Uruguay – Know Your Customer (KYC) Rules

 

 

Uruguay remains vulnerable to the threats of money laundering (ML) and terrorist financing (TF). Uruguay has a highly dollarized economy, with the U.S. dollar often used as a business currency; about 75% of deposits and 50% of credits are denominated in U.S. dollars. Officials from the Uruguayan police and judiciary assess that there is a growing presence of Mexican and Colombian criminal organizations in the region and are concerned they could begin operating in Uruguay. Drug dealers are increasingly participating in other illicit activities like car theft and trafficking in persons.

The vast majority of money laundering cases that have become public have been related to drugs and/or involve the real estate sector. Uruguay has porous borders with Argentina and Brazil and, despite its small size, there is a market for smuggled goods that is greatly determined by price differentials between Uruguay and its neighbors. Regular trade-based money laundering is likely to occur but specialists do not identify it as a major source of risk, and there is no indication it is tied to terrorist financing. However, bulk cash smuggling is likely to occur. Public corruption does not seem to be a significant factor behind money laundering or terrorist financing. To the extent known, laundered criminal proceeds derive primarily from foreign activities related to drug-trafficking organizations.

Given the longstanding free mobility of capital in Uruguay, the informal financial sector is practically non-existent. Money is therefore likely to be laundered via the formal financial sector (onshore or offshore). The six offshore banks operating in Uruguay are subject to the same laws, regulations, and controls as local banks, with the Government of Uruguay (GOU) requiring they be licensed through a formal process that includes a background investigation of the principals. Offshore trusts are not allowed. Bearer shares may not be used in banks and institutions under the authority of the Central Bank, and any share transactions must be authorized by the Central Bank. There are 13 free trade zones (FTZs) located throughout the country. While most are dedicated solely to warehousing, two were created exclusively for the development of the paper and pulp industry, and three accommodate a wide variety of tenants offering a wide range of services, including financial services. Some of the warehouse-style FTZs have been used as transit points for containers of counterfeit goods bound for Brazil and Paraguay. A decree passed in November 2010 discourages shell companies from establishing a presence in FTZs.

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

Uruguay – KYC covered entities

 

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

    • Banks
    • Currency exchange houses
    • Stockbrokers
    • Pension funds
    • Insurance companies
    • Casinos
    • Art dealers
    • Real estate and fiduciary companies
    • Lawyers
    • Accountants and other non-banking professionals that carry out financial transactions or manage commercial companies on behalf of third parties

Uruguay – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 150 – January 1–November 4, 2011

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

    • Banks
    • Currency exchange houses
    • Stockbrokers
    • Pension funds
    • Insurance companies
    • Businesses that perform safekeeping, courier or asset transfer services
    • Professional trust managers
    • Investment advisory services
    • Casinos
    • Real estate brokers and intermediaries
    • Notaries
    • Auctioneers
    • Dealers in antiques, fine art and precious metals or stones
    • FTZ operators
    • Natural or judicial persons who carry out transactions or administer corporations on behalf of third parties

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: Four in 2009
Convictions: Four in 2009

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Uruguay continued making progress in 2011. The main development was the design of a new National Strategy against money laundering put together with the technical support of the IMF. The project, expected to be a major improvement from the previous 2007 strategy, was developed in two stages: identification of the most vulnerable areas (2010) and design of a strategy to address those (2011). The strategy will be implemented in 2012-2015.

The GOU is also strengthening its Anti-Money Laundering Secretariat (AMLS) that will grow in scope and staff. In addition to developing the new strategy, in 2011, the AMLS continued working with non-financial sector entities obliged to report suspicious transactions, mainly notaries, real estate agents and casinos. The AMLS has made substantial progress in the design of standardized forms with the local association of notaries. A group of large bureaus that administer corporations are also developing auto-regulatory standards. The AMLS also is very focused on financial investigations and seeks to create awareness about the importance of seizing assets as well as imprisoning criminals.

Another positive development is the signing of an MOU under which the Financial Intelligence Unit (UIAF) is granted immediate online access to the database of the tax administration authority (DGI). In turn, DGI is working to open an international division to work on AML cases that are reported from abroad.

Other UIAF-related developments in 2011 include the design of a set of early-warning indicators that will allow it to leverage its comprehensive database of currency transaction reports, and the upgrading of regulations for firms that wire funds in order to level the playing field vis-à-vis financial services firms (a structure that stemmed from some large exchange houses).

The Superintendency of Financial Services, which oversees the UIAF, is also in the process of redesigning and upgrading management requirements for financial companies. This process entails the extension to insurance and capital market institutions of strong management practices already established for banks. In 2011, the Superintendency made significant progress with insurance companies and moderate progress with capital market institutions. The UIAF also emphasized onsite inspections of capital market institutions that previously received less attention than banking firms.

Prosecutions and convictions dropped in 2010 and 2011. In 2009 alone the GOU had frozen assets totaling $17 million. In 2011, it did not freeze any funds except for one safe-deposit box.

The GOU should amend its legislation to provide for criminal liability for legal persons.