Trends and Challenges in AML/CFT Audits During Uncertain Times: A Central America Perspective

The fight against money laundering and terrorist financing (AML/CFT) is essential for maintaining a democratic rule of law and ensuring the integrity of the global financial system. AML/CFT audits are key tools for evaluating the controls and measures financial institutions use to combat corruption and meet international compliance standards.

Financial institutions in Central America have historically faced challenges implementing effective AML/CFT programs. These challenges arise from outdated and lenient legal frameworks, high risk of illicit activity, corruption, political interference, limited resources, and insufficient modernization efforts. The current global socioeconomic and political uncertainty amplifies these issues.

Challenges During Uncertain Times

A primary challenge affecting AML/CFT audits is widespread political, economic, and institutional instability. This is particularly evident in countries where such conditions were previously uncommon, such as the United States. Recent White House changes have led to frequent shifts in economic policy and controversial measures, causing widespread uncertainty and mistrust. This has been reflected in a 0.1% contraction in U.S. GDP during the first quarter of 2025, according to data from the Bureau of Economic Analysis. The United States serves as a global benchmark in regulatory standards and anti-money laundering efforts, so disruptions have significant implications for the global economy.

Economic instability worsens when governmental actions undermine regulatory bodies and demonstrate an adversarial stance toward institutional compliance measures, exposing regulatory vulnerabilities. A notable example is the Executive Order signed by President Donald Trump on February 10, 2025, suspending the law prohibiting U.S. companies from accepting foreign government bribes (the Foreign Corrupt Practices Act). The administration also dismantled several Department of Justice units focused on combating foreign corruption and announced significant budget cuts to the unit responsible for investigating domestic corruption.

Political instability and institutional vulnerability have historically posed significant challenges to AML/CFT audits, especially in developing countries. Analyzing AML/CFT audits in Central America, particularly Guatemala, reveals that existing AML/CFT legislation (e.g., Decree 67-2001; Decree 58-2005)¹ is not aligned with modern risk management techniques or emerging technologies such as cryptocurrencies. This creates challenges for internal compliance and legal departments of financial institutions, as they must operate within a framework that is outdated and lacks specific regulation for activities in the real estate, corporate, commercial, and financial sectors and the technological domain. These limitations hinder effective AML/CFT prevention and detection programs, making it essential to incorporate the recommendations and international standards set by the Financial Action Task Force (FATF), to promote the implementation of legal, regulatory, and operational measures to combat money laundering and terrorist financing.

Historically, Guatemala has operated a lenient regulatory system that restricts information-sharing among authorities and limits transparency concerning beneficial ownership. While the Superintendency of Banks (SIB) and the Special Verification Intendency (IVE)² have attempted to align regulations with FATF standards, implementation is inconsistent due to the Guatemalan Congress’s failure to update the legislative framework. This situation poses an additional challenge for compliance departments, expected to meet international standards in a local environment but lacking necessary legal and institutional support.

Due to its geographic location, porous borders, and susceptibility to corruption, Guatemala has historically been—and continues to be—a key transit point for human and drug trafficking. Approximately 400 tons of cocaine are transported through Guatemala each year, with around 10% of the value (roughly USD 500 million) remaining within the country. Between USD 1.1 billion and USD 2.7 billion is estimated to be laundered annually, posing a significant challenge for financial institutions.³

According to the annual report for the 2024–2025 period issued by the Public Ministry, 347 criminal complaints related to money laundering were filed between April 1, 2024, and March 31, 2025. The report notes that authorities seized Q9,428,235.65 (approximately USD 107,390), representing only 0.00438% of the estimated annual recovered laundered money. This statistic highlights an opportunity for Guatemala to update its regulations and policies to more effectively prevent money laundering and terrorist financing. It also underscores the need for proactive, rather than reactive, measures to address financial crime.

Ultimately, effective AML/CFT programs need well-trained, independent personnel; advanced monitoring systems; and adequate financial resources. However, many financial institutions in Guatemala face limitations in these areas. For instance, World Bank’s Global Findex data shows that a significant portion of Guatemalan adults remain outside the formal financial system. This lack of financial inclusion restricts their participation in economic and financial activities and creates potential channels for AML/CFT-related risks.

The complexity of Know Your Customer (KYC) verifications stems from these low financial inclusion levels, forcing financial institutions to use alternative identity verification methods, such as non-standardized documents or limited information. This increases operational risk and difficulty. Implementing effective technological tools, including artificial intelligence (AI), could streamline and enhance process efficiency.

Challenges and Trends in Technology Use

New technologies have emerged as a source of uncertainty, particularly when used disruptively against control systems. For instance, various AI tools can now impersonate identities, making money-laundering schemes more sophisticated and harder to detect. Moreover, new platforms for managing large sums of money and digital assets present a higher risk of money laundering compared to historically recorded operations in the financial industry.

Although technology introduces variables that challenge financial institutions’ compliance and control frameworks, advanced technologies focus on automating parameters and processes, making AML/CFT compliance programs much more robust. According to the FATF’s report on Opportunities and Challenges of New Technologies for AML/CFT, the main technological solutions include:

• Automated transaction monitoring: Systems using AI and machine learning to identify suspicious patterns in real time, reducing false positives and improving efficiency.
• Enhanced KYC: AI-integrated tools that assess customer risk in vulnerable sectors.
• Cloud-based solutions: Scalable compliance platforms enabling smaller institutions to implement advanced systems without significant infrastructure investments.
• Blockchain and distributed ledger technology: Ensures traceability and transparency of transactions, particularly in sectors like cryptocurrencies.
• Big data analytics: Using a large volume of data to identify trends and anomalies that could signal illicit activity.
• Security in mobile and online banking: Measures like biometric authentication and encryption prevent fraud in digital transactions.

These technological solutions enhance operational efficiency, improve reporting, and enable institutions to comply with international standards such as the FATF’s 40 Recommendations, even in high-risk environments with limited domestic regulations.

Returning to our Central America case study, specific data on technology adoption in Guatemala remains limited. However, based on local context and global best practices, we can see trends of certain measures being adopted by financial institutions for AML/CFT compliance. For example:

• Implementation of SaaS (Software as a Service) platforms for compliance: These platforms offer transaction monitoring, KYC solutions, and suspicious activity reporting in an accessible and scalable format.
• Rapid growth of the fintech sector: Guatemala’s fintech industry has expanded significantly in recent years, with over 50 companies currently operating. These firms are promoting innovative solutions such as digital KYC platforms and real-time monitoring tools (e.g., identity and address verification processes) that support AML/CFT compliance.
• Technological inclusion for the unbanked population: Due to the significant number of unbanked individuals, institutions are adopting technologies like digital identities and mobile payment platforms that comply with AML/CFT standards.

Recommendations for AML/CFT

“When everything changes, crime adapts. AML/CFT audits require vision rather than routine.” During periods of uncertainty, institutions shift, and technological innovation, money laundering and anti-corruption tactics evolve. AML/CFT audit challenges are complex, requiring continuous reinforcement of information control mechanisms, regular risk map updates, thorough analysis of procedures, and ongoing compliance team awareness. Continuous improvement of audit practices has always been important, but the current landscape makes it even more critical:

• Conduct regular risk assessments to identify and prioritize threats—particularly in light of the ongoing growth of drug trafficking and related illicit activities that generate significant financial flows (Mutual Evaluation Report of the Republic of Guatemala, 2016). For example, quarterly or semiannual assessments can identify high-risk clients, vulnerable products, and critical geographic areas (e.g., border zones) while ensuring data remains current.
• Enhance KYC procedures. Limited financial inclusion necessitates alternative methods for identity verification. Institutions should create processes using alternative data sources, like mobile records, biometric data, or government-issued identification. Apply these methods broadly to include high-risk clients and those in unregulated sectors.
• Implement continual staff training. Due to the lack of specialized training, particularly with market modernization and cryptocurrency growth, quarterly or semiannual programs on regulations, money laundering techniques, and technological tools are essential. Training should also include conflicts of interest, independence, and ethics for compliance officers.
• Implement technological tools, including investing in cloud-based platforms (SaaS) for real-time transaction monitoring and generative AI tools for risk analysis.
• Stay informed on international best practices by engaging with publications and materials issued by organizations such as FATF. This helps avoid international sanctions and supports financial integrity.

Looking ahead, it may be valuable to consider regional integration in Central America to establish standardized anti-money laundering and compliance regulations. This would create a unified front against a phenomenon significantly impacting the region. Given current volatility and the momentum around new technologies, this may be a pivotal moment for regional regulatory bodies and financial institutions to lead and set a precedent.

Sources:
¹ For example, the Law Against Money Laundering and Other Assets of 2001 was last amended on June 29, 2011 (Infile Technical Sheet 67-2001); the Law to Prevent and Suppress the Financing of Terrorism came into effect on October 5, 2005, and has never been amended (Infile Technical Sheet 58-2005).
² According to statistics published by the IVE as of April 30, 2025, a total of 4,321 obligated entities—both financial and non-financial—were registered, and a slight increase was observed in the number of Suspicious Transaction Reports from 2024 to 2025.
³ Anti-Money Laundering (AML) in Guatemala, 2024, Sanction Scanner.