On September 14th, 2020, SEPRELAD issued Resolution 201/20 (the "Resolution"), establishing new regulations for the prevention of AL/FT for natural and legal persons which, on a regular basis, carry out activities involving the purchase and sale of real estate ("Obliged Subjects"). 

These regulations will apply regardless of the form or modality through which it is operated. Thus, whenever the usual activities of buying and selling real estate are carried out, the individuals or legal entities involved in this economic sector must comply with the provisions of the Resolution. Therefore, its effects reach real estate agencies, realtors, brokers, commission agents, real estate developers and/or other forms or denominations with equivalent activities. With this, the previous applicable regulations are revoked (Resolutions 264/07 and 266/07 of SEPRELAD). 

Scope:

The Obliged Subjects must implement an integral system of prevention of AL and FT, even if the activities are delegated to intermediaries. 

Risk Factors to be Considered:

For their part, the Obliged Subjects must develop and implement methodologies and procedures for the identification, evaluation and mitigation of AL/FT risks, considering criteria established both by the regulated entities themselves and by SEPRELAD. The evaluation of the risks of AL/FT 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: risks of AL/FT associated with clients, whether they are natural or legal persons, their background, activity and behavior at the beginning or throughout the business relationship;

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

(iii) Distribution channels: AL/FT risks associated with the different models and means of distribution used by the obliged subjects, such as outsourced vendors, commercial relations arranged via web or other interactive computer media, among others).

(iv) Geographical area: AL/FT risks associated with the geographical areas in which the obliged subject offers its products and/or services, both locally and internationally, taking into account the characteristics linked to security, crime rates, economic-financial and socio-demographic characteristics of these areas, and the provisions issued by the competent authorities in terms of LA/FT or the Financial Action Task Force (FATF) with respect to these jurisdictions, among others.

In turn, the Obliged Subjects must evaluate the level of exposure to AL/FT risks associated with the new products and/or services that they eventually offer and if the Obliged Subjects decide to extend their range of coverage to new geographical areas, they must prepare an evaluation of the level of exposure to AL/FT risks.

Compliance Officer:

On the other hand, 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 maximum authority of the entity. The Compliance Officer must enjoy autonomy and independence in the exercise of his/her functions and have sufficient support and resources. In sole proprietorships, the owner may perform as Compliance Officer.

Likewise, the Obliged Subjects may designate a Compliance Responsible in each branch (note that it is a different figure from the Compliance Officer and its designation is a possibility, not an obligation, as the designation of a Compliance Officer. The Compliance Responsible will be in charge of implementing prevention policies and procedures in the branch).

AL/FT Prevention Manual and Code of Ethics:

Obliged Subjects must compile all their AL/FT prevention policies and applicable legal rules in accordance with the Resolution in a manual.

In turn, the Obliged Subjects must have a Code of Ethics and Conduct, approved by the highest authority, establishing the ethical principles they must follow. It must be borne in mind that the requirement of the Code of Ethics and Conduct was not foreseen in SEPRELAD Resolutions 264/07 and 266/07, so the updating of the prevention systems of AL/FT of the obliged subjects that already had it must provide for the elaboration of such a code, as a separate document to the Manual of Prevention of AL/FT, complementing it. 

Obliged Subjects gathered in a guild may adopt a collective Code of Ethics and Conduct. 

Audits:

Obliged Subjects must also make an annual internal evaluation of the AL/FT prevention procedures, which may be executed by the Compliance Officer, by means of a report with the verifications made and the conclusions reached within the framework of the provisions in force, which must be made known to SEPRELAD within the following 90 days of the closing of the fiscal year. 

Obliged Subjects must also submit their AL/FT prevention procedures to an external audit, and the respective report must be sent to SEPRELAD within the following 180 days after the closing of each audited financial year.

Know Your Customer or “KYC”:

As a novelty, the Resolution includes the possibility of applying an abbreviated KYC procedure in the following cases 

a) Operations with a single payment of up to 150 minimum wages (approximately US$ 47,000) in the last 12 months; or

b) Term operations where the amount of the payments does not exceed the equivalent of 20 minimum wages (approximately US$ 6,200) per year. 

This allows for a simplification of procedures and documentation to be required from clients, in order to speed up transactions. 

Also as another novelty, the Resolution allows the obliged subjects to delegate the KYC procedure to third parties, but the responsibility of the KYC process remains with the obliged subject. 

If the KYC procedure determines that a customer is included in the black lists of the United Nations Security Council resolutions and those established in accordance with the law of immobilization of funds or financial assets, the obliged subject must immobilize the customer's assets, if this is within its reach. 

Reports:

Like its predecessors, the Resolution requires that all suspicious operations be reported to SEPRELAD by means of a Suspicious Operation Report ("STR"). However, the Resolution now requires that the obliged subjects also submit "negative reports" to SEPRELAD if they do not make STRs within a period of three months. 

Sanctions and Legal Effects:

Failure to comply with these obligations may result in significant financial and reputational penalties, so measures to comply with them must be taken as a matter of urgency.