It is no secret that criminal organizations often hide, hedge or invest the proceeds from their illicit activities (dirty money) through legal businesses in order to legitimize it. This is commonly called money laundering. It is also common knowledge that certain industries, and in particular casinos (both virtual and actual), car sales, art trading and real estate have been commonly targeted by criminal organizations for those illegal purposes. Costa Rica has not been an exception to this trend.
In the last decade, Costa Rica (as most western countries) has strengthened its legal framework to prevent it from becoming the "narcos" (drug cartels) dry cleaning. Just about a month ago, a new executive decree worth commenting upon was published in the official journal, which regulates certain business activities and creates a series of new obligations.
It is called the General Regulation against drug trafficking, money laundry, terrorism financing and organized crime, intended as a new, modern and effective legal instrument which avowed purpose is to adequately respond to the new trends in money laundry and terrorism financing.
To do this, the Regulation develops a set of duties upon certain business activities (including non-financial activities) to prevent funds from criminal sources to be legitimized or actions that could be used to finance terrorist groups and organized crime. Among the regulated and specifically mentioned non-financial business activities are the purchase and sale of real estate, cars, boats, firearms, fine art and jewelry, as well as –in general- casinos and gambling businesses. Professional services are also included in the list. The provisions of the newly published regulation hence call for lawyers, accountants, developers, realtors and private lenders to register before the Financial Intelligence Unit (UIF), a specialized section part of the Drug Control Agency.
Once registered, the now supervised professional will be legally bound to obtain and keep all information on the identity of their clients and/or of the final beneficiary of a given service or transaction, provided the amount of such transactions is at least US $5,000 (more than likely always the case). The professional must have any new client fill-in a "know your client" information form and request the identification document (whether cédula, dimex or passport), and keep a copy in a file they need to open for each such client. If this client is a foreign entity, it is mandatory to request an official certification –duly legalized- providing the names and data of all final shareholders (persons) abroad. Needless to say this is seldom an easy task.
Yet another obligation is that of keeping commercial transaction logs identifying the clients, the service and the business transaction, which records must be kept for at least 5 years. Of course, all this information must be readily available for the UIF at their simple request.
Finally, control protocols and procedures must be created by the aimed professionals or service entities in order to allow them to obtain sufficient information with regards the source of the funds from which the transaction and their own fees will be paid, with special attention to those funds wired from abroad, paid in international or travelers checks or cash. Any suspicious or unusual transactions must be immediately reported to the UIF, and, where multiple cash transactions take place during a month by the same client, or for the profit of a single beneficiary, that exceed US $10,000, these too must be immediately reported.
As you can see, these new rules apply to all such professionals and developers, and entail a legal burden on their shoulders that presumably will affect their business doings, while, in our view, not necessarily proving to be effective in the fight against organized crime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.