Published, October 6, 2023.

by Miguel Cassagne

Introduction

In an increasingly interconnected world, illicit activities related to money laundering and terrorist financing represent a global threat that requires strong and effective responses.

Argentina, as a committed member of the Financial Action Task Force (FATF), has recognized the importance of adapting its regulations and strengthening its prevention system.

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One of the crucial areas in this process is the sanctioning regime, which plays a fundamental role in deterring both illicit activities and non-compliance by Obligated Entities in meeting the requirements and provisions imposed by current regulations regarding the implementation and daily administration of Anti-Money Laundering and Counter-Terrorist Financing Policies.

In this article, we will explore the proposed changes in Argentina's sanctioning regime through the Reform Project of Law No. 25,246 and its significance in the fight against money laundering and terrorist financing.

Chapter I: Strengthening the Sanctioning Regime.

The reform project proposes a series of fundamental changes that have the potential to significantly strengthen Argentina's sanctioning regime, which we will detail below:

I.1. Module System for Determining Fines.

One of the most significant reforms proposed by the project is the introduction of a module system to calculate the amount of fines to be imposed on obligated entities for non-compliance. This approach provides greater flexibility and adaptability in the application of sanctions.

I.2. Expanded Range of Fines.

The reform project establishes a new range of fines that represents a significant increase compared to current law. The minimum fine, which is currently $10,000, would be raised to $300,000, and the maximum fine, which is currently $100,000, would increase to the staggering amount of $50,000,000 per offense. This increase aims to deter and sanction non-compliance with established obligations more effectively.

This expanded range recognizes the seriousness of violations and seeks to ensure that sanctions are proportionate to the offense committed. It also aims to discourage any attempt to evade responsibilities in the prevention of money laundering and terrorist financing.

I.3. Elimination of Fine Aggravating Factors.

Furthermore, the Reform Project eliminates the aggravating factors incorporated into the current Article 23 of Law No. 25,246, which establishes that "when the act has been committed recklessly or with serious imprudence by the organ or executor of a legal entity or by several of its organs or executors, the fine imposed on the legal entity shall be twenty percent (20%) to sixty percent (60%) of the value of the assets subject to the offense," and that "When the organ or executor of a legal entity has committed the offense referred to in Article 22 of this law in that capacity, the legal entity shall be subject to a fine of fifty thousand pesos ($50,000) to five hundred thousand pesos ($500,000)."

I.4. Additional Sanctions.

In addition to monetary fines, the reform project introduces a series of additional sanctions. These sanctions aim to address non-compliance more comprehensively and effectively. Some of the additional sanctions include:

- Warning: In less serious cases, a warning will be issued instead of a monetary fine. This serves as a formal warning to the obligated entity and encourages it to correct its behavior without incurring financial penalties.

- Disqualification: The project proposes disqualifications of up to five (5) years for carrying out functions as a compliance officer or a member of the management body in the case of offenses committed by legal entities. This measure aims to ensure that those in key roles in organizations fulfill their responsibilities diligently.

- Revocation of Authorization and License: In cases of serious non-compliance, the project provides for the revocation of the authorization to operate and/or the enabling license for the exercise of the activity. This can have devastating consequences for obligated entities and is an extreme measure intended to ensure compliance with obligations.

These additional sanctions will be applied proportionally and fairly, taking into account the severity of the violation and other relevant factors.

I.5. Solidarity in Sanctions for Legal Entities.

In the case of offenses committed by legal entities, the project establishes that monetary sanctions will be applied not only to the entity itself but also to its members of the management and supervisory bodies, who will be jointly liable. This emphasizes individual responsibility in the fight against money laundering and terrorist financing.

This provision aims to prevent legal entities from being used as shields to evade sanctions. By making directors jointly liable, corporate responsibility is reinforced.

I.6. Communication of Sanctions.

The project also introduces a mechanism for the communication of sanctions. When disqualification from carrying out functions as a member of the management body or the revocation of the authorization to operate and/or enabling license is imposed, these sanctions must be communicated to specific regulatory bodies, registries, and/or professional organizations related to the affected profession or activity.

These bodies will be responsible for taking measures to enforce the sanctions and ensure that obligated entities comply with them. Furthermore, they must inform the FINANCIAL INFORMATION UNIT (FIU) of the outcome of their efforts and the reasons behind them within thirty (30) days. This ensures that sanctions are applied effectively and impunity is avoided.

I.7. Fiscal Enforcement Procedure.

The project establishes that, for the collection of fines imposed by the FINANCIAL INFORMATION UNIT (FIU), the fiscal enforcement procedure provided for in the Civil and Commercial Procedural Code of the Nation will be followed. This simplifies the collection process and ensures that fines are paid in a timely manner.

A certified copy of the resolution imposing the fine will be sufficient to initiate a fiscal enforcement procedure, without the need for additional procedures. In addition, no exceptions other than prescription and documented full payment may be raised.

I.8. Compensatory Interest on Unpaid Fines.

It is important to note that unpaid fines will accrue compensatory interest at the passive interest rate, or the rate that may replace it in the future, published in the Statistical Bulletin of the CENTRAL BANK OF THE ARGENTINE REPUBLIC.

This ensures an additional incentive for compliance with imposed sanctions and prevents fines from going unpaid for extended periods.

I.9. Direct Judicial Appeal and Clarified Deadlines.

The reform project maintains the possibility that acts issued by the FINANCIAL INFORMATION UNIT (FIU) imposing sanctions provided for in the Sanctions Chapter may be directly appealed to the National Chamber of Administrative Litigation Appeals. However, it introduces some key modifications.

Firstly, it establishes that the direct judicial appeal can only be based on the illegitimacy of the appealed act. This means that those wishing to challenge a sanction issued by the FIU must argue that the sanction is illegitimate.

Furthermore, the project sets a very specific deadline for the filing of this appeal. Interested parties will have fifteen (15) business days, counted from the date of notification of the act, to file and substantiate the judicial appeal.

The appeal, once filed, will have a devolutive effect, and the FIU will have thirty (30) days to respond to the appeal, providing its arguments and defense against the allegations of the appellant.

It is important to note that, as applicable, the provisions of the National Administrative Procedures Law No. 19,549 and its amendments, as well as the Civil and Commercial Procedural Code of the Nation, will apply.

This ensures a clear and established legal framework for the process of challenging sanctions.

I.10. Details on Fines.

The Reform Project of Law No. 25,246 also introduces a new article, Article 25 bis, which provides additional details on the fines imposed within the framework of this sanctioning regime.

Firstly, it establishes that fine sanctions must be expressed in the legal currency and also in the number of modules that it represents at the date of the resolution. This measure aims to make the amount of fines transparent and understandable.

Furthermore, the project details the fine payment process. Fines must be paid within TEN (10) business days of being notified of the resolution imposing the sanction. The place of payment will be the registered office of the CENTRAL BANK OF THE ARGENTINE REPUBLIC in the Autonomous City of Buenos Aires.

To ensure compliance with these sanctions, the project establishes that the FIU will follow the fiscal enforcement procedure provided for in the Civil and Commercial Procedural Code of the Nation.

This means that a certified copy of the resolution imposing the fine will be sufficient to initiate a fiscal enforcement procedure. Additionally, no exceptions other than prescription and documented full payment may be raised.

Chapter II. Imminent Approval of the Reform. The Need to Stay Informed and Well-Advised on Compliance with Anti-Money Laundering and Counter-Terrorist Financing Regulations.

II.1. Imminent Promulgation and Entry into Force of the Reform.

As previously emphasized, the reform of Law No. 25,246 proposed in the bill is currently pending approval, having received preliminary approval, and has been under consideration in the National Senate since July 11.

Given Argentina's commitment to align its regulatory framework with international standards and the importance of strengthening the sanctioning regime in the fight against money laundering and terrorist financing, it is expected that this reform will be promulgated in the near future (almost imminent).

This is especially relevant considering that Argentina is currently undergoing the 4th round of Mutual Evaluations by the FATF, where the organization assesses not only Argentina's regulatory framework aligned with FATF Recommendations but also the effectiveness of the Argentine prevention system derived from said regulations.

In this regard, once promulgated, the reform will enter into force according to the deadlines established in the law and the corresponding regulations. In this case, obligated entities must be prepared to avoid incurring new sanctions resulting from the aforementioned reform.

II.2. The Need for Compliance and Keeping Up to Date.

Consequently, with the imminent promulgation of the reform of Law No. 25,246 and the substantial changes in the sanctioning regime, the urgent need for Obligated Entities to comply with and stay up to date with their obligations in the prevention of money laundering and terrorist financing is highlighted.

Obligated Entities must understand that these reforms entail more severe sanctions and greater individual and corporate responsibility. The application of aggravated fines, disqualification, and the revocation of the authorization to operate are potential consequences of non-compliance and can significantly affect an organization's ability to continue operating and conducting business.

Given the clear commitment demonstrated by the Financial Information Unit (FIU) to constantly introduce changes in prevention regulations, it becomes even more crucial for Obligated Entities to be well-advised by specialists in anti-money laundering and counter-terrorist financing at all times. This will enable them to guide and advise organizations at every step of the implementation and application of a prevention policy in accordance with current regulations.

Compliance and ongoing updates of prevention policies are essential to avoid adverse consequences, protect business integrity, and contribute to the global fight against money laundering and terrorist financing. The prevention of these illicit activities is a shared responsibility that requires a deep understanding of the regulations and proactive action on the part of all Obligated Entities in Argentina.

Conclusions.

Argentina's adaptation to FATF standards is essential to ensure the integrity of its financial system and contribute to the global fight against money laundering and terrorist financing. In this context, the strengthening of the sanctioning regime through the Reform Project of Law No. 25,246 represents a significant step in the right direction.

The proposed changes in the project, such as the module system, the expanded range of fines, and additional sanctions, reflect Argentina's commitment to preventing illicit activities and protecting its financial system. These measures will not only deter potential offenders but also strengthen the overall effectiveness of the prevention system.

Furthermore, the proposed changes to the sanctioning regime in the Reform Project of Law No. 25,246 aim to establish specific deadlines, ensure transparency in the amount of fines, and provide a solid legal framework for the process of challenging sanctions.

Argentina's adaptation and improvement of its sanctioning regime are clear signals that the country is willing to face current and future challenges in the fight against money laundering and terrorist financing. These changes can serve as a model for other countries seeking to strengthen their own prevention systems and comply with international standards.

As this project progresses through Congress and becomes law, it will be essential for Obligated Entities and society as a whole to understand these changes in the sanctioning regime and how they will impact the fight against money laundering and terrorist financing in the country.

For Obligated Entities, the imminent promulgation of the reform of Law 25,246 will require them to comply with and stay up to date with prevention obligations, highlighting the importance of constant adaptation and seeking specialized advice in this field.

Argentina is on a path to strengthen its sanctioning regime in the prevention of money laundering and terrorist financing, and all stakeholders must be prepared to face these challenges and contribute to a reliable financial system.

In conclusion, transparency, justice, and effectiveness in the application of sanctions are key elements for the success of any prevention system, and Argentina seeks to achieve these objectives with these reforms, taking a step forward in building a safer and more resilient financial system.