JPRF-T-2025-0158 — Issues and Incorporates Title III on Prevention, Detection, and Combat of Money Laundering and Financing of Other Crimes

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador Resolution No. JPRF-T-2025-0158

THE FINANCIAL POLICY AND REGULATION BOARD

CONSIDERING:

That Article 82 of the Constitution of the Republic establishes the right to legal certainty, which is based on respect for the Constitution and the existence of prior, clear, public laws and regulations applied by competent authorities;

That Article 84 of the Magna Carta provides that every body with normative power shall have the obligation to formally and materially adapt laws and other legal norms to the rights provided for in the Constitution;

That Article 132, number 6 of the Constitution of the Republic of Ecuador grants public control and regulation bodies the faculty to issue norms of a general nature in matters within their competence, without altering or innovating legal provisions;

That Article 226 of the Fundamental Norm mandates that State institutions, their bodies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law;

That Article 227 ibid establishes that the Public Administration constitutes a service to the community governed by the principles of effectiveness, efficiency, quality, hierarchy, coordination, participation, among others;

That Article 308 of the Constitution of the Republic of Ecuador prescribes that Financial Activities are a matter of public order;

That Article 309 of the Fundamental Norm indicates that “the National Financial System is composed of the public, private, and popular and solidary sectors (…)”. Each of these sectors will have specific and differentiated control norms and entities, which will be responsible for preserving their security, stability, transparency, and solidity;

That Article 13 of the Organic Monetary and Financial Code, Book I, created the Financial Policy and Regulation Board, part of the Executive Function and as a public law entity, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation;

That numeral 2 of Article 14 of the cited Code establishes that the Financial Policy and Regulation Board has competence to: “2. Issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial, securities, insurance, and prepaid comprehensive health care services systems in accordance with what is provided in Article 309 of the Constitution of the Republic of Ecuador”;

That Article 14.1 of the aforementioned Organic Code allows the Financial Policy and Regulation Board to exercise the following faculties, among which are: “(…); 3. Evaluate risks to financial stability and issue macroprudential regulations within the scope of its competence, in consultation with the Monetary Policy and Regulation Board, without prejudice to its independence; (…); 7. Issue the prudential regulatory framework to which financial, securities, insurance, and prepaid comprehensive health care services entities must adhere, a framework that must be coherent and not give rise to regulatory arbitrage (…); 9. Issue the non-prudential regulatory framework for all financial, securities, insurance, and prepaid comprehensive health care services entities (…); 15. a. Prevent and seek to eradicate fraudulent and prohibited practices, including money laundering and the financing of crimes such as terrorism, considering current and applicable international standards; (…); 27. Exercise the other functions, duties, and faculties assigned to it by this Code and the law.”;

That Article 150 of the aforementioned Code prescribes that entities of the national financial system shall be subject to the regulation issued by the Financial Policy and Regulation Board;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador |

That Article 160 of the cited Code establishes that the national financial system is integrated by the public financial sector, the private financial sector, and the popular and solidary financial sector;

That Article 161 of the same normative body establishes that the public financial sector is composed of 1. Banks; and, 2. Corporations;

That Article 162 ibid establishes that “the private financial sector is composed of 1. Multiple and specialized banks (…); 2. Financial services entities (...); 3. Auxiliary services of the financial system (…); 4. Financial technology services (…); 5. Specialized societies for deposits and electronic payments”;

That Article 163 of the cited Code determines that “the popular and solidary financial sector is composed of: 1. Savings and credit cooperatives; 2. Central caisses; 3. Associative or solidary entities, communal caisses and banks, and savings caisses; and, 4. Auxiliary services of the financial system, such as: banking software, transactional, monetary and securities transport, payments, collections, networks and ATMs, accounting and computing, and others qualified as such by the Superintendency of the Popular and Solidary Economy within the scope of its competence (…);”;

That Article 243 of the aforementioned Organic Code establishes that “infractions regarding money laundering and the financing of crimes such as terrorism shall be sanctioned in accordance with the provisions of the Organic Integral Penal Code and the Law on Prevention, Detection, and Eradication of the Crime of Money Laundering and Financing of Crimes”;

That Article 244 of the cited Code states that “entities of the national financial system have the obligation to establish internal control systems for the prevention of crimes, including money laundering and the financing of crimes such as terrorism, in all financial operations.”;

That Article 274 of the Organic Monetary and Financial Code determines that “control bodies of the National Financial System, in the exercise of their control functions, having knowledge of the perpetration of a crime related to financial activities, including money laundering and the financing of crimes such as terrorism, shall be obligated to report these facts (…);”;

That General Provision Twenty-Ninth of the Code, Book I, added by the Organic Law Reforming the Organic Monetary and Financial Code for the Defense of Dollarization, provides that in current legislation where mention is made of the “Monetary and Financial Policy and Regulation Board,” it shall be replaced by “Financial Policy and Regulation Board”;

That Transitory Provision Fiftieth-Fourth of the aforementioned normative body establishes that resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy and Regulation Board shall maintain their validity until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board decide what corresponds, within the scope of their competencies;

That Article 9 of the Securities Market Law, Book II of the Organic Monetary and Financial Code, establishes that the Financial Policy and Regulation Board shall, among other things: “1. Establish the general policy of the securities market and regulate its functioning; (…) 4. Issue the necessary resolutions for the application of this Law. (…) 16. Dictate the necessary norms for the risk management of entities regulated by this Law; (…) 20. Ensure the observance and compliance with the norms governing the securities market (…);”;

That General Provision Nineteenth of the Organic Monetary and Financial Code, Book II, “Securities Market Law” prescribes: “Substitute in all current norms the denomination National Securities Council or C.N.V. by Monetary and Financial Policy and Regulation Board or MONETARY AND FINANCIAL POLICY AND REGULATION BOARD in the same way in all current norms substitute the denomination Companies Superintendency by Companies, Securities, and Insurance Superintendency, without modifying its nature or functions.”;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador |

That in the Fourth Supplement of Official Register No. 610 of July 29, 2024, the Organic Law on Prevention, Detection, and Combat of the Crime of Money Laundering and the Financing of Other Crimes was published, which in its Sole Final Provision prescribes that said Law will enter into force within one year after its publication in the Official Register, that is, on July 29, 2025;

That, in accordance with Article 5 of the Organic Law on Prevention of Money Laundering and Financing of Crimes, “the Financial Policy and Regulation Board exercises leadership in matters of prevention of the crime of money laundering and the financing of other crimes, according to the competence established in the Constitution and the law to issue public policies, regulation, and supervision of credit, financial, insurance, securities, and prepaid health care services, for the prevention of the crime of money laundering and the financing of other crimes”;

That Article 6 of the cited Law determines the following attributions for the Financial Policy and Regulation Board: a. Design and approve policies, norms, and plans for prevention and control of the crime of money laundering and the financing of other crimes; b. Issue and apply preventive measures against the crime of money laundering in the sectors of economic and financial activity within its competence (…);

That Article 16 of the same Law establishes that “The Financial and Economic Analysis Unit is the technical entity responsible for the collection of information, preparation of reports, execution of national policies and strategies for prevention, detection, and combat of the crime of money laundering and the financing of other crimes. It is an entity with operational, administrative, financial autonomy, and coercive jurisdiction attached to the governing body of Public Finances.”;

That Article 26 of the aforementioned Law determines that “Obligated subjects constitute the first control in the prevention of the crime of money laundering, the financing of terrorism, and the financing of the proliferation of weapons of mass destruction. (…) Obligated subjects are classified into financial obligated subjects, non-financial obligated subjects, and providers of virtual asset services”;

That Article 27 of the aforementioned Law establishes as financial obligated subjects the following: 1. Financial sector: (…) 2. Popular and solidary financial sector: (…) 3. The following entities of the insurance system that underwrite or place life insurance or insurance related to investment: (...) 4. Non-financial entities that grant credits within the limits established by the Financial Policy and Regulation Board. 5. Entities that participate in the National Payments System. 6. Entities that offer financial leasing or financial rental services. 7. Natural and legal persons that provide national or international money, securities, or remittance transfer services. 8. Companies dedicated to currency exchange from the financial, public, private, and popular and solidary sectors. 9. Stock exchanges and securities houses. 10. Fund administrators and trusts. 11. Companies and enterprises that provide factoring services according to the risk of operations and services established by the Financial and Economic Analysis Unit through resolution.”

That the principle of responsibility recognized in Article 15 of the Organic Administrative Code establishes that: “The State shall respond for damages as a consequence of the lack or deficiency in the provision of public services or the actions or omissions of its public servants or private law subjects acting in the exercise of a public power delegated by the State and their dependents, controlled or contractors”;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador |

That, through Technical Report No. JPRF-CTIFSP-2025-0012 of June 9, 2025, and Legal Report No. JPRF-CJF-2025-026 of June 9, 2025, the Technical Coordination of Financial Sector Policy and Regulation and the Legal Coordination of Financial Policy and Norms analyze and present the technical and legal arguments to issue the “Norm for the Administration of Money Laundering Risk, its Preceding Crimes, and the Financing of Other Crimes” with the objective of strengthening and harmonizing the regulatory framework applicable to financial obligated subjects in matters of money laundering and financing of other crimes prevention;

That the Technical Secretary, Acting, of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2025-0044-M of June 9, 2025, submits to the President of the Board the Technical Report No. JPRF-CTIFSP-2025-0012 of June 9, 2025, issued by the Technical Coordination of Financial Sector Policy and Regulation, and the Legal Report No. JPRF-CJF-2025-026 of June 9, 2025, issued by the Legal Coordination of Financial Policy and Norms, in addition to the corresponding draft resolution;

That the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on June 10, 2025, and carried out via video conference on June 12, 2025, reviewed and approved the following Resolution; and,

In exercise of its functions,

RESOLVES:

SOLE ARTICLE.- Issue and incorporate Title III “On the Prevention, Detection, and Combat of the Crime of Money Laundering and the Financing of Other Crimes” into Book V “Common Application Norms for Regulated Sectors” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, according to the following text:

“TITLE III.- ON THE PREVENTION, DETECTION, AND COMBAT OF THE CRIME OF MONEY LAUNDERING AND THE FINANCING OF OTHER CRIMES

CHAPTER I: NORM FOR THE ADMINISTRATION OF MONEY LAUNDERING RISK AND THE FINANCING OF OTHER CRIMES

SECTION I: OBJECT, SCOPE, AND DEFINITIONS.

Art. 1.- Object.- This norm aims to regulate and establish the processes, procedures, and mechanisms for the prevention, detection, and management of risk associated with the crime of money laundering and the financing of other crimes, which financial obligated subjects must observe in accordance with the current legal framework.

Art. 2.- Scope.- This norm applies to all financial obligated subjects established in the Organic Law on Prevention, Detection, and Combat of the Crime of Money Laundering and the Financing of Other Crimes and by the Financial and Economic Analysis Unit.

Art. 3.- Responsibility of financial obligated subjects.- Financial obligated subjects must prevent, detect, and manage the risk associated with the crime of money laundering, the crime of financing terrorism, and the financing of the proliferation of weapons of mass destruction, in accordance with what is established in this norm. Prevention and control measures shall be applied in the performance of their activities, as well as to any product or service offered, regardless of whether the transaction is carried out or not.

Art. 4.- Definitions.- For the purposes of the application of this norm, the following glossary of terms is established:

ASSETS.- Are goods; financial assets; properties of all kinds, tangible or intangible; movable or immovable, regardless of how they were obtained; and documents or legal instruments, whatever their form, including electronic or digital, that evidence ownership or other rights over said goods.

RISK APPETITE.- Is the level of exposure to money laundering risk and the financing of other crimes that the financial obligated subject is willing to assume, accept, or tolerate in the development of its activities and operations, in order to achieve its strategic objectives (maximum acceptable risk level); that is, the degree of deviation (extra risk) it can support with respect to the risk appetite level defined by the Board or statutory administrative body acting in its place (planned risk).

ATTORNEY-IN-FACT.- Is the person legally authorized to act on behalf of another in the scopes agreed upon by both parties through a representation or mandate contract. The actions of the attorney-in-fact are considered the responsibility of the principal or grantor, unless the agent exceeds the attributions of the representation contract.

BENEFICIAL OWNER.- Is the natural person who effectively and finally, through a chain of ownership or any other means of control, owns or controls a company, and/or the natural person in whose name a transaction is carried out. Also, a beneficial owner is any natural person who exercises final effective control over a legal person or other legal structure; final effective control refers to situations where ownership or control is exercised through a chain of ownership or by any other means.

CHANNELS.- Refer to all ways or forms through which clients or users can make inquiries or transactions with financial obligated subjects, physically, electronically, or digitally.

CLOSE ASSOCIATES.- Are those persons close to the politically exposed person within their professional exercise, such as, their work collaborators, advisors, consultants, and personal partners.

COUNTERPARTY.- Is any natural or legal person with whom the financial obligated subject has commercial, business, contractual, or legal links of any order; depending on the legal composition of the financial obligated subject, they may be associates, employees, clients, contractors, and providers of products or services.

RISK CRITERIA.- Are the characteristics of the different risk factors, such as: client profile, employee, executive, provider, correspondent, type of product or service provided, transactional channel, and geographic zone where the activity or operation is carried out.

DUE DILIGENCE.- Is the set of processes and procedures that financial obligated subjects apply to know the counterparty, their business, activities, operations, products, and the volume of their transactions, with the aim of preventing them from being used as a means for the commission of the crime of money laundering and the financing of other crimes, which include the collection, verification, and updating of information, as well as the determination of risk profiles for the identification and detection of unusual or suspicious operations and adequate management of internal and external reports.

ENHANCED DUE DILIGENCE.- Is the set of additional, more rigorous, exhaustive, and reasonably designed processes and procedures that the financial obligated subject must apply to its counterparties, based on a high exposure to money laundering risk and the financing of other crimes, to mitigate and/or reduce it, as detailed by the control body.

RISK-BASED APPROACH (RBA).- Is a set of prudential regulation and supervision methodologies that allows identifying, measuring or evaluating, controlling, and monitoring money laundering and financing of other crimes risks to which financial obligated subjects are exposed. This approach evaluates the systemic importance of each financial obligated subject and its risk profile, considering factors such as products, services, practices, technologies, counterparties, countries, and geographic areas, transactions, and channels; thus reducing the possibility that these are used as an instrument for the concealment or legalization of illicit assets, linked to their activities and operations.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador |

LEGAL STRUCTURE.- A legal structure is considered to be autonomous patrimony or any other economic unit that lacks legal personality; this definition includes patrimonies constituted abroad with an administrator, fiduciary agent, protector, or any other equivalent form.

RISK EXPOSURE.- Is the level of risk that the financial obligated subject has before applying controls, mitigating, and/or reducing risk, upon the materialization of events associated with money laundering and the financing of other crimes.

SCREENING LISTS.- Are: a. National and international information lists.- Used mainly by compliance officers, containing information from various sources about natural or legal persons. This information contributes to the financial obligated subject having a broader knowledge of the legal background of its counterparties. b. Tax Havens.- Is the territory or state of null or low taxation, frequently used to lower, distort, evade, or optimize the tax burden of individuals or companies and is characterized by having lax tax and control legislations. c. Politically Exposed Persons (PEPs).- Is the list of national or foreign natural persons, qualified as such, based on the Politically Exposed Persons (PEP) Guide issued by the Financial and Economic Analysis Unit.

RISK MATRIX.- Is a control and management tool that, through the identification and measurement of risk events associated with the business lines and processes of the financial obligated subject or entity and