FATF AML Deficiency List
US Dept of State Money Laundering assessment
Non - Compliance with FATF 40 + 9 Recommendations
Chile is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Chile was undertaken by the Financial Action Task Force (FATF) in 2006. According to that Evaluation, Chile was deemed Compliant for 8 and Largely Compliant for 15 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 2 of the 6 Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
Chile was deemed a Jurisdiction of Concern by the US Department of State 2015 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Chile has a large and well developed banking and financial sector with an established AML/CFT regime. Chile’s economic stability makes it an attractive location for the financial operations of criminal groups. Recent legislation has addressed many of the systematic vulnerabilities of Chile’s past AML/CFT regime, to include deficiencies in detection and prevention of money laundering, easing of bank secrecy laws, and increase in oversight of public institutions. Some issues remain such as a lack of sufficient resources for investigators and prosecutors.
Given Chile’s extensive trading partnerships and long borders, its largely unregulated free trade zones (FTZs) are additional vulnerabilities. Chile has three FTZs, the Free Zone of Iquique (ZOFRI), the free port of Arica in northern Chile, and the Free Zone of Punta Arenas in the south. ZOFRI is a major entry point for products bound for Bolivia and has industrial, retail, and commercial areas. Punta Arenas also has a free port. Imports entering and remaining in Chile’s FTZs pay no duty or value added tax and entities established in the zones pay no corporate tax.
While the size of the market for illicit or smuggled goods is unknown, there have been seizures of counterfeit goods by Chilean Customs officials. There have been incidences of public corruption.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 67
World Governance Indicator – Control of Corruption 83
Companies face very low risks of corruption in Chile, the least corrupt country in Latin America. Chile has strong and transparent institutions that promote business and that have effective mechanisms to investigate and punish corrupt practices. Risks stem mostly from a strong connection between politicians and the economy, which can affect public procurement. A series of corruption cases in 2015 raised concern about corruption, but Chile is actively investigating the issues. The Criminal Code and the Criminal Corporate Liability Law prohibit active and passive bribery of domestic and foreign public officials. Companies operating in Chile are advised to establish an effective compliance system. Facilitation payments and gifts are not explicitly mentioned in Chilean laws, but businesses are unlikely to encounter these in practice. The maximum penalty for bribery is imprisonment of up to five years and fines for individuals, and fines and a ban from government contracts and benefits for corporate entities. For further information - GAN Integrity Business Anti-Corruption Portal
Chile has a market-oriented economy characterized by a high level of foreign trade and a reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. Exports of goods and services account for approximately one-third of GDP, with commodities making up some 60% of total exports. Copper alone provides 20% of government revenue.
From 2003 through 2013, real growth averaged almost 5% per year, despite the slight contraction in 2009 that resulted from the global financial crisis. Growth slowed to an estimated 2.3% in 2015. A continued drop in copper prices prompted Chile to experience its second consecutive year of slow growth, elevated inflation, and a depreciating currency.
Chile deepened its longstanding commitment to trade liberalization with the signing of a free trade agreement with the US, which took effect on 1 January 2004. Chile has 22 trade agreements covering 60 countries including agreements with the EU, Mercosur, China, India, South Korea, and Mexico. In May 2010, Chile signed the OECD Convention, becoming the first South American country to join the OECD. In October 2015, Chile joined the US and 10 other countries and concluded negotiations on the Trans-Pacific Partnership trade agreement. The agreement will need to be ratified by the Chilean legislature.
The Chilean Government has generally followed a countercyclical fiscal policy, accumulating surpluses in sovereign wealth funds during periods of high copper prices and economic growth, and generally allowing deficit spending only during periods of low copper prices and growth. As of 31 October 2015, those sovereign wealth funds - kept mostly outside the country and separate from Central Bank reserves - amounted to more than $22.4 billion. Chile used these funds to finance fiscal stimulus packages during the 2009 economic downturn.
In 2014, President Michelle BACHELET introduced tax reforms aimed at delivering her campaign promise to fight inequality and to provide access to education and health care. The reforms are expected to generate additional tax revenues equal to 3% of Chile’s GDP, mostly by increasing corporate tax rates to OECD averages.
Agriculture - products:
grapes, apples, pears, onions, wheat, corn, oats, peaches, garlic, asparagus, beans; beef, poultry, wool; fish; timber
copper, lithium, other minerals, foodstuffs, fish processing, iron and steel, wood and wood products, transport equipment, cement, textiles
Exports - commodities:
copper, fruit, fish products, paper and pulp, chemicals, wine
Exports - partners:
China 26.3%, US 13.2%, Japan 8.5%, South Korea 6.5%, Brazil 4.9% (2015)
Imports - commodities:
petroleum and petroleum products, chemicals, electrical and telecommunications equipment, industrial machinery, vehicles, natural gas
Imports - partners:
China 23.4%, US 18.8%, Brazil 7.8%, Argentina 4% (2015)
Investment Climate - US State Department
Chile is a coastal country located in the southwest region of South America. Chile is an attractive destination for investors, boasting an open market economy, well-developed institutions that support financial growth and strong rule of law. The country has a positive disposition toward foreign direct investment (FDI), viewing it as key to sustaining Chile’s impressive economic trajectory over the last three decades. Its laws and regulations encourage investment by foreigners and very few restrictions upon FDI exist. Chile’s conversion and transfer policies are similar to those found in highly-developed countries like the U.S. The government does not apply performance requirements in reviewing proposed investment projects. Chile's capital markets are well-developed and open to foreign portfolio investors, and the regulatory system in Chile is generally transparent.
Chile’s legal framework for attracting and protecting foreign direct investment (FDI) is solid. A new institution in charge of attracting foreign investment, the Foreign Investment Promotion Agency (APIE), was created to replace the Foreign Investment Committee (CIEChile), the former FDI authority. Chile’s 2014 Tax Reform derogated a law that created tax invariability schemes for foreign investors, as well as a tax benefit for mergers through acquisitions. However, virtually all the rest of previous guarantees for FDI remained in place, and these changes have been implemented with transition periods and respect for previously concluded investment contracts.
Legal disputes can take several years to reach conclusion in the courts, making arbitration and mediation attractive alternatives for resolving business controversies. Chile is a signatory to the 1958 New York Arbitration Convention and a member state to the International Centre for Settlement of Investment Disputes (ICSID); disputes under the U.S.-Chile bilateral Free Trade Agreement (FTA) are resolved under the latter framework. Chile is compliant with its World Trade Organization agreement on Trade-Related Investment Measures (WTO/TRIMS) obligations.
Resolving insolvency has been made easier by a new legal and institutional framework, and as a result Chile has moved up 14 places from 2014 to 2015 in World Bank’s Doing Business Report’s ranking for this particular area.
Rights to the broad range of private ownership and establishment are observed in Chile. Mineral, hydrocarbon, and fossil fuel deposits within Chilean territory are restricted from foreign ownership, but may be licensed by the government to private enterprise. In practice, the government does not expropriate assets or holdings.
Real and intellectual property (IP) rights are generally respected, but Chile is not fully compliant with the obligations concerning IP set forth in the U.S.-Chile FTA.
CODELCO, which dominates the copper mining industry, is one of only a few state-owned enterprises (SOEs), which generally operate on equal footing with private companies.
There is growing awareness of the importance of responsible business conduct (RBC) in Chile. The government has recognized a number of ‘soft law’ instruments related to RBC and developed national action plans related to business social responsibility, sustainable development and human rights.
Political violence is rare and unlikely to affect foreign investors, but there is one region in the south of Chile where violence episodes linked to land disputes between indigenous groups and farmers and forestry businesses are becoming more frequent.
Corruption exists in Chile but on a much smaller scale than is the case with most Latin American countries. Chile has a favorable ranking of 23 out of 167 countries on Transparency International’s 2015 Corruption Perceptions Index. A presidential committee against corruption and conflicts of interest created in 2015 issued a report recommending an anticorruption agenda composed of 236 new measures, laws and regulations, of which nearly half has already materialized.
Chile has 41 bilateral investment agreements in force, and 24 other investment agreements in force, including the investment chapters of the FTA with the U.S. and other FTAs signed by Chile, the Latin American Integration treaty and the Protocol of the Pacific Alliance. Additionally, Chile is a party to the convention of the World Bank's Multilateral Investment Guarantee Agency (MIGA). A U.S.-Chile bilateral treaty to avoid double taxation has been ratified by Chile, and is currently awaiting ratification in the U.S. Senate.
Some employers view Chile’s labor laws as cumbersome. The government submitted a Labor Reform bill in 2015 that has been approved by both chambers of the Chilean Congress, but as of the publication date of this report the government was still determining how to move forward after a ruling by the country’s Constitutional Court invalidated a portion of the law. The reform will extend collective bargaining to more employees, limit replacement or workers during strikes, and strengthen the negotiating position of unions in the collective bargaining process.
FDI to Chile in 2015 represented 8.5 percent of Chile’s GDP. Total FDI stock from the U.S. stood at USD 27.6 billion in Chile at the end of 2014 (most recent information available).
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