Last Updated: 19/09/2011
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, analyzing and forwarding to the competent criminal prosecution authorities any financial information that arise 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 Analysis Unit. The role of 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 beside the UAF.
ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?
Lawyers do not directly have specific obligations to report any client transaction they suspect to be involved in money laundering activities to the UAF. Lawyers are, however, covered by 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 acknowledge 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 facilitating money laundering. Furthermore, Article 33 specially provides with the penalty of deprivation of the license to perform as a lawyer (“disbarment”) in case the professional is convicted for a crime established in the Act.
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 modification was 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 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 within the following parts of Chilean law:
In addition, the UAF is authorized by Act.19,913 to issue administrative instructions known as circulares, in which the organism imparts practical guidance and supplies its own interpretation of the laws and duties that the subjects are obliged to
Besides the internal regulation, Chile has subscribed and ratified several international treaties related to money laundering, such as The Convention of Palermo on International Organized Crime and the U.N. Convention of Vienna against Narcotics and Psychotropic Drugs, agreements that in Chile are regarded as any other internal law.
Interestingly, Chile's constitutional court ruled parts of one of the country's anti-money laundering laws unconstitutional, in 2006. The ruling threatened the legal validity of an Act that the Chilean parliament passed in August 2005, which laid down rules of reporting and penalties for obstructing the flow of information to the financial intelligence unit. This ruling was issued based on bank secrecy regulations in force in such time. However, bank secrecy has been weakened in Chile pursuant to the implementation of OECD principles.
Finally, a 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’ 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 penalized 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 Perú which allowlawyers of these nationalities to practice law in Chile. Previously, they must obtain a certificate provided by the University of Chile and apply for a law license, which is granted by the Supreme Court.
Regarding visiting lawyers, in practice they may advise Chilean or foreign clients in private issues but litigation before local courts. Such lawyers are subject to the same legal obligations regarding Anti-Money Laundering than local lawyers, as, according to article 14 of the Civil Code, Chilean Law is mandatory to all the 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 has issued certain guidelines for lawyers. Lawyers who are members of the Chilean Bar Association (membership is not compulsory in Chile) are required to "make reasonable efforts to know and conclusively identify clients" and should not otherwise act for them as attorneys-in-fact.
Also, a ruling (circular) issued by the UAF on September 30, 2008, states that public notaries must keep a record of a client’s personal background where the transaction concerned involves over 1000 Unidades de Fomento (approximately US$42,500). This personal background information includes the name of the clients’ attorney, if he or she intervenes.
IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?
Bar enrolment is not mandatory for Chilean lawyers but voluntary. Consequently, the Bar Association may only oversee ethical behaviour of its members and may apply ethical sanctions.
DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.
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.
ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?
No, lawyers are not under such a duty.
ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?
No, lawyers are not under such a duty
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 activity suspicious of money laundering.
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 specialized offices, as in other countries). Lawyers are under no obligation to report due to the protection afforded by the Chilean Legislature towards Legal Professional Privilege (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 UAF requests confidential information which falls under a lawyer’s private duties, it must first obtain an authorization granted by the Court of Appeals.
On the other hand, entities subject to 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 AML Act, lawyers are not called to report. Nevertheless, AML Act penalizes 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, AML Act penalizes those who negligently did not know the illicit origin of the assets.
Finally, AML Act criminally penalizes 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, previous authorization 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.
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.
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 be 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 Chileans Prosecutors Office (Ministerio Público) and all Judges to inform to the Chilean General Comptrollership (Contraloría General de la República) a list of all the lawyers that represent in trial defendants imputed of crimes regarded in that law. Even though it is unspoken in the law, this provision is evidently addressed to money laundering control.
The attorney gets 'black listed', and his name and personal data will be eventually sent to the Chilean Internal Revenue Service (Servicio de Impuestos Internos) and other Governmental entities that may require this information for further supervision - specially on the counsellor's income statements to be done in the future.
HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?
Mr Yieninson Yapur, attorney of Mr Luis Mazza, owner of the Bureau de Change “Turismo Costa Brava”, who is also accused for money laundering offences, has been prosecuted by Criminal Judge No. 32 of Santiago for hiding assets of clients violating anti-money laundering legislation. Mr Yapur was also prosecuted for other anti-money laundering offences by the Second Prosecutor of Organized Crime of Peru.
On February 2, 2008, Chilean Attorney Mr Ricardo Schomburgk was indicted for asset laundering. The court prosecuted Mr. Schomburgk considering that he knowingly incorporated and subsequently participated as legal counsel and general manager of a company (Aero Continente Chile, a Peruvian Airline Chilean subsidiary) that was financed by and operated airplanes purchased with funds obtained from drug traffic.
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.
Further to the 2006 mutual evaluation, on December 2010 GAFISUD carried another mutual evaluation of Chile’s AML legislation.
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:
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1. Helen O'Gorman, “Mutual evaluation (GAFISUD) scolds Chile on seven points”, 25 January 2007, www.complinet.com.