On December 13, 2016, Tribunal V of the Federal Administrative Court of Appeals confirmed Resolution No. 721 issued by the Superintendent of Financial and Exchange Institutions of the Central Bank of the Argentine Republic, which fined Banco de Galicia y Buenos Aires S.A. and the members of its Board of Directors for a total of AR$1,353,000, for infractions to the “know your customer” policy implemented by Communiqué “A” 3094.
Tribunal V of the Federal Administrative Court of Appeals, in re: “Banco Galicia y Buenos Aires S.A. y Otros c/ Banco Central de la República Argentina s/ Entidades Financieras – Ley 21.526 – Art. 42” confirmed Resolution No. 721 dated October 10, 2013 (the “Resolution”) issued by the Central Bank of the Argentine Republic (the “Central Bank”), thus upholding the fines imposed by such entity on the Banco de Galicia y Buenos Aires S.A. (“Galicia”) and the members of its Board of Directors for a total amount of AR$1,353,000.
At the time of imposing the fines, the Central Bank considered that Banco Galicia had breached its duty to implement appropriate “know your customer” policies regarding Messrs. Huei Chi Wen and Yen Ting Wen, both customers of Banco Galicia, as it did not hold customer profiles for the abovementioned customers when such were requested by the Central Bank, as per # 184.108.40.206. of Communiqué “A” 3044 (the “Communiqué”).
Banco Galicia and the members of its Board of Directors appealed the Resolution. They argued that the Central Bank lacked the power to establish sanctions in matters related to money-laundering and terrorism financing which were exclusively attributed to the Financial Information Unit (Unidad de Información Financiera, “UIF”) through Law No. 25,246 Moreover, Banco Galicia argued that such powers are not considered in the Central Bank’s By-Laws. Banco Galicia further stated that the alleged infractions (occurred between 2001 and 2005) have lapsed under the applicable statute of limitations. Regarding the customer files, Banco Galicia stated that they were made by the customer’s previous bank, which was later acquired by Banco Galicia. Additionally, they argued that the members of the Board of Directors had no responsibility on the basis of their lack of involvement in the process. Finally, Banco Galicia maintained that the fines applied were excessive and arbitrary, due to the Central Bank’s lack of grounds in setting the amounts.
Upon confirming the Resolution, Tribunal V argued that the creation of the UIF “(…) may not be understood as an obstacle for the Central Bank to exercise regulatory and oversight powers which are innate to the due auditing of financial activities regarding financial and exchange institutions; extending to the regulation of aspects complementary to those regulated in the specific regime established by Law No. 25,246” and pointed that the Supreme Court has stated in the past that the Central Bank holds banking or financial police powers. In such sense, Tribunal V argued that such police powers, alongside the Central Bank’s power to apply sanctions, only apply to certain entities which carry out an activity of a specific nature, which must adjust to the dispositions and control of the Central Bank, framework in which the Communiqué was enacted.
Furthermore, Tribunal V maintained that the infractions had not lapsed, since the commission of new infractions interrupts the statute of limitation period of prior infractions, and, as the case was a part of “penal administrative law”, the criminal statute of limitation principles which would impede such interpretation do not apply. Banco Galicia’s argument regarding its lack of responsibility for the creation of customer files due to the fact that even if ABN AMRO Bank (later acquired by Banco Galicia) had put together such files, Banco Galicia should have kept such files in order to comply with the communiqué.
On the other hand, Tribunal V argued that the members of the Board of Directors’ responsibility was maintained due to “culpa in vigilando”, since such responsibility could not be displaced and that if “(…) only those individuals who had a personal and direct intervention in the reproachable actions or omissions could be held responsible, all the administrative regulatory regime which regulates foreign exchange would be reduced to irrelevancy.”.
Finally, the case was returned to the Central Bank so that the fines could be corrected and imposed with proper rationale in accordance with the applicable law and the particulars of the case.
This precedent upholds the co-existing regimes imposed by both the UIF and the Central Bank, which financial institutions must comply with regarding money-laundering and terrorism financing regulations.
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