Nicaragua – Know Your Customer (KYC) Rules

 

 

The Republic of Nicaragua is not considered a regional financial center. It continues to be a strategic transshipment route for South American cocaine and heroin destined for the United States and cash returning to South America. Because of these activities, Nicaragua‘s financial system is highly vulnerable to money laundering. Money laundering is primarily related to proceeds from illegal narcotics and political corruption. Reportedly, the narcotics trade is increasingly linked to arms trafficking.

Nicaragua‘s geography—with access to both the Atlantic and Pacific Oceans, large inland lakes, porous border crossings, and sparsely populated and underdeveloped Atlantic Coast region—makes it an ideal haven for transnational organized crime groups, including human and drug trafficking organizations. The Central America Four Agreement among El Salvador, Guatemala, Honduras, and Nicaragua allows for free movement of the citizens of these countries across their respective borders without passing through immigration or customs inspection. Consequently, the agreement represents a vulnerability to each country for the cross-border movement of contraband and illicit proceeds of crime.

As of March 2011, a total of 148 companies operated in 34 designated free trade zones (FTZs). The National Free Trade Zone Commission (CNZF), a government agency, regulates all FTZs and the companies operating in them. The Nicaraguan Customs Agency monitors all FTZ imports and exports. It is suspected that money laundering occurs via traditional mechanisms such as legal businesses; however, some evidence exists of informal ―cash and carry‖ networks for delivering remittances from abroad that may be indicative of money laundering There have been no convictions for money laundering in either sector.

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: YES
    • Domestic PEP: YES

Nicaragua – KYC covered entities

 

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

    • Banks
    • Credit unions
    • Financial companies
    • Credit institutions
    • Stock exchange systems
    • Insurance companies
    • Savings and loan cooperatives
    • Brokerage firms
    • Money exchangers
    • Casinos
    • Non-profit organizations
    • Pawn shops

Nicaragua – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 368 in 2010

Number of CTRs received and time frame: Not available

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

    • Banks
    • Credit unions
    • Financial companies
    • Credit institutions
    • Stock exchange systems
    • Savings and loan cooperatives
    • Brokerage firms
    • Money exchangers
    • Casinos
    • Non-profit organizations
    • Pawn shops

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 17 in 2011
Convictions: Three in 2011

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Statutes enacted to criminalize money laundering and terrorist financing lack sufficient implementation due to weak enforcement mechanisms and a corrupt judicial system. There have been cases when money laundering/drug trafficking sentences were reduced or dismissed by appellate judges under suspicious circumstances. Further, legislation against organized crime has many enforcement deficiencies that should be improved by the Nicaraguan National Assembly.

While the law grants the Financial Analysis Committee (CAF) the ability to monitor other financial institutions, the CAF does not have the resources or the power to enforce regulations.