Honduras -- AML/CFT Compliance Regulatory Overview

Honduras currently operates in a complex regulatory environment regarding cryptocurrencies and Virtual Asset Service Providers (VASPs). As of my last update, Honduras does not have specific, dedicated legislation regulating cryptocurrencies or VASPs.

This means there isn't a specific "Ley de Criptoactivos" or "Ley de Activos Virtuales" that defines VASPs, licenses them, or explicitly outlines their AML/KYC obligations in a comprehensive manner.

However, this does not mean there are no obligations. VASPs operating in Honduras (or dealing with Honduran customers) are generally expected to comply with the country's existing general Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) framework, which applies to all financial activities and, by extension, to any entity that might be considered a financial institution or a designated non-financial business or profession (DNFBP) under national or international standards (like those from the Financial Action Task Force - FATF).

Here's a breakdown based on the current situation:

I. AML/CFT Legislation (General Application)

The primary AML/CFT legislation in Honduras that would generally apply to any financial activity, including those involving virtual assets, is:

• 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.

II. Customer Due Diligence (CDD) Requirements (Extrapolated)

Based on the general AML Law (Decreto No. 144-2014) and international FATF standards (which Honduras, as a member of FATF-LAC, is expected to adhere to), VASPs, even without specific VASP regulation, should implement robust CDD measures. These typically include:

1. Identification and Verification:
   • 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.
2. Purpose and Nature of Relationship: Understanding the purpose and intended nature of the business relationship or occasional transaction.
3. Ongoing Monitoring: Continuously monitoring transactions and activities throughout the business relationship to ensure consistency with the customer's profile and source of funds.
4. 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.
5. Beneficial Ownership: Identifying and verifying the beneficial owners of legal persons and arrangements.
6. Sanctions Screening: Screening customers against national and international sanctions lists.

III. Suspicious Transaction Reporting (STR)

Under the Ley Contra el Lavado de Activos (Decreto No. 144-2014), any entity deemed a "reporting entity" (sujeto obligado) has the obligation to report suspicious transactions to the Financial Intelligence Unit (FIU). Even if VASPs are not explicitly named, the spirit of the law and FATF recommendations suggest that any entity aware of potential money laundering or terrorism financing should report it.

• 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.

IV. Record-Keeping Obligations

Based on the general AML law and international standards, VASPs should maintain comprehensive records for a specified period:

• 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.

V. Oversight Authority

Since there is no specific VASP regulatory body, oversight is divided among existing financial authorities, primarily regarding financial stability, consumer protection, and general AML/CFT compliance for traditional financial institutions.

1. 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.
   • URL: https://www.cnbs.gob.hn/
   • 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.

2. 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.
   • URL: https://www.bch.hn/

Important Considerations for VASPs in Honduras:

• 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.

Given the evolving nature of crypto regulation globally and the current lack of specific legislation in Honduras, it is highly advisable for any VASP operating in or serving customers in Honduras to seek independent legal counsel to understand their specific obligations and potential liabilities under existing general laws and future regulatory developments.