The Influence of the FATF in Argentina: a Heavily Indebted Country Toeing the Line

The FATF, soft law and mutual evaluations

In 1989, the Financial Action Task Force (FATF) was created in Paris by the Group of Seven (the USA, Canada, Germany, France, Italy, Japan and the UK) to combat money laundering globally and collaboratively. The initial focus of this group was to tackle money laundering, which at that time was primarily linked to drug trafficking. Later, following the 9/11 terrorist attacks, the fight against terrorist financing was added, and more recently, the fight against the financing of weapons of mass destruction proliferation.

As an international entity, one of the FATF’s primary functions is to study and make recommendations on the prevention and fight against money laundering (ML), terrorist financing (TF) and the proliferation of weapons of mass destruction (PWMD). In this context, the FATF assesses member jurisdictions to verify whether they have implemented these recommendations into domestic law and analyses the effectiveness of the anti-money laundering (AML), counter-terrorist financing (CTF) and PWMD prevention policies implemented through that legislation. This evaluation process is conducted through the “Mutual Evaluation Round”, which assesses the member country or jurisdiction on two key aspects: (i) technical compliance with FATF Recommendations, determining the degree of implementation of AML, CTF and PWMD requirements in the assessed country’s domestic law; and (ii) the effectiveness of the AML/CTF/PWMD system in terms of the country’s achievements in prevention, to determine how effectively the country’s legal and institutional framework produces the intended results.

Among the areas evaluated are the implementation of customer due diligence and know-your-customer (KYC) systems, effective supervision of financial and non-financial institutions, the number of cases opened by the country’s financial intelligence unit (FIU), the number of Suspicious Activity Reports (SARs) filed with the public prosecutor’s office, the number of cases initiated in the courts and the number of convictions, international co-operation and information-sharing measures, among other preventive aspects. From this analysis, the FATF publishes its lists. While FATF Recommendations are considered soft law – because non-compliance cannot lead to claims before international courts – failure to comply leads to indirect sanctions, such as listing, loss of membership, or adverse political and economic consequences such as complications in accessing funding programmes from the World Bank or the International Monetary Fund (IMF), entities to which Argentina specifically owes large amounts of money and that actively collaborate with the FATF.

Argentina’s performance in mutual evaluations

Argentina has been evaluated four times by the FATF, with the latest evaluation concluded just a few months ago, although the results have not yet been published. Argentina became an FATF member in 2000, beginning its journey towards alignment with the standards set by the group. In the same year, Law 25,246 was enacted, through which Argentina amended its criminal treatment of ML to align with new forms agreed upon in international conventions, particularly the 2000 Palermo Convention and the FATF Recommendations. As a result, Article 278 was incorporated into the Penal Code, which estalished that any crime could be considered a predicate offence for ML. Up to that point, ML had been treated as a form of concealment.

The FATF evaluations have had a tremendous impact on the country, demonstrating their great effectiveness. The evolution of both the accusatory and preventive systems against ML and TF crimes in Argentina has been shaped by internal regulations that were adopted as a result of the political decision by Argentine authorities to conform to international standards. The country’s response to the mutual evaluations and its efforts to address the observations made over the years, in order to avoid adverse consequences, have undoubtedly been the primary reason for these developments. As a result, the current Argentine legal framework for AML/CTF/PWMD is aligned with international requirements.

Argentina enters the “grey list”

Following the FATF’s Third Mutual Evaluation Round, and due to the deficiencies found in Argentina’s preventive and repressive AML/CTF/PWMD systems, the country received a very low score. The report at that time showed non-compliance with 49 of the 54 strategic guidelines, which led to Argentina being added to the FATF’s “grey list” in October 2010. Argentina’s entry into the “grey list” prompted a new phase in the evolution of its internal ML and TF combat system. The country reacted to this adverse situation by launching an ambitious plan to reverse the outcome, resulting in amendments to ML and TF criminal offences, and the issuance of most of the regulations and norms to prevent these crimes by the FIU in the following years (especially between 2011 and 2013). Most of these norms will now be subject to updating, largely motivated by the Fourth Mutual Evaluation Round concluded this year.

In June 2011, Law 26,683 was passed, amending the Penal Code to stop treating ML as a form of concealment and to consider it as an autonomous offence, defined in the new Article 303 of the Penal Code, thereby aligning with FATF Recommendations.

This article defines ML as the act of converting, transferring, managing, selling, encumbering, concealing or circulating assets derived from a criminal offence, with the possible result of making them appear to be of lawful origin, provided that their value exceeds a certain amount (which is updated periodically).

Regarding terrorism and TF offences, in line with the political goal of complying with FATF Recommendations, Law 26,734 was passed in December 2011, repealing Articles 278 ter and 278 quater (introduced by Law 26,268), and amending the definition of terrorism in Article 41 quinquies of the Penal Code and TF in Article 306 of the same code.

These laws stated that terrorism was committed when any of the offences provided for in the Argentine Penal Code were committed “with the intent to terrorise the population or force national public authorities, foreign governments, or agents of an international organisation to carry out an act or refrain from doing so”. Furthermore, Article 41 quinquies considered it a TF offence to direct resources towards the functioning and support of individuals/groups engaged in terrorism or for the commission of terrorist acts themselves.

These definitions of criminal offences became outdated over time, in light of subsequent FATF Recommendations, leading to further updates through Law 27,739 (March 2024), which will be discussed later in detail.

After evaluating the changes introduced to Argentina’s preventive and repressive systems, Argentina was able to demonstrate significant progress to the FATF in implementing measures to combat these crimes. This led to Argentina being removed from the “grey list” at the October 2014 FATF Plenary, based on the evaluation results. Although significant improvements were made during that period, after nearly a decade of those changes being in force, the Argentine system once again needed to be updated to meet international standards and FATF Recommendations, which are themselves dynamic and subject to constant change and updates, just as organised crime is.

Normative restructuring for the fourth mutual evaluation

Since 2021, Argentina has made numerous legislative amendments to align its system with FATF Recommendations in preparation for the Fourth Mutual Evaluation Round. These actions were aimed not only at aligning Argentina’s system with the recommendations but also at obtaining a good technical rating in the recently concluded evaluation process, which would allow, among other things, easier access to international credit or programmes from the IMF or World Bank and make debt restructuring easier. Among the key updates made to the regulations since 2021, the following stand out:

(a) FIU Resolution No. 112/2021, on Beneficial Ownership Policies: This resolution modified the definition of “beneficial owner” and established measures for obliged entities to verify the identity of the beneficial owners of their clients, reducing the percentage required to be considered a beneficial owner. Previously, a “beneficial owner” was defined as an individual holding at least 20% of the capital or voting rights of a legal person or a legal structure without legal personality. The new resolution lowered the threshold to 10%. It also clarified the concept of “control”, considering beneficial owners to be those individuals who exercise ultimate control over the clients.

(b) Executive Decrees Nos. 652/2022 and 653/2023, on National Risk Assessment: Argentina made unprecedented efforts to comply with FATF Recommendation 1, which requires member countries to carry out a national risk assessment of ML, TF and PWMD. These decrees approved the reports of the First National Risk Assessment for Money Laundering and the National Risk Assessment for Terrorist Financing and Proliferation of Weapons of Mass Destruction, respectively, covering a five-year period (from 1 January 2017 to 31 December 2021).

These reports identified a total of 1,386 ML cases initiated between 2017 and 2020, with an annual average amount affected by this crime of over USD1 billion. Domestically, the National Risk Assessment found that 42% of ML cases with an identified predicate offence involved assets derived from tax crimes, 29% from drug-related crimes, 10% from property crimes and 9% from customs offences.

(c) FIU Resolution No. 14/2023, applicable to Banks and Financial Institutions: This resolution updated the AML/CTF regulatory framework for banks and financial institutions, introducing new risk assessment measures and ML/TF prevention based on a risk-based approach (RBA). Obligations imposed include developing a risk assessment methodology considering factors such as clients, products, channels and geographic areas, submitting a self-assessment of risks, and more.

(d) FIU Resolution No. 42/2024, applicable to Chartered Public Accountants: This updated the AML/CTF/PWMD regulatory framework for chartered public accountants in Argentina, introducing the RBA to client monitoring, mandating the submission of technical risk self-assessment reports, and requiring independent external reviews every two years. It also imposes the submission of annual and monthly systematic reports, and sets out policies and indicative alerts to strengthen the AML/CTF/PWMD systems of obliged entities.

(e) FIU Resolution No. 48/2024, applicable to Corporate Lawyers: For the first time, a regulatory framework for AML/CTF/PWMD applicable to lawyers in Argentina was established. This follows the inclusion of lawyers as obliged entities required to report to the FIU under Article 20, clause 17 of Law 25,246 (as amended by Law 27,739), in accordance with FATF Recommendation 22.

This regulation does not apply to all lawyers but only to those who, on behalf of their clients, prepare or carry out: (i) real estate transactions over 700 minimum living and mobile wages (MLMWs); (ii) management of assets exceeding 150 MLMWs; (iii) management of bank accounts, savings and/or securities exceeding 50 MLMWs; (iv) organisation of contributions to create, operate or manage legal entities or other legal structures; or (v) creation, operation or management of legal entities or other legal structures, and the sale of legal businesses or shares in legal entities or other legal structures.

(f) Regulations on Virtual Asset Service Providers (VASPs): Following their inclusion as obliged entities under Article 20, clause 17 of Law 25,246 (as amended by Law 27,739), VASPs are now required to report to the FIU on AML/CTF matters in accordance with FATF Recommendation 15 and its interpretive note. Furthermore, the Virtual Asset Provider Registry was established under the jurisdiction of the National Securities Commission (CNV), requiring VASPs to register as a condition for operating in Argentina. CNV Resolution No. 994/2024 regulates the VASP registry, and FIU Resolution No. 49/2024 established, for the first time, a regulatory framework for AML/CTF/PWMD applicable to VASPs in Argentina. All of this is intended to comply with FATF Recommendation 15 and its interpretive note.

This latest resolution sets minimum requirements for identifying, assessing, monitoring and mitigating ML/TF/PWMD risks, based on an RBA for VASPs. Key requirements include: (i) the obligation to have an AML/CTF/PWMD system in place, including the preparation and updating of an AML/CTF/PWMD Manual; (ii) the establishment of annual training programmes, documentation retention policies and KYC due diligence policies for clients based on an RBA; (iii) monitoring according to risk level, submitting technical risk self-assessment reports and their evaluation methodology, and evaluating the preventive system through Independent External Reviews (IERs); and (iv) filing SARs on ML, TF and PWMD, and submitting Annual Systematic Reports (ASRs) and monthly reports on “Operations with Virtual Assets” and “Customer Registration and Deregistration”, among other things.

(g) Decree 278/2024, on Freezing of Assets Associated with TF: This decree updated regulations on the freezing of assets to improve technical compliance with FATF Recommendations and UN Security Council resolutions, addressing vulnerabilities identified in the latest National Risk Assessment for Terrorist Financing and Weapons of Mass Destruction Proliferation.

(h) FIU Resolutions No. 54/2024 and 55/2024, applicable to Art, Philatelic and Numismatic Investment Businesses: These resolutions updated requirements for identifying, assessing, monitoring, managing and mitigating ML/TF/PWMD risks based on an RBA, in line with FATF Recommendations. They introduced the RBA concept in KYC processes and customer monitoring. Obligations include establishing a Code of Conduct, Manual, Training Programmes and Annual Compliance Officer Plan, and filing Risk Self-Assessment Reports considering National Risk Assessments. Internal audits or IERs are required every two years when sales exceed 180 MLMWs in one year. ASRs and monthly systematic reports must also be submitted. Finally, policies, procedures, controls, indicative alert signals and guidelines are provided to reinforce AML/CTF/PWMD systems.

(i) FIU Resolution No. 56/2024, on Deadlines for Reporting Suspicious Activities to the FIU: This resolution defines “suspicious facts and operations” and “unusual operations” more precisely, aligning with the definitions incorporated by Law 27,739. Suspicious operations are those “attempted or carried out that raise suspicion or provide reasonable grounds to suspect that the assets involved originate from or are linked to a criminal offence or are related to terrorist financing or the financing of the proliferation of weapons of mass destruction, or that, having previously been identified as unusual, after analysis and evaluation by the obliged entity, do not justify their unusualness”. “Unusual operations” are understood to be those “attempted or carried out in isolation or repeatedly, regardless of the amount, that lack economic and/or legal justification, and/or are unrelated to the client’s risk level or transactional profile, and/or that, due to their frequency, regularity, amount, complexity, nature, and/or other specific characteristics, deviate from market practices and customs”.

The deadlines for reporting suspicious activities to the FIU have also been modified. Reports must now be filed within 24 hours of the obliged entity identifying the operation as suspicious, whereas the previous timeframe for ML suspicions was 15 days. However, the new regulation stipulates that in no case may the report to the FIU exceed 90 calendar days from the date the suspicious operation was carried out or attempted (previously it was 150 days). The same applies to TF. Additionally, the confidentiality of reported information is guaranteed, except in specific cases involving the Central Bank, and independent external reviewers are granted access to the information necessary to assess the monitoring system and alerts.

(j) Law 27,739: This law was enacted as part of Argentina’s effort to meet the terms of its latest agreement with the IMF, incorporating the FATF’s suggested improvements. It was passed before the FATF officials’ on-site visit to Argentina during the Fourth Mutual Evaluation Round to avoid a poor evaluation score that could place Argentina back on the “grey list”. The law introduces a comprehensive reform of Argentina’s AML/CTF/PWMD system, focusing on six main pillars:

• Establishment of Parliamentary Oversight: The responsibilities of the Bicameral Permanent Commission for the oversight of intelligence agencies and activities were expanded to include monitoring the work of the FIU. The VASP Registry was established under the CNV’s regulatory scope. The Centralised Beneficial Ownership Registry was created under the Federal Administration of Public Revenues (AFIP) to contain accurate, up-to-date information on the beneficial owners of legal persons and structures, ensuring that competent authorities have full access.
• Amendments to the Penal Code: In addition to incorporating new predicate offences for ML (eg, environmental crimes) into Article 303 of the Argentine Penal Code, the law significantly increased the threshold for criminal liability, raising it to 150 MLMWs. Regarding terrorism offences, Article 41 quinquies previously defined terrorism as the commission of certain Penal Code offences with the intent to terrorise. The reform now expands this definition to include the commission of offences under special laws and laws incorporating criminal provisions from international conventions in force in Argentina. As for TF, Article 306 of the Penal Code was amended to include the use of “such funds to finance, for oneself or others, the travel or logistics of individuals and/or goods to a state other than their place of residence or nationality, or within the same national territory, with the purpose of perpetrating, planning, preparing, or participating in terrorist acts; and to finance, for oneself or others, the provision or receipt of training for the commission of terrorist acts”.
• Reform of Law 25,246 (AML/CTF/PWMD system): The most notable aspects of this reform include the strengthening of the Administrative Sanctioning Regime, enhancing the deterrence of Argentina’s AML/CTF/PWMD system and making it more effective with new sanctions, more severe fines, new Obliged Entities, and special regulations for specific Obliged Entities (eg, non-profit organisations), in line with FATF Recommendations 8 and 22. Additionally, following the guidelines of Recommendation 15, VASPs were added as Obliged Entities.
• The law incorporates the definition of VASPs, defining a VASP as “any natural or legal person that, as a business, conducts one or more of the following activities or operations for or on behalf of another natural or legal person: i. Exchange between virtual assets and fiat currencies; ii. Exchange between one or more forms of virtual assets; iii. Transfer of virtual assets; iv. Custody and/or administration of virtual assets or instruments enabling control over them; and v. Participation and provision of financial services related to an issuer’s offering and/or sale of a virtual asset.” Additionally, the law defines a “virtual asset” as “a digital representation of value that can be traded and/or transferred digitally and used for payments or investments”. It adds that virtual assets do not include legal tender in the national territory or currencies issued by other countries or jurisdictions (fiat currency).
• The law also incorporates the RBA definition into Law 25,246, following FATF Recommendation 1. The law now defines an RBA as “the regulation and application of measures to prevent or mitigate money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction, proportionate to the identified risks, including the processes for identifying, assessing, monitoring, managing, and mitigating those risks, with the aim of focusing efforts and applying resources more effectively”.
• Finally, the law unified the obligations of Obliged Entities. With the reform of Article 21 of Law 25,246, Obliged Entities are now prohibited from initiating or continuing a relationship with clients who have not been duly identified, or for whom continuous monitoring and/or due diligence of the commercial, contractual, economic and/or financial relationship has not been carried out. They are also required to determine the ML, TF and PWMD risks associated with the client and their operations, products, services, transactions, operations or distribution channels, as well as the geographical area involved, to conduct a self-assessment of those risks and to implement appropriate mitigation measures.

Conclusions

The impact of the FATF on the evolution of Argentina’s AML/CTF/PWMD system is undeniable. Over the years, the FATF’s mutual evaluations and recommendations have been the primary driving force behind regulatory changes in the country. This has been primarily due to the potentially severe consequences for a country with as large an external debt as Argentina’s, should it be placed on the “grey list”. The threat of inclusion on grey or black lists, or actual inclusion, with the resulting adverse consequences, has pushed Argentina to align its legislation with international standards.

Each of the reforms described, from the initial criminalisation of ML to the recent Law 27,739, has been driven by the political decision to avoid sanctions and ensure Argentina remains compliant with FATF Recommendations. This determination has led Argentina to make significant efforts to constantly update its regulatory framework, create specialised bodies and adopt risk-based approaches.

In conclusion, the Argentine case illustrates how an international body like the FATF, through an intense evaluation system and the application of incentives and pressures, can have a substantial impact on the domestic policies of member countries, thereby contributing to the improvement of crime prevention efforts. A separate discussion is whether national sovereignty is threatened. What is clear is that the possibility of indirect sanctions resulting from poor performance in an FATF evaluation has proven to be a powerful catalyst for harmonising national legislation with global standards in the field.

Therefore, the deepening of the fight against and prevention of these crimes, both internationally and domestically, will undoubtedly continue. In fact, its expansion is accelerating. The challenge now lies in maintaining an up-to-date Argentine legal framework – without lapsing into inaction – while respecting fundamental constitutional rights to life, property, privacy and due process. We also hope that extraordinary measures will not have to be taken again in a short period of time to update the legislation in response to the urgency of an upcoming evaluation and the risk of returning to the “grey list”. Given that Argentina is a state with a huge debt to international organisations such as the IMF, the economic consequences of being placed on the “grey list” cannot be the country’s absolute priority.