The Ecuadorean governing state entities of each sector have issued mandatory resolutions for insurance and reinsurance companies as well as for financial institutions to establish anti-money laundering and financing of terrorism compliance programs.
These resolutions set up the guidelines of what the prevention manual should contain. Setting eleven aspects that all compliance programs shall meet. To highlight some:
- The procedures for the timely internal and external reporting of transactions with amounts over the thresholds, as well as unusual and unjustified transactions.
- The hierarchy, functions and level of responsibilities assigned to the board of directors, compliance committee, compliance officer and other officials in relation to the prevention of money laundering, and the financing of crimes such as terrorism in the entity.
- Procedures for contractual relationships with reinsurers, intermediaries, advisors insurance and insurance experts.
- The policies and procedures to prevent the misuse of technological developments for money laundering, and the financing of terrorism, through channels such as electronic money, ATMs or other deposit networks and non-personal transactions.
- Establishing monitoring processes for all transactions, in such a way as to determine whether the client’s transaction is adjusted to the transactional and behavioral profiles established.
- The singularization of the official responsible of exempting clients from the obligation to subscribe to the lawfulness of funds form.
A compliance committee shall be established. The latter has to be integrated by: the legal representative or his delegate, a member of the board, the manager of operations or its delegate, the credit manager or its delegate, the internal auditor, the compliance and the legal advisor or his delegate.
This committee will have the following obligations and duties: approve the Compliance Manual, receive, analyze and decide on reports of unusual and unjustified economic transactions sent by the compliance officer. Sending those reports to the Financial and Economic Analysis Unit. Apply internal administrative sanctions to employees for non-compliance with internal processes of prevention and due diligence, amongst others.
The application of due diligence for financial institutions and insurance companies implies: “getting to know their client”. Which means establishing transactional and behavioral profiles and in the case of corporations, determining the identity of the natural persons or the corporation who owns the shares or participations and has final control of the legal person. Extended to those who directly or indirectly own 25% or more of subscribed and paid capital of the entity or company.
In order to implement this, the entities regulated under this resolution must design and adopt application forms called “Start and Renewal of Business Relationship”. These forms must include information regarding the client’s income, business and home address, economic activities, and income tax, amongst fourteen others.
Insurance and reinsurance companies are obliged to present this forms on contracts whose insured amount is equal or less than fifty thousand dollars of the United States of America (USD 50,000.00), for natural persons and two hundred thousand dollars of the United States of America (USD 200,000.00) for legal entities. Financial Institutions have to fill these forms with all their clients regardless of the amount of the transaction.
Financial Institutions will apply an “Extended Due Diligence” when there are “Politically Exposed” clients or the client comes from or resides in a country or territory designated by F.A.T.F. as a fiscal heaven or non-cooperative countries. This also applies to clients, which the institution has no certainty if he/she acts on behalf of.
For “Politically Exposed” people controls shall be tighter. In order to begin or continue a commercial relationship with these clients, the authorization and approval of senior management must be given.
However, the most relevant part of this resolution is the disposition to monitor and apply strict controls to the transactions made during political campaigns. All financial institutions shall design and adopt effective, efficient and timely methodologies to identify:
- The campaign economic managers. Including all the persons authorized to make deposits, withdrawals, or dispose of those goods.
- Unusual transactions, focused in detecting and reporting unjustified donations and contributions.
These Compliance Manuals shall be distributed, with proof of reception, to all the shareholders, directors, employees and entity officials. Financial Institutions shall submit these manuals and monthly reports to the Banks Superintendence and to the Unit of Financial and Economic Analysis. Insurance and reinsurance companies shall submit and file reports to the latter as well as to the Companies, Securities and Insurance Superintendence.