Increase in the volume of remittances in Nicaragua and applicable regulation

By: Mónica Brenes and Rodrigo Taboada

According to a report published by the Central Bank of Nicaragua (“BCN”) on August 3, 2022 the flow of remittances registered in the country in the second quarter was US$763.6 million U.S. dollars, which implies a growth of 44.1% with respect to the same quarter of 2021.

In the first half of 2022 a total of US$1,396.2 entered Nicaragua, this amount being 35.5% higher with respect to the same period of the previous year. The report for the third quarter has not yet been published, but according to the monthly statistics of the BCN it can be noted that in the months of July and August of the current year the amount of remittances received increased considerably with respect to the same period of the previous year, being in July and August 2021 an income of US$351.4 million and in July and August 2022 a total income of US$574.1 million. The considerable increase has been noted in the last three years, in 2020 they entered a total of US$1,851.4 million, in 2021 they entered a total of US$2,146.9 million and in the first eight months of 2022 a total of US$1,970.3 million.

On December 27, 2019, the BCN published RESOLUTION CD-BCN-LIX-2-19 “Regulations for Remittance Payment Service Providers” which regulates the authorization and operation of the services provided by remittance payment service providers in the Republic of Nicaragua. These Regulations define Remittance Disbursement Service Providers as: Natural or juridical persons whose main purpose or within their usual commercial activities is the provision of remittance disbursement services, in their different modalities, both physical and electronic.

This regulation establishes the process and requirements for obtaining a license and registration of natural and legal persons wishing to be providers of this service, as well as their renewal process every 5 years, the obligations they must comply with and the sanctions they face in case of non-compliance. Institutions supervised by the Superintendency of Banks and Other Financial Institutions (“SIBOIF”) and the National Microfinance Commission (“CONAMI”) are not required to apply for a license, but must register with the BCN to offer this service. Remittance payment service providers, in addition to applying for a license or registration with the BCN, must also register with the Financial Analysis Unit (“UAF”), in order to comply with reporting obligations for the prevention of money laundering.

On February 3, 2021, the BCN published another Regulation applicable to remittance matters through RESOLUTION CD-BCN-VI-1-21 “Regulation of Sub-Agents of Remittance Payment Service Providers” which aims to establish requirements to be met by remittance payment service providers authorized by the BCN to operate with sub-agents. In said Regulation, a Service Agency is defined as: Commercial establishment or premises where the subagent will offer the service, to receive and disburse funds in the name and on behalf of the remittance disbursement service provider. Sub-agent is described as: A legal or natural person domiciled in the Republic of Nicaragua who establishes a contractual relationship with one or more remittance disbursement service providers with licenses and/or registrations issued by the BCN, who carry out remittance disbursement transactions in their different modalities, both physical and electronic, on behalf of said provider.

The regulated entity continues to be the remittance disbursement service provider; however, this second Regulation establishes guidelines and information collection and reporting obligations that the provider must comply with the NCB when it has a commercial relationship with a subagent.

To date, 7 licensed legal entities and 9 registered legal entities are published on the BCN’s web page as remittance payment service providers, among which are the country’s main banks and microfinance institutions, as well as other non-financial entities. Regulation in this area in recent years has favored the proper functioning of this sector, which, as statistics show, represents an important part of the flows that contribute to the country’s economy.