Amid concerns sparked by the enactment of Law 1224, the Law for the Protection of Nicaraguans Against Sanctions and External Aggressions, which compels the National Financial System (SFN) to disregard international regulations prohibiting the provision of services to sanctioned individuals for human rights violations or crimes against humanity, the Superintendency of Banks and Other Financial Institutions (SIBOIF) has amended its regulations. The reform establishes that sanctioned clients are considered high-risk and must therefore be reported to the Financial Analysis Unit (UAF).
The reform does not reference the requirement under Law 1224 to provide services to sanctioned individuals. However, it stipulates that offering international financial services to designated individuals must not jeopardize international business relationships. If it does, “financial institutions will determine whether to continue or terminate commercial relationships with these clients.” In other words, international anti-money laundering standards and regulations take precedence. As a result, the most banks can offer sanctioned individuals are basic payroll accounts in local currency, with significant restrictions.
Following the enactment of Law 1224, which challenges international regulations by obligating the National Financial System (SFN) to maintain relationships with sanctioned individuals—despite the risk this poses to the continuity of correspondent relationships with foreign banks that facilitate international transactions—the Superintendency of Banks and Other Financial Institutions (SIBOIF) issued a circular on November 27. This circular sought to ease the concerns of correspondent banks by advising domestic banks not to enforce Law 1224.
SIBOIF adapts regulations to align with new law
In a renewed effort to address the persistent fear that correspondent banks might suspend their services to the country, SIBOIF amended several articles of the regulation on managing and preventing risks related to money laundering, asset laundering, and terrorism financing. This reform was implemented through Resolution CD-SIBOIF-1479-1-NOV29-2024, which was published in the December 2 edition of the official newspaper La Gaceta.
“SIBOIF adjusted the regulation in line with the circular issued on November 27, stating that clients listed as sanctioned individuals must be classified as high-risk clients and reported to the Financial Analysis Unit (UAF) through Suspicious Activity Reports (SARs). I believe SIBOIF makes it clear that sanctioned individuals are high-risk clients and must be treated as such by the banks, including suspending their services if this jeopardizes the banks’ international service agreements,” explains a banking advisor who requested anonymity for fear of reprisals.
The reform to the regulation includes several additions, such as an amendment to Article 6, which pertains to the responsibilities of the board of directors. The following clause was added: “Define and establish, within its AML/CFT Manual, an explicit and written, non-discriminatory policy for the acceptance of clients and/or market segments.”
The reform approved by SIBOIF
But in Article 11 referring to verification, they included “reviewing, the name of clients, beneficiaries, partners, guarantors, representatives and/or signatories, against internal and/or external databases of publicly available risk lists or provided by competent authority or international organizations on persons (natural or legal) in attention or designated…”
While in Section 16, referring to Enhanced Customer Due Diligence (CDD) measures, it states that the entity must apply enhanced CDD to clients “… who appear on national, foreign, international lists, or those of specialized organizations, regarding individuals associated with these risks.”
Finally, to Article 11, referring to verification, the following was added: “Establish enhanced due diligence measures for clients designated on lists and report them to the Financial Analysis Unit (UAF),” and it further states that “it must be verified that for clients designated on these lists, the provision of international financial services does not jeopardize their international business relationships.” Additionally, “financial institutions will determine whether to continue or terminate commercial relationships with these clients.”
Accounts in national currency for sanctioned individuals
According to the expert, with this reform, the Siboif makes it clear that Law 1224, the Law for the Protection of Nicaraguans Against External Sanctions and Aggressions, does not change the situation for those sanctioned in any way.
“At most, a bank can offer them a payroll account in national currency, but they would have to be excluded from all international services, credit cards, etc. In other words, for Siboif, anti-money laundering regulations take precedence over a law that was only celebrated by pro-government media,” says the expert.
He also adds that the reform made by Siboif to the regulation clearly states that these clients are considered high-risk, and banks may close their accounts if they prove that the clients pose a risk to the international contracts held by the institution. In other words, Siboif’s interpretation, as the banking regulatory body, is entirely different from what is outlined in Law 1224. Therefore, “even if the sanctioned client has an account, for instance, a payroll account, the bank must report this situation to the UAF,” he concludes.