Amendments to Anti-Money Laundering and Terrorism Financing Regulations Applicable to Financial and Exchange Entities

Taking into account the amendments introduced by Law No. 26,683 to prevent money laundering and terrorism financing (please refer to “The Executive Branch Enacted the Proposed Bill Amending the Anti-Money Laundering and Terrorist Financing Law”, published in Marval News #106 on June 30, 2011), the Financial Information Unit (UIF) and the Central Bank of Argentina (BCRA) created a technical commission formed by the staffs of both agencies in order to adapt the regulations applicable to financial and exchange entities. As a result, the UIF issued Resolution No. 121/2011 (the "Resolution"), which establishes new obligations they must observe in their capacity as reporting entities under article 20, paragraphs 1 and 2 of the Law No. 25,246.

The Resolution, effective from August 19, 2011, expressly states in its recitals that the UIF will be the only competent authority to issue regulations on the matter, barring the Central Bank from extending or modifying the scope of the Resolution.

Among the different modifications, we highlight the following:

1. Classification of “clients” depending on the type and amount of the transactions

   The Resolution includes significant changes to the "know-your-client" (“KYC”) policies. The Resolution made a distinction between regular and occasional clients, considering: (i) regular clients: those clients with whom a permanent relationship is maintained (regardless of the amount of their business) and those clients that lack a permanent relationship but performed operations in an annual amount of at least AR$ 60,000 or its equivalent in other currencies, and (ii) occasional clients: those clients with whom a permanent relationship is not established and whose annual operations are less than that amount. The type of documentation that the reporting entities require will depend on whether the client is a regular or an occasional one.

2. Changes on the KYC procedures

   Before initiating the relationship with their clients, reporting entities must, among others, require information on the products to be used and the reasons for their choice. For regular clients, reporting entities must define the profile of the client using certain parameters, such as information and documentation related to economic ownership, financial and tax position provided by the client and/or obtained by the reporting entities themselves. This requirement evidences the criteria of the UIF of considering criminal tax evasion to be sufficient basis for a finding of a precedent crime of money laundering. In respect of deposits made in cash, the Resolution also includes the identification of depositors when the deposit reaches or exceeds the amount of AR$ 40,000 or its equivalent in other currencies.

3. Amendments regarding the Compliance Officer’s appointment

   Certain changes are made regarding the requirements applicable to the appointment of the Compliance Officer. The Resolution also provides for the possibility that the Compliance Officer be assisted by a Committee of Control and Prevention of Anti-Money Laundering and Terrorism Financing, and appointing an Alternate Compliance Officer. In the event of branches of foreign financial institutions, the Resolution provides that the Compliance Officer must be the highest local authority, and in the case of representatives of foreign financial entities not authorized to operate in Argentina and exchange traders, the one authorized by the BCRA.

4. Unusual transactions registry

   The Regulation provides for a change to the rule of the previous resolution, which required registration only for suspicious transactions. Now, the reporting entities must prepare records and risk management analysis of any detected unusual transactions and of those that having been considered suspicious have been reported. With this modification, the tasks of those officers responsible for compliance will be increased considerably.

5. Updating of clients’ files

   Regarding each client, the reporting entities must prepare a file containing all the information and documentation that the Resolution sets in each case for regular or occasional clients. The updating of the files to the requirements of the Resolution must be carried out in accordance with the following schedule: (a) for new clients: from the time the Resolution became enforceable; (b) for existing clients:(i) before March 1, 2012, for those who have operated during 2011 in an annual aggregate amount greater than AR$ 3,000,000 or its equivalent in other currencies, (ii) before December 31, 2012, for those who have operated during 2011 in an aggregate annual amount between AR$ 1,000,000 and AR$ 3,000,000 or its equivalent in other currencies, and (iii) when clients request new products or services, or visit the entity for any reason, in the case of those who have operated during 2011 in an annual aggregate amount lower than AR$ 1,000,000 or its equivalent in other currencies.

6. Deadline for Reporting Suspicious Transactions

   Suspicious transactions of money laundering must be reported within 150 calendar days, and those suspicious of terrorism financing must be reported within 48 hours. In both cases, the supporting documentation for the Suspicious Transaction Report (ROS) must be retained for a period of 10 years and remain available to the UIF, and, if requested, delivered within 48 hours. Thus, the Resolution enacts the rule already adopted by Law No. 26,683.

7. Confidentiality of the Report

   The Resolution expressly provides that the ROS must be confidential, except with respect to the Central Bank when it acts in a supervisory proceeding, supervision and inspection in situ, within the framework of its collaboration with the UIF.