Argentina: Overview On Argentina Anti Money Laundering (AML) And Combating Terrorist Financing (CFT) Situation

Last Updated: 11 November 2008
Article by Gillermo Plate

Introduction: Main AML/CFT Factors

  • Argentina has identified several crimes related to tax evasion, counterfeiting, corruption and several other types of fraud, as main source of unlawful appropriation of assets. The main AML activity takes place through financial operations with international financial centers.

  • Tax evasion is the predicate crime in the majority of Argentine money laundering investigations. Argentina has a long history of capital flight and tax evasion, and hold billions of dollars offshore, much of it legitimately earned money that was never taxed.

  • Argentina has suffered two terrorist attacks. The first of them against the Israel Embassy (1992) and the second one against Israeli – Argentinean Mutual Association (1994).

Within this context, Argentina is a full member of the Financial Action Task Force (FATAF) and of the "Grupo de Acción Financiera de Sudamérica" (GAFISUD1), a FATF-style regional body, who is committed to implement the 40+9 Recommendations and have agreed among its members to undergo mutual evaluations of their AML/CFT systems.

The key AML/CFT Argentine legislation is anti money laundering Law no. 25,246 and counter – terrorist financing Law no. 26,268.

AML Legislation And Regulations

Anti money laundering law no. 25,246 was enacted in April, 2000. This law defines money laundering as an aggravation after the fact of an underlying crime. Its most important provisions are:

  1. Amendment of the Penal Code and incorporation in its Chapter XIII, the "Laundering of Proceeds of Crime" therefore punishing in its Section 3:

    "...whoever, after the commission of a crime by another individual, in which he has not participated:

    1. helps someone to avoid investigations by the authority or to elude the latter's action,

    2. hides, alters or makes trails, evidence or instruments of the crime disappear or aids the perpetrator or participant to hide, alter or make them disappear,

    3. acquires, receives or hides money, things or effects arising from a crime,

    4. does not report the commission of a crime or does not identify the perpetrator or participant in a crime already known, where he would have been obliged to bring the criminal prosecution of such a crime,

    5. makes safe or helps the perpetrator or participant to make safe the product or benefit of the crime."

  2. Creation of the Financial Information Unit (UIF) with functional independence within the Ministry of Justice and Human Rights of the Nation, (Section 5) and,

  3. Setting of a stricter regulatory framework for the financial sectors, and a list of persons and entities that shall report suspicious activity to the Financial Information Unit (Section 20).

The law requires customer identification, record keeping, and reporting suspicious transactions by all financial entities and businesses supervised by the Central Bank, the Securities and Exchange Commission (Comisión Nacional de Valores, CNV), and the National Insurance Superintendence (Superintendencia de Seguros de la Nación, SSN). The law also establishes confidentiality duties for institutions when filing suspicious transaction reports to the UIF. In the event UIF decides further investigations, the case should be forwarded to the Attorney General´s Office.

It is also important to mention that:

  1. A person who commits a crime cannot be independently prosecuted for laundering money obtained from the crime;

  2. Only someone who aids the criminal after the fact in hiding the origins of the money can be guilty of money laundering, and;

  3. Only transactions (or a series of related transactions) exceeding 50,000 pesos (approximately U.S. $16,000) can constitute money laundering. Transactions below 50,000 pesos can constitute only concealment, a lesser offense.

Since enactment of anti money laundering law, UIF has issued several resolutions widening the range of institutions required to report suspicious transactions: Tax authority, Customs, banks, currency exchange houses, casinos, securities dealers, insurance companies, postal money transmitters, accountants, notaries public, and dealers in art, antiques and precious metals.

CFT Legislation And Regulations

With respect to Combating the Financing of Terrorism, it was not until march 2005 that Argentina enacted the Law 26,026 thereby approving the United Nations International Convention on Combating the Financing of Terrorism and not until June 2007 that the Argentine Congress passed legislation (Law no. 26,268) criminalizing terrorism and terrorist financing, and establishing terrorist financing as a predicate offense for money laundering.

The counter – terrorist law no. 26,268, amended Chapter VI, Title VIII, Book Two of the Penal Code, thereby introducing the crime of terrorism and terrorist Financing of Terrorism" thereby punishing:

  1. "anyone who be part of a criminal association set up with the aim of, through the commission of crimes, terrorizing the population or compelling a government or an international organization to do or abstain from doing an act, provided that such criminal association has the following features:

    1. An action plan aimed at spreading ethnic, religious or political hatred;

    2. Organized in international operative networks;

    3. Availability of war weapons, explosives, bacteriological or chemical agents or any other means capable of endangering the life or integrity of an indefinite number of persons;

  2. "anyone who collects or provides property or money, in the knowledge that they are to be used, in full or in part, to finance a terrorist criminal association as described... or a member of such association in order to commit any of the crimes for which they have been set up, regardless of whether such crimes are ultimately committed or not."

Persons convicted of terrorism are subject to prison sentence of 5 to 20 years, and those convicted of financing terrorism are subject to a five to 15 years sentence.

This Law has also modified anti money laundering Law no. 25.246 incorporating into the Financial Information Unit, the responsibility for analyzing, handling and disclosing information with the purpose of preventing and deterring not only money laundering but also terrorist financing.

The counter – terrorist Law no 26,268, provides the legal foundation for Argentina's financial information unit, Central Bank, and other regulatory bodies, to investigate and prosecute such crimes.

Argentine Central Bank (BCRA)

Besides the Financial Information Unit, the Argentine Central Bank (BCRA) is a key entity in AML/CFT matters2. Right after enactment of Law 25.246, it has adopted concrete measures in order to enhance its role as main supervisor of the financial system and in order to implement an adequate follow up of the banking system on AML/CFT.

With this respect, the BCRA Board of Directors created the Comité de Control y Prevención de Lavado de Dinero y Financiamiento del Terrorismo (AML/CFT Committee), integrated by members of the Board and in charge of centralizing evaluations and main objectives on this matter.

The BCRA, in its double capacity of main banking authority and entity obliged to report AML suspicious activity to the Financial Information Unit, has regulated the financial entities duties on AML and CFT. These regulations, requires customer identification, record keeping, reporting suspicious transactions3 and

  • The development of internal policies and procedures;

  • A system of internal controls to ensure compliance;

  • A special Committee on AML/CFT integrated by at least two members of the board of directors;

  • A designated senior level individual (Compliance Officer) with primary responsibility for ensuring compliance;

  • Independent testing;

  • Training for appropriate personnel;

  • Methods for identifying high risk accounts;

  • Processes for establishing expected activity levels.

Conclusion

The adoption of counter terrorist financing legislation has effectively removed Argentina from the Financial Action Task Force's (FATAF) follow-up process, which began in 2004 to address deficiencies in the Argentinean Government's anti-money laundering and counter – terrorist financing regime. Since then, Argentina has the legal and regulatory capability to combat and prevent money laundering and terrorist financing.

On September 11, 2007, the Argentine Government enacted through Decree 1225/2007, the National Anti – Money Laundering and Counter – Terrorism Finance Agenda (National Agenda) to serve as roadmap for implementing AML/CFT laws and regulations. This agenda provides the structure for the Government of Argentina to improve existing legislation and regulation, and enhance inter-agency coordination. The challenge now is for Argentine law enforcement and regulatory agencies and institutions, to implement the National Agenda and aggressively enforce the newly strengthened and expanded legal, regulatory, and administrative measures available to them to combat financial crimes.

With this respect, the BCRA has recently started a program to audit the financial sector. Within a three year term, each of the financial entities will be audited by a special unit created within the Superintendence of Financial Entities, for the sole AML/CFT purpose. This special unit has been trained on the international standards by international experts.

Local laws and regulations plus international standards will be required and those entities with inconsistencies or deficiencies in their AML/CFT compliance programs will be subject to a yearly follow up process and/or sanctions. Third parties independent testing will be crucial and financial entities will have to enhance its efforts to comply with higher standards.

We strongly believe that the efforts of the financial community and the regulatory agencies and government officials, will definitely end in a better financial system and general wealth, thereby also contributing with the international effort to combat crime and terrorism.

Footnotes

1. GAFISUD members are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, and Uruguay.

2. Even before the passage of terrorist financing legislation in June 2007, the BCRA was the lead Argentine entity responsible for issuing regulations on combating the financing of terrorism.

3. All suspicious or unusual transactions must be reported directly to the UIF

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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