Circular RUNOR 1-971: Prevention of Money Laundering, Terrorism Financing and Other Illicit Activities; Corporate Governance Guidelines for Financial Entities

"2011 – Year of Decent Work, Health and Worker Safety" COMMUNICATION “A” 5218 19/08/2011 TO FINANCIAL ENTITIES, TO EXCHANGE HOUSES, AGENCIES, OFFICES AND BROKERS, TO NON-FINANCIAL ENTITIES ISSUING CREDIT CARDS, TO TRUSTEES OF FINANCIAL TRUSTS INCLUDED IN THE FINANCIAL ENTITIES LAW, TO REPRESENTATIVES OF FOREIGN FINANCIAL ENTITIES NOT AUTHORIZED TO OPERATE IN THE COUNTRY:
Ref.: Circular
RUNOR 1 - 971
“Prevention of money laundering, terrorism financing and other illicit activities”. “Guidelines for corporate governance in financial entities”. Modification and update of applicable regulations . ______ We address you to inform you that this Institution has adopted the following resolution:
“1. Replace Section 1 of the regulations on “Prevention of money laundering and other illicit activities” and the regulations on “Prevention of terrorism financing”, which hereinafter will be referred to as “Prevention of money laundering, terrorism financing and other illicit activities”, with the one attached hereto and which forms part of this communication.
2. Incorporate as point 4.2.5. of Section 4. of the regulations on “Guidelines for corporate governance in financial entities” the following:
“4.2.5. Control and prevention committee for money laundering and terrorism financing to assist in compliance with the obligations arising from the applicable regulations for the prevention of said crimes.”
3. Provide that the provisions in the preceding points will be applicable from the date of entry into force of Resolution No. 121/2011 of the Financial Information Unit.”

-2-
The information already entered into the database up to the date of entry into force of the aforementioned resolution for amounts that do not reach the new daily and monthly limits established in point 1.3. of Section 1. of the accompanying regulation, shall be maintained for the regulatory period. Finally, the modified sheets that are to be incorporated into the ordered texts of the reference are attached. Likewise, it is recalled that on this Institution's website www.bcra.gov.ar, accessing “regulations” (“ordered texts”), the modifications made with texts highlighted in special characters (strikethrough and bold) will be found. From the remaining provisions issued by this Institution, the corresponding replacement sheets will be sent in due course, with the necessary reference adjustments. We salute you attentively. CENTRAL BANK OF THE ARGENTINE REPUBLIC Matías A. Gutiérrez Girault Alfredo A. Besio Manager of Issuance of Regulations on behalf of General Manager of Regulations
ANNEX

• Index -
  Section 1. Complementary regulations for the prevention of money laundering and terrorism financing.
  1.1. Applicable regulations.
  1.2. Information to the Central Bank.
  1.3. Maintenance of a database.
  Section 2. Payment of checks and bills of exchange over the counter.
  2.1. Limitation.
  2.2. Exceptions.
  2.3. Safeguards.
  Section 3. Cash realization of credits in deposit accounts.
  3.1. Scope.
  3.2. Specific treatment.
  3.3. Exceptions.
  Correlation table.
  B.C.R.A.
  ORDERED TEXT OF THE REGULATIONS ON
  “PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING AND OTHER ILICIT ACTIVITIES” Version: 9th COMMUNICATION “A” 5218 Validity:
  19/08/2011

1.1. Applicable regulations.
Financial and exchange entities must observe what is established in Law 25.246 and its amendments, in the regulatory norms issued by the Financial Information Unit related to the matter and in this regulation. This includes the decrees of the National Executive Power with reference to the decisions adopted by the United Nations Security Council in the fight against terrorism and to comply with Resolutions (with their respective Annexes) issued by the Ministry of Foreign Affairs, International Trade and Worship. Such provisions must also be observed by exchange brokers and representatives of foreign financial entities not authorized to operate in the country, as appropriate according to their activity.
1.2. Information to the Central Bank.
A certified copy of the designation of the principal Compliance Officer and alternate, if any, made in accordance with the conditions and within the deadlines established in the norms issued by the Financial Information Unit, must be sent to the Main Management of Analysis and Monitoring of Special Operations of the Superintendence of Financial and Exchange Entities.
1.3. Maintenance of a database.
1.3.1. Covered operations.
Financial and exchange entities must maintain in a database the information corresponding to clients who carry out operations -considered individually- for amounts equal to or greater than $ 40,000 (or its equivalent in other currencies), for the following concepts:
1.3.1.1. Cash deposits: in checking accounts, savings accounts, fixed-term deposits and in other fixed-term modalities.
1.3.1.2. Deposits constituted with securities, calculated according to their closing quotation value on the day prior to the deposit.
1.3.1.3. Placement of debentures and other debt securities issued by the entity itself.
1.3.1.4. Repos (assets and liabilities).
1.3.1.5. Purchase and sale of securities -public or private- or placement of units in common investment funds.
PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING B.C.R.A.
Section 1. Complementary regulations for the prevention of money laundering and terrorism financing.
Version: 10th COMMUNICATION “A” 5218
Validity:
19/08/2011

1.3.1.6. Purchase and sale of precious metals (gold, silver, platinum and palladium).
1.3.1.7. Cash purchase and sale of foreign currency (includes arbitrage).
1.3.1.8. Remittances or transfers issued and received (operations with other entities in the country and with the abroad) regardless of the form used to process the operations and their destination (deposits, repos, purchase and sale of securities, etc.).
1.3.1.9. Purchase and sale of checks drawn against accounts abroad and traveler's checks.
1.3.1.10. Payment of imports.
1.3.1.11. Collection of exports.
1.3.1.12. Sale of the financial entity's portfolio to third parties.
1.3.1.13. Loan amortization services.
1.3.1.14. Early loan cancellations.
1.3.1.15. Constitution of trusts and all types of other fiduciary assignments.
1.3.1.16. Purchase and sale of cancellation checks.
1.3.1.17. Sale of financial payment checks.
1.3.1.18. Operations related to tourism (sale of tourist packages, hotels, tickets, etc.), as long as they are not included in points 1.3.1.7. or 1.3.1.9.
1.3.2. Storage and maintenance of information.
The data of all clients in whose name accounts are opened or operations are registered shall be stored.
The storage and maintenance of information shall also cover cases of clients who -in the opinion of the intervening entity- carry out linked operations that, although -considered individually- do not reach the minimum level established in the first paragraph of point 1.3.1., in their entirety exceed or reach said amount. To this end, the operations carried out must be accumulated daily, storing the data of persons who register operations -regardless of their individual amount- that in their entirety reach an amount equal to or greater than $ 5,000 (or its equivalent in other currencies), without considering in any case those below said amount. PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING B.C.R.A.
Section 1. Complementary regulations for the prevention of money laundering and terrorism financing.
Version: 9th COMMUNICATION “A” 5218
Validity:
19/08/2011

1.3.3. Backup.
At the end of each calendar month, with the data stored in accordance with the provisions of points 1.3.1. and 1.3.2. -in this case, when during the period they have summed up computable operations of $ 40,000 or more (or its equivalent in other currencies)-, a backup copy must be formed. This element shall contain, in addition to that information, the data corresponding to the previous months of the last 5 (five) years, that is to say that it must comprise a maximum of 60 months. That backup copy must be made available to the Central Bank of the Argentine Republic to be delivered within 48 business hours of being requested.
1.3.4. Exclusions.
Operations contracted with holders belonging to the local non-financial public sector and the entities included in Law 21.526.
PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING B.C.R.A.
Section 1. Complementary regulations for the prevention of money laundering and terrorism financing.
Version: 10th COMMUNICATION “A” 5218
Validity:
19/08/2011

2.1. Limitation.
Checks -common or deferred payment- drawn to bearer or to the order of a specific person, for amounts greater than $ 50,000, shall not be paid over the counter. Nor shall bills of exchange -at sight or at a fixed day- drawn against checking accounts opened in cooperative credit unions, drawn or not to the order of a specific person for amounts greater than $ 25,000, be paid over the counter.
2.2. Exceptions.
2.2.1. The payees drawn in favor of the holders of the accounts against which they are drawn, exclusively when presented to the depositary entity by themselves.
2.2.2. Values in favor of third parties destined for the payment of salaries and other habitual remuneration for amounts that include the payroll globally, for which the drawer must extend, on each occasion, a certification in which the purpose of the draft is expressly stated, which shall be archived in the entity.
2.2.3. Cancellation checks, in accordance with what is established in Section 8. of the regulations on “Currency circulation”.
2.2.4. Values in favor of beneficiaries of the monetary benefits regulated by Law 24.557, for which the drawer must extend, on each occasion, a certification in which the purpose of the draft is stated, which shall be archived in the entity.
2.3. Safeguards.
It will be necessary to arrange the safeguards considered necessary aimed at preventing that, through repeated withdrawals, for amounts that do not reach the level determined in point 2.1., the established limitation is circumvented. PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING B.C.R.A.
Section 2. Payment of checks and bills of exchange over the counter.
Version: 7th COMMUNICATION “A” 5218
Validity:
19/08/2011

3.1. Scope.
The disbursements for financings greater than $ 50,000 granted by financial entities must be realized by crediting them to the checking or savings account of the applicants. For the calculation of such amount, the total sum committed in the agreement shall be considered, even if partial disbursements lower than that figure are foreseen. In the case of independent assignments, from the moment that during the course of a calendar quarter this amount is exceeded, the realization of the excess of $ 50,000 shall be credited to the account, a criterion that will be applied to any other future realization -regardless of its amount- to that client.
3.2. Specific treatment.
3.2.1. It is admitted that the realizations covered by these regulations can be made in:
3.2.1.1. Accounts located in local financial entities other than the one providing the assistance, by issuing a check, draft or transfer to the order of the clients for the credit in them.
3.2.1.2. Accounts opened in the name of person/s different from that of the borrower of the funds, as long as the financial entity maintains reliable evidence that the latter ordered such crediting, as well as that the account holder expressly conforms to said operation.
3.2.2. Loans of public securities, in which the client does not require to have pesos or foreign currency available, shall be credited to the “principal” account that the granting entity has open in the Securities Box.
3.2.3. In the assignments of rights or credit titles in favor of financial entities, without responsibility for the assignor, the crediting shall be made in an account opened in the name of the latter.
3.3. Exceptions.
3.3.1. Loans between financial entities.
3.3.2. Loans guaranteed with mortgage or pledge, destined for the acquisition of goods on which such encumbrances are constituted.
3.3.3. Loans instrumented through “warrants”.
3.3.4. Import financing operations that are carried out with the application of funds from credit lines of external correspondents, to the extent that:
3.3.4.1. The disbursement of funds is made directly abroad.
PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING B.C.R.A.
Section 3. Cash realization of credits in deposit accounts.
Version: 5th COMMUNICATION “A” 5218
Validity:
19/08/2011

3.3.4.2. The local financial entity notifies its client reliably (content and receipt) about the loan amount, interest rate, term, final application of the funds and other identifying data of the operation that gives rise to the assistance (documentary credit, correspondent bank, etc.).
3.3.4.3. A copy of the notification is incorporated into the client's file, together with the proof of its receipt.
3.3.5. Active repos and spot purchases of securities and foreign currency to be settled, in cases where there is no delay in the fulfillment of the respective obligations.
PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING B.C.R.A.
Section 3. Cash realization of credits in deposit accounts.
Version: 5th COMMUNICATION “A” 5218
Validity:
19/08/2011

ORDERED TEXT ORIGIN OF THE REGULATION Observations
Section Point Paragraph Comm. Point Paragraph
1.1. “A” 5218
1.2. “A” 5218
1.3.1. “A” 2627 2. 1st According to Com. “A” 3037, 4353 and 5218.
1.3.1.1 “A” 2627 2.1. According to Com. “A” 3037.
1.3.1.2. “A” 3037
1.3.1.3. “A” 2627 2.2.
1.3.1.4. “A” 2627 2.3. According to Com. “A” 3037.
1.3.1.5. “A” 2627 2.4. According to Com. “A” 3037, 4353.
1.3.1.6. “A” 2627 2.5. According to Com. “A” 3037.
1.3.1.7. “A” 3037
1.3.1.8. “A” 2627 2.6. According to Com. “A” 3037 and 4353.
1.3.1.9. “A” 2627 2.7. According to Com. “A” 3037.
1.3.1.10. “A” 2627 2.8.
1.3.1.11. “A” 3037
1.3.1.12. “A” 2627 2.9.
1.3.1.13. “A” 2627 2.10.
1.3.1.14. “A” 2627 2.11.
1.3.1.15. “A” 2627 2.12.
1.3.1.16. “A” 3217 1.
1.3.1.17. “A” 3249 3.
1.3.1.18. “A” 4954 According to Com. “A” 5218.
1.3.2. “A” 2627 3. According to Com. “A” 3037, 4353, 4424 and
5218.
1.3.3. “A” 2627 5. According to Com. “A” 4353 and 5218.
1.
1.3.4. “A” 2627 4. According to Com. “A” 5162.
2.1. 1st “A” 2543 1. 1st According to Com. “A” 3059 and 3831
2nd “A” 4713
2.2.1. “A” 2543 1. 2nd According to Com. “A” 3061 and 4713
2.2.2. “A” 2543 1. 2nd
2.2.3. “A” 5130
2.2.4. “A” 5162 2.
2.
2.3. “A” 2543 2.
3.1. 1st “A” 2213 1st
2nd “A” 2213 3rd
3.2.1. "B" 5672 5th
3.2.1.1. "B" 5672 5th
3.2.1.2. Includes interpretative clarification
3.2.2. "B" 5672 4th
3.2.3. "B" 5672 6th
3.3.1. "B" 5672 2nd
3.
3.3.2. “A” 2213
"B" 5672
2nd
3rd
B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE ORDERED TEXT OF THE REGULATIONS ON “PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING AND OTHER ILICIT ACTIVITIES”

PREVENTION OF MONEY LAUNDERING, TERRORISM FINANCING B.C.R.A.
ORDERED TEXT ORIGIN OF THE REGULATION Observations
Section Point Paragraph Comm. Chapter Point Paragraph
3.3.3. “A” 2213 2nd
3.3.4. "B" 5709 2nd
3.3.4.1. "B" 5709 2nd
3.3.4.2. "B" 5709 2nd
3.3.4.3. "B" 5709 2nd
3.
3.3.5. "B" 5672 2nd

4.1. Audit committee.
It is recommended that the majority of the Board members who make up the Audit Committee, in accordance with what is established by the Central Bank of the Argentine Republic in the “Minimum standards on internal controls”, hold the status of independent and that at least one of these members has extensive experience in accounting and/or financial matters. The Audit Committee must consider the implementation of training programs so that its members have an appropriate knowledge base that allows them to develop their tasks.
4.2. Other committees.
According to the dimensions, complexity, economic importance and risk profile presented by the financial entity and the economic group in question, the establishment of other specialized committees is recommended, with a clear definition and dissemination of their mandates, composition (including members considered independent) and work procedures. Among other committees, the following can be mentioned:
4.2.1. Risk management committee, which will monitor the activities of Senior Management related to the management of credit, market, liquidity and/or assets and liabilities, operational, compliance and reputation risks, among others. Likewise, it will advise the Board on the risks of the entity.
4.2.2. Staff incentives committee, responsible for monitoring that the economic incentive system for staff is consistent with the culture, objectives, long-term business, strategy and control environment of the entity, as formulated in the pertinent policy.
4.2.3. Corporate governance committee, which evaluates the management of the Board and the renewal and replacement of Senior Management.
4.2.4. Ethics and compliance committee, which ensures that the entity has adequate means to promote appropriate decision-making and compliance with internal and external regulations.
4.2.5. Control and prevention committee for money laundering and terrorism financing to
assist in compliance with the obligations arising from the applicable regulations for the prevention of said crimes.
Both independent directors and those who do not meet that condition, but possess relevant knowledge and skills, should have a key role in such committees. For the purpose of maximizing objectivity, it is convenient that the majority of the members hold the status of independent, considering in their case the situations provided for in the first paragraph of this point and the specific nature of the entity. The aforementioned committees are not exclusive of others that may be specifically required by norms of the Central Bank of the Argentine Republic. GUIDELINES FOR CORPORATE GOVERNANCE B.C.R.A. IN FINANCIAL ENTITIES
Section 4. Committees.
Version: 2nd COMMUNICATION “A” 5218
Validity:
19/08/2011

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE
ORDERED TEXT OF THE REGULATIONS ON “GUIDELINES FOR CORPORATE GOVERNANCE IN FINANCIAL ENTITIES” ORDERED TEXT ORIGIN OF THE REGULATION
Section Point Paragraph Comm. Chapter Point Paragraph
Observations
1.1. “A” 5201
1.2. “A” 5201
1.3. “A” 5201
1.4. “A” 5201
1.
1.5. “A” 5201
2.1. “A” 5201
2.2. “A” 5201
2.3. “A” 5201
2.
2.4. “A” 5201
3.1. “A” 5201
3.
3.2. “A” 5201
4.1. “A” 5201
4.
4.2. “A” 5201 According to Com. “A” 5218.
5.1. “A” 5201
5.
5.2. “A” 5201
6.1. “A” 5201
6.
6.2. “A” 5201
7.1. “A” 5201
7. 7.2. “A” 5201
7.3. “A” 5201