Trade and Commercial Law Assessment - Honduras - Economic ...

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS The Financial Intelligence Unit: Currently, the FIU is an independent body. However, apparently, the banks seek to have the FIU placed under the Public Ministry, which would compromise its independence. In addition, the banks have been slow to cooperate with the new regime of regulation. Given Honduras’s history of little banking regulation, it should not be surprising that the banks have not been enthusiastic about the new regulatory climate. Beyond the normal resistance to regulation and change, however, the banks surely understand that enforcement of the new regulations will likely result in a loss of deposits. The enforcement of Honduras’s money laundering prohibitions and other financial crime laws presents a mixed picture. Institutional corruption is widespread among the police and the courts. Banks are resisting new regulation. Meanwhile, a few employees in the Ministry of Security and, especially, in the Organized Crime Unit of the Public Ministry continue to address corruption. . 3. Supporting Institutions The Banks: Historically, Honduran banks have engaged in practices that have led to many of them to bankruptcy. Apparently, it was common practice for banks to make “loans” to the family members of those operating the banks. When these loans were not repaid, which was often the case, the defaults threatened the stability of the banks and ultimately forced the closure of a number of them. Until recent years, no particular law punished such conduct. The one, and generally unsuccessful, option for prosecution was for monetary fraud (“estafa”). A new law regulates a number of aspects of banking and includes strict guidelines for making loans. In addition, a newly created Comisión Nacional de Banca y Seguros has broad powers to regulat e banks. When a bank’s capitalization falls below a certain level and does not increase above that level by a specified date, the Comisión has the power to remove the administrators of the bank and appoint new ones. Operations at the Port, Airports, and Borders: As discussed more fully in the Trade section, until recently, police were not able to engage in enforcement efforts against narcotics and smuggled goods at Puerto Cortez. However, currently, as a result of an agreement between the port and the police, police can seize illegal goods and narcotics. Such seizures should provide information that could expose money laundering. Police have no authority at the airport. If they wish to investigate a plane or a passenger, they must provide 24-hour notice to airport officials. Police also have little authority at the borders. 4. Social Dynamics In Ho nduras, as in several other Central American countries, high levels of corruption, together with narcotics traffic, facilitates undetected money laundering. More of this money laundering might be detected if police followed through on drug arrests and looked for the money laundering connections. XIII-4
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS In the short term, the prospects for increased enforcement against money laundering and other financial crimes depend on a combination of continued technical assistance from donor agencies and cooperation from those dedicated, non-corrupt Honduran law enforcement officials. B. RECOMMENDATIONS ♦ Improve compliance by banks with requirement to report suspicious money transactions. ♦ Continue investigation and prosecution of corruption among police and Customs officials and target smuggling and undervaluation/taxation of imported goods. XIII-5
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Trade and Commercial Law Assessment - Honduras - Economic ...

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