Chile – Know Your Customer (KYC) Rules

 

 

 

Chile has a large and well-developed banking and financial sector with an established anti-money laundering/counter-terrorist financing (AML/CFT) regime. Systematic vulnerabilities in Chile‘s regime include stringent bank secrecy laws and relatively new regulatory institutions in which oversight gaps remain.

Chile has free trade agreements with more than 50 countries. Increased trade and currency flows, combined with an expanding economy, could attract illicit financial activity and money laundering. Given Chile‘s extensive trading partnerships and long borders, its largely unregulated free trade zones are additional vulnerabilities. Illicit proceeds from internal drug trafficking and domestic consumption are laundered in the country. Relatively limited incidences of public corruption demonstrated no significant link to money laundering or terrorist financing in Chile. There is no significant market for illicit or smuggled goods in Chile.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: NO
    • Domestic PEP: NO

Chile – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Chilean Law:

    • Banks (checking but not savings accounts)
    • Credit unions
    • Pension funds
    • Mutual fund administrators
    • Brokers and dealers
    • Leasing and factoring companies
    • Credit card issuers and operators
    • Insurance brokers and companies

Chile – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 525 from January to June 2011

The following is a list of STR covered entities covered by Chilean Law:

    • Banks
    • Savings and loan associations
    • Financial leasing companies
    • General, mutual, and investment funds managers
    • Pension fund administration companies
    • The Foreign Investment Committee
    • Money exchange firms and other entities authorized to receive foreign currencies
    • Factoring operations
    • Credit card issuers and operators
    • Securities brokers and agents
    • Money transfer and transportation companies
    • Stock exchanges
    • Insurance companies
    • Forwards and options market operators
    •  Tax-free zones legal representatives
    • Casinos
    • Gambling houses and horse tracks
    • Customs general agents
    • Auction houses
    • Realtors and land developers
    • Notaries and registrars
    • Sports clubs

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 27 from January to June 2011
Convictions: Not available

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Chile‘s (GOC) anti-money laundering efforts continue to mature. The most significant obstacle to money laundering investigations in Chile is bank secrecy. Article 154 of the General Banking Law places all types of bank deposits and obligations under bank secrecy, and only allows banking institutions to share information about such transactions with the depositor or creditor (or an authorized legal representative). Law 707 states that banks may not share information about the movement and balances in a current account with a third party. Due to these legal restrictions, banks do not share information with prosecutors without a judicial order.

Some banks and their compliance officers aggressively apply rigorous, international AML/CFT standards, but they are restricted to simply reporting suspicious activity and then waiting for the appropriate court authorization to release any private information. Other banks are slow to reply to court orders to provide prosecutors with additional information. Judges can detain the bank‘s general manager until all information is disclosed, but this tool is rarely used. In instances when a judge has issued an order for the general manager‘s detention, bank information was provided immediately. Tax authorities are allowed access to bank information without a judicial order under certain circumstances.

In April, 2011 trafficking in persons was added as a predicate offense for money laundering.

The GOC can improve its AML/CFT regime by establishing regulatory control over non-bank institutions, such as money exchange houses and charities, and passing the draft law currently pending in the Senate to allow for the lifting of bank secrecy and the freezing of assets to bring Chile closer to compliance with its UNSCR 1267 obligations and international standards. Chile should do more to investigate complex money laundering schemes, such as trade-based money laundering.