This is a guest post of RCTZZ Abogados in Argentina.
Argentina’s Financial Information Unit (FIU), the governmental authority that enforces the law on prevention of money-laundering activities and terrorism financing has introduced a resolution stating that financial institutions (FIs) are obligated to review their systems with the goal of preventing money laundering and terrorism financing (AML/TF). Resolution Nr. 30-E/2017 (Res. 30) requires FIs as “obliged subjects” –ie, FIU’s reporting agents – to review their AML/TF systems at two levels, externally and internally.
The rule requires FIs to use an independent external auditor (IEA) with proven expertise in the prevention of money laundering and terrorism financing to issue a yearly report about the quality and effectiveness of their AML/TF measures. The report should include an assessment of the appropriateness of their underlying corporate governance rules. Any areas, processes and other topics that the auditor finds ineffective should be identified in the report; the report should also introduce a plan to correct these flaws, with a detailed schedule.
To support the practical application of Res. 30, FIU issued Resolution 67-E/2017 (October 9, 2017) (Res. 67), creating the Registry of Independent External Auditors of AML/TF and setting out such auditors’ qualification requirements, factors incompatible with serving as an AML/TF auditor, the registration process, the contents of their reports and a disciplinary regime. The Registry shall be open to public access.
Qualification requirements to become an IEA are a university degree, a sound background in AML/TF issues and at least five years of professional experience related to AML/TF.
Incompatibiltiy factors may include being:
- a partner, shareholders, director or member of the supervisory committee or syndic of the obliged subject that hired the IEA or of persons or entities economically related thereto
- a spouse or relative of the controlling partner or shareholder of the obliged subject, having decision power over it or over a member of the board of directors or the supervisory committee or syndic of the obliged subject that hired the IEA (incompatibility includes next of kin by blood and affinity to the third degree)
- an employee of the obliged subject that hired an IEA or of entities of the same economic group
- An external auditor and/or partner of the external auditor’s firm of the obliged subject at the same time (this impediment extends to the economic group)
- a borrower and/or a creditor of the obliged subject in an amount that may affect the independence of its duties and
- other conflicts of interests of a personal, labor, economic or financial nature that may affect the IEA’s independence.
Obtaining approval for an IEA
An obliged subject seeking to fulfill its obligation should request the registration of one or more IEAs in the Registry by e-filing several pieces of information and documents about the IEA????. The obliged subject must preserve a record of the IEA with all this information available for the FIU for five years. The IEA may practice only after the corresponding validation of its record in the Registry is issued.
Contents of the report
The IEA audit or review report shall describe in detail the internal control measures in place, assess its operative efficacy and, if applicable, propose possible corrections or improvements. The IEA’s report is not a financial statement’s audit report.
The report shall be confidential. It shall include at least some of the following information:
- The term of review (which may not be longer than one year vis-à-vis the previous term) that need not coincide with the FI’s fiscal year closing date
- The scope of works (risk management assessment, corporate governance and internal policies and rules, KYC policy compliance, monitoring and reporting systems, clients’ record keeping, regulatory compliance, training plan and internal controls on AML/TF)
- An opinion about the quality and effectiveness of the AML/TF System and
- The findings, suggested measures and proposed schedule of compliance.
Annual reporting deadline
By September 15 every year, the IEA should inform the FIU of the results of its reports. FIU may request the IEA’s reports and working papers.
Penalties in case of infringements
In case of infringements of Res. 67, IEAs may be subject to warnings, suspension from the Registry (for a period ranging from six months to two years), exclusion from the Registry (for up to five years).
Things to come
Res. 67 enters force on December 31, 2017.
We should expect intense activity on this matter from the FIU in the coming months. Res. 67 will certainly attract AML/TF professional firms eager to provide independent external review or audit services and become leaders in this market.
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Hernán D. Camarero, Partner in Richards, Cardinal, Tützer, Zabala & Zaefferer’s Corporate/M&A, Banking and Finance and FX Controls practices.
Please do not hesitate to contact the author at Richards, Cardinal, Tutzer, Zabala & Zaefferer s.c. –Abogados-, an independent law firm in Argentina, www.rctzz.com.ar for further information at email@example.com.
 § 19, Par. a), AML Act.
 This cause shall be enforceable while the Central Bank of Argentina’s rules mandate FIs’ external auditors to issue a report on AML/TF within the framework of their external audits.
 Such as inter alia money remittances companies, gambling companies, stock broker-dealers, investment funds managing companies, marchands, insurance companies, credit card companies, Argentine Securities and Exchange Commission, valuables transportation companies, couriers, insurance agents, accountants, realtors, car manufacturers and car dealers, and trustees.
 Please see our article published at https://www.latamlawblog.com/2017/07/argentina-financial-information-units-new-aml-regulations-for-financial-institutions/.