By: Daniel Leiva
On October 26, 2021, agreement number 380 of the Attorney General’s Office was published in the Official Gazette, which contained the new Instructions of the Financial Investigation Unit for the Prevention of Money Laundering and Asset Laundering. Said instructions will enter into effect on June 6, 2022 as a result of an extension granted so that the obligated parties may adapt to the new requirements of said instructions. For some, the new instructions represent an additional regulatory burden, for others, great opportunities to obtain legal certainty in their business operations, especially for Fintechs.
The new instructions integrate the recommendations of the Financial Action Task Force (FATF) to comply with international standards on risk management and best practices in this area, among which are, among others, the design of a risk-based compliance scheme and the use of new technologies. The former involves focusing the compliance model on the risks to which a company or a specific sector may be exposed by virtue of its economic activity; and the latter involves, on the one hand, the recognition of 100% digital products and business practices (which naturally carry their inherent risks) and the prior assessment of risk before launching new products, especially when they involve the use of new technologies.
This integration of the recommendations has allowed the instructions to include the possibility of 100% digital contracting, thus focusing its policies and procedures to these virtual channels, including transactional monitoring, document backup and due diligence to be performed on customers or KYC for its acronym in English. The latter allows players in the Fintech ecosystem to operate their business under a scheme of legal certainty in terms of the regulations to be complied with.
While it is true that one of the biggest concerns for any company is (or should be) the regulatory one, in Fintechs, considering their nature and the means by which the business is developed, this concern should be intensified. Some of these actors may be in an unregulated or under-regulated environment (as far as financial regulation is concerned), however, they will always be obliged in El Salvador to comply with the Anti-Money Laundering Law, which implies a clear challenge in safeguarding the user experience without losing sight of regulatory compliance.
The adjustments to the regulation allow these actors to comply with these parameters, adapting their flows to regulatory compliance through the use of new technologies that allow them to ensure comprehensive regulatory compliance; tools such as artificial intelligence applied to transactional monitoring, biometric recognition, proof of life through photographs or videos, KYC solutions in blockchain, among others, can be integrated into the risk-based approach of Fintech through its electronic channels without losing the user experience. The above guarantees the exploitation of the business model and compliance with the regulatory framework.