Countries/Jurisdictions of Primary Concern - El Salvador
El Salvador is part of the transit route for South American cocaine destined for the United States, and the corresponding cash payments returned to South America. The U.S. dollar is the official currency in El Salvador, and the country’s dollarized economy and geographic location make it an ideal haven for transnational organized crime groups, including human smuggling and drug trafficking organizations. Money laundering is primarily related to proceeds from illegal narcotics and organized crime; there is no indication that money laundering is being used to fund terrorist activities. The Central America Four Agreement among El Salvador, Guatemala, Honduras, and Nicaragua allows for the free movement of their citizens across the respective borders, bypassing formal immigration and customs inspection. This agreement is a vulnerability to each country and the region for the cross-border movement of contraband and illicit proceeds of crime.
According to authorities, organized crime groups employ the following mechanisms to launder money: the use of front companies, parking lots, travel agencies, remittances, the import and export of goods, and cargo transportation. Illicit activity includes the use of smurfing operations, whereby small amounts of money are deposited or transferred in a specific pattern to avoid detection by government authorities.
As of December 2013, there are 17 free trade zones (FTZs) operating in El Salvador. The FTZs are comprised of more than 200 companies operating in areas such as textiles, clothing, distribution centers, call centers, business process outsourcing, agribusiness, agriculture, electronics, and metallurgy. A significant number of remittances are transferred through banks, and it is possible narcotics trafficking organizations remit illicit proceeds from drug sales in the United States to El Salvador.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR ILLEGAL DRUG SALES THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: YES
CRIMINALIZATION OF MONEY LAUNDERING:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: NO civilly: NO
KNOW-YOUR-CUSTOMER (KYC) RULES:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, agricultural credit institutions, pension funds, insurance companies, money exchanges, auditors, accountants, notaries, gaming centers, auto dealers, and securities dealers
Number of STRs received and time frame: 1,156 in 2013
Number of CTRs received and time frame: 3,416 in 2013
STR covered entities: Banks, agricultural credit institutions, money exchanges, accountants, notaries, gaming centers, auto dealers, and securities dealers
MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:
Prosecutions: 88 in 2013
Convictions: Not available
RECORDS EXCHANGE MECHANISM:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
El Salvador is a member of the Caribbean Financial Action Task Force (CFATF), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.cfatf-gafic.org/downloadables/mer/El_Salvador_3rd_Round_MER_(Final)_English.pdf
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
The regulatory institutions charged with money laundering supervision are weak and lack both human resources and sufficient regulatory powers. The Superintendence of the Financial System supervises only those money remitters, accountants, and auditors with a relationship with a bank or bank holding company. Independent entities are not subject to any supervision, nor are other designated non-financial businesses and professions (DNFBPs).
The Government of El Salvador’s General Assembly passed an Asset Forfeiture (AF) Law in November 2013, and is waiting for final presidential signature to implement program establishment. The AF legislation allows the government to sell property seized in conjunction with narcotics arrests and to use the profits for counternarcotics efforts or other authorized use.
In 2013, assets worth $2.7 million were criminally forfeited.
El Salvador should provide a clear prohibition against tipping off in its legislation and regulations, and clarify and enforce its provisions regarding criminal liability for legal persons. The Government of El Salvador should develop regulations, guidelines, and adequate supervisory programs for DNFBPs. El Salvador should lower its CTR threshold from approximately $57,140 to $10,000 to comport with the international standard. El Salvador should provide clear guidance on protecting sensitive operational information and safeguarding information received from international partners.