Honduras

**Ley Contra el Lavado de Activos (Law Against Money Laundering) – Decreto No. 144-2014.**

This law establishes the framework for preventing, detecting, and punishing money laundering and financing of terrorism in Honduras.

It defines "reporting entities" (sujetos obligados) which primarily include banks, financial institutions, insurance companies, and other specified entities, and obliges them to implement AML/CFT measures.

While VASPs are not explicitly named, if a VASP engages in activities that fall under the general definition of financial services or involves fiat currency conversions through regulated entities, those regulated entities (banks, etc.) will apply the requirements of this law.

**For Individuals:** Obtaining and verifying full legal name, date of birth, residential address, nationality, and a unique identification number (e.g., national ID card, passport). Verification should involve reliable, independent source documents, data, or information.

**For Legal Entities:** Obtaining and verifying legal name, legal form, address, proof of incorporation/existence, names of directors and beneficial owners (UBOs), and the legal representative's identification.

**Purpose and Nature of Relationship:** Understanding the purpose and intended nature of the business relationship or occasional transaction.

**Ongoing Monitoring:** Continuously monitoring transactions and activities throughout the business relationship to ensure consistency with the customer's profile and source of funds.

**Risk Assessment:** Implementing a risk-based approach to CDD, applying enhanced due diligence (EDD) for higher-risk customers (e.g., Politically Exposed Persons - PEPs, customers from high-risk jurisdictions, complex structures) and simplified due diligence (SDD) for lower-risk ones.

**Beneficial Ownership:** Identifying and verifying the beneficial owners of legal persons and arrangements.

**Sanctions Screening:** Screening customers against national and international sanctions lists.

**Reporting Obligation:** Report any transaction or attempted transaction, regardless of amount, where there are reasonable grounds to suspect money laundering or terrorism financing.

**No Tipping-Off:** Prohibits disclosing to the customer or third parties that an STR has been or will be filed.

**CDD Records:** Copies of identification documents, verification data, and any other information obtained during the CDD process.

**Transaction Records:** Details of all transactions, including amounts, types of assets, dates, and parties involved (including originating and beneficiary information, as per FATF Travel Rule principles, even if not explicitly legislated for VASPs in Honduras).

**STRs:** Copies of all suspicious transaction reports filed.

**Retention Period:** Typically, records must be kept for a minimum of **five (5) years** after the business relationship has ended or after an occasional transaction has taken place.

**Comisión Nacional de Bancos y Seguros (CNBS) – National Commission of Banks and Insurance:**

**Role:** This is the primary financial regulatory body in Honduras. While it doesn't *specifically* regulate VASPs, it oversees regulated financial institutions that might interact with virtual assets. It has issued warnings regarding the risks of cryptocurrencies.

**Unidad de Inteligencia Financiera (UIF) – Financial Intelligence Unit:**

The UIF operates under the CNBS (or closely associated with it) and is the body responsible for receiving, analyzing, and disseminating STRs. Any reports concerning virtual asset activities would likely go here.

**Banco Central de Honduras (BCH) – Central Bank of Honduras:**

**Role:** The Central Bank is responsible for monetary policy and financial stability. It has repeatedly stated that cryptocurrencies are not legal tender in Honduras and has warned against their use due to volatility, lack of regulation, and potential for illicit activities.

**Lack of Specific Licensing:** VASPs are not currently licensed or specifically regulated as such in Honduras. This creates legal uncertainty and potential operational risks.

**De-risking by Banks:** Honduran banks, being regulated entities, are often cautious about dealing with crypto businesses due to the lack of clear VASP regulation and perceived AML/CFT risks. This can make it challenging for VASPs to access traditional banking services.

**Future Legislation:** Honduras is under pressure from international bodies like FATF-LAC to implement VASP-specific regulations. Discussions are ongoing, and future legislation is highly anticipated, which would specifically designate VASPs as "reporting entities" and detail their obligations.

**FATF Standards:** Even without local VASP laws, responsible VASPs should proactively align themselves with the FATF's Recommendations, particularly Recommendation 15 on virtual assets and VASPs, and the guidance documents published by FATF.

**Banco Central de Honduras (BCH) Resolution No. 477/2024 (February 13, 2024):** The Central Bank of Honduras issued a resolution prohibiting financial institutions under its supervision from holding, managing, facilitating, or operating with cryptocurrencies, stating they are not legal tender and pose risks to the financial system.

**Comunicado de Prensa, Banco Central de Honduras, "Comunicado oficial sobre el uso de criptoactivos en Honduras" (February 13, 2024):** While the resolution itself might not be publicly linked directly, the press release clearly states its content and implications.

[No direct URL for the resolution text is typically provided for press releases; it's an internal BCH directive. However, official statements confirm its existence and content.]

A related article confirming this: **Banco Central de Honduras prohíbe las criptomonedas en su sistema financiero.** *El Heraldo.* https://www.elheraldo.hn/economia/banco-central-honduras-prohibe-criptomonedas-sistema-financiero-FH17565863 (Article in Spanish reporting on the ban).

Banco Central de Honduras - Comunicados de Prensa

**Comisión Nacional de Bancos y Seguros (CNBS):** As the primary regulator for banks and insurance companies, the CNBS generally aligns with the BCH's stance, focusing on consumer protection and financial stability. No specific custody regulations for digital assets have been issued by the CNBS.

Comisión Nacional de Bancos y Seguros (CNBS) - Official Website

**No specific custodial license requirements** exist for digital asset custodians in Honduras. Since cryptocurrencies are not recognized or regulated, there is no legal framework or licensing regime for entities providing crypto custody services. Any entity attempting to operate a dedicated crypto custody business would be doing so outside of formal regulatory oversight.

It is highly probable that traditional financial institutions (banks, fiduciaries) licensed by the CNBS are *prohibited* from offering direct crypto custody services due to the BCH's warnings and the lack of a legal framework.

**Segregation of Client Assets Rules:**

**No specific rules or mandates** exist for the segregation of client digital assets. In a regulated environment, segregation is crucial to protect client funds in case of custodian insolvency. However, without a regulatory framework, such requirements are non-existent.

**No specific insurance or bonding requirements** are mandated for digital asset custodians. This means that if a crypto custody service were to fail or suffer a hack, clients would likely have no recourse through mandated insurance.

**No specific cold storage mandates** exist. Technical security requirements like the use of cold storage (offline storage of private keys) are typically part of detailed regulatory frameworks for digital asset custodians. Given the absence of such a framework, no such mandates are in place.

**No legal definition** for a "qualified custodian" in the context of digital assets exists in Honduran law or regulation. The concept of a qualified custodian is generally introduced in jurisdictions where digital assets are recognized and integrated into a regulatory framework, often requiring specific capital, operational, and security standards.

As of late 2023/early 2024, there is **no publicly announced or formally proposed specific legislation** in Honduras that would establish a regulatory framework for digital asset custody.

While Honduras, like many countries, is under pressure from international bodies such as the Financial Action Task Force (FATF) to implement Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) regulations for Virtual Asset Service Providers (VASPs), this typically focuses on identity verification and transaction reporting rather than specific custody rules. Any future VASP regulation would likely start with AML/CFT compliance before delving into detailed custody requirements.

The current official stance remains highly cautious, with the BCH warning against crypto use rather than moving towards regulation.

**Legal Basis:** UN Security Council Resolutions, issued under Chapter VII of the UN Charter, are legally binding on all UN member states. Honduras is obligated to implement these resolutions into its national law and practice.

**Asset Freezing:** Immediately freeze funds and other assets of individuals and entities designated by the UN Security Council (e.g., on the ISIL (Da'esh) & Al-Qaida Sanctions List, Taliban Sanctions List, various country-specific sanctions lists).

**Prohibition of Services:** Prohibit making funds or financial services available to sanctioned individuals/entities.

**Reporting:** Report frozen assets and attempted transactions to the relevant authorities (e.g., Financial Intelligence Unit of Honduras - UIF-HN).

**Relevance to Crypto:** If a Honduran entity (even an individual engaging in international crypto transactions) were to interact with a UN-sanctioned individual or entity using crypto, they would be in violation of these obligations.

**United Nations Security Council Sanctions Committees:** https://www.un.org/securitycouncil/sanctions/information

**Financial Action Task Force (FATF) Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers:** FATF recommends that VASPs implement controls to detect and prevent proliferation financing and targeted financial sanctions evasion.

**Extra-territorial Reach:** OFAC (Office of Foreign Assets Control) sanctions are U.S. law, but they have significant extra-territorial reach. They apply to:

U.S. persons (including U.S. citizens, permanent residents, entities incorporated in the U.S., and their foreign branches).

Transactions that touch the U.S. financial system or involve U.S.-origin goods/services.

In certain cases, non-U.S. persons who cause a violation by a U.S. person, or who engage in activities subject to "secondary sanctions."

**Prohibited Transactions:** U.S. persons (and others subject to OFAC jurisdiction) are generally prohibited from engaging in transactions with individuals and entities on the Specially Designated Nationals and Blocked Persons (SDN) List and other OFAC sanctions lists.

**Asset Blocking:** Assets of sanctioned parties that come within U.S. jurisdiction must be blocked.

**Sanctioned Geographies:** Restrictions apply to transactions involving comprehensively sanctioned jurisdictions (e.g., Cuba, Iran, North Korea, Syria, and certain regions of Ukraine/Russia).

**Relevance to Crypto:** OFAC has explicitly targeted cryptocurrency addresses and entities involved in sanctions evasion. Any Honduran entity or individual conducting crypto transactions that involve U.S. persons, U.S.-based crypto exchanges, or touch the U.S. financial system (e.g., stablecoins issued by U.S. entities) must comply.

**OFAC Sanctions Programs and Country Information:** https://home.treasury.gov/policy-issues/office-of-foreign-assets-control-sanctions-programs-and-country-information

**OFAC Guidance for the Virtual Currency Industry (2020):** https://home.treasury.gov/system/files/126/ofac_guidance_virtual_currency.pdf

**Extra-territorial Reach:** EU sanctions apply to:

All nationals of EU Member States.

Entities incorporated or constituted under the law of an EU Member State.

Any person or entity in respect of business done in whole or in part within the EU.

**Asset Freezing:** Freeze funds and economic resources of listed individuals and entities.

**Sectoral Sanctions:** Apply to certain sectors (e.g., finance, technology) concerning specific countries.

**Relevance to Crypto:** Similar to OFAC, if a Honduran entity or individual conducts crypto transactions involving EU persons, EU-based exchanges, or entities within the EU, they must comply with EU sanctions.

**EU Sanctions Map (Consolidated List):** https://sanctionsmap.eu/#/main

**Council Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA):** While MiCA primarily regulates crypto-assets, it also reinforces AML/CFT and sanctions compliance obligations for VASPs operating within the EU.

**Honduras does NOT maintain any specific national sanctions lists focused solely on cryptocurrency addresses or entities.**

However, the **Unidad de Información Financiera (UIF-HN)** is the national authority responsible for receiving and analyzing suspicious transaction reports and is the point of contact for implementing UN financial sanctions. Therefore, the UIF-HN would maintain national lists of individuals and entities whose assets must be frozen in compliance with UN Security Council resolutions. These lists would apply irrespective of the asset type (crypto or traditional).

**Unidad de Información Financiera (UIF-HN):** https://www.uif.gob.hn/

**Regulator Name:** Banco Central de Honduras (BCH)

**Entity Targeted:** General Public, Financial System Institutions (preventative guidance)

**Violation Type:** Not a violation, but a clarification of legal status and warning against risks.

**Penalty Amount:** N/A (This was a regulatory declaration, not a punitive action against a specific entity.)

**Date:** **March 25, 2024** (Communiqué 001/2024) - Although this specific communiqué is from 2024, it reiterates and strengthens previous warnings, making it the most current and definitive statement within the timeframe. Previous, less formal warnings have been issued in prior years.

**Outcome:** The BCH officially stated that cryptocurrencies are **not legal tender** in Honduras and are **not backed or regulated by the Central Bank**. It also warned the public about the inherent risks associated with using and investing in cryptocurrencies, emphasizing that they are not recognized as currency or assets by the Honduran financial system. This effectively prohibits financial institutions under BCH supervision from operating with cryptocurrencies as recognized assets and strongly advises the public against their use.

**News coverage confirming the stance:** https://www.reuters.com/markets/currencies/honduras-central-bank-says-bitcoin-not-legal-tender-warns-risks-2024-03-27/

**Criminal Cases:** While there might be instances of fraud or money laundering investigations by the Public Ministry (Ministerio Público) or police involving cryptocurrencies, these fall under general criminal law, not specific cryptocurrency enforcement by a financial regulator against a crypto entity. These are typically cases against individuals involved in scams rather than regulatory actions against established crypto businesses. Information on such criminal cases is often less detailed publicly regarding "penalty amounts" and "entity targeted" in the context of financial regulation.

**Regulatory Focus:** Honduras, like many smaller nations, is still in the early stages of addressing digital assets. Its focus has been on protecting the financial system's stability and informing the public about risks, rather than establishing a licensing regime or proactive enforcement against crypto companies.