Countries/Jurisdictions of Primary Concern - Guatemala
Guatemala is not considered a regional financial center. It continues to be a transshipment route for South American cocaine and heroin destined for the United States and for cash returning to South America. Smuggling of synthetic-drug precursors is also a problem. Reports suggest the narcotics trade is increasingly linked to arms trafficking.
Historically weak law enforcement agencies and judiciary, coupled with endemic corruption and increasing organized crime activity, contribute to a favorable climate for significant money laundering in Guatemala. According to law enforcement agencies, narcotics trafficking, corruption, and extortion are the primary sources of money laundered in Guatemala; however, the laundering of proceeds from other illicit activities, such as human trafficking, firearms, contraband, kidnapping, tax evasion, and vehicle theft, is substantial. Law enforcement agencies report that money laundering continued to increase during the year, especially by groups of air travelers heading to countries such as Panama with slightly less than the amount of the Guatemalan reporting requirement ($10,000), and through a large number of small deposits in banks along the Guatemalan border with Mexico. In addition, lax oversight of private international flights originating in Guatemala provided an additional avenue to transport bulk cash shipments directly to South America. There is no indication of terrorist financing activities.
Guatemala’s geographic location makes it an ideal haven for transnational organized crime groups, including human and drug trafficking organizations. The Central America Four Border Control Agreement between El Salvador, Guatemala, Honduras, and Nicaragua allows for free movement of the citizens of these countries across their respective borders without passing through immigration or customs inspection. As such, the agreement represents a vulnerability to each country for the cross-border movement of contraband and illicit proceeds of crime.
There is a category of “offshore” banks in Guatemala in which the customers’ money (usually Guatemalans with average deposits of $100,000) is legally considered to be deposited in the foreign country where the bank’s head office is based. In 2013, there were seven “offshore” entities, with head offices in Panama, the Bahamas, Barbados, and Puerto Rico. These “offshore” banks are subject to the same AML/CFT regulations as any local bank. Guatemala has 16 active free trade zones (FTZs) and seven more are scheduled to start operations soon. FTZs are mainly used to import duty-free goods utilized in the manufacturing of products for exportation, and there are no known cases or allegations that indicate the FTZs are hubs of money laundering or drug trafficking. There are no reported hawala or other money or value transfer services operating in Guatemala. A significant number of remittances are transferred through banks and appear to pose little risk for money laundering.
Casinos are currently unregulated in Guatemala and a number of casinos, games of chance, and video lotteries operate, both onshore and offshore. Unregulated gaming activity presents a significant money laundering risk.
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: YES civilly: YES
KNOW-YOUR-CUSTOMER (KYC) RULES:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks and offshore banks; credit unions, finance, factoring and leasing companies; bonded warehouses; credit card companies, cooperatives, issuers, or payment agents; stock brokers; insurance companies; Institute of Insured Mortgages; money remitters and exchanges; pawn brokers; public accountants and auditors; casinos, raffles and games of chance; nonprofit entities; dealers in precious metals and stones, motor vehicles, and art and antiquities; and real estate agents
Number of STRs received and time frame: 442: January 1 - October 31, 2013
Number of CTRs received and time frame: 6,943,424: January 1 - September 30, 2013
STR covered entities: Banks and offshore banks; credit unions, bonded warehouses, finance, factoring and leasing companies; credit card companies, cooperatives, issuers, or payment agents; stock brokers; insurance companies; Institute of Insured Mortgages; money remitters and exchanges; pawn brokers; public accountants and auditors, casinos, raffles and games of chance; nonprofit entities; dealers in precious metals and stones, motor vehicles, and art and antiquities; and real estate agents
MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:
Prosecutions: 33: January 1 – October 31, 2013
Convictions: 47: January 1 - October 31, 2013
RECORDS EXCHANGE MECHANISM:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Guatemala became a member of the Financial Action Task Force of South America (GAFISUD), a FATF-style regional body, in July 2013. It remains a member of the Caribbean Financial Action Task Force (CFATF). Its most recent mutual evaluation can be found at: https://www.cfatf-gafic.org/index.php?option=com_docman&task=cat_view&gid=344&Itemid=418&lang=en
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
Staffing of the FIU (IVE) increased over the last several years, as has the number of filed STRs. However, there are still relatively few convictions for money laundering, most of which are for illegal transport of cash. The limited capacity and number of both law enforcement officials and Public Ministry (i.e., the Attorney General’s office) staff may hamper these authorities from enforcing the law and successfully prosecuting more cases.
In December 2009, former President Alfonso Portillo was indicted in the United States on one count of conspiracy to commit money laundering in the United States. On August 26, 2011, Guatemala’s Constitutional Court unanimously upheld the U.S. request to extradite him on that charge. On August 29, 2012, the Constitutional Court rejected a request from Portillo’s lawyers for an injunction against former President Alvaro Colom’s administrative approval of the extradition. Portillo was extradited to the United States on May 24, 2013.
A 2011 law prevents new businesses from issuing bearer shares of stock. The law requires any existing business with bearer shares to convert the shares to nominative by June 2013. According to information from the Mercantile Registry, about 97 percent of businesses that issued bearer shares prior to the entry into force of this law made the conversion to nominative shares by the June 2013 deadline. Shareholders of businesses holding bearer shares after June 2013 are not able to exercise their rights nor carry out any procedure with the Mercantile Registry.
A 2010 regulation establishes limits for cash deposits in foreign currency, notably requiring more information and bank certification for transactions totaling over $3,000 per month. According to law enforcement authorities, banks’ purchases of foreign currency declined 13 percent in 2012, and increased 1.8 percent during the first nine months of 2013 in relation to the same period in the previous year.
On November 25, 2013, the Government of Guatemala added designated non-financial businesses and professions, covered previously only under the CFT law, as reporting entities subject to KYC rules and suspicious transaction reporting requirements. It also added public accountants and auditors as newly obligated entities. Guatemala’s AML law does not cover all designated non-financial businesses and professions included in the international standards, in particular, lawyers. Notaries are covered under the CFT law, but no implementing procedures have been adopted for them. Under the CFT law, STR filing is optional for notaries.
The Government of Guatemala should put into force a gaming law to regulate the industry and reduce money-laundering potential. A draft gaming law is now under consideration by key members of Congress. In October 2012, the Guatemalan Congress approved an anti-corruption law that increases penalties for existing crimes and adds new crimes such as illicit enrichment and trafficking in influence. In addition, in October 2013, a transparency law was passed that, if implemented well, should aid in reducing corruption and increasing fiscal transparency.
Tipping off is not criminalized and there is no provision to protect STR filers from liability. Reportedly, covered entities expressed fear that there may be repercussions if they file reports. Guatemala should amend its AML/CFT legislation to include such provisions.