No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe
Jump to a Section
  • At the Office
    • Ethics
    • HR Compliance
    • Leadership & Career
    • Well-Being at Work
  • Compliance & Risk
    • Compliance
    • FCPA
    • Fraud
    • Risk
  • Finserv & Audit
    • Financial Services
    • Internal Audit
  • Governance
    • ESG
    • Getting Governance Right
  • Infosec
    • Cybersecurity
    • Data Privacy
  • Opinion
    • Adam Balfour
    • Jim DeLoach
    • Mary Shirley
    • Yan Tougas
No Result
View All Result
Corporate Compliance Insights
Home Financial Services

El Salvador’s Crypto-Bro President Is Flirting with AML Disaster

Compliance Chaos Has Yet to Settle in the World’s First Crypto-State.

by Nick Henderson-Mayo
January 25, 2022
in Financial Services, Opinion, Risk
Protests agains President Bukele in San Salvador.

Guayo Fuentes, Shutterstock.


The speed and haste by which El Salvador adopted Bitcoin as legal tender has opened the door for significant risk and KYC challenges. While the volume of crypto exchanges continues to snowball, the lack of appropriate AML regulation leaves businesses across sectors exposed. 

El Salvador’s ‘crypto-bro’ president, 40-year-old Nayib Bukele, has made Bitcoin (BTC) the central plank of his economic agenda. The populist leader has ruled the Central American country since 2019, racking up a litany of accusations from democratic backsliding to rampant corruption. But it’s his flirtation with cryptocurrency that has hit headlines. Not only did he force through world-first reforms making Bitcoin legal tender in a midnight session of Congress, but he plans to build a geo-thermal powered city devoted to Bitcoin mining at the base of a volcano.

This new city, the president said, will have no income tax and “have everything. Residential areas, commercial areas, services, museums, entertainment, bars, restaurants, airport, port, rail – everything devoted to Bitcoin.”

Meanwhile, the government has given away a new digital wallet app, Chivo, to each citizen, containing $30 worth of Bitcoin and installed hundreds of crypto cash machines across the country. Given the rapid fluctuations in Bitcoins’ value, no one knows quite how much the new city will cost to build, but El Salvador’s legalization of Bitcoin as tender has shifted from an interesting thought experiment to a potential AML compliance crisis.

Moving Fast and Breaking AML/KYC Protocols

The FATF – the world’s money laundering and terrorist financing watchdog – could end up grey listing El Salvador due to the cryptocurrency reforms. Cato Institute (a right-leaning think tank founded by Charles Koch) economist Steve Hanke, a former Reagan administration official and proponent of the dollarization of Latin American economies, has identified at least 27 red flag behaviors regarding virtual-asset transactions that could impact the Salvadoran economy.

Editors Note: A rundown of Hanke’s and President Bukele’s disagreements with each other can be found via their correspondence on Twitter.

Ok, ID-10t, I’m going to school you again, not because it’s going to be of use for you, since you’re just getting paid to attack #Bitcoin and defend fiat, but because the people deserve to know you are a fraud. https://t.co/BbDGGnyjuu

— Nayib Bukele 🇸🇻 (@nayibbukele) January 8, 2022

Making the tokens legal currency means everyday businesses may find it exceedingly difficult to undertake necessary KYC requirements expected of Bitcoin transactions. Bukele’s hasty measures have made it far easier for criminals who have Bitcoins to exchange them for hard currency, or potentially launder tokens through luxury goods or real estate. Identifying deliberately structured transactions becomes exponentially more difficult when the currency can have double- or triple-digit value fluctuations against the dollar, sometimes daily. 

Making sense of customer profiles could present a significant challenge too. Around 70% of El Salvador is unbanked, offering virgin territory for money launderers to open new accounts with wallets bursting with BTC. A rural farmer with millions in Bitcoin to their name is a textbook case for enhanced due diligence or increased monitoring anywhere else in the world. In El Salvador that farmer can currently fly under the radar.

One of the benefits of Bitcoin is that transactions are stored on blockchain, theoretically making every payment trackable and traceable. But the Chivo wallet, made available to every Salvadoran, has been plagued with problems from identity theft to disappearing coins. It’s a worrying start for a national crypto experiment where trust in the technology is the gold standard. 

The use of cryptocurrency itself is not theoretically more prone to money laundering than paper currency. The issue in El Salvador lies in the lack of sufficient AML and KYC regulations. In their assessment of El Salvador’s Bitcoin roll out, Fitch has not yet downgraded their rating of the country’s banks. But the credit appraiser stated: “If technological infrastructure, controls, and the regulatory and supervisory framework are not adequately developed or implemented, it could expose banks to greater operational, cyber, and money laundering risks.” 

Failures and Successes in Monitoring LATAM Crypto Transactions

Other countries in the region have been more successful with the switch to digital. In Colombia, the online banking space grew by 60% in 2020, with more than 1.6 million Colombians downloading and activating a digital wallet for the first time last year. Younger generations are the most enthusiastic adopters. Despite rapid growth and popularity, the industry in Colombia is well-regulated. Each wallet provider must be certified to meet the payment card industry (PCI) compliance standards. Traditional banks have also entered the space, offering customers a more reliable and trusted name.

Where Colombia leads, other Latin American countries are following. Across the region, cash payments accounted for around 80% of transactions in 2018. By the end of 2020, this had nosedived to little more than a quarter. With the growing popularity of digital payments across Latin America not attracting the same concerns as developments in El Salvador, some countries are clearly managing money laundering compliance in the digital age much better than others.

What This Means for International Business

The adoption of Bitcoin in El Salvador threatens to exacerbate money laundering concerns unless a regulatory framework is effectively implemented. With phishing scams and online frauds the world over demanding ransom in Bitcoin, efforts to require KYC procedures for crypto exchanges through stricter regulations like the EU’s 6th Directive could be rendered useless by a Central American haven.

As Fitch has noted, Salvadoran banks have yet to meet Basel II or Basel III standards. The country does not follow IFRS accounting standards and doesn’t have capital requirements for market or operational risk. For correspondent banking services and regulated entities the world over, when presented with a transfer from El Salvador and the source of funds listed simply as BTC, what kind of money laundering risk does that present? Is a very high dollar amount in an average citizen’s bank account simply the result of a Bitcoin induced economic boom, or the illicit proceeds of corrupt gains?

President Bukele’s moves to promote the controversial adoption of Bitcoin come amidst increasing concerns about democratic backsliding and corruption in the country. The US has recently banned dozens of Salvadoran officials from the United States for corruption, several of whom are senior members of President Bukele’s administration. A number have also been indicted for money laundering and accepting bribes.

President Bukele shows no sign of stepping back from his controversial reforms. The self-proclaimed ‘World’s Coolest Dictator’ has previously used the military to force legislation through congress and has ousted five supreme court judges and an attorney general who ruled against him. President Bukele’s penchant for ‘rule-by-tweet’ and his popularity in cryptocurrency circles is raising serious red flags. FATF action against El Salvador could have serious consequences. Grey listing flags the country for increased monitoring, and is the first step towards black listing. If black listed, El Salvador would join only Iran and North Korea. The international community would be obliged to sanction El Salvador and automatically apply enhanced due diligence.

The trouble with President Bukele is he may be more interested in winning fans among cryptocurrency advocates than assuaging the international community’s concerns. He’s promised to make ‘surprise announcements’ at upcoming Bitcoin summits, and started the new year predicting that Bitcoin will reach $100,000 in value in 2022. Crypto fans may be watching El Salvador’s experiment closely, but so are criminals. 


Tags: AMLCryptocurrencyKnow Your Customer (KYC)
Previous Post

Survey Results: Compliance Officers May Experience Mental Health Issues In Part Because They Feel They Have ‘No Permission to Fail.’

Next Post

Paul, Weiss 2021 FCPA and Anti-Corruption Enforcement Developments

Nick Henderson-Mayo

Nick Henderson-Mayo

nick-hendersonNick Henderson-Mayo is director of learning and content at compliance eLearning and software provider VinciWorks. He has played an important role in developing VinciWorks’ most interactive and customizable courses covering topics like ESG, anti-bribery, anti-money laundering, GDPR, diversity, mental health, health and safety and more. Nick is a policy expert with a background in public, voluntary and private sectors and has expert-level knowledge across a wide range of areas.

Related Posts

stablecoins

Exploring CorpFin’s New Perspective on Covered Stablecoins

by King & Spalding
May 12, 2025

Guidance clarifies when digital assets function as payment tools rather than investment vehicles

monies illustrating money laundering

Power Shift: What Happens When America Steps Back From Global AML Enforcement?

by Joe Biddle
April 15, 2025

EU's new anti-money laundering authority emerges as potential counterweight amid uncertain US priorities

robot reading book generated by ai

Teaching Machines to Spot What Matters

by Kevin Lee
April 8, 2025

How emerging technologies are transforming inefficient alert systems and reshaping financial crime prevention

bills on clothesline money laundering

Trump 2.0 Is Already Shaking Up the Sanctions & AML Landscape

by Paul | Weiss
March 11, 2025

Financial institutions should prepare for potential ‘Know Your Customer's Customer’ obligations sanctions priorities shift

Next Post

Paul, Weiss 2021 FCPA and Anti-Corruption Enforcement Developments

No Result
View All Result

Privacy Policy | AI Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Research
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2025 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT
No Result
View All Result
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe

© 2025 Corporate Compliance Insights