Resolution No. JPRF-S-2022-039 — Reforming the Standards for Insurance Companies and Reinsurance Companies on Anti-Money Laundering, Terrorist Financing, and Other Crimes

Resolution No. JPRF-S-2022-039 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 226 of the Constitution of the Republic of Ecuador provides: "State institutions, their agencies, dependencies, public servants, and persons acting by virtue of state authority shall exercise only the competencies and powers attributed to them in the Constitution and the law. They shall have the duty to coordinate actions for the fulfillment of their purposes and to make effective the enjoyment and exercise of the rights recognized in the Constitution."; That, Article 13 of the Organic Monetary and Financial Code, Book I, creates the Financial Policy and Regulation Board as part of the Executive Function, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation; That, Article 14 number 2 of the aforementioned Code, regarding the scope of action of the Financial Policy and Regulation Board, mandates: "2. Issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial, securities, insurance, and prepaid comprehensive health care service systems in accordance with what is provided in Article 309 of the Constitution of the Republic of Ecuador (...). For the fulfillment of these functions, the Financial Policy and Regulation Board shall issue regulations in matters within its competence, without altering legal provisions. The Financial Policy and Regulation Board may issue regulations by segments, economic activities, and other criteria. (...)."; That, the Organic Monetary and Financial Code, Book I, Article 14.1, number 15, letter a), establishes as functions of the Financial Policy and Regulation Board, to establish within the framework of its competencies any measure that contributes to preventing and seeking to eradicate fraudulent practices, including money laundering, the financing of crimes such as terrorism, considering the current and applicable international standards; That, the unnumbered article incorporated after Article 6 of the Organic Monetary and Financial Code, Book I, titled "International Best Practices" states that bodies with regulatory, normative, or control capacity shall seek to adopt as a reference framework the international technical standards related to the scope of their competence for the issuance of regulations and for the exercise of their functions, strictly adhering to the normative hierarchy established in the Constitution of the Republic of Ecuador; That, through the Organic Law on Prevention, Detection, and Eradication of the Crime of Money Laundering and Financing of Crimes, measures are instituted to prevent illegal money, or money acquired outside the law, from consolidating in the national economy; and it determines functions, duties, and responsibilities both for public institutions and for obligated subjects to report; That, Article 4 of the aforementioned Law, indicates which obligations must be fulfilled by institutions of the national financial system and insurance;

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That, Articles 9 and 10 of the aforementioned Law, state that the Monetary and Financial Policy Board shall exercise leadership in matters of anti-money laundering and crime financing prevention, and that, in exercise of the powers established by law, it will issue public policies, monetary, credit, exchange, financial, insurance, and securities regulation and supervision, for the prevention of money laundering and crime financing; That, the Fiftieth Fourth Transitory Provision of Article 106 of the Organic Reformatory Law to the Organic Monetary and Financial Code for the Defense of Dollarization, published in the Official Register Supplement No. 433 of May 3, 2021, states: "Resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy Board and norms issued by control bodies shall maintain their validity until the Monetary Policy Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies."; That, the Technical Secretariat of the Financial Policy and Regulation Board, through Memorandum No. JPRF-SETEC-2022-0070-M of September 26, 2022, submits to the President of the Board the following reports: (i) Legal Report No. JPRF-CJ-2022-0040 of September 26, 2022, establishes that the Financial Policy and Regulation Board, as responsible for the formulation of credit and financial policy and regulation, has legal competence to reform Chapter III "Standards for Insurance Companies and Reinsurance Companies on Anti-Money Laundering, Terrorist Financing, and Other Crimes", Title III "On the Surveillance, Control, and Information of the Private Insurance System", Book III "On the Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, considering the reality of obligated subjects to adapt them to constitutional rights and in observance of International Best Practices, in accordance with what is provided in the unnumbered article subsequent to 6 and Article 14.1 number 15 letter a) of the Organic Monetary and Financial Code, Book I, as well as Article 84 of the Constitution of the Republic of Ecuador; and, (ii) Technical Report No. JPRF-CT-2022-0034 of September 26, 2022, through which, the Technical Coordination proposes to reform the "Standards for Insurance Companies and Reinsurance Companies on Anti-Money Laundering, Terrorist Financing, and Other Crimes" contained in Title III "On the Surveillance, Control, and Information of the Private Insurance System", Book III "On the Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, in order that the aforementioned Standard responds to the development and operation of the insurance sector seeking improvements in its implementation, and for the JPRF to fulfill the function established in the COMYF to establish within the framework of its competencies, prevent and seek to eradicate fraudulent and prohibited practices, including money laundering and the financing of crimes such as terrorism, as well as to perform the analysis of the impacts of the application of approved regulations.;

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That, the Financial Policy and Regulation Board, in an extraordinary session convened by technological means on September 27, 2022 and carried out via video conference on September 29, 2022, reviewed the Memorandum No. JPRF-SETEC-2022-0070-M of September 26, 2022, issued by the Technical Secretariat of the Board; as well as Legal Report No. JPRF-CJ-2022-0040 of September 26, 2022 and Technical Report No. JPRF-CT-2022-0034 of September 26, 2022, issued by the Legal Coordination and Technical Coordination of the aforementioned Board, respectively, as well as the corresponding draft resolution; and, In exercise of its functions, RESOLVES: ARTICLE ONE.- Substitute the text of the second paragraph after letter f) of number 5) of Article 16 of Section IV "Elements of the Anti-Money Laundering, Terrorist Financing, and Other Crimes Risk Management Prevention System (SPARLAFTD)", of Chapter III "Standards for Insurance Companies and Reinsurance Companies on Anti-Money Laundering, Terrorist Financing, and Other Crimes", of Title III "On the Surveillance, Control, and Information of the Private Insurance System", of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, which states: "In the case of the profile for the deputy compliance officer, he/she must meet the profile required for the holder, except that his/her experience must be at least two (2) years.", by the following: "For large companies defined in Article 4, Section II "Methodology to be Applied", Chapter IV "Salary Ranges for Administrators and Legal Representatives of Insurance Companies and Reinsurance Companies", Title II "On the Constitution, Organization, Activities, and Operation", of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the profile for the deputy compliance officer must meet the profile required for the holder, except that his/her experience must be at least two (2) years. For small and medium-sized companies defined in Article 4, Section II "Methodology to be Applied", Chapter IV "Salary Ranges for Administrators and Legal Representatives of Insurance Companies and Reinsurance Companies", Title II "On the Constitution, Organization, Activities, and Operation", of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the profile for the deputy compliance officer must meet the profile required for the holder, except that his/her experience must be at least two (2) years; and, may simultaneously develop another function in the obligated subjects, provided that it does not correspond to the areas of policy underwriting, claims, or internal audit, or others in which it can be determined that there is an incompatibility of functions in relation to the obligations related to the role of compliance officer."

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ARTICLE TWO.- Substitute the text of letter i. of literal g) of number 1 of Article 18 of Section IV "Elements of the Anti-Money Laundering, Terrorist Financing, and Other Crimes Risk Management Prevention System (SPARLAFTD)", of Chapter III "Standards for Insurance Companies and Reinsurance Companies on Anti-Money Laundering, Terrorist Financing, and Other Crimes", of Title III "On the Surveillance, Control, and Information of the Private Insurance System", of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, which states: "i. Forms must be signed physically or through electronic signature. Documents that verify the collected information must be archived in physical or digital media.", by the following: "Forms may be physical, electronic, or digital and must be formalized by any means recognized by law." ARTICLE THREE.- Substitute the text of the third paragraph of number 1) of Article 20 of Section IV "Elements of the Anti-Money Laundering, Terrorist Financing, and Other Crimes Risk Management Prevention System (SPARLAFTD)", of Chapter III "Standards for Insurance Companies and Reinsurance Companies on Anti-Money Laundering, Terrorist Financing, and Other Crimes", of Title III "On the Surveillance, Control, and Information of the Private Insurance System", of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, which states: "The internal auditor must prepare a quarterly report addressed to the audit committee, in which he/she will detail the conclusions obtained in the compliance evaluation process of the SPARLAFTD, however, in case extraordinary situations are detected that warrant reporting, he/she must inform the Board of Directors immediately.", by the following: "The internal auditor must prepare an annual report addressed to the audit committee, in which he/she will detail the conclusions obtained in the compliance evaluation process of the SPARLAFTD, however, in case extraordinary situations are detected that warrant reporting, he/she must inform the Board of Directors immediately." ARTICLE FOUR.- Incorporate as the second paragraph in the First Transitory Provision of Chapter III "Standards for Insurance Companies and Reinsurance Companies on Anti-Money Laundering, Terrorist Financing, and Other Crimes", of Title III "On the Surveillance, Control, and Information of the Private Insurance System", of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the following: "Once the deadline for the implementation of this standard has concluded, the Superintendency of Companies, Securities and Insurance may approve an additional deadline of up to six (6) months for those obligated subjects who could not comply with the initial deadline. For this effect, obligated subjects must present a duly justified report to the control body for its approval."

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FINAL PROVISION.- This resolution shall enter into force from the present date, without prejudice to its publication in the Official Register, and shall be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance. NOTIFY.- Given in the Metropolitan District of Quito, on September 29, 2022. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The resolution preceding this was processed and signed by Master María Paulina Vela Zambrano, President of the Financial Policy and Regulation Board, in the Metropolitan District of Quito, on September 29, 2022.- I CERTIFY. TECHNICAL SECRETARY Dr. Nelly Arias Zavala