On Oct. 4, the Financial Crimes Enforcement Network issued an advisory to alert U.S. financial institutions of the increasing risk that proceeds of political corruption from Nicaragua may enter the U.S. financial system.
FinCEN said it expects that senior foreign political figures connected to the regime of Nicaraguan President Daniel Ortega could react to the perceived threat of further unrest, potential sanctions, or other factors by moving assets out of their accounts in Nicaragua or elsewhere. These assets could be the proceeds of corruption, and they may be directed into U.S. accounts, or laundered through the U.S. financial system, it says.
FinCEN requests that financial institutions file Suspicious Activity Reports, consistent with their existing Bank Secrecy Act obligations, when they identify potential misuse of Nicaraguan public funds or potential proceeds of political corruption associated with senior foreign political figures connected to the Ortega regime.
In addition to their general due diligence requirements, covered financial institutions are required to implement a due diligence program for private banking accounts held for non-U.S. persons designed to detect and report any known or suspected money laundering or other suspicious activity through those accounts. This program must also be designed to determine whether any such account is held by, or on behalf of, a senior foreign political figure; and, if so, these institutions must apply enhanced scrutiny reasonably designed to detect and report “transactions that may involve the proceeds of foreign corruption.”
As part of their risk-based implementation of these requirements, financial institutions should consider whether they have any financial contact with persons or entities (foreign or otherwise) that may be acting directly or indirectly for or on behalf of any senior political figures of the Government of Nicaragua.
FinCEN also reminded financial institutions of their obligation to implement due diligence programs for correspondent accounts they maintain for foreign financial institutions that include appropriate, specific, risk-based and, where necessary, enhanced policies, procedures, and controls reasonably designed to detect and report known or suspected money laundering activity involving such accounts.
FinCEN requests that financial institutions reference this advisory by including the key term “Nicaragua FIN-2018-A005” in the SAR narrative and in appropriate SAR fields to indicate a connection between the suspicious activity being reported and the persons and activities highlighted in the advisory.
“For years, Nicaragua’s President Daniel Ortega and his government have held fraudulent elections, suppressed civil society and independent media, and stolen money from government funds,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker said in a statement. “The international financial community must be on guard to prevent exploitation by corrupt regime insiders.”
“Given the oppressive and corrupt conduct of the Ortega regime, and resulting unrest in Nicaragua, people and companies associated with or linked to the Ortega regime may try to move corruption-related assets out of Nicaragua,” added FinCEN Director Kenneth Blanco. “U.S. financial institutions are an important line of defense against corrupt and bloodstained money flowing through our system, and we are advising our partners in the financial sector to be on high alert.”
The advisory is underscored by the actions Treasury has taken against Nicaraguan officials involved in corruption and human rights abuse. To date, Treasury’s Office of Foreign Assets Control (OFAC) has designated four senior officials—within the Nicaraguan government, the Sandinista National Liberation Front, and ALBA de Nicaragua (ALBANISA), the company that imports and sells Venezuelan petroleum products—under the Global Magnitsky authority, which enables Treasury to target corrupt officials, human rights abusers, and their facilitators around the world.
FinCEN previously published a June 2018 “Advisory on Human Rights Abuses Enabled by Corrupt Senior Foreign Political Figures and Their Financial Facilitators” in which it identified typologies and red flags illustrating how corrupt senior foreign political figures and their facilitators access the U.S. financial system to obscure and launder the proceeds of high-level political corruption.
Financial institutions may reference the current advisory together with the June 2018 advisory, FinCEN says.