2018 Year in Review: Anti-Money Laundering and Counter Terrorism Financing

In 2018, the Financial Information Unit (the “UIF,” after its acronym in Spanish) carried out significant developments towards aligning local anti-money laundering and counter terrorism financing (AML/TF) regulations to comply with international standards by consolidating a new “risk-based” approach regarding obligations of certain reporting entities (sujetos obligados), by adjusting its regulations regarding Politically Exposed Persons, and by implementing coordinated surveillance.

Which are such main regulatory developments?

1. Updating rules applicable to reporting entities

The UIF is reviewing its regulations applicable to its reporting entities, to align themwith international standards.

For this purpose, during 2018, it consolidated an adjustment to the regulatory framework applicable to the following reporting entities:

• Financial and exchange sector (Regulation UIF Nº 30/2017*),
• Capital markets sector (Regulation UIF Nº 21/2018*), and
• Insurance sector (Regulation UIF Nº 28/2018*).

* restated by Regulation UIF N°156/2018 and amended by Regulation UIF N°18/2019).

These rules establish new measures, proceedings and controls that the reporting entities must adopt and apply to manage the risk of being used as vehicles of money laundering or terrorism financing, moving from a “normative approach” to a “risk-based approach”.

Furthermore, these new rules are aimed at leveling out the criteria and requirements applicable to all sectors.

In addition, Regulation UIF N°130/2018 amended the minimum thresholds established in Argentine Pesos set forth in the regulations applicable to reporting entities/individuals (such as, notaries, entities receiving donations or contributions from third parties, accountants, individuals or entities that sell or purchase works of art, antiques, among others). This Regulation includes a comprehensive review and update of the amounts that were formerly set, two years ago, under Regulation N°104/2016.

2. Updating list of individuals considered as Politically Exposed Persons (“PEP”)

On March 23, 2019, Regulation UIF N° 134/2018 (as amended by Regulation UIF N° 15/2019) entered into force whereby a new list of PEPs was approved. This Regulation is based on a risk based approach and establishes the following categories of individuals considered as PEP, setting forth in each case, the scope, functions and/or positions:

• Foreign PEP,
• PEPs from the Argentine government,
• PEPs from provincial government, municipal government and the government of the City of Buenos Aires.
• Other PEPs. This category includes:
  • Individuals acting (r that have acted) in important positions within (i) political parties or coalitions; (ii) trade unions or business organizations; and (iii) healthcare insurance organizations.
  • Individuals in  decisin-making positions, or those who manage, control or dispose of the assets in companies that receive funds from the general public destined to third parties (and that have the power to control and dispose of such funds).
• PEP by closeness or affinity. This category includes individuals that present personal ties (for example, spouse or relative up to second degree of blood or affinity) or legal ties with other individuals who are considered as PEP. Although the rule establishes guidelines regarding this category, it also includes as PEP “all other relation or tie that may be relevant to the reporting entity for its characteristics and based on a risk based analysis”.

The reporting entities must determine the risk level upon initiating or continuing the contractual relationship with a PEP, and must implement adequate due diligence measures, proportional to the related risk and the transaction or transactions involved. Upon initiating the commercial relationship, reporting entities must request each client a sworn statement whereby she/he discloses whether she/he qualifies or not as PEP.

In addition, the condition as PEP does not automatically cease after two years as of the date the individual has left public office. Reporting entities must make their own assessments, on a case-by-case basis, to determine whether or not an individual will be considered as PEP, pursuant to the guidelines established in the regulation.

3. Surveillance. Collaboration between UIF and other regulators

One of the main concerns of the current administration is to promote a collaborative approach between the UIF and agencies acting as regulators of the reporting entities, to optimize the surveillance processes of each of the entities under their oversight.

In such connection, Regulations UIF N°97/2018 and N°155/2018 were passed, to establish collaboration duties between UIF and:

• the Argentine Central Bank (Banco Central de la República Argentina) (BCRA),
• the Argentine Securities and Exchange Commission (Comisión Nacional de Valores) (CNV),
• the Superintendence of Insurance (Superintendencia de Seguros de la Nación) (SSN) and
• the Cooperative Authorities  (Instituto Nacional de Asociativismo y Economía Social) (INAES)

In this sense, upon carrying out a surveillance proceeding, these agencies must provide due collaboration to UIF to assess the reporting entities’ AML/FT compliance.

In addition, a “task force” is created with these agencies, meeting on a monthly basis, to ensure an adequate level of coordination and collaboration, with surveillance and follow-up activities, setting technical criteria and assessing the risks of each sector, as well as informing and analyzing the outcome of their surveillance.

Furthermore, Regulation UIF N°154/2018, approved the “UIF’s Risk-based approach proceeding”, applicable to surveillance proceedings initiated by UIF aimed at controlling the regulated entities’ degree of compliance with AML/PF rules.