999 and regulatory provisions detail which entities are required to prevent
Money Laundering and what are their duties. These rules cover essential aspects such as know your
customer policy, record-keeping, sending suspicious transaction reports, etc.
828.
The implementation of Article 7, paragraph b, of the Palermo Convention on cooperation
exchange of information nationally and internationally by the authorities in charge of
combating money laundering is limited, because although the country approved the establishment of the
Financial Analysis Commission (CAC), the entity responsible for receiving and analyzing suspicious
operations, this entity does not operate for lack of a budget allocation to cover their operational costs and
does not constitute a Financial Intelligence Unit (FIU), as explained in Section 2.5., Recommendation
26 of this Report
829.
With respect to the liability of legal persons referred to in article 10 of the Palermo Convention,
the Penal Code, Article 113 empowers the Judge who is leading the proceedings, after hearing the legal
representatives or the parties, to impose certain measures, but these are only incidental to the principal
penalty for the physical person (see section 2.1 of this report).
830.
A penalty in the criminal field as referred to in article 113, adding that the article mentions Art.
164 of Act No. 561 (Banking Act) which states that in cases of non-compliance of anti-money
laundering procedures.
831.
The Nicaraguan body partially responsible for the collection, analysis, and dissemination of
information, although it is not an FIU as understood by the FATF, is the Financial Analysis Commission
(CAF) which since its creation in 1999 has not been supplied with the resources it needs to do its work.
832.
Responsibility of legal persons under the Palermo Convention. Article 113 of the Criminal Code
stipulates that when the offences committed within a legal person or for its benefit, the judge or court,
after hearing the parties or their legal representatives, may impose, when justified and necessary in the
specific case, one or more of the following accessory penalties:
•
The intervention in the business to safeguard the rights of workers or creditors for the length of
time necessary up to a maximum of five years;
•
Temporary or definitive closure of the business, its premises or establishments. Temporary
closure shall not exceed five years;
•
Dissolution of the company, association or foundation;
127
•
Suspension of the company, business, foundation or association from its activity for a period not
exceeding five years;
•
Prohibition on the future exercise of activities, commercial operations or business of the type in
the exercise of which the offence was committed, encouraged or concealed. This prohibition
may be temporary or definitive. If temporary it may not exceed five years.
•
Temporary closures in sub-paragraph b) and suspension under sub-paragraph d) of the previous
paragraph may be approved by the judge even during the hearing of the case.
833.
The same article goes on to stipulate that the accessory penalties shall be designed to prevent
continuation of the offence and its effects.
834.
In addition to the above, Article 164 (second part) of Act No.561 (The Banking Law) stipulates
that in cases of non-compliance with anti-money laundering procedures:
“The financial institution shall incur a fine of between five thousand and sixty thousand fine units,
depending on the seriousness of the case, when it increases its legal, operational and reputational
risks by:
1) Failing to develop a money laundering prevention programme
2) Failing to comply with the obligation to report to the competent authority, pursuant to the law in
effect, unusual operations or transactions that give rise to suspicion of money laundering.
The director, manager, official, compliance officer or any other employee of the institution who
divulges or informs the customer that his transaction is being analysed or considered for a possible
money laundering suspicious transaction report or informs him that such a report has been submitted,
shall be punished with a fine equivalent to between four and eight times his monthly salary. In the
case of Directors, the fine shall be between ten and fifty thousand fine units. This shall be without
prejudice from removal from the post if the offence is repeated.
UN Security Council Resolutions
835.
No internal regulations were discovered that set out the specific procedures for implementation
of Resolutions S/RES/1267(1999), its successive resolutions and S/RES/1373(2001); however, the
Nicaraguan authorities undertake to disseminate these lists and monitor compliance.
836.
Additional Element—Ratification or Implementation of other relevant international conventions:
The Republic of Nicaragua has signed and ratified the 2002 Inter-American Convention against
Terrorism. Terrorism is criminalised in Article 394 of the Criminal Code, while Article 395 criminalises
financing of terrorism.
837.
Nicaragua has not signed the 1990 Council of Europe Convention on Laundering, Search,
Seizure and Confiscation of the Proceeds from Crime; nevertheless, Act 285 of 1999 governs
withholding, embargo, sequestration and confiscation, in addition to the provisions for confiscation in
Articles 112 and 113 of the Criminal Code, which relate to confiscation and accessory penalties for legal
persons.
6.2.2.
Recommendations and Comments
838.
Even acknowledging the efforts made by the Republic of Nicaragua, it should continue with the
approval and implementation of domestic laws incorporating the provisions of the International
Conventions mentioned herein and to which the country is a party.
128
839.
Set out the domestic procedure for compliance with the UN Security Council Resolutions, as
well as the responsibilities of each body or competent authority of the country in relation to such
compliance.
840.
Amend Act No.285 of 15th April 1999 (on Narcotics, Psychotropic Drugs and Other Controlled
Substances, Laundering of Money and Proceeds of Unlawful Activities) to make it applicable to the
prevention of money laundering in all its forms and to the financing of terrorism. Only the SIBOIF has a
set of regulations that applies to regulated entities under its supervision, and these establish mechanisms
for prevention, control, detection and suspicious transaction reports on money laundering and terrorist
financing.
6.2.3.
Compliance with Recommendation 35 and Special Recommendation I
Rating
Summary of factors underlying rating
R.35
LC
Although the country has signed and ratified the main anti-money laundering and
combating of terrorist financing United Nations Convention against Transnational
Organised Crime, the Inter-American Convention against Corruption, the InterAmerican Convention on Mutual Legal Assistance in Criminal Matters, the
Central American Convention for the Prevention and Repression of Money
Laundering Related to the Illicit Traffic of Drugs and Related Offences to quote a
few); it still remains for the country to carry out a review of the instruments in
question and pass domestic laws to ensure their complete implementation.
SR.I
PC
There is no domestic law setting out the procedure to be followed by the country
to implement efficiently and in a timely manner the provisions of Resolutions
S/RES/1267(1999), its successor resolutions and S/RES/1373(2001), or the other
resolutions approved by the UN Security Council on the subject.
The country circulates Update Lists of persons and organisations designated for
their links to international terrorism and financing of terrorism approved by the
UN Security Council among authorities and the regulated financial sector of the
country; nevertheless no knowledge was obtained of a special procedure to be
followed by the actors for compliance with the Resolutions, particularly as regards
the requirement for freezing without delay of property and resources of terrorists
and terrorist organisations.
6.3. Mutual Legal Assistance (R.36-38, SR.V)
6.3.1.
Description and Analysis
841.
Summary: The Republic of Nicaragua has signed a series of Multilateral Legal Assistance
Treaties and Conventions which lay the foundations for the development of international cooperation
with other jurisdictions in investigation and prosecution of money laundering and financing of terrorism
offences. The same difficulties with the implementation of provisional measures necessarily affect the
provision of mutual legal assistance.
Recommendation 36
842.
The Multilateral Mutual Legal Assistance Treaties and Conventions to which Nicaragua is a
party allow the competent authorities of the country to provide or request assistance from the central
authority/ies of another State in accordance with the Mutual Legal Assistance Treaty or Convention
invoked; putting into effect joint investigation techniques; collection of evidence and judicial actions
such as: (a) presentation, search and seizure of information, documents or evidence (including records)
from financial institutions or other natural or legal persons (b) taking of evidence or financial
declarations, (c) taking of evidence or declarations from persons (d) handing over of originals or copies
of relevant documents or records, as well as any other information or items of evidence (e) efficient
129
handover of legal documents (f) facilitating the voluntary appearance of persons, for the purpose of
offering information or testimony to the requesting country (g) identification, freezing, seizure or
confiscation of laundered assets or assets intended to be laundered, assets used or intended to be used for
financing of terrorism, as well as the instrumentalities of these offences and assets of corresponding
value.
843.
The judicial procedures of the Republic of Nicaragua allow taking of evidence, presentation of
court documents, carrying out inspections or seizures, examination and inspection of objects and
premises, providing information and evidence, handing over originals or authentic copies of documents
and files on the case, and bank, financial, commercial, social and any other type of documentation, in
accordance with the terms of Article 89 of Act 285-1999.
844.
Nicaraguan criminal law allows seizure and confiscation of laundered property and goods that
are the proceeds of or profits derived from drug trafficking.
845.
Also, Article 112 of Act 641 of the Criminal Code permits confiscation, which will apply as an
accessory penalty to any penalty imposed for a crime of malice or neglect, or misdemeanour. It consists
of the loss of the effects of such acts or of property acquired with the proceeds, the instruments used in
the offence or which would have been used in it, or the profits derived from the criminal activity,
whatever transformations they may have undergone. This applies to all crimes, including money
laundering and terrorism, and Article 113 sets out the accessory penalties to which legal persons are
liable.
846.
The country stated that it has provided legal assistance to hemispheric countries, such as
Guatemala, Peru, etc., in these cases by searches for documents, including financial records, of natural
persons, under the criminal procedure in force, with judicial authority.
847.
The Procuraduría General de la República and the Ministerio Público together act as central
authorities for the processing of foreign requests for legal assistance, according to the terms of the
Multilateral Mutual Legal Assistance Treaties and Conventions, the crimes concerned and the legal asset
that is being safeguarded.
848.
Both bodies give priority to the processing of legal assistance and are supported by the National
Police and other public institutions, depending on the judicial procedures to be followed and the
documentation required in the Mutual Legal Assistance request.
849.
The authorities informed in general terms about a large number of responses to requests for
assistance from other countries. However, it was not possible to identify the response times. It is worth
mentioning that as part of the customary consultation to the members of CFATF, FATF, GAFISUD and
the observer organizations, prior to this evaluation, no negative information was received with respect to
the countries’ experience with the collaboration received from Nicaragua.
850.
Article 138 (12) of the Nicaraguan Constitution states that legislative approval of international
treaties or instruments gives them legal effect within and outside Nicaragua, once they have come into
force internationally, either by deposit or exchange of ratifications or compliance with the requirements
or time limits embodied in the texts of the Treaty or international instrument.
851.
Conditions exist in the country to permit legal assistance in the area, obviously always subject to
the requirements and formalities set out in Treaties and Conventions, Nicaragua’s Constitution, and
domestic legislation. No restrictive or disproportionate conditions were therefore observed for the
provision of Legal Assistance by Nicaragua. The crime of money laundering as recognised by Nicaragua
is wide enough, in that it recognises as predicate offences those which are punishable by five years
imprisonment or more. In addition, it does not make legal assistance conditional on the existence of a
prior conviction abroad; Article 2 of the Criminal Code states that “The offence of laundering money,
property or assets is independent of any prior offence and shall be prevented, investigated, tried,
prosecuted or sentenced by the competent authorities as such, in relation to the illegal activities from
130
which it may spring, and for this no previous criminal prosecution for the predicate offence need be
proved. For purposes of its prosecution it shall be sufficient to demonstrate its link with the offence from
which it derives”.
852.
The Republic of Nicaragua has agencies and procedures for providing Mutual Legal Assistance
in the field to other countries. Nevertheless the time taken by these procedures and their effectiveness
remains to be determined.
853.
The Procuraduría General de la República and the Ministerio Público furnished statistics on the
Legal Assistance that both agencies have provided in response to requests for legal assistance in the
matter of money laundering and its predicate offences, and this reflects the degree to which the
international cooperation mechanisms approved by the country are adhered to.
854.
Under Article 282 of the Nicaraguan Criminal Code, the offence of money laundering is
considered to have been committed as long as the offences in question are those punishable with an
upper limit of five years imprisonment or more, and which generate resources or wealth for laundering.
855.
There is no impediment to the provision of assistance in cases of money laundering linked to
unlawful conduct of a fiscal nature. The Nicaraguan Criminal Code recognises crimes such as tax fraud
in its aggravated form, customs fraud and smuggling, which are classed as predicate offences for money
laundering as long as the maximum threshold of the term of imprisonment imposed is five years or more.
856.
Professional or bank secrecy does not hinder the Procuraduría General de la República or the
Ministerio Público in obtaining access to information, documents, or registers in the custody of financial
institutions or specially designated non-financial institutions of the country (lawyers, accountants, stock
market brokers, casinos, dealers in precious metals, among others), and which are required for the
purposes of international legal assistance.
857.
Article 34 of Act 285 of 1995 stipulates that bank secrecy shall not be an obstacle to the
investigation of the crime of money laundering; the information must be requested by the competent
judge or at the request of the Fiscal General.
858.
Added to this is the fact that under Article 211 of the Nicaraguan Code of Criminal Procedure,
on the basis of an express and reasoned request by the Fiscal General or the Director General of Police,
the judge may require competent financial authorities or any financial institution, public or private, to
produce information on financial transactions in its custody. The order to produce financial information
has effect only [Translator’s Note: This sentence is incomplete in the original]
859.
The powers conferred by domestic law on the law enforcement agencies of the country for the
practice of judicial measures in national cases can be applied by these authorities for handling
international Legal Assistance matters related to this crime.
860.
Specifically, actions such as raids, taking witness statements, collection of evidence, documents,
records and others embodied in domestic law and in Mutual Legal Assistance Treaties and Multilateral
Cooperation Conventions.
861.
To avoid conflicts of jurisdiction the competent authorities of Nicaragua may launch an
investigation based on Nicaraguan Criminal Law, governed by the Principle of Universality embodied in
Article 16 of the Preliminary Title of the Criminal Code on Criminal Guarantees and the Application of
the Criminal Law, which stipulates that “Nicaraguan criminal laws shall also be applicable to
Nicaraguans or foreigners who may have committed outside the national territory any of the following
offences:
a) Terrorism;
b) Piracy;
c) Slavery and trading in slaves;
131
d) Crimes against the international order;
e) Counterfeiting of foreign currency and traffic in such currency;
f) Crimes of traffic in migrants and traffic in persons for purposes of slavery or sexual exploitation and
exploitation of labour;
g) International traffic in persons;
h) International traffic in and removal of human organs and tissues;
i) Traffic in cultural historic patrimony;
j) Offences relating to narcotic drugs, psychotropic substances and other controlled substances;
k) Offences related to the international trade in vehicles
l) Laundering of money, property or assets;
m) Sexual offences against children and adolescents;
n) Any other offence that may be prosecuted in Nicaragua under the international instruments ratified by
the country.
862.
Article 354 of the Nicaraguan Code of Criminal Procedure sets out the procedure to be followed
when there is a conflict of extradition requests: “If two or more States claim the same individual for
different violations, preference shall be given to the more serious offence under national law; if they are
of equal seriousness, States with which there is an Extradition Treaty or Convention shall be given
priority”.
863.
It further states that “If the different requests apply to the same offence, preference shall be given
to the State where the offence was committed and, in any case, the country of which the accused person
is a subject or citizen, without prejudice to the abovementioned rule regarding Conventions.
864.
Additional Element—Requests from foreign authorities. Mutual Legal Assistance requests are
subject to compliance with the procedures and formalities set out in Mutual Legal Assistance Treaties
and Multilateral Conventions. Thus facilitation of judicial procedures such as collection of documents
(financial records and others), evidence, witness statements, etc. cannot take place as a result of a direct
petition between judicial or law enforcement authorities of the Republic of Nicaragua and another
country.
Recommendation 37. Dual Criminality
865.
In Nicaragua the principle of double criminality applies for Mutual Legal Assistance with other
countries. Nevertheless, account is taken of the broad based nature of money laundering, predicate
offences for which are all offences punishable by deprivation of liberty to the maximum upper limit of
five years or more, as was mentioned in the section of this report on Legal System and Related
Institutional Measures, 1.2 Criminalisation of Money Laundering (R1 and R2).
866.
There are no obstacles or impediments to extradition in the country’s legislation, unless it does
not meet the requirements and procedures laid down in the Nicaraguan Code of Criminal Procedure and
the Extradition Treaties and Conventions signed and ratified by Nicaragua. According to statistics
provided by the country, there are a total of fifteen (15) of these, both multilateral and bilateral, signed
with the following countries: United States, Costa Rica, Belgium, Great Britain, Colombia, Bahamas,
Chile, Spain, Mexico. Under the Code of Criminal Procedure, the Ministerio Público is the central
authority for extradition.
867.
Even though the offense of ML lacks two of the conducts required by Recommendation 1, those
conducts (falsification and forgery) are criminalized in Nicaragua, and that would provide enough basis
for granting mutual legal assistance when required without affecting the principle of dual criminality.
868.
With respect to dual criminality for FT, on the basis of national legislation (the Criminal Code
and the Code of Criminal Procedure) the country may provide international cooperation in cases related
to the financing of terrorism, terrorist acts and terrorist organisations. In addition, as a State party to
regional and international Conventions, the country possesses the legal mechanisms to be able to respond
132
to requests for judicial procedures and take actions required by a Mutual Legal Assistance request
regarding the commission of these offences.
869.
Extradition is governed in Articles 18 and 19 of the Nicaraguan Criminal Code and 348-360 of
the Code of Criminal Procedure, as well as the Extradition Treaties and Conventions signed and ratified
by Nicaragua. As is the case with other crimes, extradition is admissible in situations where another
State is undertaking investigations or prosecutions for terrorism and financing of terrorism.
870.
Article 19 of the Criminal Code embodies the principle that nationals or persons who at the
moment of the commission of the offence possess Nicaraguan nationality shall not be extradited. In both
cases, if extradition is requested, the State of Nicaragua must try them for the offence committed and, in
case of conviction, the judge shall take into consideration the time served for the offence abroad.
Recommendation 38. Seizure/Confiscation at foreign request.
871.
Chapter XIII of Act 285 (Article 89 onwards) governs international legal cooperation, listing the
points on which the State of Nicaragua shall provide collaboration to facilitate investigations and actions
related solely to the crime of money laundering. Financing of terrorism is handled through diplomatic
channels.
872.
Sub-paragraph f) stipulates: “Hand over originals or authentic copies of documents and files
related to the case, bank, financial, commercial, social and other documentation”.
873.
Sub-paragraph g) includes in this assistance the identification or location of instruments and
elements to serve as evidence. Also, sub-paragraph h) allows assistance to be provided in any form, as
long as it is permitted by the domestic law of the Republic of Nicaragua.
874.
For financing of terrorism the procedure to be followed would be diplomatic channels.
However, this leads to serious doubts regarding its chance of success in seizures/confiscations, since the
crime of financing of terrorism is not prosecutable by the Nicaraguan authorities when it is committed
outside Nicaraguan territory. This is covered by Articles 14, 15 and 16 of the Criminal Code (see criteria
SR.II.3).
875.
Application of these procedures is viable in the handling of Mutual Legal Assistance requests, in
accordance with domestic law and the Mutual Legal Assistance Treaties (MLAT).
876.
Mutual Legal Assistances extend to the value of properties or goods acquired with economic
resources deriving from a predicate offence for money laundering. In this regard, Article 86 of Act 285
of 1999 stipulates that when an embargo is placed or any other precautionary measure is ordered and it is
not possible to distinguish the objects or values acquired from illicit sources from those acquired from
lawful sources, the judge shall order the measure to apply up to an estimated value of the amount
concerned.
877.
Under Article 91 of Act 285 the Procuraduría is the agency responsible for processing and
responding to requests for assistance from other countries in money laundering matters, without
prejudice to their being handled through diplomatic channels. Nevertheless, there is no provision
expressly permitting seizure or confiscation of property linked to financing of terrorism. (See criterion
38.1)
878.
There is a fund in which money from money laundering cases, derived from the party concerned
or from fines imposed under Act 285-1999 is deposited. Article 88 of Act 285 governs the way in which
money laundering profits shall be distributed among agencies such as the Ministry of Health, the
National Anti-Narcotics Council, the National Police and NGOs as follows:
a) 20 per cent to the Ministry of Health for rehabilitation programmes
133
b)
c)
d)
e)
20 per cent to the National Anti-Narcotics Council for preventive campaigns
20 per cent to the National Police for combating drugs
20 per cent to the National Prison System for programmes for rehabilitation of addicted inmates
20 per cent for prevention and rehabilitation programmes of legally operating NGOs, governed by
the National Council.
In cases of indivisible property, the abovementioned institutions, in coordination with the judge, may
agree on the distribution. If there is no agreement the judge shall order its sale by auction.
879.
However, this distribution is intended for institutions related to prevention and combating of
crimes related to drugs, see sub-paragraphs a,b,c,d and e, without including institutions or agencies
concerned with law enforcement in money laundering and financing of terrorism. These, as can be seen
from the abovementioned provisions, remain outside the distribution.
880.
Sharing of Confiscated Assets (c.38.5): The sharing of assets confiscated by the nation in money
laundering cases depends on the terms of the Multilateral Conventions and the MLATs underlying each
particular request. There are no statistics to show how these measures have been applied by Nicaragua.
No procedure has been set concerning the way money laundering related property shall be shared in
cases of joint investigations between Nicaragua and other countries. See in addition criterion 38.4.
881.
Additional Element (R.38): The judicial authorities only recognise seizure orders from abroad if
they are issued by a competent judicial authority of the requesting State in a criminal prosecution for
money laundering or financing of terrorism, not in cases where the orders come from an authority of the
requesting State under an administrative process.
882.
Nicaraguan legislation does not recognise loss or confiscation of property except as a result of
criminal conviction. Non-criminal confiscation is therefore impossible in cases where it is requested by
other countries in accordance with the consensus arising in its domestic law (Article 112).
Special Recommendation V. International Cooperation for FT
883.
The financing of terrorism is not in the list of offenses committed outside the territory of
Nicaragua which the Penal Code (art. 16) authorizes to prosecute under the “principle of universality”.
However, subparagraph n of the same article contains a broad clause by which “The criminal laws of
Nicaragua shall also be applicable to Nicaraguans or foreigners who commit outside the Nicaraguan
territory … any other crime that can be prosecuted in Nicaragua based on the international instruments
ratified by the country”. The authorities are of the opinion that this provision gives them competence to
investigate, penalize and provide international cooperation in relation with acts of terrorist financing
committed outside Nicaragua, because the offense of FT is included in the Penal Code as a result of the
obligations assumed by the country under the UN Convention for the Suppression of the Financing of
Terrorism, 1999.
884.
The practical application of this interpretation has not been tested. Also, there are no laws
establishing the procedure to follow for international cooperation in cases of terrorist financing in the
absence of a bilateral treaty with the requesting country. Act 285 refers solely to offences related to drug
trafficking and money laundering, and no regulations or rules are to be found in the Code of Criminal
Procedure covering detection, seizure or confiscation of property linked to financing of terrorism, nor the
final destination of the property.
885.
In addition to the above, it should be noted that as regards the procedure to be followed
regarding financing of terrorism, provisional measures may not be adopted if a person is not arrested or
prosecuted before the Nicaraguan courts.
886.
The Republic of Nicaragua provides for the establishment of a fund only for assets derived from
seizure in cases of money laundering, not cases of financing of terrorism. Article 88 of Act 285 of 1999
refers solely to money laundering. There is no special seizure or confiscation fund for the law
134
enforcement authorities to assist them in the effective prosecution of terrorist financing. Likewise,
confiscation of property related to the financing of terrorism is not recognised in the case of a request
from a foreign authority, for the reasons set out in the previous criterion.
Statistics
887.
The Procuraduría General de la República supplied the following figures on Mutual Legal
Assistance related to money laundering, drug trafficking and related offences.
888.
date.
No. of
MLAs
1
2
3
24/01/05
19/05/05
19/05/05
SOURCE
COUNTRY
Panamá
Panamá
Panamá
4
13/09/05
Costa Rica
5
6
7
8
9
10
11
12
13
14
15
16
26/09/05
26/09/05
26/09/05
26/09/05
26/09/05
26/09/05
26/09/05
26/09/05
26/09/05
26/09/05
18/01/06
13/02/06
Panamá
Panamá
Panamá
Panamá
Panamá
Panamá
Panamá
Panamá
Panamá
Panamá
Panamá
México
17
30/10/06
México
18
22/01/07
El Salvador
19
27/02/07
Costa Rica
20
26/02/07
Costa Rica
21
22
16/09/07
16/11/07
El Salvador
El Salvador
23
20/11/07
México
24
25
05/12/07
01/02/08
México
Peru
26
08/04/08
Guatemala
27
28
10/04/08
10/01/08
El Salvador
USA
DATE
OFFENCE
Money Laundering
Money Laundering
Money Laundering
Aggravated
Deprivation of Liberty
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Money Laundering
Drugs and Weapons
Traffic
Smuggling
Traffic in Human
Beings
International Traffic in
Minors
Smuggling
Money Laundering
Financing
of
Narcotics
Drug Trafficking
Money Laundering
International
Drug
Trafficking
Money Laundering
Money Laundering
The Ministerio Público provides the following figures on international cooperation from 2004 to
No.
DATE
OF
RECEIPT
COUNTRY
OFFENCE
135
No.
DATE
OF
COUNTRY
RECEIPT
OFFENCE
0006-04
20/01/04
Money Laundering
0007-04
28/01/04
0008-04
10/02/04
0009-04
10/02/04
0010-04
10/02/04
0012-04
13/02/04
0016-04
19/05/04
0019-04
09/08/04
Colombia
Eighth
Special
Prosecutors Office for
Criminal
Courts,
Santiago
de
Calí,
Colombia
0020-04
13/08/04
Colombia
Irregularities
in
the
Office of Disciplinary Importation of Plastic Balls
Investigations of the
National Directorate of
Revenue and Customs
of Bogotá
0021-04
27/10/04
United Kingdom
Great Britain
Puerto Rico
State Department
Guatemala Supreme
Court
Guatemala Supreme
Court
Guatemala Supreme
Court
Guatemala Supreme
Court
Colombia Prosecutors
Office
El Salvador
Supreme Court
Money Laundering
Money Laundering
Smuggling,
Customs
Fraud, Drug Trafficking,
Money Laundering
Money Laundering and
Cross-Border Transport
Sale
of
Arms
and
Ammunition
Embezzlement, Unlawful
Trading
and
Unlawful
Associations
Traffic, Manufacture and
Possession of Narcotics,
Criminal
Association,
Traffic in Arms and Illegal
Possession of Arms
of Illicit Traffic in Narcotic
Drugs and Psychotropic
Substances
Prosecution
00022-05
15/03/05
Crown
Service
Republic of Honduras Bribery, Tax Fraud, Neglect
National Prosecution of Duties of Public Officials
Service
and Abuse of Authority
0025-05
08/07/05
Kingdom of Belgium
0030-05
29/09/05
0033-05
24/10/05
0037-06
13/02/06
0039-06
19/04/06
0044-07
06/02/06
0046-07
31/05/07
International
Trafficking
and
Trading
Republic of Guatemala Money Laundering
Republic
Ukraine
Drug
Arms
of
the Smuggling of Drugs, Illegal
Acquisition,
Possession,
Transport and Despatch of
Narcotics
United Mexican States Acquisition of Money from
Unlawful Sources
Republic of Honduras Illicit Traffic in Drugs
Ministerio Público
Fiscal General of the Illicit Traffic in Drugs
Republic
of
El
Salvador
Panamá
Money Laundering
Procuraduría General
136
DATE
OF
COUNTRY
RECEIPT
No.
OFFENCE
de la República
0047-07
23/07/07
0049-07
28/11/07
0051-08
25/02/08
0052-08
03/03/08
Ministerio Público of
Ecuador
México
Procuraduría General
El Salvador
Ministerio Público
Traffic in Illegal Migrants
El Salvador
Ministerio Público
Transport of Drugs and
Controlled Substances
Financing of Drugs and
Controlled Substances
Transport of Drugs and
Controlled Substances
Main findings:
889.
According to figures provided by the Nicaraguan authorities the majority of prosecutions and
trials for money laundering are related to cash smuggling. Few requests for Mutual Legal Assistance
have been made to other States for this offence and therefore follow up and implementation of
international cooperation mechanisms for the Republic of Nicaragua in cases of money laundering under
the new broadened money laundering provisions of the Criminal Code is pending.
890.
Act 285 empowers the law enforcement authorities to carry out the acts of investigation
mentioned above, as international assistance. However, it does not give power to seize or confiscate
property related to money laundering or financing of terrorism without a corresponding criminal
prosecution. In addition, the Act does not provide for international assistance in financing of terrorism.
891.
There is no adequate distribution of seized assets from activities related to money laundering, for
law enforcement agencies working in this area, since the distribution is intended for institutions related to
prevention and combating drug related crimes, see sub-paragraphs a,b,c,d and e of Article 88 of Act 285,
and excludes institutions or agencies related to money laundering and financing of terrorism.
892.
No procedure has been adopted for sharing property related to money laundering in cases of joint
investigations with Nicaragua.
6.3.2.
Recommendations and Comments
893.
Power should be granted to freeze and confiscate property related to ML and FT without a
corresponding prosecution, when another State requests it.
894.
International assistance in matters concerning financing of terrorism should be explicitly
provided for in the law for acts committed outside the territory of Nicaragua.
895.
It is recommended that a special fund be created from confiscated property to assist the law
enforcement authorities to fulfil their objectives in the area of ML and FT.
896.
Mechanisms should be created to share with the law enforcement authorities of other countries
confiscated property arising from coordinated activities.
6.3.3.
R.36
Compliance with Recommendations 36 to 38 and SR.V:
Rating
Summary of factors relevant to s.6.3 underlying the overall rating
LC
• Deficiencies identified in R.1 may affect the mutual legal assistance (failure of
two previous offences, the inability to punish the criminal association and lack
of administrative sanctions for legal persons irrespective of the criminal
137
responsibility of natural persons)
• Deficiencies identified in SR.II and SR.V can limit the possibilities of
assistance to other countries (doubts regarding application of criminal law for
TF acts occurring outside of Nicaragua, lack of administrative sanctions on legal
persons.
R.37
C
[compliant]
R.38
PC
• No consideration has been given to the possibility of sharing with other
countries, in the absence of a prior international agreement, goods confiscated as
a result of collaborative actions with other countries.
• There are no appropriate laws and procedures for effective response to requests
for Mutual Legal Assistance from other countries concerning identification,
freezing or confiscation of property relating to financing of terrorism, in the
absence of a bilateral treaty with the requesting country.
• There has been no consideration to the creation of a special fund from
confiscated assets from financing of terrorism. Also, there was no evidence that
the Fund that exist with proceeds from money laundering is functioning
effectively.
• It was not possible to determine if the requests for mutual legal assistance are
replied expeditiously.
SR.V
PC
• The same reasons and deficiencies found in R.38 affect the rating of the SR.V
(in the absence of international treaties, there are no procedures to enforce
requests for identification, freezing, seizure confiscation of property related to
Terrorist Financing).
• There are no regulations that determine how to seize or confiscate property
linked to the offence of Terrorist Financing, nor the final destination of the
property.
• The possibility of prosecuting TF acts committed outside the territory of
Nicaragua, and provide mutual assistance in this matter is not expressly
provided for by law and depends on a broad interpretation which has not yet
been confirmed in court.
• No authority is empowered in Nicaragua to exchange information with foreign
FIUs on account of transactions suspected of terrorist financing.
6.4. Extradition (R.37, 39, SR.V):
6.4.1.
Description and Analysis
897.
Summary: The Republic of Nicaragua admits requests for extradition presented by another State
for persons prosecuted and convicted as perpetrators, accomplices or participants in the offences of
money laundering and/or financing of terrorism, except for nationals, in whose case the judicial
authorities of the country shall proceed against them in accordance with the terms of the Code of
Criminal Procedure and the Multilateral and Bilateral agreements signed and ratified by Nicaragua,
which clearly set out the requirements, conditions and procedures to be followed by the authorities of the
country for extraditions.
Recommendation 37. Dual Criminality
898.
Articles 18 and 19 of the Criminal Code and 348 to 360 of the Code of Criminal Procedure
govern extradition. It should be mentioned that in addition to these laws there is a series of Bilateral
Treaties and Multilateral Conventions governing extradition.
138
899.
From the information collected it can be seen that even though the principle of double
criminality applies in domestic legislation, it does not seem to constitute an impediment or hindrance for
extradition requests in cases of money laundering and terrorist financing, in view of the breadth of the
criminal basis of money laundering established by the Nicaraguan Criminal Code, which includes as
predicate offences crimes incurring a sentence of deprivation of liberty with an upper limit of five years
or more. In addition the Nicaraguan Criminal Code includes acts of terrorism and financing of terrorism
and crimes.
900.
Under Nicaraguan legislation, extradition is conditional upon compliance with requirements and
procedures set out in the Code of Criminal Procedure and the Extradition Treaties and Conventions
signed and ratified by the country, of which, according to figures supplied by the authorities, there are
fifteen (15).
Extradition Convention between Nicaragua and the United States of America
Extradition Treaty between Costa Rica and Nicaragua
Treaty for Extradition and Protection against Anarchism
Extradition Treaty between Belgium and Nicaragua
Treaty for Extradition of Fugitives between the United States [and Nicaragua? – sentence
incomplete]
Treaty between Great Britain and Nicaragua for Reciprocal Extradition of Fugitive Criminals
Extradition Convention [Translator’s Note: incomplete?]
Code of Private International Law
Extradition Treaty between Colombia and Nicaragua
Treaty for Extradition of Fugitive Criminals between Nicaragua and the Bahamas
Inter-American Convention on Extradition
Extradition Treaty between Nicaragua and Mexico
Treaty for Extradition and Legal Assistance in Criminal Matters between Nicaragua and Chile
Extradition and Protection Treaty between Nicaragua and Spain
Agreement between the government of Nicaragua and the government of the United States of
America concerning the handing over of persons to the International Criminal Court
901.
From a study of the domestic law and the International, Multilateral and Bilateral Conventions
signed and ratified by the Republic of Nicaragua it may be concluded that money laundering is an
extraditable offence.
902.
Title V of the Code of Criminal Procedure of the Republic of Nicaragua governs the extradition
procedures. It states that when there is no Treaty or Convention signed and ratified by Nicaragua, the
conditions, procedure and effects of extradition shall be determined by the terms of the Code (Article
348).
903.
The Criminal Chamber of the Supreme Court is the forum empowered to grant or refuse
extradition (Article 349) and its decisions are communicated to the requesting or requested State through
the Executive Power.
904.
Article 356 of the Code of Criminal Procedure sets out the following procedure for extradition:
1. The person whose extradition is requested shall be placed at the orders of the Criminal Chamber
of the Supreme Court, which will designate a public defender for the accused if he does not have
one;
2. During the extradition procedures the accused may be preventively detained for a maximum
period of two months;
3. The requesting State must submit identification data on the accused, documentary evidence of a
judicial arrest warrant, or, as the case may be, a definitive conviction; an authentic copy of the court
proceedings, containing proof or at least reasonable evidence of the guilt of the person concerned;
139
and an authentic copy of the legislation covering the offence, the degrees of participation of the
perpetrator, and the statute of limitations.
The true copies referred to in this Article must be submitted with the formalities required by ordinary
legislation. If the documentation is presented without these formalities being observed or is
incomplete, the court shall request by the quickest route the documents that are missing.
4. When this procedure is complete, the court hears the accused, his defender and the Ministerio
Público for up to twenty days, ten of which are devoted to the presentation of evidence and ten to
arguing it.
5. Procedural questions arising during the hearing shall be decided by the court, which shall dismiss
outright any motion that is not pertinent or which tends in its judgement to slow down the
proceedings.
6. The court shall hand down a decision granting or denying extradition within ten days following
the periods mentioned above, and may attach whatever conditions it considers desirable. In any
case, it shall request and obtain from the requesting country a formal undertaking that the extraditee
shall not be tried for any different previous act, nor penalised with sanctions different from those
corresponding to the act or those imposed in the respective sentence, a copy of which the requesting
country shall transmit to the Nicaraguan courts.
7. The decision of the Criminal Chamber may be appealed within three days from the day following
the notification. It must be borne in mind that different central authorities have been designated for
the different Conventions and Treaties signed and ratified by Nicaragua. In the case of extradition it
is the Ministerio Público which issues requests for passive extradition and makes the application to
the Supreme Court in cases of active extradition.
905.
Article 43 of the Constitution of Nicaragu, as defined by Nicaragua. Extradition for common
law offences is regulated by law and international treaties. Nicaraguans may not be extradited from the
national territory”.
906.
The Criminal Code of the Republic of Nicaragua, for its part, embodies in Article 19 the
principle of non-extradition of nationals.
“Article 19, Principle of Non-Extradition of Nationals. The State of Nicaragua shall not for any
reason hand over Nicaraguans to another State.
Nor shall a person be handed over who at the moment of the commission of the punishable offence
has possessed Nicaraguan nationality.
In both cases, if extradition is requested, the State of Nicaragua must try the person concerned for
the common law offence committed. If the person whose extradition is requested has served part of
the sentence or the security measure imposed, these shall be taken into consideration by the court”.
907.
On the basis of the Constitution and in conformity with the abovementioned law, Article 349 of
the Nicaraguan Code of Criminal Procedure expressly prohibits the extradition of Nicaraguans from the
national territory.
908.
In cases in which the extradition of a national is denied, the judicial authorities of the Republic
of Nicaragua, pursuant to Article 19, shall proceed to try him for the common law offence committed
(money laundering or financing of terrorism) applying for the purpose the laws embodied in the
Nicaraguan Criminal Code and Code of Criminal Procedure.
909.
In this regard, the competent authorities of countries may cooperate among themselves or with
other States, having recourse to the machinery and formalities of Mutual Legal Assistance.
140
910.
Extradition requests are dealt with in reasonable periods of time and in accordance with the
parameters set out in domestic legislation and the international instruments to which the Republic of
Nicaragua is a party.
911.
Additional Element (R.39): Simplified Procedures relating to Extradition. The Nicaraguan
authorities responsible, the requirements they apply and the procedures for handing over the accused are
clearly and simply described in the Criminal Code and the Code of Criminal Procedure, and they require
respect for guarantees and rights of the accused person and for due process.
912.
The Nicaraguan Code of Criminal Procedure sets out a simplified procedure for urgent cases, as
follows:
“Article 355. Urgent informal extradition. Extradition may be requested by any means of
communication, provided there is an arrest warrant in existence for the accused and the requesting
country undertakes to abide by the requirements indicated for the process.
In this case the documents listed in the following article must be submitted to the Embassy or
Consulate of the Republic no later than ten days from the arrest of the accused. The Criminal
Chamber of the Supreme Court must be informed immediately and documentation submitted to it
to enable it to hear and decide the case.
If these requirements are not complied with, the arrested person shall be freed and his extradition
may no longer be requested by this summary procedure”.
913.
The Code of Criminal Procedure contains no simplified extradition procedure allowing formal
procedures to be suspended.
Statistics (extradition).
914.
The Republic of Nicaragua provides the following figures for extradition:
No.
ACTIVE EXTRADITIONS
DATE
OF
COUNTRY
REQUEST
OFFENCE
0005-04
2/09/04
United
States
America
of Theft with Breach of
Trust
0008-05
01/11/05
United
States
of Attempted Murder
America
State
Department
0010-06
28/08/06
Republic of Honduras
International Traffic in
Narcotics
0011-07
12/06/07
Bolivia
Rape
0015-08
15-05-08
Colombia
International Traffic in
Narcotic
and
Psychotropic Drugs
and other Controlled
Substances
PASSIVE EXTRADITIONS
No.
FECHA
SALIDA
PAÍS
DELITO
141
0024-05
14/04/05
0038-06
14/02/06
0010-06
28/08/06
0041-06
22/08/06
India
0042-06
19/09/06
0045-07
09/05/07
United
States
America
United
States
America
6.4.2.
Embassy of Spain in Murder
Nicaragua
United
States
of Rape
America
Republic of Honduras International
Trafficking
Drug
Fraud,
Unlawful
Appropriation
of
Property
and
Falsification
of
Passports
of Murder
of Conspiracy
distribute Heroin
to
Recommendations and Comments
915.
It would be desirable for the country to include within its domestic extradition legislation the
possibility of applying a simplified extradition procedure for persons who consent to the suspension of
the formal procedures.
6.4.3.
Compliance with Recommendations 37 and 39 and SR.V
Rating
Summary of factors relevant to s.6.4 underlying the overall rating
R.39
C
[compliant]
R.37
C
[compliant]
SR.V
PC
[This recommendation is dealt with in various sections. See deficiencies of
SR.V in relation to R.38 and R.40]
6.5. Other Forms of International Cooperation (R.40 SR.V)
6.5.1.
Description and Analysis
916.
Summary: In the area of international cooperation, Nicaraguan legislation covers all aspects of
the requirements and formalities for request and granting of international legal assistance. However,
with regard to international cooperation at the administrative level there are limitations that hinder the
exchange of financial intelligence information between the Financial Analysis Commission (CAF) and
foreign Financial Intelligence Units (FIUs). These are: non-operational status of the Commission and the
lack of a law expressly empowering the it to exchange information with foreign counterparts as laid
down in Act 285 of 1999. In the case of the SIBOIF, that agency has signed Memoranda of
Understanding with supervisory agencies of other States, which include matters concerning cooperation
and consolidated supervision to avoid the abuse of the regulated sectors in those countries.
STATISTICS ON CONVENTIONS
Source : SIBOIF
INFORMATION EXCHANGE
AGREEMENTS OF SIBOIF WITH
FOREIGN COUNTERPARTS
COUNTR
Y
DATE
SIGNED
RENE
WAL
EXTENS
ION
EXPIRY
DATE
Understanding for Consolidated
Supervision and Information
Exchange
Panama
14th May
2002
13th
May
2008
3 years
14th May
2011
142
Understanding for Consolidated
Supervision and Information
Exchange between SIB Nicaragua
and CNBS of Honduras
Understanding for Consolidated
Supervision and Information
Exchange between SIB Nicaragua
and SSF El Salvador
Understanding for Consolidated
Supervision and Information
Exchange between SIB Nicaragua
and SUGEF Costa Rica
Memorandum of Understanding
between SIB Guatemala and SIB
Nicaragua
Honduras
15th May
2003
15th
May
2006
5 years
15th May
2011
El
Salvador
20th May
2003
23rd
May
2006
5 years
23rd May
2011
Costa Rica
12th August
2003
5 years
18th
December
2012
Guatemala
31st October
2003
17th
Decem
ber
2007
***
Indetermi
nate
Indetermina
te
Understanding for Consolidated
Supervision and Information
Exchange between SIB Nicaragua
and SIB Dominican Republic
Interagency Cooperation Convention
between SBS-AFP Peru and SIB
Nicaragua
Dominican
Republic
20th April
2005
***
Indetermi
nate
Indetermina
te
Peru
31st May
2005
31st
July
2006
Indetermi
nate
Indetermina
te
Work Closely and Cooperatively in
the Supervision of Cross-Border
establishment of banks and banking
organisations incorporated in the
United States and Nicaragua
Multilateral Memorandum for
Exchange and Mutual Cooperation
for Consolidated and Cross-Border
Supervision between members of the
Central American Council of
Superintendencies of Banks,
Insurance and Other Financial
Institutions
Multilateral Memorandum of
Understanding among the countries
of Central America, Panama and the
Dominican Republic for Information
Exchange and Mutual Cooperation
USA-OCC
12th
December
2005
***
Indetermi
nate
Indetermina
te
Regional
12th
September
2007
***
Indetermi
nate
Indetermina
te
Regional
29th June
2007
***
5 years
29th June
2012
Recommendation 40.
917.
In accordance with the interpretative note to FATF Recommendation 40, this standard does not
refer specifically to Mutual Legal Assistance, but to other forms of international cooperation used by the
competent authorities of countries, that is to say Financial Intelligence Units and supervisory and
monitoring bodies for the regulated sectors.
918.
In the area of legal cooperation alone, it was possible to determine that the authorities cooperate
with their foreign counterparts without major hindrances, making assistance conditional on compliance
with the requirements and formalities of domestic law applicable to the Bilateral Treaties and
Multilateral Conventions signed and ratified by the country.
919.
Unlike what happens in the area of ordinary criminal justice, specifically in the prosecution of
money laundering and financing of terrorism, the Financial Analysis Commission (CAF) is not
143
empowered by Act 285 of 1999 to exchange information with counterpart agencies, or to sign
Cooperation Agreements or Memoranda of Understanding for interagency cooperation.
920.
A study of the domestic legislation and international instruments in the area of Mutual Legal
Assistance enables us to state that the country has the legal capability to provide assistance in a timely,
constructive and effective manner, without neglecting the requirements of the law or violating due
process or the rights of the accused. In the Republic of Nicaragua Mutual Legal Assistances are
processed by the Procuraduría General de la República and the Ministerio Público, in their capacity as
Central Authorities for this purpose, depending on the Treaty or Convention in question.
921.
As indicated in earlier sections, the CAF is not legally empowered to exchange financial
intelligence information with foreign FIUs, and this is obviously a problem for the exchange of
information to prevent the crimes that concern us.
922.
The Republic of Nicaragua, in the matter of exchange of information with foreign authorities,
does not have at its disposal the machinery or channel of Memoranda of Understanding between the CAF
and foreign FIUs. Furthermore, the CAF is not a member of the Egmont Group. As a way out, and in
view of the national authorities’ recognition of the extreme importance of international cooperation, the
National Police, through their Economic Crimes Division, exchange information with international and
regional police and intelligence organisations and forces, such as INTERPOL.
923.
As regards international legal cooperation there is no obstacle to spontaneous exchange of
information, as long as the procedures of domestic law and the international instruments ratified by
Nicaragua on the subject are complied with. However, the problem lies in the fact that the CAF, a multidisciplinary body, is not expressly authorised by Act 285 of 1999, which created and regulates it, to
provide assistance in the exchange of intelligence information with foreign counterpart bodies.
924.
The Code of Criminal Procedure and Act 285 of 1999 indicate the competent authorities to carry
out enquiries or judicial investigations in cases related to money laundering and the financing of
terrorism. In addition, Article 211 of the Nicaraguan Code of Criminal Procedure states that on the basis
of an express and reasoned request from the Fiscal General or the Director General of the Police, a judge
may require competent financial authorities or any financial institution, public or private, to produce
information on financial transactions in their custody. The order to produce financial information has
effect only [Translator’s Note: This sentence is incomplete in the original]
925.
The CAF is not empowered by Act 285 of 1999 to exchange intelligence information with FIUs
abroad and is therefore not authorised to offer assistance based on the following: (a) searches in its own
databases, including information related to suspicious transaction reports; (b) searches in other databases
to which it may have direct or indirect access, including databases of the law enforcement branches,
public databases, administrative databases and commercially available databases.
926.
The judicial authorities of the country have the power to carry out investigations on behalf of
foreign counterparts, as long as this is based on a request for legal assistance.
927.
Exchanges of information and mutual legal cooperation based on Nicaraguan law or Mutual
Legal Assistance Treaties or Conventions are not subject to conditions that might be considered
restrictive, disproportionate or undesirable. This does not apply to exchanges of preventive intelligence
information, owing to the lack of a specific law to authorise cooperation on the subject between the CAF
and the FIUs of other countries.
928.
The CAF is not authorised to exchange intelligence information with other FIUs on any subject,
let alone on fiscal matters.
929.
Despite the above, the basis in criminal law for money laundering established by the Nicaraguan
Criminal Code is broad. It states that predicate offences for money laundering shall be those punishable
144
in the Criminal Code with a maximum sentence of five or more years imprisonment and which generate
resources or wealth for laundering (Article 282 of the Nicaraguan Criminal Code).
930.
From the above it may be concluded that in terms of Article 282 of the Criminal Code there is no
hindrance to the country providing legal assistance in cases of money laundering linked to offences of a
fiscal nature. In this area there are offences such as tax fraud, in its aggravated form, customs fraud and
smuggling which are classed as predicate offences for money laundering as long as the upper threshold
of the sentence of imprisonment for both offences is five years or more.
931.
Professional or banking confidentiality and secrecy that applies to information held by financial
institutions and DNFPs, defined by the FATF and by Nicaragua as casinos and other institutions
previously listed in Act 285 of 1999, do not constitute grounds for rejection of requests for legal
assistance made by another State to Nicaragua, in the context of investigations or prosecution for money
laundering and/or financing of terrorism.
932.
Article 34 of Act 285 of 1995 stipulates that bank secrecy shall not hinder an investigation into
money laundering; the information must be requested by the competent judge or at the request of the
Fiscal General.
933.
In addition, Article 211 of the Code of Criminal Procedure states that on the strength of an
express and reasoned request from the Fiscal General or the Director General of the Police the judge may
require competent financial authorities or any financial institution, public or private, to produce
information on financial transactions in their custody. The order to produce financial information has
effect only [Translator’s Note: This sentence is incomplete in the original]
934.
As regards safeguards in the use of exchanged information, Nicaraguan legislation and
international instruments on the subject govern the use of information by the requesting State. In the
administrative sphere there is no exchange of information between the CAF and foreign FIUs. On the
other hand, exchanges of information by the National Police with foreign counterparts and international
intelligence police bodies (for example INTERPOL) are governed by Protocols of Cooperation or
membership in international police bodies, and their compliance is mandatory for Nicaragua and all the
other countries.
935.
Additional Element—Exchange of Information with Non-Counterparts There is no internal
legislation expressly authorising the provision of international assistance or cooperation based on
reciprocity, neither through an FIU as suggested in criteria 40.10 and 40.10 of the methodology.
International Cooperation on FT.
936.
Conditions for legal cooperation are embodied in the country’s judicial framework; nevertheless,
in the area of administrative cooperation no laws have as yet been adopted to enable the CAF and other
regulators, except for SIBOIF, to provide effective and timely cooperation to their counterparts in other
countries, regarding information on operations giving rise to suspicions of terrorism and terrorist
financing.
937.
Nicaraguan agencies lack mechanisms for rapid and constructive interchange with noncounterpart agencies in other countries.
938.
The CAF may obtain internally information from other competent authorities involved in
combating money laundering and the financing of terrorism, but it does not have a mechanism of
cooperation to enable it to exchange information with foreign FIUs.
6.5.2
Recommendations and Comments
939.
An agency should be created, or some state agency empowered, to exchange financial
intelligence information with the FIUs of other countries.
145
6.5.3
Compliance with Recommendation 4 and Special Recommendation V
Rating
Summary of factors relevant to s.6.5 underlying the overall rating
R.40
PC
•
No Nicaraguan authority has the power to exchange information with foreign
FIUS concerning operations that give rise to suspicion of money laundering
SR.V
PC
•
No Nicaraguan authority has the power to exchange information with foreign
FIUS concerning operations that give rise to suspicion of financing of
terrorism
7.
OTHER ISSUES
7.1. Resources and Statistics (R.30 and R.32)
[*Assessors should use this section as follows. The text of the description, analysis, and
recommendations for improvement that relate to Recommendations 30 and 32 is contained in all the
relevant sections of the report i.e. all of section 2, parts of sections 3 and 4, and in section 6. There is a
single rating for each of these Recommendations, even though the Recommendations are addressed in
several sections. Section 7.1 of the report will contain only the box showing the rating and the factors
underlying the rating, and the factors should clearly state the nature of the deficiency, and should cross
refer to the relevant section and paragraph in the report where this is described.]
Rating
Summary of factors relevant to Recommendations 30 and 32 underlying the
overall rating
R.30
PC
- Since its creation in 1999, the CAF has not been provided with staff or resources
to handle the information it receives, and the law does not give it the technical
autonomy necessary to do the work of an FIU.
- Poor training of judges, prosecutors and police on new laws passed to combat
ML and FT.
- Ignorance or conflicting interpretations on the part of judges, prosecutors and
police of the provisional measures that the law puts at their disposal.
R.32
PC
- The small number of ML cases initiated makes obtaining statistical information
still relatively simple. Nevertheless, there is no system enabling the authorities to
use the data available to carry out a comprehensive review of the effectiveness of
their AML/CFT system.
- The information available on requests for Mutual Legal Assistance does not
show the response times.
- Information on suspicious operations does not enable them to be broken down
according to their characteristics or the subject of the report, or to show total
amounts, trends or typologies.
7.2. Other relevant AML/CFT measures or issues
[*Assessors may use this section to set out information on any additional measures or issues that are
relevant to the AML/CFT system in the country being evaluated, and which are not covered elsewhere in
this report].
7.3. General framework for AML/CFT system (see also section 1.1)
[*Assessors may use this section to comment on any aspect of the general legal and institutional
framework within which the AML/CFT measures are set, and particularly with respect to any structural
146
elements set out in section 1.1. Where they believe that these elements of the general framework
significantly impair or inhibit the effectiveness of the AML/CFT system, these should be brought
forward in the relevant sections of the report and cross-referenced with this section.]
TABLES
Table 1: Ratings of Compliance with FATF Recommendations
Table 2: Recommended Action Plan to improve the AML/CFT system
Table 3: Authorities’ Response to the Evaluation (if necessary)
147
Table 1. Ratings of Compliance with FATF Recommendations
The rating of compliance vis-à-vis the FATF Recommendations should be made according to the four
levels of compliance mentioned in the 2004 Methodology (Compliant (C), Largely Compliant (LC),
Partially Compliant (PC), Non-Compliant (NC)), or could, in exceptional cases, be marked as not
applicable (NA).
Rating
Summary of factors underlying rating 21
LC
• Counterfeiting and piracy of products are not included as
predicate offences for money laundering.
• There have been 2 convictions but no charges before the
Courts for money laundering (there were only four
investigations to date) despite the criminalisation of money
laundering since 1997 (amended and approved in mid2008).
• The only convictions have been for smuggling of cash,
which the authorities put on an equal footing with money
laundering, because of the way in which the cash is
transported without being declared. Nevertheless this
offence does not possess the elements required by the
Vienna and Palermo Conventions to be considered money
laundering.
• Law enforcement personnel have not received the
necessary training in money laundering, they are unaware
of the legal tools in existence and they harbour diverse and
contrary interpretations.
2. ML offence – mental
element and corporate
liability
PC
• Except for institutions regulated by SIBOIF, there is no
criminal liability or liability of any other kind for legal
persons in money laundering. Penalties are only imposed
on the legal person as accessory to penalties imposed on a
physical person.
• The lack of legal cases on money laundering prevents the
determination of whether judges will impose sanctions
based on statistics as, in theory, is foreseen in the
legislation.
3. Confiscation and
provisional measures
LC
• Some operators of justice are not aware of existing legal
mechanisms that would enable them to adopt a wide range
of pre-protective measures (before the start of the trial
stage) and interim (after the prosecution) in cases of ML.
• Only two cases indicate the adoption of freezing of funds,
assets or rights in relation to money laundering, although
they have been in force since 1997.
Forty Recommendations
Legal systems
1. ML offence
Preventive measures
21
These factors are only required to be set out when the rating is less than Compliant.
148
4. Secrecy laws consistent
with the
Recommendations
LC
• The powers of the Fiscal General (as President of the CAF)
to obtain information without the need for a Court Order in
the follow up to a STR does not apply to financing of
terrorism.
5. Customer due diligence
PC
• Many of the regulated institutions under Act No.285 have
not yet been regulated or supervised and are not applying
the requirements of the said Act (among them are financial
cooperatives and microfinance institutions, which handle a
very high volume of resources)
• There are no regulations governing prevention of financing
of terrorism for the financial institutions that are not under
supervision of the SIBOIF.
• The new SIBOIF Rules are already in force, but the
deadline to comply with some new requirements (like
establishing risk matrices) has been extended. For this
reason it was not possible to determine to what extent these
measures are already in place in financial institutions.
• The constitutionality of the SIBOIF Rules is being
challenged before the Supreme Court and this has given
rise to uncertainty among the regulated institutions
regarding the permanence of the preventive regime.
6. Politically exposed
persons
PC
• The enhanced CDD requirements for high risk customers
are laid down in the SIBOIF Rules, which is applicable
only to financial institutions under the SIBOIF
• Financial institutions are required to establish only the
source of funds of foreign PEPs, and not the source of
wealth.
7. Correspondent banking
PC
• The existing regulation requiring financial institutions to
collect sufficient information on the institutions with which
they maintain correspondent relationships, and assess their
AML/CFT controls to determine whether these are
adequate and effective, as well as to obtain approval of
senior management before establishing new correspondent
relationships, applies only to institutions under the
supervision of the SIBOIF
• Application of these Rules by the regulated institutions has
not so far been total, since their application is phased and
the institutions state that they need more time than is
allowed by the Rules.
8. New technologies &
non face-to-face
business
9. Third parties and
introducers
PC
10. Record keeping
PC
• The risk posed by non face to face relationships or
transactions is regulated only for the institutions subject to
supervision and inspection by the SIBOIF.
• Although the institutions under the SIBOIF have a
regulation stating that the development of CDD may not be
delegated, there is no such regulation for other financial
institutions. In practice however these do not make use of
third parties for CDD
• The regulated institutions not under the supervision of the
SIBOIF are unaware of their obligations under Act 285 as
regards keeping records on money laundering and they are
not supervised.
Among them are credit and loan
cooperatives, casinos, pawnshops, Bureaux de Change and
PC
149
11. Unusual transactions
PC
12. DNFBP – R.5, 6, 8-11
NC
13. Suspicious transaction
reporting
PC
14. Protection & no tippingoff
PC
15. Internal controls,
compliance & audit
PC
money remittance operators.
• The requirement of Act 285 (for the remainder of the
regulated institutions) refers only to keeping information on
the identification of the customer, and does not include the
customer’s transactions, correspondence and later activities
• The monitoring requirement is not being complied with by
the majority of money remittance companies, microcredit
institutions, financial cooperatives, Bureaux de Change,
and other financial activities not supervised by the SIBOIF,
as well as by any of the DNFPBs
• There is no general regulation or obligation in Act 285 for
institutions not supervised by the SIBOIF, nor guidelines
for the various regulated institutions on how to apply it in
accordance with the nature of their business.
• The provisions of Act 285 and its Regulations do not
require conservation of supporting documents of suspicious
transactions analyses
• The casinos are the only DNFBPs subject to compliance
with anti-money legislation and they have failed to comply.
• There are no regulations or competent authority for any
DNFBPs in AML/CFT matters.
There are adequate regulations for regulated entities
supervised by the SIBOIF but compliance on the part of
sectors other than the banking sector is minimal
• The financial institutions not supervised by SIBOIF do
not comply with their ML and FT suspicious transactions
reporting obligations
• The Superintendency is not sufficiently rapid and severe
when it detects some omission in sending reports of
unusual or suspicious transactions during its inspections.
• There is no requirement for reporting unusual
transactions which, when analysed, are explained solely
by fiscal or tax considerations
• The quality of STRs is still defective
•
• The provisions which prohibit individuals from alerting a
client or third parties on information given to the
authorities, does not explicitly mention cases with
information related to terrorist financing.
• For institutions regulated by Act 285 which are not
supervised by the SIBOIF there are no requirements to:
• Develop internal procedures, policies and controls to
prevent ML/FT and to make these known to their
employees
• Appoint a Compliance Officer
• Have internal and external audit to verify compliance with
ML/FT obligations
• Have procedures for investigation of background to ensure
high Rules in recruitment
16. DNFBP – R.13-15 & 21
NC
• There is no compliance with suspicious transaction report
requirements in the DNFBP sector
• Casinos are the only category of DNFBPs included in the
150
AML Act.
• There has not been any practical implementation of the
law, not even in the casino sector.
17. Sanctions
PC
•
•
•
•
•
Administrative sanctions set out in Act No.285 for
institutions that are not under supervision of SIBOIF
have not been effective; the competent authority has
not applied any sanctions. In addition, the sanctions
are not proportional or dissuasive.
Only the SIBOIF, as regulatory body, has imposed
sanctions on the institutions under its supervision.
The sanctions that the SIBOIF can impose on directors,
managers, officials and compliance officers, according
to Act 561 (art. 164) and its “General Rules for the
Imposition of Fines” (art. 10) are only for tipping of the
customer about a suspicious transaction report.
No range has been established for sanctions for noncompliance with provisions of Act No.285
There is no regulation conferring on the supervisory
body the power to revoke, restrict or suspend the
licences of financial institutions
18. Shell banks
C
Compliant
19. Other forms of reporting
C
Compliant
20. Other NFBP & secure
transaction techniques
LC
• The authorities did not provide adequate information on
measures to reduce the use of cash and modernise financial
transactions
21. Special attention for
higher risk countries
PC
• The measures for high risk countries contained in the
ML/FT prevention Rules are applied solely to supervised
financial institutions, and do not include the other (and
very numerous) financial activities such as microcredit
bodies, financial cooperatives and remittance companies
22. Foreign branches &
subsidiaries
PC
• The obligations derived from Recommendation 22 apply
only to institutions supervised by the SIBOIF
• The SIBOIF has not yet applied consolidated supervision
to financial groups
23. Regulation, supervision
and monitoring
PC
• Only institutions supervised by the SIBOIF are subject to
ML/FT supervision
• The SIBOIF as supervisory body carries out inspections to
verify compliance with ML/FT rules
• The Financial Analysis Commission – CAF – does not
have the staff, technical equipment or resources to regulate
and supervise all institutions not covered by the SIBOIF
• The CAF, as competent authority, has not carried out any
verification in the financial institutions to determine
compliance with obligations imposed by the Act
• Regulation to prevent criminals or their associates
obtaining or being beneficiaries of a significant or majority
control or carrying out an administrative function in a
supervised entity exists only for the institutions under the
151
supervision of the SIBOIF
• There is no regulation requiring licensing or registration of
remittance companies and Bureaux de Change, nor are
they subject to supervision and/or monitoring by any
regulatory or supervisory entity
• The SIBOIF has not carried out consolidated supervision
of financial groups
24. DNFBP - regulation,
supervision and
monitoring
NC
• There is no supervision of the DNFBP sector, including
casinos
• No sanctions are applied to the DNFBP sector, including
casinos
• There is no training programme for the DNFBP sector
including casinos,
25. Guidelines & Feedback
PC
• Only the SIBOIF has issued guidelines to help financial
institutions and other regulated entities to strengthen their
ML/FT measures
• No feedback is given regarding the quality of the reports
on suspicious transactions.
• No study of ML and FT techniques or typologies specific
to Nicaragua has been carried out.
Institutional and other
measures
26. The FIU
NC
•
•
•
•
•
•
•
Nicaragua does not have a financial intelligence unit and
the Bill to create it has been before the Assembly for four
years without being debated
The CAF is legally empowered to carry out certain
functions regarding reception and analysis of information
on operations giving rise to suspicions of money
laundering submitted by the regulated institutions, but
this does not make it an FIU. In practice the CAF does
not exercise these functions because it has no structure,
staff or budget of its own.
The Act does not unequivocally mandates the CAF to
forward to the judicial authorities all the cases in which a
high level of suspicion of commission of an offence has
been confirmed.
The CAF does not have operational independence
because its decisions are taken by a group of officials
belonging to various state bodies.
The analysis of the STRs is delegated to the Economic
Investigations Directorate of the National Police, which
does not have adequate information or resources for this
kind of task, and this is reflected in the fact that a tiny
percentage of STRs is used in criminal investigations.
The CAF is not empowered by law to exchange
information with foreign FIUs
One of the members of the CAF is an auditor nominated
by the Association of Accountants. This situation would
allow an inconvenient influence of the private sector in
the management of information as critical as the STRs.
152
27. Law enforcement
authorities
PC
• The law enforcement authorities have appropriate
investigative techniques in the matter of money
laundering, but not financing of terrorism.
• There are no mechanisms that allow postponing or
suspending the arrest of persons involved in ML or TF, or
the seizure of money, to obtain a better result in the
investigations.
• There are multiple criteria among law enforcement and
judiciary officials about the possibility to apply special
investigative techniques, and this could cause
nullifications of investigations and the failure of penal
procedures related with ML/FT.
• Except in the framework of effective collaboration by the
accused during an investigation, measures for postponing
prosecution, for example while better evidence is being
obtained or property and persons are being traced, do not
exist, nor have any been considered.
• There are no specific cases of investigation or prosecution
in which investigative techniques in force since 1997 have
been employed, and their level of effectiveness cannot
therefore be assessed.
• The law enforcement and judiciary authorities have not
received adequate training in relation to ML. They are
unaware of the procedural tools available to them in the
law, and have multiple contradictory interpretations of it.
28. Powers of competent
authorities
PC
• Suitable legal tools and powers exist for securing evidence
in money laundering but not financing of terrorism
investigations.
•
No actual cases were encountered in which
investigative measures were seen to have been applied, or
in which collection of evidence took place in
investigations into money laundering and financing of
terrorism
29. Supervisors
PC
• The CAF has power to verify compliance with the
obligations imposed by Act No. 285, but has not exercised
them because of the shortage of human and technical
resources
• Only the SIBOIF has supervised, regulated and imposed
sanctions in the area of ML/FT
• There is no timely follow up of the deficiencies detected
by SIBOIF inspections, during its ongoing program of insitu and extra-situ oversight.
• Reports are not sent in timely fashion to the supervised
institution; they are forwarded up to three months after the
conclusion of the inspection
• The SIBOF has limited staff for inspecting supervised
institutions and for following up on deficiencies
discovered
30. Resources, integrity and
training
PC
• Since its creation in 1999, the CAF has not been provided
with staff or resources to handle the information it
receives, and the law does not give it the technical
153
autonomy necessary to do the work of an FIU.
• Poor training of judges, prosecutors and police on new
laws passed to combat ML and FT.
•
Ignorance or conflicting interpretations on the part of
judges, prosecutors and police of the provisional measures
that the law puts at their disposal.
31. National co-operation
PC
• The CAF only began to meet recently and does not do so
regularly.
•
32. Statistics
PC
• The small number of ML cases initiated makes obtaining
statistical information still relatively simple. Nevertheless,
there is no system enabling the authorities to use the data
available to carry out a comprehensive review of the
effectiveness of their AML/CFT system.
• The information available on requests for Mutual Legal
Assistance does not show the response times.
•
33. Legal persons –
beneficial owners
NC
The CAF does not fully carry out its functions in the
area of formulation of public policies against money
laundering and terrorist financing, or of coordination in
combating these two offences
Information on suspicious operations does not enable
them to be broken down according to their characteristics
or the subject of the report, or to show total amounts,
trends or typologies.
• Although there is mandatory registration for legal persons,
and some requirements for identification and verification
by notaries who revise company contracts, companies are
not required to update information when there are changes
in ownership or control
• The issue of bearer shares is permitted, and it is very
difficult to determine the identity and confirm information
on the beneficial owner or person who controls companies
• Information on legal persons held by the Nicaraguan
Property Registration Authority does not permit precise
identification of the beneficial owner or the person
controlling legal persons, especially in the case of the few
companies that issue bearer shares
• Although there is mandatory registration for legal persons,
and some requirements for identification and verification
by notaries who revise company contracts, companies are
not required to update information when there are changes
in ownership or control
• The lack of centralised information and of an adequate
technological platform in the public Property Register
limits and delays consultation of information by users and
the expeditious issue of certificates for both the public and
private sectors. It also restricts verification of data by
financial institutions for compliance with CDD
requirements
34. Legal arrangements –
beneficial owners
N/A
• There is no evidence of the use in Nicaragua of the
concept of the Trust, or of any similar arrangement.
International Co-operation
154
35. Conventions
LC
• Although the country has signed and ratified the main antimoney laundering and combating of terrorist finant United
Nations Convention against Transnational Organised
Crime, the Inter-American Convention against Corruption,
the Inter-American Convention on Mutual Legal
Assistance in Criminal Matters, the Central American
Convention for the Prevention and Repression of Money
Laundering Related to the Illicit Traffic of Drugs and
Related Offences to quote a few); it still remains for the
country to carry out an review of the instruments in
question and pass domestic laws to ensure their complete
implementation.
36. Mutual legal assistance
(MLA)
LC
• Deficiencies identified in R.1 may affect the mutual legal
assistance (failure of two previous offences, the inability to
punish the criminal association and lack of administrative
sanctions for legal persons irrespective of the criminal
responsibility of natural persons)
• Deficiencies identified in SR.II and SR.V can limit the
possibilities of assistance to other countries (doubts
regarding application of criminal law for TF acts occurring
outside of Nicaragua, lack of administrative sanctions on
legal persons.
37. Dual criminality
38. MLA on confiscation
and freezing
39. Extradition
40. Other forms of cooperation
Nine Special
Recommendations
SR.I Implement UN
instruments
C
PC
C
PC
Rating
PC
• Compliant
• No consideration has been given to the possibility of
sharing with other countries, in the absence of a prior
international agreement, goods confiscated as a result of
collaborative actions with other countries.
• There are no appropriate laws and procedures for effective
response to requests for Mutual Legal Assistance from
other countries concerning identification, freezing or
confiscation of property relating to financing of terrorism,
in the absence of a bilateral treaty with the requesting
country.
• There has been no consideration to the creation of a
special fund from confiscated assets from financing of
terrorism. Also, there was no evidence that the Fund that
exist with proceeds from money laundering is functioning
effectively.
• It was not possible to determine if the requests for mutual
legal assistance are replied expeditiously.
• Compliant
• No Nicaraguan authority has the power to exchange
information with foreign FIUS concerning operations that
give rise to suspicion of money laundering
Summary of factors underlying rating
• There is no domestic law setting out the procedure to be
followed by the country to implement efficiently and in a
timely manner the provisions of Resolutions
155
S/RES/1267(1999), its successor resolutions and
S/RES/1373(2001), or the other resolutions approved by
the UN Security Council on the subject.
• The country circulates Update Lists of persons and
organisations designated for their links to international
terrorism and financing of terrorism approved by the UN
Security Council among authorities and the regulated
financial sector of the country; nevertheless no knowledge
was obtained of a special procedure to be followed by the
actors for compliance with the Resolutions, particularly as
regards the requirement for freezing without delay of
property and resources of terrorists and terrorist
organisations.
SR.II Criminalise terrorist
financing
LC
• Except for regulated institutions of SIBOIF, no
mechanisms
were
discovered
through
which
administrative or civil sanctions could be imposed on legal
persons linked to financing of terrorism.
• The Criminal Law empowers authorities to prosecute and
sanction the offence of TF when the act occurs outside
Nicaraguan territory, but the power is not explicit and
there are still no cases to support this interpretation
SR.III Freeze and
confiscate terrorist
assets
NC
• There are no effective laws or procedures for freezing
terrorist funds or other assets of persons designated by the
UN Security Council pursuant to Resolution 1267
• Even if the law allows the freezing of funds during the
investigation or prosecution for the offence of Terrorist
Financing, resorting to ordinary criminal procedure, the
law enforcement officials do not believe that justice is
applicable and in many cases are unaware of these powers
(see R.3).
• There are no appropriate measures for effective monitoring
of the obligations inherent in Special Recommendation III,
concerning freezing of funds related to financing of
terrorism.
SR.IV Suspicious
transaction reporting
PC
• The deficiencies identified in Recommendation 13 also
affect compliance with Special Recommendation IV
SR.V International cooperation
PC
• The same reasons and deficiencies found in R.38 affect the
rating of the SR.V (in the absence of international treaties,
there are no procedures to enforce requests for
identification, freezing, seizure confiscation of property
related to Terrorist Financing).
• There are no regulations that determine how to seize or
confiscate property linked to the offence of Terrorist
Financing, nor the final destination of the property.
• The possibility of prosecuting TF acts committed outside
the territory of Nicaragua, and provide mutual assistance
in this matter is not expressly provided for by law and
depends on a broad interpretation which has not yet been
confirmed in court.
• No authority is empowered in Nicaragua to exchange
information with foreign FIUs on account of transactions
156
suspected of terrorist financing.
SR VI
AML requirements
for money/value
transfer services
NC
• The money transfer companies are obligated by AML
legislation, but are not regulated or supervised by any
authority.
• There is no obligation to obtain a license or at least
register.
• Only the largest remittance company, which is an agent of
a multinational, has established CDD measures and reports
suspicious transactions to the CAF. There are other
companies with significant activity for international
transfers (eg microfinance) that do not implement controls
to prevent the ML / TF.
• The authorities do not know the number of businesses
operating in Nicaragua, or its agents, or the amount of
resources they manage.
SR VII Wire transfer rules
PC
• Informal money transfer operators, financial cooperatives
(credit unions or savings and loans), and microfinance
associations are not subject to any regulation for electronic
transfers.
SR.VIII Non-profit
organisations
PC
• There has been no evaluation on the characteristics and
dimensions of the non-profit sector, the extent of their
exposure to the risk of being used for terrorist financing
and to what extent existing rules are adequate to reduce
that risk.
• Although there is a centralized registry of NPOs, access to
information is restricted and only allows public bodies,
judicial authorities and NPOs themselves (not individuals
who could use this information as part of their monitoring
and due diligence AML / CFT).
• The country does not conduct effective oversight of law
enforcement on the part of NPOs or exercises control to
prevent their use in terrorist financing activities.
Corrective actions seem aimed mainly to collect fines for
the late update of the registry.
SR.IX Cross Border
Declaration & Disclosure
PC
• There is no obligation to declare cash and securities out of
the country (only upon entry).
• There are no provisions or procedures allowing the
imposition of administrative sanctions for failure to
declare.
• There is no use of information gathered from the
statements, nor is there adequate coordination between the
Directorate General of Customs and other relevant
agencies on risk management policies and AML / CFT.
157
Table 2: Recommended Action Plan to Improve the AML/CFT System
AML/CFT System
Recommended Action (listed in order of priority)
1. General
No text required
2. Legal System and Related
Institutional Measures
2.1 Criminalisation
Laundering (R.1 & 2)
of
Money
•
•
•
2.2 Criminalisation
Financing (SR.II)
of Terrorist
•
•
2.3 Confiscation, freezing and
seizing of proceeds of crime (R.3)
•
•
•
•
•
2.4 Freezing of funds used for
terrorist financing (SR.III)
•
•
The Criminal Code should be amended to include
counterfeiting and piracy of products as predicate
offences for money laundering.
It would be convenient to include ML in the list of
offences which can be sanctioned under incitement
and conspiracy.
Criminal or administrative sanctions should be made
applicable to legal persons involved in money
laundering (directly, not as ancillary to the penalty
imposed on physical persons).
Provision should be specifically included in article 16
of the Criminal Code to enable financing of terrorism
to be prosecuted in Nicaraguan jurisdiction regardless
of whether the act occurred inside or outside
Nicaraguan territory
There should be administrative or civil sanctions for
legal persons involved in the offence of financing of
terrorism.
Establish effective mechanisms (freezing funds) to
secure funds, property or rights to finance terrorism,
not urgent measures envisaged in the Criminal
Procedure Code.
Train law enforcement officials on the possibilities
existing under the law for the adoption of asset
freezing.
A minimum degree of uniformity of criteria for the
adoption of precautionary measures in the offence of
Money Laundering and Terrorist financing should be
promoted among the members of the judiciary,
judges, Prosecutor, Public Prosecutor and Police.
It should be disclosed and law enforcement officials
trained in the scope and effect of Act 285 to remove
uncertainty regarding the origin of precautionary
measures provided for therein.
It is recommended to implement the provisions of
Article 246 of the Criminal Procedure Code, which
provides legislative jurisdiction of any Criminal
District Judge to authorize investigative measures that
restrict constitutional rights.
Include in the Code of Criminal Procedure the
freezing of assets as a matter of urgency in FT cases
Establish procedures for freezing and unfreezing
funds in accordance with UN Resolutions 1267 and
1373.
158
2.5 The Financial Intelligence Unit
and its functions (R.26)
•
•
•
•
•
•
•
2.6 Law enforcement, prosecution
and other competent authorities
(R.27 & 28)
•
•
•
•
2.7 Cross Border Declaration &
Disclosure (SR IX)
•
•
Create a Financial Intelligence Unit (FIU) in keeping
with the principles of FATF Recommendation 26 and
the 10 corresponding criteria regarding evaluation
methodology.
Consider future membership of the FIU in Egmont
Group.
Appoint all members of the CAF (except the auditor
nominated by the Association of Accountants) and
increase the frequency and number of meetings of that
Commission.
Until the FIU is created, the CAF must have physical
premises to operate securely, suitable staff appointed
exclusively to it, operational independence and the
other resources that will enable it to meet the
technical requirements of the functions assigned to it
by Act 285-1999.
Issue guidelines and instructions to the financial
institutions and other regulated entities, as well as to
the Superintendency of Banks and Other Financial
Institutions and other supervisory and control bodies
that may be created in future, on trends or patterns of
money laundering and financing terrorism that have
been detected, as well as on the quality of STRs and
other aspects relevant to the process of submission of
STRs.
Explore alternatives to avoid the security risks arising
out of the existence of copies of the STRs in the hands
of various entities (Fiscalía and Police), and to avoid
these reports having to pass through many state
bodies before arriving at their destination.
It is recommended as soon as the FIU is created and
begins work, it should consider joining the Egmont
Group.
Consideration should be given to measures designed
to defer prosecution, for example, while more
evidence is collected or assets and people tracked,
even without the investigation bring linked to a
collaborative program with the law.
It is recommended that the practice of legal outreach,
such as training, workshops and conferences on the
scope of the criminal law, criminal procedure, and
related special laws relating to money laundering and
terrorist financing.
Must designate an authority or jurisdiction for
feedback on criminal trends in TF and ML between
the authorities and law enforcement.
Mechanisms should be established or powers granted
to law enforcement authorities to urgently freeze
funds connected with the offence of TF.
Establish the obligation to declare cash and securities
out of the country (not just upon entry).
Make arrangements and procedures that enable the
customs authorities to impose administrative
sanctions for failure to declare cash or by providing
false or wrong cross-border declarations.
159
•
•
•
•
Scan the information obtained from the declarations,
share and coordinate with national authorities for
purposes of prevention of ML and TF.
Provide mechanisms for the DGA to exchange with
foreign counterparts about suspicious movements of
cash, securities or precious metals.
Strengthen the capacity of the customs authority for
monitoring, tracking and detection at border posts on
the basis of risk and using intelligence information to
enable it to prioritize their efforts more efficiently.
Continue training efforts in the prevention of money
laundering and terrorist financing to the staff in
charge of Directorate General Customs Services.
3.
Preventive Measures –
Financial Institutions
3.1 Risk of money laundering or
terrorist financing
3.2 Customer due diligence, •
including enhanced or reduced
measures (R.5 to 8)
•
•
•
•
•
•
•
3.3 Third parties and introduced •
business (R.9)
Mechanisms and regulations should be established to
ensure that institutions included in Act No.285 but not
supervised by the SIBOIF comply with the
obligations arising from that Act.
The SIBOIF Rules embody most of the aspects of the
FATF recommendations, but it applies only to
institutions supervised and monitored by the SIBOIF.
Regulations for the financial institutions should
include measures to prevent and repress financing of
terrorism.
Eliminate the uncertainty prevailing on the
permanence of the SIBOIF Rules, by prompt
resolution of the constitutional appeal at present
before the Supreme Court.
Consider the possibility of assigning AML/CFT
supervision of the financial institutions not falling
under the SIBOIF to the respective regulatory bodies
of each of them and assign to the CAF only those
which lack a specific regulatory agency.
For institutions that are not under the supervision of
the SIBOIF, risk management procedures should be
required as well as enhanced CDD, including
determination of the origin of the funds and approval
of all commercial relationships by senior staff when a
customer is classified as PEP.
Amend the Rules of the SIBOIF to require that
financial institutions establish the source of wealth of
foreign PEPs, and not only the source of funds.
The requirements of Recommendations 7 and 8
should be applied to all regulated institutions and not
solely to one sector.
Regulations should be issued on the use of third
parties for customer due diligence and on customers
presented by another institution, requiring CDD to be
applied in any contractual relationship, or else make
the obligation non-delegatable as in the case of
financial institutions governed by the SIBOIF.
160
3.4 Financial institution secrecy or •
confidentiality (R.4)
•
•
3.5 Record keeping and wire transfer •
rules (R.10 & SR.VII)
•
•
•
3.6 Monitoring of transactions and •
relationships (R.11 & 21)
•
•
•
Bank secrecy is not an obstacle to the judicial
authorities in collection of information on money
laundering and FT. However the power of the Fiscal
General (as President of the CAF) to obtain
confidential information without any need for a Court
Order in the case of money laundering STRs should
be explicitly extended to financing of terrorism.
A method should be established for control of the
orders for information sent by judges to the financial
institutions on the request of the Ministerio Público,
and an office designated to be responsible for such
control.
Consider legally authorizing the Attorney General
(Fiscal General) to also access information from the
institutions not supervised by SIBOIF without warrant
R.10: For regulated institutions not supervised by the
SIBOIF the record keeping requirement should be
broadened to include information and documentation
on transactions and activities of the customer,
correspondence, analysis of possible suspect
transactions, etc. (not only documentation on the
customer’s true identity).
SR.VII: The requirement for including complete
information on the originator of a transfer should be
extended to money transfer operators, savings
cooperatives (credit unions) and microfinance
associations which are outside the regulatory
framework of the SIBOIF.
SR.VII: The informal remittance businesses should
be required to register with some authority and
implement all AML/CFT prevention measures.
SR.VII: A state agency should be designated to be
responsible for the AML/CFT regulation and
supervision of money transfer businesses, savings
cooperatives and microfinance associations.
R.11. Compliance with the monitoring requirements
embodied in Act 285 should be demanded of all
money remittance companies, financial cooperatives,
Bureaux de Change and other financial activities not
supervised by the SIBOIF.
R.11 The monitoring obligations of institutions not
supervised by the SIBOIF should be set out in greater
details and guidelines should be provided for the
various regulated institutions on how to apply them,
in accordance with the nature of their business.
R.11 The provision of Act 285 and its Regulatory
Decree on conservation of documents and information
should be broadened beyond the simple conservation
of “information on the true identity of persons” to
include supporting documents of the suspicious
transaction analysis.
R.21. The same control over operations with high
risk countries should be applied to financial
institutions not under SIBOIF supervision.
161
3.7 Suspicious transaction reports •
and other reporting (R.13-14, 19, 25
& SR.IV)
•
•
•
•
•
•
3.8 Internal controls, compliance, •
audit and foreign branches (R.15 &
22)
•
•
R.13: The necessary institutional and regulatory
measures should be taken to ensure that the financial
institutions not supervised by the SIBOIF comply
with their suspicious transaction reporting obligations.
R.13: The SIBOIF should speed up the conclusion of
its inspection reports in order to be able to act more
promptly and severely when failure to comply with
unusual and suspect operation reports is discovered,
particularly in the public banking sector.
R.13: Compliance with the reporting requirement by
non-bank institutions supervised by the SIBOIF
should be strengthened.
R.13: It is suggested that the STRs from institutions
supervised by the SIBOIF be sent by secure electronic
means to avoid waste of time and loss of information.
R.14: The prohibition to warn a customer and other
people applicable to institutions not supervised by the
SIBOIF when a suspicious transaction report on that
customer is made, should be updated to include
explicitly cases related with terrorist financing.
R.25: The CAF, while no FIU exists, must provide the
reporting institutions with appropriate feedback to
enable them to improve the quality of their reports
and to be abreast of the most relevant trends and
typologies.
SR.IV: It is suggested that the requirement for
reporting transactions in which there is a suspicion of
financing of terrorism be set out expressly in the law
and not just implicit in the reporting of unusual
transactions (however, this does not affect the
categorisation of SR.IV).
Regulations should be issued requiring the other
financial institutions to establish internal procedures,
policies and controls to prevent ML/FT, and these
should be made known to all their officials and
employees; to include a post of Compliance Officer in
their administrative structures; and to have external
and internal audits to verify compliance with the antiML/FT regulations. In addition, that they should have
procedures to ensure that their employees maintain a
high level of integrity.
Regulations should be issued to ensure that all sectors
that have branches and subsidiaries should observe
ML/FT measures and that there should be effective
supervision by both the host country and the home
country.
SIBOIF should have procedures for consolidated
supervision of financial groups, since the regulations
in force give it the power to do so.
3.9 Shell banks (R.18)
3.10 The supervisory and oversight •
system - competent authorities and
SROs. Role, functions, duties and
•
A scale for proportionate and dissuasive sanctions for
non-compliance with Act No.285 and its Regulations
should be issued.
Fines for directors, managers, officials and
162
powers (including sanctions) (R.23,
29, 17 & 25)
•
•
•
•
•
•
•
•
3.11 Money value transfer services •
(SR.VI)
•
•
4.
Preventive Measures – Non- •
Financial
Businesses
and
Professions
4.1 Customer due diligence and •
record-keeping (R.12)
•
•
compliance officers, as responsible for the application
of ML/FT rules, should be considered.
Regulations should be issued to give the competent
authority or the supervisory bodies power to revoke,
restrict or suspend licences of financial institutions
which re-offend in non-compliance with their duties
under the ML/FT regulations in force.
Financial institutions should be made subject to
effective ML/FT supervision by the competent
authority or the supervisory or regulatory body.
The CAF should be provided with the human,
financial and technical resources to enable it to carry
out supervision over the financial institutions, to
verify compliance with ML/FT rules in force.
Regulations should be issued to prevent criminals or
their associates obtaining or becoming beneficiaries
of a significant or majority part of, or occupying
administrative functions within, a financial institution.
There should be a body to regulate, license and
supervise money transfer firms and Bureaux de
Change.
Guidelines should be issued to help financial
institutions to implement and comply with
requirements of ML/FT rules.
For example,
typologies, warning signals, instructions, etc.
Steps should be taken to ensure that the reports on
SIBOIF inspections are sent in a timely fashion to
supervised institutions to enable them to correct the
deficiencies detected.
The number of persons responsible for SIBOIF
inspections, as well as for following up the
deficiencies detected in these inspections, should be
increased.
Make it mandatory for money transfer businesses to
register with some government agency with the
capacity to manage this information.
Issue a regulation empowering the CAF or an agency
with the necessary expertise to issue regulations and
guidelines for money transfer operators, and to
impose the penalties for non-compliance embodied in
Act 285-99.
While the above takes place, the CAF should start
raising awareness and overseeing compliance of ML
controls by money transfer businesses, making use of
the limited powers that it has in this respect.
Except casinos, which are already obligated, all other
categories of DNFBPs should be included for under
the law for prevention of ML / TF.
Issue the necessary regulations, sectioned, so that
NPNFD comply with the FATF Recommendations
Designate a competent authority and adequate
163
•
4.2 Suspicious transaction reporting •
(R.16)
•
•
•
•
4.3 Regulation, supervision and •
monitoring (R.24-25)
4.4 Other non-financial businesses •
and professions (R.20)
•
5.
Legal
Arrangements
Organisations
resources for the regulation and supervision of these
obligations.
Prepare statistics showing the proportion of the
financial system represented by each of the NPNFD
with a view to giving priority to those representing the
greatest risk.
Regulate and monitor the implementation of the
obligations AML / CTF of casinos.
Include as obligated all other categories of NPNFD
under recommendations 12 and 16 of the FATF.
Designate an authority responsible for licensing or
registration, regulation, supervision and punishment
of the individual categories of NPNFD.
Take the necessary steps to include the minimum
requirements
for
establishing
NPNFD
Recommendations 13-15 and 21 and apply them
appropriately to these.
The CAF, in partnership with other relevant
authorities, should make an effort to raise awareness
among NPNFD to educate them about their
obligations.
Nicaragua should take all necessary steps to ensure
that DNFBPs are regulated within the ML/FT
Prevention regime, by passing a law to include all the
international obligations in this sector. The rules
should guarantee inclusion of the minimum
requirements
for
DNFBPs
described
in
Recommendations 24 and 25, and apply them
adequately and efficiently to the sector
Greater efforts should be made to reduce the use of
cash in the economy and modernise financial
transactions.
It is suggested that an authority be designated to
regulate and control pawnshops and other regulated
entities that may be designated as such in the future,
with a view to ensuring that they comply effectively
with AML/CFT obligations.
An anti-money
laundering regulation should be issued in accordance
with the nature of their business (this does not affect
the listing).
Persons
and
&
Non-Profit
5.1 Legal Persons – Access to •
beneficial ownership and control
information (R.33)
•
The Property Registration Authority should be
modernised and its procedures computerised, to
streamline consultation by users and issue of
certificates, and better security should be provided for
the historical information that it holds in its records.
It is suggested that information held by the Register
should be centralised at the national level and not
independently for each Department of the country.
This would simplify access to data on companies
164
•
5.2 Legal Arrangements – Access to •
beneficial ownership and control
information (R.34)
5.3
Non-profit
(SR.VIII)
organisations •
•
•
•
•
•
•
•
from any geographical location in the country and
without delays for the authorities and the public.
Regarding bearer shares, the country should take steps
to enable speedy location of reliable information on
beneficial ownership. For example, each company
issuing bearer shares should have a single
representative of the holders of bearer shares,
domiciled in Nicaragua and required to keep a register
of transfers or such shares.
If the law authorising Trusts is passed, measures
should be taken to ensure access by the authorities to
adequate and timely information on the beneficial
owners and all parties involved in this type of
contract. Some of these measures are suggested in the
OECD 2001 report entitled “Behind the Corporate
Veil: Using Corporate Entities for Illicit Purposes”.
Nicaragua should carry out a study on the
characteristics and dimensions of the non-profit
sector, its level of exposure to risk of being used for
financing of terrorism, and to what extent the
regulations in force are adequate for reducing that
risk.
Efforts should be made to inform and raise awareness
in the NPO sector on risks and preventive measures in
this area.
Make better use of (and possibly increase) the
resources of the Department for Registration and
Control of Associations of the Ministry of Public
Administration to monitor compliance with the
substantive obligations of the biggest and
internationally most active NPOs, not simply for
penalising late renewal of registration or other formal
violations.
Make it possible for the public and foreign authorities
to have access to information on NPOs held in the
Ministry of Public Administration (as is the case for
commercial companies), particularly with regard to
the objectives and activities of the organisations, and
the identity of the persons who exercise control over
them, including senior staff, members of the Board of
Directors and confidential posts.
Establish a requirement for detailed record-keeping
on international and domestic operations and money
transfer.
Create channels for rapid coordination of activities
and exchange of information among national
authorities to enable them to take quick action in the
case of suspected FT through an NPO.
Designate specific contact points and procedures for
response to foreign requests for information on a
particular NPO.
Consider the possibility of increasing the staff
assigned to monitoring and supervision of non-profit
organisations, because of the large number of such
entities registered.
165
•
•
Train staff of the Department for Registration and
Control of Associations in prevention and detection of
the use of NPOs in money laundering and/or terrorist
financing operations.
Adopt regulations or guidelines to prevent money
laundering and financing of terrorism for NPOs.
6.
National and International
Co-operation
6.1 National co-operation
coordination (R.31)
and •
•
•
6.2 The Conventions and UN •
Special Resolutions (R.35 & SR.I)
•
•
6.3 Mutual Legal Assistance (R.36- •
38 & SR.V)
•
•
•
More frequent CAF meetings and meetings of the
National Council Against Drugs (CNDLCD) to deal
with matters concerning definition and follow up the
action plan and policy of the country to combat these
offences.
Periodic interaction and coordination between the
CAF and authorities related to prevention and
prosecution of these offences.
Define AML/CFT policy objectives and a national
strategy with an identification of risks, priorities and
performance indicators, and monitor the results.
Even acknowledging the efforts made by the Republic
of Nicaragua, it should continue with the approval and
implementation of domestic laws incorporating the
provisions of the International Conventions
mentioned herein and to which the country is a party.
Set out the domestic procedure for compliance with
the UN Security Council Resolutions, as well as the
responsibilities of each body or competent authority
of the country in relation to such compliance.
Amend Act No.285 of 15th April 1999 (on Narcotics,
Psychotropic Drugs and Other Controlled Substances,
Laundering of Money and Proceeds of Unlawful
Activities) to make it applicable to the prevention of
money laundering in all its forms and to the financing
of terrorism. Only the SIBOIF has a set of regulations
that applies to regulated entities under its supervision,
and these establish mechanisms for prevention,
control, detection and suspicious transaction reports
on money laundering and terrorist financing. .
Power should be granted to freeze and confiscate
property related to ML and FT without a
corresponding prosecution, when another State
requests it.
International assistance in matters concerning
financing of terrorism should be explicitly provided
for in the law for acts committed outside the territory
of Nicaragua.
It is recommended that a special fund be created from
confiscated property to assist the law enforcement
authorities to fulfil their objectives in the area of ML
and FT.
Mechanisms should be created to share with the law
enforcement authorities of other countries confiscated
property arising from coordinated activities.
166
6.4 Extradition (R.39, 37 & SR.V)
•
6.5 Other Forms of Co-operation •
(R.40 & SR.V)
7.
It would be desirable for the country to include within
its domestic extradition legislation the possibility of
applying a simplified extradition procedure for
persons who consent to the suspension of the formal
procedures
An agency should be created, or some state agency
empowered, to exchange financial intelligence
information with the FIUs of other countries
Other Issues
7.1 Resources and statistics (R. 30 & •
32)
•
•
•
•
•
7.2 Other relevant
measures or issues
Provide for the CAF staff and resources to manage the
information it receives, while establishing a FIU.
Train judges, prosecutors and police about new laws
and issued to combat ML and TF.
Standardize interpretation by judges, prosecutors and
police on the precautionary measures that the law
makes available.
Create a system that allows the authorities to use
available data to review the effectiveness of its system
AML / CFT comprehensive manner.
Produce information on the response times of requests
for mutual legal assistance and monitor their
effectiveness.
Facilitate the sorting and analyzing reports of
suspicious
transactions
according
to
their
characteristics, case reports, amounts of money, etc.
to assess trends and typologies.
AML/CFT
7.3 General framework – structural
issues
167
Table 3: Authorities’ Response to the Evaluation (if necessary)
Relevant sections
and paragraphs
Country Comments
ANNEXES
Annex 1:
Annex 2:
Annex 3:
Annex 4:
List of abbreviations
Details of all bodies met on the on-site mission - Ministries, other government
authorities or bodies, private sector representatives and others.
Copies of key laws, regulations and other measures
List of all laws, regulations and other material received
168
Annex 1:
List of abbreviations
AML
Anti-Money Laundering
CAF
Commission of Financial Analysis
CFATF
Caribbean Financial Action Task Force
CFT
Combating the Financing of Terrorism
CDD
Customer Due Diligence
CNDLCD
Consejo Nacional de Lucha Contra las Drogas (National Council to Combat Drugs)
DNFBP
Designated Non-Financial Businesses and Professions
FATF
Financial Action Task Force
FIU
Financial Intelligence Unit
FT
Financing of Terrorism
INFOCOOP
Nicaraguan Cooperative Development Institute
ML
Money Laundering
MOU
Memorandum of Understanding
OSFL
Organización sin fines de lucro (non-profit organization, NPO)
PEP
Politically Exposed Person
PGR
Procuraduría General de la República
ROS/RTS
Suspicious transaction report (Reporte de Operación/Transacción Sospechosa)
SIBOIF
Superintendencia de Bancos y Otras Instituciones Financieras (financial regulator)
UN
United Nations
UNSCR
United Nations Security Council Resolution
169
Annex 2: Details of all bodies met on the on-site mission –
Ministries, other government authorities or bodies, private sector representatives and others.
The Executive: Ministerios, Dependencias e Instituciones Operativas
• Ministerio de Gobernación
(Ministry of the Interior, or internal affairs)
• Consejo Nacional de Lucha Contra las Drogas (National Council Against Drugs)
• Comisión de Análisis Financiero (CAF)
(Comission of Financial Analysis)
• Policía Nacional
(National Police)
o Dirección de Investigación de Drogas
o Dirección de Investigaciones Económicas
• Procuraduría General de la República
(Solicitor General)
o Procurador General
o Procuraduría de Justicia
o Unidad contra Crimen Organizado y Unidad Anticorrupción
• Dirección General de Servicios Aduaneros
(Customs)
• INFOCOOP, Instituto Nicaragüense de Fomento Cooperativo (Institute for Cooperatives)
• Registro Público de la Propiedad
(Public Registry of companies and property)
• Departamento de Registro y Control de Asociaciones sin Fines de Lucro (NPO Registry)
Legislative
• National Assembly
o Comisión de Producción, Economía y Presupuesto
Judiciary and Autonomous Agencies
• Ministerio Público (Fiscalía General)
• Supreme Court
o Sala Constitucional & Sala Penal
• Other Magistrates:
o Tribunal de Apelaciones, Sala Penal
o Juez de Distrito Civil
o Association of Judges and Magistrates
(Attorney General’s Office)
(Court of Appeals)
(Court of First Instance)
Financial Sector– Government
• Superintendency of Banks and Other Financial Institutions, SIBOIF
Supervisor)
• Central Bank
(Bank Regulator and
Financial Sector– Private institutions
• ASOBANP, Asociación de Bancos Privados
(Bankers Association)
• ASOBOLSA, Asociación de Corredores de Bolsa (Brokers Association)
• ANAPRI, Asociación Nicaragüense de Aseguradoras Privadas (Insurance Association)
• Seguros INISER
(insurance company)
• Banco BANCENTRO
• Banco BANPRO
• Banco HSBC
• Invercasa, Puesto de Bolsa
(stock broker)
170
•
•
•
•
•
Invernic, Puesto de Bolsa
(stock broker)
Monex, Casa de Cambios
Western Union – Grupo AirPack
ALFIBAC, Almacén Financiero
(bonding warehouse)
ALFINSA, Almacén Financiero
(bonding warehouse)
DNFBPs – Government and Private entities
• Departamento de Registro y Control de Asociaciones y Fundaciones (NPO registry)
• Registro Público Mercantil
(Company Registry)
• Asociación de Juristas Democráticos
(Association of Lawyers)
• Varela Comercial , agente de bienes raíces
(real estate agent)
• Financiera FAMA
(Microfinance NPO)
• Microfinanciera ACODEP
(Microfinance NPO)
• Cooperativa CARUNA
(microfinance credit union)
• Casino Pharaoh
171
Annex 3:
Lists of all laws, regulations and other material received
AML/CFT:
•
•
•
•
Act 641 of 2007 (in force since July 2008). Criminal Code, notably Articles 282, 283, 394, 395.
Act 285 of 1999. "Law on Narcotics, Psychotropic Substances and other controlled substances,
money laundering and assets derived from illegal activities".
Decree 74 of 1999. Regulation of Law 285-99.
Resolution CD-SIBOIF-197-2, 1st March 2002 (and subsequent amendments). ALD/CFT Rules
for financial institutions [replaced after the visit by CD-SIBOIF-524-1-Mar 5-2008].
Other relevant legislation:
•
•
•
•
•
•
•
•
•
•
Commercial Code
Act 316 of 1999. Law of the Superintendency of Banks
Act 561 of 2005. General Banking Act, financial institutions and non-banking financial
groups.
Act 587 of 2006. Capital Markets
Act 1727 of 2007. Insurance Act (as amended)
Act 406 of 2001. Criminal Procedure Code
Act 411 of 2001. Attorney General
Act 147 of 1992. Nonprofit Organizations
Act 499 of 2004 and Decree 91 of 2007, on Cooperatives
Act 152 of 1993 (as amended). Citizen Identification Act
172
© Caribbean Financial Action Task Force
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