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Costa Rica Gatekeeper Money Laundering Legislation

The Costa Rican legislature is voting on a new law that modifies Law # 7786 which is referred to as the “Drug, Money Laundering and Financing of Terrorism Law” (Ley sobre estupefacientes, sustancias psicotrópicas, drogas de uso no autorizado, actividades conexas legitimación de capitales y financiamientos al terrorismo).

The modifications to the existing law are aimed at expanding the circle of those individuals or entities that are subject to money laundering compliance. This type of legislation is generally referred to as “Gatekeeper Legislation” and is being pushed around the globe by the Financial Action Task Force (FATF) known in Latin America as GAFI.

In the past the legislation was applicable only to financial institutions and entities that managed third party funds.   The new law is now including:

  • Trust administrators or any find of money management structure, which is carried out by individual or corporate entities.
  • In the real estate sector it will require that any individuals or entities that are intermediaries, owners or builders that are in the real estate business in a habitual manner to report these transactions.
  • Dealers of precious metals and stones have also been added to the list.
  • Lawyers, Notaries, Accountants and any other individual or entity that carries out the following activities on behalf of clients:
  1. The purchase or sale of real estate.
  2. Money management for a client.

Based on the wording of this section it would include real estate agents and real estate companies as well.

  • The administration or purchase and sale of corporate entities or structures.

All the individuals or companies indicated above would be required to register before the Costa Rica Financial Regulatory Agency known as SUGEF.

Since the Notary Public in Costa Rica is the individual responsible for recording property transfer in the recording office of Costa Rica the new law is imposing stringent reporting requirements on Notary Publics. The Notary Public in addition to collecting the identification information on all parties to a transaction will be required to collect the following:

  1. The method of payment that was used in the transaction as well as the taxes, recording fees and registry costs involved in the transaction.
  2. Must specify the bank account information where the funds are coming from including the number, date, hour of any deposits made and or checks issued.
  • When property transactions or trusts are involved they must now maintain a transaction registry and keep a registry of the following
  • Identification of all clients and carry out a “know your customer” due diligence report as to the source of funds.
  • Keep records available for inspection by relevant authorities.
  • Establish a policy for politically exposed persons
  • Establish a country risk evaluation procedure to scrutinize transactions from high risk money laundering jurisdictions.
  • Must report any suspicious activity or transaction.

This Costa Rica “gate keeper” legislation will increase the transaction costs for all the operations stipulated in the law. Those costs will simply be transferred to the consumer that uses the services.

Watch our video on how the gatekeeper legislation will impact the real estate sector of Costa Rica.

 

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