Countries/Jurisdictions of Primary Concern - Nicaragua
The Republic of Nicaragua is not considered a regional financial center. Nevertheless, the financial system is vulnerable to money laundering as the country continues to be a strategic narcotics transshipment route for South American cocaine and heroin destined for the United States and cash returning to South America. The high level of political corruption is also a significant concern. Money laundering cases are primarily related to proceeds from illegal narcotics, mainly cocaine, but some subject matter experts believe there are indications of money laundering activities related to proceeds from smuggling. It is also suspected that money laundering occurs via traditional mechanisms such as legal businesses. Additionally, some evidence exists of informal “cash and carry” networks for delivering remittances from abroad that may be indicative of money laundering. Although there are no convictions for money laundering in these sectors to date, some local businesses such as hardware stores, hotels, and clubs were seized from people accused of drug trafficking and money laundering. Subject matter experts also believe the black market for smuggled goods in Nicaragua is larger than officially recognized, indicating possible trade-based money laundering. The Central America Four Agreement among El Salvador, Guatemala, Honduras, and Nicaragua allows for the free movement of citizens across respective borders without passing through immigration or customs inspection. Consequently, the agreement represents a vulnerability to each country for the cross-border movement of contraband and proceeds of crime.
Nicaragua, with access to the Atlantic and Pacific Oceans, large inland lakes, porous border crossings, and a sparsely-populated and underdeveloped Atlantic Coastal region, is an ideal haven for transnational organized criminal groups, including human and drug trafficking organizations. Although Nicaragua faces domestic drug trafficking issues, money laundering proceeds are mostly controlled by international organized crime. The most noteworthy money laundering cases prosecuted in Nicaragua are primarily tied to foreign criminal activity.
The National Free Trade Zone Commission, a government agency, regulates free trade zone (FTZ) activities. As of 2013, a total of 215 companies operated in 34 designated FTZs. The Nicaraguan Customs Agency monitors all FTZ imports and exports.
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.: NO
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, financial companies, credit institutions, stock exchange, insurance companies, credit and loan cooperatives, brokerage firms, money exchanges and remitters, credit card issuers, casinos, microfinance organizations, and pawn shops
Number of STRs received and time frame: 153: January 1 - May 15, 2013
Number of CTRs received and time frame: Not applicable
STR covered entities: Banks, financial companies, credit institutions, stock exchange, insurance companies, credit and loan cooperatives, brokerage firms, money exchanges and remitters, credit card issuers, casinos, microfinance organizations, and pawn shops
MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:
Prosecutions: 19 in 2013
Convictions: 4 in 2013
RECORDS EXCHANGE MECHANISM:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Nicaragua is a member of two FATF-style regional bodies, the Caribbean Financial Action Task Force (CFATF), and the Financial Action Task Force on Money Laundering in South America (GAFISUD), which Nicaragua joined in December 2013. Its most recent mutual evaluation can be found at: https://www.cfatf-gafic.org/index.php?option=com_docman&task=cat_view&gid=337&Itemid=418&lang=en
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
Nicaragua made progress in improving its AML/CFT regime. On January 30, 2013, Presidential Decree 07-2013 established the regulations to implement the Financial Intelligence Unit (FIU) Law (Law 793 - approved June 2012). Subsequently, the Superintendency of Banks and other Financial Institutions enacted a regulation requiring covered institutions to register with the FIU and to designate an administrator for their money laundering prevention program. The February 6, 2013 Presidential Decree 09-2013 creates an interagency commission to develop additional legal instruments to prevent and counteract terrorism.
On June 5, 2013, the Government of Nicaragua published Presidential Decree 21-2013, which establishes the ability to freeze terrorist assets without delay. All obligated entities are able to immediately and preventively freeze assets or funds and report it to the FIU within 24 hours. The FIU reports the preventive freeze of assets and/or funds to the Prosecutor’s Office, who then requests resolution from the judiciary. The terms for all actions, including the judicial resolution, cannot exceed 72 hours.
In 2013, The National Microfinance Commission (CONAMI) enacted new regulations on the prevention of money laundering. The Commission trained 18 microfinance institutions on AML/CFT prevention, stressing that each institution develop and implement an AML/CFT prevention manual and code of conduct. One new CONAMI regulation establishes minimum requirements on the measures microfinance institutions should implement or improve to prevent and mitigate the risk of being used, wittingly or unwittingly, for money laundering activities. A second regulation obliges microfinance institutions to have an internal control system in order to minimize risks and ensure compliance with all applicable regulations and laws. The CONAMI and the FIU have enhanced supervisory and monitoring authorities to detect unusual and suspicious transactions.
The Judicial Studies Institute of the Supreme Court of Justice and the FIU carried out 15 national seminars on the AML/CFT legal framework for 420 workers in the criminal justice system.
Previous AML/CFT laws remain in force, including Law 735, which among other things, addresses the prevention, investigation and prosecution of organized crime and the administration of seized, forfeited and abandoned assets; however, its enforcement is insufficient without the political will to create a unit to administer seized and abandoned assets.
The new statutes enacted to criminalize money laundering and terrorist financing will continue to face challenges. Nicaragua should improve efforts to combat corruption and enhance judicial independence.