Business leaders, opposition politicians and civil society groups are expressing serious concerns that a new Sandinista law to combat money laundering and terrorism financing will be used as a Trojan Horse to invade citizen privacy, gather financial information on opponents, intercept correspondences and persecute adversaries.
Critics of the Sandinista government worry that the Law to create the Financial Analysis Unit (UAF), which was signed into law Monday by President Daniel Ortega, will do for civil liberties in Nicaragua what the USA Patriot Act did for civil liberties in the United States.
Sandinistas say the opposition is being alarmist and that concerns over the newly formed UAF are unfounded. The new law, Sandinista congressmen say, is consistent with other international efforts to combat money laundering, organized crime and terrorism financing.
But political assurances from the ruling party, which passed the UAF law unilaterally with total disregard for the concerns of the opposition and business lobby, have failed to convince anyone outside the thick walls of officialdom.
Last Friday, the country’s leading federation of private business chambers, COSEP, sent a letter to President Ortega urging him to veto Articles 4 and 9 of the law, which establish the faculties of the UAF and determines who will be required to report their finances to the new government body. Those obligated to report include, but are not limited to, all financial organizations supervised by the Superintendence of Banks, financial cooperatives, micro-finance organizations, money exchanges, lending institutions, businesses and agencies that handle remittances, and casinos and other gambling houses.
Article 9 also gives UAF the right to investigate “any person” who “due to the nature of their business or profession manages funds or resources, data or information that is required by the UAF”—in other words, anyone who is somehow involved in any type of economic activity.
“Article 9 converts any citizen into an ‘obligatory subject’ who can be required to provide the UAF with information on financial transactions without any judicial order. This violates presumption of innocence and makes every citizen a suspect of money laundering,” says citizen activist organization Movement for Nicaragua.
After carefully disregarding COSEP’s call for a partial veto, Ortega sent the law to be published Monday in the official daily La Gaceta, officially passing it into law.
COSEP says it will now challenge the law before the Sandinista-controlled Constitutional Chamber of the Supreme Court, for what it’s worth.
After failing to convince Sandinista legislators to moderate the language of law, and then failing to convince the president to partially veto its more troublesome articles, business leaders are raising concerns that the business consensus that Ortega’s administration touted during its first term in office has been replaced by obstinate Sandinista unilateralism.
Ortega’s approval of the UAF on Monday and his recent threats against U.S. aid for civil society has suddenly opened a gaping sinkhole of discord between his administration and the country’s two largest business chambers. The bridge of consensus that once linked politics and economics in Nicaragua now appears to be swinging violently in the gale-force winds whipped up by the Sandinista government in recent days.
On June 13, COSEP president José Adán Aguerri wrote an opinion piece in the daily El Nuevo Diario reminding the Sandinistas that the permanent dialogue between the private sector and Sandinista government resulted in the approval of 53 “consensus laws” during the first five years of Daniel Ortega’s presidency. Those laws helped build investor confidence in the economy, which has grown steadily as a result, Aguerri says. But since the Sandinistas increased their grip on power with a legislative supermajority in the 2011 elections, Aguerri says the ruling party has taken to governing unilaterally.
“It is fundamentally important to COSEP that the ruling party assumes the president’s guarantee to govern by consensus, despite having a wide majority in the legislature,” Aguerri says. “We need to return to a politics of economic consensus in the legislature, which has been of benefit to the entire country so far.”
Sandinista lawmakers claim the business class, political opposition and civil society are just bellyaching for no good reason. Edwin Castro, head of the Sandinista legislative bloc, says the UAF law will not become an instrument of persecution and will guarantee individual rights.
“We analyzed in detail [COSEP’s] initial suggestions and the changes they suggested, but this is a law that guarantees rights, there are no rubs with the Constitution,” Castro told official media.
Castro said the UAF law has even been tied to the Law of Democratic Security, which he says is “a fundamental pillar of guarantee of individual rights; so the same will be guaranteed in this law.”
Sandinista lawmaker Walmaro Gutiérrez, president of the National Assembly’s Economic and Budget Commission, said the UAF legislation will prevent Nicaragua’s financial system from becoming a refuge for drug-trafficking and organized crime.
Other Sandinista officials have also closed ranks around the new legislation, repeating variations of the party line in defense of the UAF.
Is the new law really that UAF-ul?
The new UAF law, (Ley 793 on the books), was passed by Sandinista lawmakers as part of the government’s effort to remove Nicaragua from the Financial Action Task Force’s (FATF) “gray list.” The FATF, or GAFI in Spanish, is an intergovernmental organization founded by the G-8 nations to combat international money laundering and the financing of global terrorism.
Nicaragua is currently classified as a country with serious legislative deficiencies to combat money laundering and terrorism financing, but a “high-level political commitment to address deficiencies through implementation of an action plan developed with FATF.”
The Sandinistas, therefore, claim the UAF law is Nicaragua’s response to those concerns. They say the legislation is in full compliance with international standards.
Not so, says Alejandro Aguilar, dean of the Law and Social Sciences School at the Universidad Americana (UAM) in Managua. Aguilar says the Sandinistas’ UAF, which will operate under the Executive Branch with extreme presidential discretion, is so poorly designed that “it’s unthinkable that Nicaragua will be taken off the FATF gray list because [the UAF] doesn’t have sufficient autonomy or independence.”
Aguilar says the Sandinistas’ UAF is the only one in the entire Western Hemisphere to be designed in a “paramilitary or police-state style.”
“If the UAF were just an analysis unit, there wouldn’t be any controversy because it would respond adequately to the anti-money laundering system,” Aguilar told The Nicaragua Dispatch. The problem, he says, is that the UAF goes beyond the administrative role it should have been delegated and takes on one of criminal investigation—a role that should be reserved for the state prosecutors office and police.
Sandinista lawmakers, he says, have given the UAF “extreme investigative faculties.”
“UAF can request banking information on any citizen with complete discretion, and not only in instances of possible money laundering, but all transactions and financial statements of any citizen [in violation] of the presumption of innocence and an individual’s right to privacy,” Aguilar says.
In addition, he says, UAF has a “potent arm” in that it can impose fines of up to half a million dollars on financial institutions and organizations that don’t report information.
By putting the UAF under the direct authority of the president and using intentionally ambiguous wording in the legislation to allow for maximum discretion, there doesn’t seem to be much reason to give the Sandinistas the benefit of the doubt when they say the financial analysis unit will operate independently in a country not known for its separation of powers.
“They can’t just declare that the UAF will be independent and autonomous; they have to establish that autonomy with specific regulations,” Aguilar says. “Otherwise, the FATF will say—and correctly so—that the UAF is not independent of arbitrary meddling.”