Regulation in Central America and suggestions for compliance.
Extinguishment of ownership is legally defined as the loss in favor of the State of any right over assets susceptible of economic valuation, without consideration of any nature for its owner or any person who holds or behaves as such.
This type of action is regulated in each country of Central America and will always be a contingency for anyone who owns assets and eventually disposes of them in any way.
Common aspects at regional level:
As a common aspect of the extinguishment action it can be mentioned that, in Guatemala, Honduras and Costa Rica, there is the principle of Nullity Ab Initio, through which the unlawfulness of the origin of the assets related to different activities of an unlawful nature is presumed. They also apply the principle of good faith and the possibility of accrediting or contradicting the investigating authority is granted.
At the regional level, in general, the scope of application or object of the law is related to aspects of money laundering, organized crime, terrorism and arms trafficking. Specific regulations add issues of migration, medicines, computer crimes or corruption, or even any crime typified by law.
A differentiating element is the approach to the objective in each legislation. In Guatemala and Honduras, the purpose of the law is to identify, locate, recover, repatriate and extinguish assets of illicit or criminal origin or provenance in favor of the State. In El Salvador, the purpose of the law is to regulate the procedure that regulates the action in favor of the State on those assets that are within the budgets, and in Costa Rica, the purpose is to complement the set of measures against individuals or legal entities that have incorporated to their patrimony assets or rights originated in illicit and criminal activities or destined to them.
Another particular element in each territory is the authority in charge of these matters, being in Guatemala the National Council for the Administration of Assets in Extinction of Ownership and the National Secretariat for the Administration of Assets in Extinction; in El Salvador the Specialized Courts in Extinction of Ownership, the Attorney General’s Office of the Republic and the National Civil Police; in Honduras the Special Prosecutor’s Office against Organized Crime, the Anti-Money Laundering Unit, the Office for the Administration of Seized Assets (OABI), the Financial Information Unit (UIF); in Nicaragua the National Council against Organized Crime and in Costa Rica, in the future, the Court specialized in the area of asset forfeiture located in the city of San José. Each entity has its own internal regulations and specific procedures.
Foreclosure and Compliance Policies
Forfeiture actions represent a contingency of loss of rights over different assets, so there are certain recommendations at the compliance level that we suggest implementing to minimize this contingency.
Among them, it is suggested to implement several Policies and Procedures: a) Know Your Customer -KYC-; b) Know Your Supplier or Third Party Intermediary; and c) Know Your Employee. In addition, it is suggested to provide constant internal training, schedule audits and delivery of reports, as well as implement a functional Whistleblower Channel.
Among the most relevant of these suggestions and the one that can be emphasized the most is the Know Your Customer or Supplier -KYC- policy, in the sense that it should be defined, at least, in the following way: Establish Binding Forms: which establish the scope defined by the transaction; 2. Establish Risk Segmentation: which includes Nationality, Geographic Location, Economic Activity, Relationship with Politically Exposed Persons, Importance of the Transaction; and 3. Expanded Due Diligence, which includes: Public Information; Lists of Designated Persons and Commercial References.
It will be through these concrete actions that a surprise action of forfeiture of ownership by the State can be avoided in relation to assets that have been acquired in a lawful manner and in good faith, since in due course it will be possible to prove that in the acquisition and/or sale, there were adequate acts that did not allow to reasonably presume that the asset was linked in any way to an unlawful activity.