Can Banks request that much information?

Feb 10, 2022 | English Blog

Posted by: Claraliz Oviedo Maglione | Senior Associate at Alvarado y Asociados.

Short answer, yes, they are entitled to do so, as explained below.

Banks are obliged to perform a security review process as mandated by the Normative for The Management Of Prevention of risks of Laundering money, goods or assets, and of the Financing of Terrorism Resolution CD-SIBOIF524-1-MAR5-2008 dated March 2008 as reformed by Resolution: CD-SIBOIF11-2009-576-1-SEA dated March 2009, (Normative PLD/FT), which establish the requirements, guidelines and minimum basic aspects that the supervised entities of the Nicaraguan financial system, must adopt, implement, update and improve, on their own initiative and responsibility, according with the nature of the industry and market in which each of them operates and according to the level of risk of their respective structures, customers, business, products, services, distribution channels and jurisdictions in which it operates; to manage, prevent and mitigate the risk of being used, consciously or unconsciously, locally or cross-border, to launder money, goods or assets; and for the financing of terrorism.

In accordance with article 8 of such Normative, the supervised entity (in this case the bank), on the basis of their specificity and risk profile within the industry in which it operates, must implement its own procedures, measures and adequate internal controls to continuously develop, a policy of “Know Your Client Due Diligence” (DDC) in accordance with the minimum requirements set out in the Normative.

Such Normative was modified in 2009, 2010 and 2012. In 2017 a new normative was issued, Resolution Nº CD-SIBOIF-980-1-ENE18-2017 on January 18, 2017 named Normative for the Management and Prevention of Terrorism Financing Risks; and, of the Financing of the Proliferation of Weapons of Mass Destruction (Normative GPR- FT/FP).

One of the main reasons for the creation of normative of this nature, is precisely to comply with Recommendation No. 7 of the Financial Action Task Force (FATF), that provides that countries must implement targeted financial sanctions to comply with the Resolutions of the Security Council of the United Nations related to the prevention, suppression and interruption of the proliferation of weapons of mass destruction and their financing.

Therefore, on 2018, two Laws were approved: Law 976, Law of the Financial Analysis Unit (Ley de la Unidad de Análisis Financiero-UAF), duly published in the Official Gazette No. 138 of July 20, 2018 and Law No. 977, Anti-Money Laundering Law, Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction (Ley No. 977, Ley Contra el Lavado de Activos, el Financiamiento al Terrorismo y el Financiamiento a la Proliferación de Armas de Destrucción Masiva), published in the Official Gazette No. 138 of July 20, 2018.

Law 977 and its reforms directly provides a list of Obliged Subjects that must inform UAF, without being able to claim reservation or secrecy of any kind, in which Financial Institutions supervised by the Superintendence of Banks are included (therefore, Banks).

As such, and reinforcing the Normative previously mentioned, they are obliged to perform a “Know Your Client Due Diligence” which are a set of measures applied to identify natural persons and legal entities with which they establish and maintain or attempt to establish relations of business or service, including obtaining, verifying and keeping up-to-date and complete information on the origin and provenance of the assets, funds or income from them, their patterns of operations, the products and services they access and their final beneficiaries on whose behalf it is intended to establish a relationship of business; in particular, know the nature of the business and the shareholding and control structure of legal persons and trusts.

The Bank is therefore allowed, to reasonably know who are the majority or significant shareholders and owners that compose a company which is also a partner of a client of the Bank, as well as the real beneficiaries and/or owners of the funds managed; and particularly in the case of Commercial Companies should also identify: i. Persons exercising effective control over its operations, assets, property and businesses in general; ii. Shareholders/key partners, authorized signatory or signatories, or other persons exercising significant control over the company; iii. Partners and other persons exercising ownership control in the case of collective and Limited Partnerships and; iv. Controlling persons, when other companies or trusts exercise control over the company.

The same level of review and scrutiny applies to natural persons, and therefore, when opening an account and subsequently for updating your data, it is totally valid that they require a personal identification document, personal, bank or commercial references, the origin of the funds, assets or merchandise you deposit, certificates and/or licenses and/or permits, or documents equivalents, as applicable according to your activity, among others.

Supervised entities, without prejudice to criminal, civil, administrative and other responsibilities that in accordance with the applicable laws they can be established, can be sanctioned financially by the Superintendent of Banks and of Other Financial Institutions.

Based on the foregoing, remember that a file must exist regarding yourself or the Company you represent, and such file must contain all information that is reasonably applicable to identify you, your business, and your financial activities, in order to open and maintain accounts in such financial institution.

If you have any doubt about the reach of this normative, don’t hesitate to contact us.