Suspected Money Launderers Can Maintain Bank Accounts in El Salvador

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New regulation allows suspected money launderers to maintain bank accounts, even while under prosecution

The head of El Salvador’s financial regulatory agency has instructed banks not to close the accounts of suspected or formally accused money launderers, the latest in a long line of incidents that expose El Salvador’s hollow fight against graft.

In December, Héctor Gustavo Villatoro, the head of El Salvador’s Financial System Superintendence (Superintendencia del Sistema Financiera – SSF) released a memo forbidding banks from severing commercial ties with alleged financial criminals. The memo state that banks “cannot terminate commercial relations founded in a decision of presumed culpability,” directly opposing the country’s chief anti-money laundering law.

By contradicting El Salvador’s Law Against Money Laundering and Other Assets, the new regulation permits suspected money launderers to control their assets, even after the start of criminal court cases. Accusations against several high-profile figures in recent years demonstrate who stands to benefit from such a policy – namely, government officials and economic elites implicated in bribery schemes and money laundering operations.

SEE ALSO: El Salvador’s Nayib Bukele Tainted by Money Laundering Allegations

In 2016, El Salvador’s ex-Attorney General, Luis Mártinez, and a prominent businessman, Enrique Rais, were arrested for conspiring to defraud the judicial system. The two men were found to have created an organized crime structure that bribed public officials to obtain court rulings favorable to Rais’ waste disposal company.

Mártinez, in turn, was accused of converting the Attorney General’s Office into a pay-to-play shop, where he accepted lucrative gifts in exchange for stopping or delaying corruption investigations. While Mártinez is in prison awaiting trial, Rais remains at large, living in a luxurious hideout in Switzerland – his bank account has yet to be closed.

The man behind El Salvador’s new regulation, Gustavo Villatoro, was appointed director of the SSF in July 2020. Prior, Villatoro served as director of customs under ex-president Elías Antonio Saca, who later faced corruption charges. In 2018, Saca pled guilty to charges of embezzlement and money laundering, receiving a 10-year prison sentence.

The successful prosecution of Antonio Saca was considered a significant win for El Salvador’s fight against financial crimes. In 2019, the country added 15 prosecutors to money laundering and asset forfeiture units and obtained its first money laundering convictions against MS-13 gang members. El Salvador was also reinstated in the Egmont group, an international association of Financial Intelligence Units dedicated to upholding international standards against money laundering and terrorist financing.

InSight Crime Analysis

Despite El Salvador’s participation in international anti-money laundering efforts, the SSF’s new regulation legitimizes legal loopholes that allow corrupt officials to maintain control over their assets, even while fleeing prosecution.

El Salvador was suspended from the Egmont group in 2016 after then-President Salvador Sánchez Cerén vetoed a proposed amendment that would have given autonomy to the Attorney General’s Office’s Financial Investigation Unit (Unidad de Investigación Financiera – UIF), shielding it from external powers.

SEE ALSO: Corruption Cries Mount Over Pandemic Spending in El Salvador

Under El Salvador’s current anti-money laundering law, banks are required to report suspicious activity to the UIF, which has the power to freeze and seize criminal assets, depriving criminals of ill-gotten gains and preventing their pre-trail escape. Despite Villatoro’s assertion that the new regulation prevents account closures to preserve evidence, the regulation undermines the autonomy of the UIF and insulates officials against corruption charges, ensuring that, even in the case of prosecution, their assets could facilitate a pre-trial escape.

A 2020 US Department of State report on money laundering and financial crimes in El Salvador praised the country for making great advances in seizing and forfeiting criminal asset.

But for the time being, money laundering, embezzlement, and bribery schemes remain condoned practices for many government officials and economic elites.

This post was originally posted on InSight Crime – View Original Article

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