Last Updated: 18/07/2014
CENTRAL AUTHORITY FOR REPORTING.
The Chilean Financial Intelligence Unit (Unidad de Análisis Financiero – “UAF”), was created by Act. No.19.913. The UAF is an independent, public legal person, with its own patrimony and related to the Chilean Government through the Public Treasury Secretary (Ministerio de Hacienda). The UAF is chaired by a National Director, who is appointed by the President of the Nation. The UAF is a member of the Egmont Group.
The UAF has the duty of requesting, receiving, analysing and forwarding to the competent criminal prosecution authorities any financial information that arouses suspicions of money laundering activities. It has no jurisdiction regarding the prevention and investigation of terrorism financing. The UAF can also provide information directly to the courts that are dealing with asset laundering cases.
Article 3 of Act No. 19,913 imposes a duty for all covered subjects -- including banks, stock exchanges, casinos, realtors, among many others businesses -- to appoint an official or compliance officer responsible for relations with the Financial Intelligence Unit. The role of the compliance officer is to monitor the implementation of existing national rules on the issues of money laundering and terrorist financing.
The compliance officer analyses and subsequently reports suspicious transactions to the UAF. They are also responsible for submitting records of cash transactions exceeding 450 Chilean Index Units (Unidades de Fomento) (approx. US$ 20,000).
OTHER ANTI-MONEY LAUNDERING REGULATOR(S).
No other regulators besides the UAF.
However, other regulatory agencies such as the Superintendency of Banks and Financial Institutions (Superintendencia de Bancos e Instituciones Financieras), the Superintendency of Securities and Insurance (Superintendencia de Valores y Seguros), Superintendency of Pension Funds (Superintendencia de Fondos de Pensiones), and the Superintendence of Casinos (Superintendencia de Casinos), among others, issue regulations for their respective regulated entities, which are consistent with the regulations issued by the UAF.
ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?
Lawyers do not have specific obligations to report to the UAF any client transaction they suspect to be involved in money laundering activities. Lawyers, however, fall under the general obligations under Chilean law to report certain transactions.
Lawyers, like other Chilean citizens, are also subjected to Chile’s criminal law provisions, including those enacted by the AML Act pursuant to their professional activities if they are involved in money laundering or facilitate the laundering of money by their clients. Under the provisions of Articles 27 and 28 of the AML Act, a lawyer is liable to financial penalties and/or imprisonment if they hide the origin of any kind of goods, knowing or being able to know that they were obtained as a result of the commission of terrorist activities, drug trafficking or other felonies indicated in the law.
The articles also detail criminal consequences for any individual found guilty of taking part in any association created with the purpose of facilitating money laundering. Furthermore, Article 33 specifically provides the penalty of disability to practice the legal profession.
LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.
The main legislation which addresses money laundering is Act No. 19,913, known as the Chilean Anti-Money Laundering Act (the “AML Act”). This Act was published in the Official Gazette on December 18, 2003, and its most relevant modifications were Act No. 20,119, published in the Official Gazette on August 31, 2006 and Act No. 20,393 published in the Official Gazette on December 2, 2009.
The AML Act defines the offence of money and asset laundering as the concealment or disguise, in any fashion, of the illegal origin of specific goods, knowing that they stem directly or indirectly, from some criminal offences described in a closed list of criminal provisions. This definition means that the Act sets forth a restricted list of predicate criminal offences that constitute the origin of money and/or assets which may then be laundered.
The predicate criminal offences in the list are to be found in the following Chilean laws:
Act Number 20,000 on Illegal Trafficking of Narcotic and Psychotropic Drugs;
Act Number 18,314 on Terrorist Conducts;
Article 10 of Act Number 17,798 on Weapons Control;
Title XI of the Law 18,045, Securities Market Actof 1981;
Title XVII of Decree with Force of Law Number 3 of 1997, issued by the Ministry of Finance, that contains the General Banking Act;
Paragraphs four, five, six and nine of Title V of Book II of the Chilean Criminal Code; and
Sections 141, 142, 366 quarter, 367 and 367bis of the Chilean Criminal Code.
There is a bill in Congress that extends and adds to the existing predicate criminal offenses, empowers the Attorney General (Ministerio Público) to access information on bank secrecy, and empowers the UAF to investigate terrorist financing, and other matters. It is expected that the law will be issued during 2014.
In addition, the UAF is authorised by Act.19,913 to issue administrative instructions known as circulares, in which the UAF imparts practical guidance and interprets the laws and duties that the regulated subjects are obliged to follow.
Besides its internal regulations, Chile has subscribed and ratified several international treaties related to money laundering, such as The Convention of Palermo on International Organised Crime and the U.N. Convention of Vienna against Narcotics and Psychotropic Drugs.
Finally, at the end of 2009, Act No. 20.393 which imposed Corporate Criminal Liability for companies involved in money laundering, bribery to national/international public officers and terrorist finance, entered into force. This act was enacted after Chile’s accession to OECD in order to demonstrate its commitment to prevent such crimes using corporation assets or agents.
Companies involved in such crimes may be penalised with prohibition to celebrate contracts with the government, tax benefit cancellations, publication of the judgment in the Official Gazette or any other newspaper, and in grave cases ultimately with the company’s dissolution and loss of legal personality.
Act No. 20.393 allows companies to implement and certify a Prevention Policy in order to avoid the aforementioned crimes. A company that does so is entitled to apply for a penalty exemption or reduction. Companies that do not have a Prevention Policy duly certified by independent auditors may be penalized with the maximum penalties in the event the aforesaid crimes occur.
These provisions affect law firms, in the same way that they affect any other company.
ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?
Notwithstanding some special provisions included in international treaties, lawyers licensed abroad are not allowed to litigate before Chilean courts since law licenses are granted only to Chilean citizens and foreign residents that have studied a full law programme in Chile (Código Orgánico de Tribunales, article 523/526).
Currently, Chile has ratified international treaties with Ecuador, Uruguay, Colombia, Brazil, Bolivia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Peru which allow lawyers of these nationalities to practice law in Chile. Previously, they had to obtain a certificate provided by the University of Chile and apply for a law license, which is granted by the Supreme Court.
In practice visiting lawyers may advise Chilean or foreign clients in private issues, excluding litigation before local courts. These lawyers are subject to the same legal obligations regarding Anti-Money Laundering as local lawyers, as, according to article 14 of the Civil Code, Chilean Law is mandatory to all inhabitants of Chile, regardless of their nationality.
LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.
The Chilean Bar Association issued certain guidelines for lawyers on May 7, 2014 (the “Recommendations”). Lawyers who are members of the Chilean Bar Association (membership is not compulsory) are required to follow these guidelines and assist in the prevention of this crime. http://www.colegioabogados.cl/.
These guidelines include recommendations for recognising hazardous situations before laundering risk operations and taking corresponding preventive measures.
Similarly, certain professions or functions whose exercise is legally allowed only for lawyers (Public Notary and Land Register), are required to maintain records of transactions that exceed certain amounts, available to the UAF, and to report suspicious transactions. These records include the names of the clients of the lawyer, if he or she is involved.
IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?
Bar enrolment is voluntary for Chilean lawyers. Consequently, the Bar Association may only oversee ethical behaviour of its members and may apply ethical sanctions.
As already stated, the Bar Association has issued a Guide to Good Practice Recommendations for Detecting and Combatting Money Laundering and Drug Trafficking.
This guide establishes certain requirements to determine whether the services required by the client carry a risk of being part of a money laundering operation, including customer inquiries regarding their activities, the final beneficiary of the service, the nature of it, the amounts involved, origin and source of the money, whether it involves politically exposed persons, etc.
DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.
Entities regulated by the UAF must demonstrate, through the existence of adequate know your customer policies and manuals, that they have adopted a policy of crime prevention. This policy, in general, is based on the scrutiny of the customer and its business to determine risk profiles and detect suspicious transactions.
Apart from the Chilean Bar Association voluntary guidelines, there are no regulations or guidelines for lawyers regarding client identification and verification. As previously mentioned, anti-money laundering laws do not impose an obligation on lawyers to investigate or report client activities.
DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?
No, lawyers are not under such a duty. However, the Recommendations of the Bar Association contain a basic due diligence approach based on risk.
ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?
No, lawyers are not under such a duty. However, the Recommendations recognise as a risk factor the fact that the client is related to PEPs, and greater diligence is recommended in such cases.
ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?
No, lawyers are not under such a duty. However, in the aforementioned Recommendations, operations that include entities that are subject to regulations or special controls, such as companies traded on the Stock Exchange are recognised as less risky.
ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.
WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?
Lawyers, with the exception of Notary Publics and Land Registrars (Conservadores de Bienes Raíces), are not subject to a general obligation to report suspicious activities.
This applies even to lawyers that mainly deal with the incorporation of companies and trusts (in Chile, these activities are carried out by law offices and not by resident agents or other specialised offices, as in other countries). Lawyers are under no obligation to report due to the Chilean Law's professional secrecy rules (lawyer-client confidentiality rules).
In accordance with the AML Act, Notary Publics and Land Registrars -- both of which are lawyers that hold special trust offices -- are subject to the same specific obligation to report suspicious activities to the UAF as other institutions dealing with the transfer of monies, such as banks and financial institutions, brokerage firms, financial leasing companies, securitisation companies, general fund-managing companies, investment fund-managing companies and money exchange firms, among other entities.
Suspicious transaction means any act, operation or transaction that, pursuant to the uses and customs of the activity in question, appears unusual or apparently lacking in economic or legal purpose. The activity in question may be carried out once or repeatedly.
Those who report information that pertains to suspicious transactions in good faith are exempt from all legal liability.
DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?
When the UAF requests confidential information which falls under a lawyer’s private duties, it must first obtain an authorisation granted by the Court of Appeals.The application of legal privilege is reviewed on a case by case basis.
On the other hand, entities subject to the Anti-Money Laundering Act (AML Act) must report suspicious transactions activities even if such information falls under any obligation of confidentiality (legal, regulatory or contractual).
DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?
There is no specific indemnity for lawyers under Chilean Law.
However, anybody who reports information that pertains to suspicious transactions in good faith is exempt from all legal liability.
ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?
According to the AML Act, lawyers are not called to report. Nevertheless, the AML Act penalises with criminal sanctions those who manage information regarding the illicit origin of the assets but decide to omit or hide such information to AML authorities.
On the other hand, the AML Act also penalises those who negligently did not know the illicit origin of the assets.
Finally, the AML Act criminally penalises those who purchase, manage or use such assets, knowing they come from the commission of a crime.
IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.
According to Article 6 of the AML Act, entities under duty to report or entities called to inform, with previous authorisation granted by the Court of Appeals, must not tip-off regarding suspicious transaction reports, investigations in progress or information provided to the UAF.
DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.
There are no express restrictions on accepting a new client. Eventually, limitations may come from the duty, applicable to any entity or person, to inform AML authorities regarding the illicit origin of the assets. The Recommendations deliver risk-based criteria for deciding not to accept a client.
ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.
There are no express obligations regarding monitoring of existing clients. Eventually, obligations may arise from the duty, applicable to any entity or person, to inform AML authorities regarding the illicit origin of the assets as soon as a lawyer knows of the situation.The aforementioned Recommendations suggest monitoring of client operations, when there is medium risk.
DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.
As explained, lawyers do not have specific obligations regarding anti-money laundering.
However, like any other person in Chile, lawyers are subject to the common criminal law and may therefore be eventually considered, pursuant to the provisions on criminal participation, as principals, accomplices or aiders if they knowingly participate in money laundering acts or facilitate the laundering of money by their clients.
It is interesting to acknowledge that Act Number 20,000 on Illegal Trafficking of Narcotic and Psychotropic Drugs obligates the Chilean Prosecutors Office (Ministerio Público) and all Judges to inform the Chilean General Comptrollership (Contraloría General de la República) with a list of all the lawyers that represent in trial defendants imputed of crimes regarded in that law. Those who are on that list are not eligible for office or employment in the public service.
HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?
Some lawyers have been prosecuted and/or convicted for being part of organised criminal groups, for laundering money for them or for collaborating with such unlawful conduct, but there is no specific public register of attorneys in this situation.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) OR A FATF-STYLE REGIONAL BODY CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
Chile is a member of the South American Financial Action Task Force on Money Laundering (GAFISUD), a Financial Action Task Force-style regional body. A mutual evaluation of Chile’s AML legislation was carried out by GAFISUD on 2010. The report is available here.
The evaluation team expressed concerns about the fact that despite evidence showing that lawyers are also involved in money laundering activities, they are not subject to suspicious transaction reporting requirements.
Information supplied by:
Chirgwin Larreta Peñafiel
Av. Nueva Tajamar 481, 21st Floor,
World Trade Center, South Tower
Las Condes - Santiago - Chile
Tel.: +56 2 429 0850
Fax: +56 2 429 0860