Finance Regulations Guide for Chile, a Promising Fintech Hub in Latin America
Chile's fintech sector is governed by the Fintech Law (Law N° 21.521) and associated regulations such as NCG 502. These laws regulate registration, authorization, and obligations for financial service providers in the fintech sector.
The Financial Market Commission (Comisión para el Mercado Financiero, CMF) is the main regulator overseeing Anti-Money Laundering (AML) and fintech/open-banking companies in Chile. The CMF supervises compliance with laws, ensures transaction security and transparency, and directly oversees fintech activities, including companies providing financial services via technology.
Key AML Requirements
Under Chilean AML regulations, all affected institutions must:
- Keep records of AML-related activities for a minimum period of five years and inform the Financial Analysis Unit of any cash operation greater than ten thousand dollars USD or the equivalent in Chilean pesos.
- Have appropriate software to develop warning systems that identify and detect suspicious transactions and submit suspicious activity reports (SAR) through the UAF website if a customer refuses to provide required information or documentation, or submits something false.
- Conduct Customer Due Diligence (CDD) before or during the establishment of a permanent legal or contractual relationship, when a transaction amounts to or exceeds USD 1,000 with no permanent relationship, or when there are suspicions of ML/TF, regardless of the transaction amount.
- Intensify Ongoing CDD for Politically Exposed Persons (PEPs), establish risk management systems to determine if a prospective client, client, or final beneficiary is a PEP, and take measures to determine the clients' source of funds and final beneficiaries identified as PEPs.
- Obtain additional information for PEPs, including the intended nature of the relationship, origin of funds, origin of assets, purpose of the act, operation, or transaction, approval from senior management, and more frequent updates of information and identification documents.
Enhanced Due Diligence (EDD)
Enhanced Due Diligence (EDD) is required for PEPs, electronic funds transfers considered high-risk, individuals and members listed in UN sanctions, countries and jurisdictions under GAFILAT monitoring, countries and jurisdictions with preferential tax regimes, and countries and jurisdictions published by the Chilean Tax Service.
Penalties for Non-Compliance
Hiding or disguising the origin of illicit funds in Chile is punishable by imprisonment of five years and one day to fifteen years, a fine of two hundred to one thousand monthly tax units, and penalties for transporting cash or bearer negotiable instruments exceeding USD 10,000 without declaration.
Chile's AML Framework and Fintech
Chile's AML framework for fintech likely includes typical AML compliance measures such as Know Your Customer (KYC) processes, transaction monitoring, and suspicious activity reporting, consistent with international standards. However, specific procedural details for fintech are embedded in CMF regulations and the Fintech Act's requirements.
Other Relevant Authorities
The Central Bank also plays a role in Chile's fintech sector, focusing on currency stability and foreign exchange matters.
In summary, Chile's regulatory commitment to modernizing fintech oversight while integrating AML controls under the CMF jurisdiction ensures a secure and transparent financial environment for both traditional and fintech companies.
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- To maintain compliance within the fintech sector, companies are required to adhere to Anti-Money Laundering (AML) regulations, which necessitate the implementation of Know Your Customer (KYC) processes, transaction monitoring, and suspicious activity reporting, as overseen by the Financial Market Commission (CMF).
- In the realm of investing, technology plays a crucial role in fintech, particularly in the development of software for AML compliance, aimed at identifying and detecting suspicious transactions, as mandated by Chilean AML regulations.
