Argentina moves to modernize its AML legislation

Criminal organizations understand that the transnational nature of the modern economic community provides ample opportunity for them to channel assets of illicit origin and turn them to illicit purposes. These practices, writ large, affect the integrity of the entire financial system, and, to achieve their dangerous ends, they are constantly shifting and evolving - taking advantage of the latest financial developments and technological tools.

To address this moving target, many in the international community have joined together to develop the Financial Action Task Force, a global control and cooperation system that combats money laundering and the illicit financing that supports terrorism and the proliferation of weapons of mass destruction (AML/CFT & PWMD).

FATF is recognized as the global money laundering and terrorist financing watchdog. It describes itself as responsible for setting international standards that aim to prevent these illegal activities and the harm they cause to society, and, as a policy-making body, to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. FATF evaluates compliance with international standards, as well as the effectiveness of the AML/CFT systems of its member countries. Argentina has been a part of this global effort as a full member of FATF since 2000.

Evaluating the degree of commitment that countries have to combatting money laundering and terrorist financing is key to FATF’s mission, and Argentina will soon undergo such an evaluation. The outcome of such evaluations has great significance for countries; for Argentina, the coming evaluation has great implications for its position in the modern global economy as a trading partner and a safe and secure destination for foreign investment.

From 2009 to 2014, Argentina was on FATF’s so-called grey list of jurisdictions "under intensified monitoring." This means that Argentina had to commit to a prompt resolution, within defined deadlines, of the strategic deficiencies which FATF had identified.

With the coming new evaluation, there is a broad consensus in Argentina that it is essential to remedy these deficiencies and move forward into the global economy. 

The procedures that form the basis of FATF assessments include two interrelated components. The technical compliance component analyzes and evaluates whether the required laws, regulations or other measures are in place and in effect and whether the supporting AML/CFT & PWMD institutional framework is in place. The effectiveness component assesses whether these systems are working and the extent to which the country is achieving the defined objectives.

Recently, Argentina’s Executive Branch submitted a bill to Congress aiming to improve current legislation related to AML/CFT & PWMD. The goal of the bill is to update Argentina’s regulations governing these practices.

Back in 2000, via Law 25,246, Argentina created its Financial Intelligence Unit (FIU), and amended the rules supporting FIU via Law 26,683 in 2011. Eleven years have gone by since then and, with the new legislation, the Argentine government hopes to update and provide more robustness to its AML/CFT rules. In this article, we take a concise look at the bill.

The measure projected by the Executive Branch proposes an updating of the Criminal Code to take into account, among other items, the problems raised in international conventions related to the repression of the financing of terrorism. It would increase the penalties when the existence of an AML/CFT & PWMD practice is discovered. It also modifies definitions of the scope and characteristics of money laundering offenses.

The bill also proposes amendments to Law 25,246, incorporating definitions of concepts that are important for the present-day AML/CFT & PWMD system, such as "virtual assets," "terrorist act," "beneficial owner," "clients," and "virtual asset service providers."

In addition, the bill overall aims to strengthen the FIU and provide it with more independence, making it less susceptible to political influence. To this end, the FIU is defined as "a decentralized agency of the National Public Administration, under the jurisdiction of the Ministry of Economy, with its own legal personality, which shall operate with functional, administrative, economic and financial autonomy and sovereignty."

The bill updates the catalogue of precedent crimes for money laundering and stipulates where the FIU should concentrate its efforts to prevent and prosecute such crimes.

It also provides greater protections to the reporting entity, preserving its identity in a broader manner and keeping its identity secret for a longer period of time – steps which would contribute to the overall effectiveness of investigations.

Another aspect of the bill is that Individuals or legal entities that operate with virtual assets will become regulated entities, with a special focus on the cryptocurrency market. In this way, "the list of regulated entities is rearranged, and organized by financial sector (Financial Institutions), Virtual Asset Service Providers (VASPs), Designated Non-Financial Businesses and Professions (DNFBPs) and regulated entities not included in the international standard."

The draft bill pays significant attention to the obligations and preventive measures to be adopted by regulated entities, deepening a risk-based approach. For instance, if customer due diligence measures cannot be carried out, the relationship with that customer should not be initiated or continued.

Finally, in order to respond to the FATF Recommendation regarding the need to provide effective, proportionate and dissuasive sanctions, the range of possible responses by the FIU to those who do not comply with the AML/CFT & PWMD prevention system has been expanded to include warnings and even disqualification of the compliance officers who fail to follow the basic requirements.

Complementing these measures, the bill would establish qualitative and quantitative scales for the application of the sanctions catalogue.

Many in Argentina welcome this potential legislation which is now under analysis by Congress. The modifications to the AML/CFT & PWMD system have been delayed a long time and it is generally recognized that they are imperative to make the system more vigorous and effective and to ensure that Argentina complies with its international commitments.

In sum, the bill submitted to Congress by the Executive Branch seems auspicious. We hope that it will be put in place with care, and with parliamentary and institutional consensus, following a necessary and robust debate among Argentina’s stakeholders.