Wednesday 8 February 2023

Bill Proposed To Lift Bank Secrecy Law in Costa Rica

If approved by the Legislative Assembly, Costa Rica's tax man could obtain banking information of any taxpayer without the need for a court order.

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8 February 2023 - At The Banks - BCCR

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Bank secrecy (or bank privacy) prohibits banks in Costa Rica providing to authorities personal and account information about their customers without a court order.

A bill that is being currently discussed in Congress would remove banking secrecy (or bank privacy) in the country, allowing the Dirección General de Tributación (Tax Department), at will and without a court order obtain taxpayer private information from national and foreign banks operating in the country.

The bill proposes a sanction of three to one hundred base salaries (currently between ¢1.26 million to ¢42 million colones) to financial institutions that do not comply with the request or delay providing the information.

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The bill, proposed by the Frente Amplio (FA) party and supported by government, adding it to the current legislative agenda, amends article 106 of the Código de Normas y Procedimientos Tributarios (Tax Rules and Procedures Act), lifting banking secrecy by authorizing “automatic and periodic non-individualized” requests, thereby giving the Ministerio de Hacienda (the Ministry of Finance) access to pertinent information on a taxpayer without the need of a court order.

The Ministry of Finance and the Comptroller General endorse the project. However, the State banks, Banco Nacional (BN), Banco de Costa Rica (BCR) and Bancrédito called it unconstitutional. The State banks jointly objected to the elimination of banking secrecy and the fine that would be imposed on them if they refuse to divulge the information about their customers.

Currently, under article 24 of the Costa Rica’s Constitution that guarantees the right to privacy, freedom, and secrecy of communications, to lift banking secrecy for tax purposes, Hacienda is required to obtain an order from the Tribunal Contencioso Administrativo (Contentious Administrative Court).

The current legislation also requires Tributación to include in the request details such as the reason for requesting access to private information, the facts motivating the tax audit and the justification of why the banking information is relevant for tax purposes.

With the reforms, the foregoing will disappear.

The proposal was approved in the legislative subcomittee on Finance made up of legislators from the parties Frente Amplio (FA), Renovación Costarricense and Partido Unidad Social Cristiana (PUSC).

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This is not the first time this time of proposal has made it to the legislative floor. In 2014, a similar proposal was made, at that time the reason was for the country meet the requirements to join the Organization for Economic Cooperation and Development (OECD). A similar proposal was also been introduced in 2010 as reported by La Republica.

Although no government (or private) agency may get access to specific account information without a court order, there are reports of Costa Rican banks cooperating with other banks in Latin America and with the U.S. Federal Reserve in cases of suspected money laundering and fraud.

 

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