Financial Information Unit Amends Regulatory Framework Applicable to Reporting Entities in Capital Markets

On May 9, 2023, the Financial Information Unit (UIF) issued General Resolution No. 78/2023, amending the regulatory framework in force regarding the prevention of money laundering and financing of terrorism (ML/TF) applicable to Reporting Entities (SO) in the capital markets, adapting the obligations they must comply with to identify, assess, mitigate, and monitor their ML/TF risks.

The main changes the resolution introduces include:

1. Regulation of obligations for “property trade” operations, considering the definition the regulatory framework of the Argentine Securities Commission uses. This includes, among others, creating client identification files with the information and/or documents proving the origin and destination of the funds in the transaction without source in settlements through the foreign exchange market and identifying and verifying the signatories and/or intervening attorneys-in-fact; preparing the transactional profile; continuous due diligence; registering unusual transactions; and reporting suspicious transactions. This will also apply to transactions related to securities transfer.
2. Incorporation of new high-risk situations, such as SO operating with third party funds (unless they are SO), which implies the application of enhanced due diligence.
3. Updating of the Risk Self-Assessment Technical Report, if there is changes in the SO's risk level beyond its annual update, except for broker dealers submitting it every 2 years.
4. Incorporation of red flags alerts to be considered when determining whether a Suspicious Transaction Report should be filed. This includes, for example, cases of triangulation of transfers of negotiable securities between the client, his relatives, companies, and related third parties with no apparent economic reasons; or when the client's main activity is related to virtual assets.
5. Prohibition to open or maintain anonymous accounts or accounts under fake names.
6. Incorporation of a new automatic updating mechanism, adopting as parameter the minimum wage, which will serve as ceiling when applying simplified due diligence measures in collective financing systems.
7. Modification of the deadline for submitting Systematic Reports. These must be carried out between the first and the fifteenth day of each month. There is a detail of the information that each of the different reports must include.
8. Detailing of the information that, as a minimum, the Register of Unusual Operations must include. Among them, the denomination and level of ML/FT risk associated with the client, its profile, the operation and/or transaction under analysis, details of the alert, type of unusuality, and measures taken for the resolution of the alert.
9. Establishing of the minimum information in the Monthly Systematic Reports, particularly regarding the lists of international transfers of securities.
10.  Limitation of the term to inform the UIF of the temporary absence, impediment, leave of absence, or removal of the Compliance Officer. The former deadline was five working days as of the day it took place, and the current deadline is 24 hours.
11.  SO dependability on third parties for carrying out customer due diligence measures only regarding the identification and verification of the customer and the beneficial owner, and the understanding of the purpose and nature of the business relationship.

Likewise, the Resolution established requirements that must be complied with to depend on third parties, such as taking adequate measures to ensure that the third party will provide -upon request and without delay- copies of identification information and other relevant documents.

It should be noted that the responsibility for complying with the due diligence measures will remain the SO’s, depending on the third party.

12. Elimination of the regime of supervised clients abroad.
13. In the transfer of securities, whether within the country or from or to abroad, the SO must collect precise information on the originator and the recipient of the transaction.
14. Finally, regarding continuous due diligence, the Resolution modifies the periodicity for updating the files of medium-risk clients, extending it from two to three years. As to the high and low-risk clients, the periods of 1 and 5 years respectively remain.