New regulation for the Prevention of ML/TF for games of chance operators

On November 13, 2020, SEPRELAD issued Resolution 258/20 (the “Resolution”), establishing a new regulation for the prevention of ML/TF for natural and legal persons that carry out activities related to the exploitation of games of chance (“Obliged Subjects"), supervised by the National Gaming Commission ("CONAJZAR"), repealing Resolution 62/08. 

Scope

The Obliged Subjects must implement a comprehensive ML and TF prevention system, even if the activities are delegated to intermediaries. 

Risk Factors to Consider

For their part, Obliged Subjects must develop and implement methodologies and procedures for the identification, evaluation and mitigation of ML/TF risks, considering criteria established both by the obliged subjects themselves and by SEPRELAD. The ML/FT risk assessment must be done at least every two years, and the methodology associated with them must be verified at least every four years, and consider at least the following risk factors: 

(i) Clients: ML/TF risks associated with clients, be they natural or legal persons, their background, activity and behavior at the beginning or during the entire commercial relationship. 

(ii) Products and/or services: ML/FT risks associated with the products and/or services that the obliged party offers on its own during the entire design or development stage. 

(iii) Distribution channels: ML/TF risks associated with the different models and means of distribution. 

(iv) Geographical area: ML/FT risks associated with the geographical areas in which the obliged subject offers its products and/or services, both locally and internationally, considering the characteristics related to security, crime rates, economic-financial and socio-demographic characteristics of these, and the provisions that the competent authorities in matters of ML/TF or the Financial Action Group (FATF) issue with respect to said jurisdictions, among others. 

In turn, the Obliged Subjects must assess the level of exposure to ML/TF risks associated with the new products and/or services that they eventually offer, or if they are going to be commercialized using new technologies, through a report that must be available for SEPRELAD and CONAJZAR. If the Obliged Subjects decide to expand their range of coverage to new geographical areas, they must also prepare an assessment of the level of exposure to ML/TF risks. 

ML/TF Prevention Committee

Obliged Subjects must have an ML/TF Prevention Committee, made up of the Compliance Officer and at least one member of the Board of Directors. 

Compliance Officer

For their part, Obliged Subjects must have a Compliance Officer, with a higher hierarchical rank, such as a manager or a director, who must report directly to the highest authority of the entity. The Compliance Officer must enjoy autonomy and independence in the exercise of its functions and have sufficient support and resources. 

In sole proprietorships, the position of Compliance Officer can be held by the owner. 

Compliance Responsible (Encargado de Cumplimiento)

Likewise, the Obliged Subject may appoint a Compliance Responsible (Encargado de Cumplimiento) in their branches, agencies or similar, who must apply the ML/TF prevention policies and procedures in those places, in coordination and under the responsibility of the Compliance Officer. 

ML/TF Prevention Manual and Code of Ethics

Obliged Subjects must compile all their ML/TF prevention policies and the applicable legal regulations in accordance with the Resolution in a manual. 

In turn, Obliged Subjects must have a Code of Ethics and Conduct, approved by the highest authority, establishing the ethical principles that they must follow. 

Audits

Obliged Subjects must also make an annual internal evaluation of the ML/TF prevention procedures, which results in a report with the verifications carried out and the conclusions reached within the framework of the current provisions, which must be made known to SEPRELAD and CONAJZAR within the following 90 days from the close of the fiscal year. 

Obliged Subjects must also submit their ML/TF prevention procedures to an external audit, and the respective report must be sent to SEPRELAD and CONAJZAR within the next 180 days after the close of each audited fiscal year. 

Know Your Customer or "KYC"

Obliged Subjects must continue implementing KYC procedures for their clients through a set of rules and measures to obtain sufficient information to know the identity of their clients and their final beneficiaries, understand the purpose of the relationship and operations, establish their transactional profile and verify that their operations are compatible with that profile. 

As a novelty, the Resolution includes the possibility of applying an abbreviated KYC procedure in operations of up to approximately US$ 180. 

In turn, with the intervention of CONAJZAR, SEPRELAD can enable the application of simplified KYC regimes for certain low-risk products. 

Clients who, at the beginning or during the relationship present a high risk to ML/FT, must undergo an extended KYC procedure. 

The KYC procedure can now be delegated to third parties. 

Reports

Like its predecessor, the Resolution requires that all suspicious operations be reported to SEPRELAD through a ROS. However, now the Resolution requires that Obliged Subjects also send “negative reports” to SEPRELAD if they do not make ROS' within a period of three months. 

Sanctions and Legal Effects

Failure to comply with these obligations may entail significant financial and reputational sanctions, therefore, measures must urgently be taken for their compliance.