- Critics of President Bukele warn that there is a danger of increased money laundering, and that the regulations of the Caribbean regulatory body could be violated.
- They also point out that Bitcoin could facilitate the financing of criminal activities.
- Bukele affirms that opponents of his government lie and that, as of September 7th, any doubts will be clarified.
The opposition of the government of President Nayib Bukele have warned that El Salvador could be removed from the Caribbean Financial Action Task Force (CFATF) due to the lack of independence and control over Bitcoin in preventing money laundering, when the Bitcoin Law comes into force on September 7th.
The CFATF oversees anti-money laundering and terrorist financing activities in the region. The El Salvador press picked up on the concerns on Tuesday, indicating that there are risks of increased money laundering in the Central American country.
The coordinator of the Anti-Corruption Legal Advisory Center in El Salvador (ALAC), Wilson Sandoval, affirmed that the Financial Investigation Unit (UIF), “lacks independence because it is attached to the Attorney General’s Office (FGR),” which is directed by an ally of Bukele who was recently appointed.
Attorney General Rodolfo Delgado was appointed by the Legislative Assembly with a ruling majority on May 1st.
Sandoval commented that the “Bitcoin Law does not include any aspect on the prevention of money laundering.” He does acknowledge that the issue is mentioned in the “Technical Standards to Facilitate the Application of the Bitcoin Law,” which was recently published by the Central Reserve Bank (BCR).
It is pointed out that “this does not give assurance that said crime will not be committed,” and adds that there are gaps in the law. The expert claims that the Salvadoran regulator would breach CFATF recommendation 29, which could result in the removal of El Salvador from the organization.
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Bukele: They Are Liars and Clumsy
“The Prosecutor’s Office is a politically intervened entity,” Sandoval said, adding that “Raúl Melara, who was the legitimate prosecutor, was removed and they have imposed a prosecutor who obeys the interests of the Presidential House (CAPRES).”
He also warned that if the prosecution fails to comply with recommendation 29 of the CFATF, it will be handled outside the regional regulatory body. He maintains that Bitcoin can be lent to finance criminal structures and the main entities affected will be the banks.
According to Sandoval, if El Salvador does not comply with international standards on money laundering, no one will want to work with the Salvadoran banking system.
President Bukele, on the other hand, has defended himself through his Twitter (NYSE:TWTR) account by calling his opponents liars and clumsy. He claims that they are trying to scare citizens about Bitcoin, and promises that everything will be cleared up after September 7th, when the law comes into effect.
Steve Hank: El Salvador Is Heading Towards Chaos
US economist Steve Hank, has also warned about possible problems with the CFATF. According to Hank “the new Bitcoin Law of El Salvador is a solution in search of a problem.” To the mind of the Johns Hopkins University economics professor, “the country is heading towards monetary chaos and economic collapse.”
Hank explained that, in a working document, he had managed to identify “27 CFATF regulations related to virtual asset transactions that will be almost impossible for banks, companies and their Salvadoran clients to comply with with the new law.”
On The Flipside
- Bukele has been attacked on all fronts for his boldness in embracing Bitcoin as legal tender. It remains to be seen if the criticisms ring true or not.
Why You Should Care?
- El Salvador will be the first litmus test for Bitcoin regarding the risks involved as a currency against its use in criminal activities.
- In addition, it will have to prove if it is compatible with the financial systems already in place, and whether it is a solution or if, on the contrary, it will generate such a case as envisioned by Hank.
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