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

In 2011 the Financial Information Unit (the "UIF", after its Spanish acronym) issued more than 20 resolutions that set forth new requirements to be met by the reporting entities listed in Article 20 of Law 25,246 and its amendments (the "Prevention of Money Laundering Act") and, in particular as regards entities from insurance industry, the UIF issued two resolutions. The UIF created a working group formed by officials from the UIF and from the Argentine Superintendence of Insurance (with the collaboration of several institutions and associations) in order to analyze and adjust the regulations issued on this subject in accordance with the amendments introduced by Law 26,683 to the Prevention of Money Laundering Act. Consequently, on December 14, 2011, Resolution 230/2011 (the "Resolution") was published in the Official Gazette, revoking UIF’s Resolution 32/2011, and setting forth the new obligations to be observed by entities listed in article 20, paragraphs 8 and 16 of the Prevention of Money Laundering Act (the "Reporting Entities").

Among the different amendments set forth by the Resolution, effective from the day of its publication in the Official Gazette, we shall highlight the following:

The Resolution provides a substantial change in the scope of those that will be considered Reporting Entities according to the Prevention of Money Laundering Act. While maintaining the expressions "brokers, agents and insurance adjusters", the Resolution adds that they will be reached "only when involved in operations related to pension or life insurance". Therefore, the Resolution unifies the criteria adopted in UIF’s Resolution 70/2011 for compliance with the online reports.

The Resolution provides for changes to the previous resolution, which only required registration of suspicious transactions. Now, the Reporting Entities must prepare records and risk management analysis of any unusual transactions detected and of those that having been considered suspicious have been reported. With this modification, the work of compliance officers will increase considerably.

The Resolution contains some guidelines regarding issues that must be explicitly included in the Manual of Procedures. It establishes that the Manual of Procedures must include the different parameters applied to the prevention systems implemented by the Reporting Entities which must be confidential except for the Compliance Officer, for those who operate in the process of monitoring, control, design and programming of the implemented criteria, and for those who assist Compliance Officers in their functions.

Certain changes have been introduced regarding the requirements applicable to the appointment of Compliance Officers. The Resolution also provides for the possibility of appointing an alternate Compliance Officer.

Reporting Entities must adopt appropriate screening systems to guarantee strict regulations in relation to the hiring of employees and monitoring their behavior, proportional to the risk related to the tasks that employees must carry out, keeping records of those controls, with the involvement of the head of the Human Resources department.

The Resolution includes significant changes to the "Know-Your-Client" policies. The Resolution makes a distinction between clients (individuals or companies) that take policies with a single premium, or annual premiums lower or equal to, or higher than AR$ 40,000 (approximately USD 9,300 at the current rate of echange) or its equivalent in foreign currency, in a given calendar year. The type of documentation that the Reporting Entities require to each client will depend on whether the client is a regular or an occasional one.

Before initiating a relationship with their clients, Reporting Entities must, among other, require information on products to be used and the reasons for their choice. For certain clients, Reporting Entities must define the profile of the client using certain parameters, such as information and documentation related to their economic financial and tax situation (declaration of assets, certification of income, tax returns, financial statements audited by public accountant and certified by the corresponding professional council, bank documents, etc., as appropriate) provided by the client and/or obtained by the Reporting Entities themselves. This requirement evidences the criteria of the UIF, which considers tax evasion as a precedent to money laundering.

The Resolution establishes special identification procedures for which additional documentation must be obtained to define a customer’s profile, when: (a) the client takes a policy whose single premium or annual premium is equal or higher than AR$ 80,000 (approximately USD 18,600) or its equivalent in foreign currency; (b) the client makes extraordinary contributions that exceed the sum of AR$ 80,000 (approximately USD 18,600) or its equivalent in foreign currency as premiums in a calendar year, (c) the sum of the transactions mentioned in (a) and (b) above is equal or higher than AR$ 80,000 (approximately USD 18,600) or its equivalent in foreign currency, in a calendar year, (d) the insurer must pay a claim and/or compensation for an amount higher than AR$ 200,000 (approximately USD 46,500) or its equivalent in foreign currency (e) as a result of rescission requests, the insurer must return premiums to the client for an amount equal or higher than AR$ 200,000 (approximately USD 46,500) or its equivalent in foreign currency, in a calendar year, (f) the client makes partial surrenders in a calendar for an aggregated sum equal or higher than AR $ 200,000 (approximately USD 46,500) or its equivalent in foreign currency, and (g) a total surrender is made in a calendar year, for an aggregated sum equal or higher than AR$ 200,000 (approximately USD 46,500) or its equivalent in foreign currency.

A client's file must contain records of compliance with all the requirements specified in the Resolution. Additionally the file must include all data exchanged, whether physically or electronically, between the client and the Reporting Entity, and any other information or element that may contribute to reproduce the client's profile or that the Reporting Entity considers necessary to know the client.

Files must be updated in line with the requirements of the Resolution in accordance with the following schedule: (a) for new clients: from when the Resolution came into force; and (b) for existing clients: before July 1, 2012.

Suspicious transactions must be reported within 150 calendar days, while those suspicious of terrorism financing must be reported within 48 hours. In both cases, the supporting documentation for the Suspicious Transaction Report (“ROS” after its Spanish acronym) must be retained for a period of 10 years and remain available to the UIF, and, if requested, delivered within 48 hours.

The Resolution expressly provides that the ROS must be confidential, except to Argentine Superintendence of Insurance when acting in supervisory proceedings and inspections, within the framework of its assistance to the UIF.

 The Resolution establishes that financial entities that offer insurance policies will adjust their operations to the provisions of UFI’s Resolution 121/2011, taking into consideration the circumstances specified in the Resolution for purposes of detecting suspicious transactions.