Legislative Watch: AML/CFT proposals in El Salvador, Bahamas

El Salvador eyes stricter money laundering rules

El Salvadoran lawmakers have ramped up discussion on draft legislation targeting money laundering activity associated with drug trafficking that seeks cooperation between public and private institutions to attack the problem.

In a preliminary meeting, lawmakers met with representatives from the security ministry, supreme court, attorney general's office (FGR), the UN drug control office, the national anti-drug commission, the central bank, Salvadoran banking association Abansa, and the Caribbean Financial Action Task Force (CFATF).

FGR first introduced the legislation to the assembly in 2018. With the meeting, officials are placing new focus on the bill that establishes a framework for prevention, control and sanctions against money laundering.

According to the legislative news service, the leading lawmaker on the assembly's public safety commission, Antonio Almendáriz (PCN), said that this new law would fill gaps in current legislation, "Criminals are taking advantage of these [gaps] to evade it. Article two [of the current law] was left so generalized that the prosecutor's office can not effectively cooperate with the financial intelligence unit."

Legislator Javier Valdés (FMLN) indicated that they will analyze the initiative and hope to hear the opinions and observations of all the sectors involved, "We must listen to all the sectors, not only the big banks, but also the micro and small ones so that they can express their opinions."

Bahamas forwards digital assets bill

The Bahamian securities regulator (SCB) has released draft legislation that would regulate the issuance or sale of digital tokens in or from within The Bahamas, and how sellers and intermediary service providers should conduct themselves.

Deputy prime minister and finance minister K. Peter Turnquest in recent comments hailed the proposed legislation as having the potential to make the nation a Caribbean leader in fintech/crypto regulations, adding, "We're knocking on the tip of the iceberg," as reported in local news outlet Tribune 242.

Regulators kicked off a public consultation period that ends on May 28 for the Digital Assets and Registered Exchanges bill.

The bill proposes a legislative structure with standards for entry into and participation in the digital token space. These requirements stipulate who may participate, the level of capital required, the rules for reporting and seeking regulatory approval, and the penalties for failure to comply.

Additionally, the proposed legislation requires that participants adhere to established anti-money laundering and counter-financing of terrorism (AML/CFT) laws, ensure data protection measures related to the personal information of clients, and implement measures to prevent data breaches that would jeopardize clients' crypto assets.

SCB chairman Robert Lotmore, cited in local outlet The Bahamas Investor, said the draft legislation is the first of a series that aims to establish a comprehensive approach to crypto assets regulation.

"The SCB has been working in close consultation with the industry on the development of this bill, which we anticipate will be the first piece of a suite of legislation that will establish the regulatory framework for crypto assets in The Bahamas," Lotmore said. "A comprehensive policy position paper will be released next, and the securities commission looks forward to input from the industry and general public on that as well."

The Bahamas has struggled with money-laundering and transparency issues, recently falling on the EU's list of jurisdictions with ineffective AML/CFT policies.

Finance minister Turnquest has stressed that the government views fintech and crypto development as a key pillar in its efforts to reposition the financial services sector, and re-establish a competitive advantage, adding such innovation went "hand in hand" with its technology hub ambitions.