Financial Regulations In Chile

Country Overview

Classified as a “high income” state by the World Bank,¹ Chile has undergone significant economic growth and poverty reduction over the past several decades.² The 2019-2020 protests in response to inequality and corruption highlighted weaknesses in economic and social stability,³ however; these have since been further compounded by the COVID-19 pandemic. In 2020, the health crisis drove a 6% contraction in GDP⁴, an estimated increase in poverty of 12.2% from 8.1%⁵ and a surge in unemployment.⁶ The Organisation for Economic Co-operation and Development (OECD) predicts that Chilean economic activity will return to pre-pandemic levels by late 2022, but the pandemic’s ever-shifting landscape lends uncertainty to its recovery.

Meanwhile, the COVID-19 pandemic spurred on accelerated digital transformation in Chile, with increases in e-commerce, online marketing and streaming⁷. The government is eager to cultivate innovation, and an increasingly modern and inclusive digital economy will be key in helping the state to recapture its previously impressive development progress. With Latin America’s highest rate of banking penetration, at 74.3%,⁸ and an internet penetration rate of 82.3%,⁹ Chile is primed to compete with Latin American fintech hubs like Mexico and Brazil. Although the Chilean fintech ecosystem is in the early stages of development, it is growing at an annual rate of 38%,¹⁰ with an especially promising digital payments sector.¹¹ Congress has been presented with an open finance regulatory framework, which will seek to promote competition and innovation, reduce barriers to entry and foster financial inclusion.¹²

Beyond open banking, Chile’s 2021 digital agenda focuses on a cybersecurity regulation for the insurance industry and a possible National Artificial Intelligence Policy. A bill to regulate the protection and treatment of personal data and create the Personal Data Protection Agency remains in the legislative process. In spearheading further digitalization, regulators must ensure that efforts do not widen socioeconomic inequality, that access to high-speed broadband networks is increased and SMEs receive adequate support in the adoption of digital solutions.¹³

Financial Regulatory Authorities

The Central Bank of Chile (CBoC) is the primary monetary authority and policymaker and the central bank of Chile. The bank works autonomously and separately from national authorities, as mandated by the national Constitution.

The Financial Market Commission (CMF) is the country’s primary capital market and insurance market regulator that partners with the Ministry of Finance to develop legislation.

Policy, Laws and Regulations

Cybersecurity Regulation for the Insurance Industry, 18 May 2021

The Financial Market Commission issued a regulation establishing standards on operational risk management and cybersecurity for insurance companies in a move to enhance supervision. Obliged entities must conduct a self-assessment regarding operational risk every two years, and an annual self-assessment regarding cybersecurity. The self-assessments are due 30 September, with the exception of 2021, when reports are due 31 December 2021. Obliged entities must also report cybersecurity incidents. The regulation will go into effect 30 September 2021. 

National Artificial Intelligence Policy, 15 December 2020

The Ministry of Science, Technology, Knowledge and Innovation launched a public consultation, which ended 06 January 2021, on a proposed National Artificial Intelligence Policy. According to Minister of Science Andrés Couve, “We want to promote an Artificial Intelligence Policy that addresses not only the socioeconomic opportunities, but also the ethical dilemmas and impacts that arise from its use, through consensus and commitments from the public and private sectors, academia and civil society so that this is a state policy, which can be updated and implemented by future governments.”¹⁴ The draft policy centers on six principles: “AI with a focus on people, AI for sustainable economic development, safe AI, inclusive AI, AI in society and globalized AI.”¹⁵ Specific strategies and objectives fall under one of three axes: “enabling factors, development and adoption, and regulatory and ethical aspects.”¹⁶ The Ministry is expected to release a document incorporating feedback from the consultation in 2021.

Legislation

Financial Innovation Bill, September 2021

The Financial Market Commission’s long-awaited Fintech Act for the Securities Market, also known as the Financial Innovation Bill, was introduced to Congress. The Fintech Act seeks to provide a legal and regulatory framework for fintechs and pave the way for open banking. According to the CMF’s 09 February press release, the Act “will promote innovation, financial inclusion, development of new funding sources [for] small-size enterprises, and greater competition in the financial market.”¹⁷

The Act hinges on five pillars: proportionality, neutrality, integrity, flexibility and modularity. If enacted, it would apply to collective financing platforms, alternative trading systems, order routers and financial instrument intermediaries, safekeepers of financial instruments and loan advisors. The entities would be required to register in the CMF’s new Registry of Providers of Financial Services, and must demonstrate compliance before being allowed to carry out any functions. The Act also seeks to amend the Administration of Third Party Funds and Individual Portfolios, Corporations Law and Securities Market Law in a move to maintain regulatory consistency. Amongst other changes, the amendments would grant the CMF greater authority in regulating securities intermediaries and the authority to request obliged entities to institute an API in order to facilitate the exchange of client information.¹⁸

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Reference:

^{1. “Chile.” The World Bank. https://data.worldbank.org/country/CL.}

^{2.. “OECD Economic Surveys: Chile.” OECD, February 2021. https://www.oecd.org/economy/surveys/Chile-2021-OECD-economic-survey-overview.docx.pdf.}

^{3. “The World Bank in Chile.” The World Bank, 08 April 2021. https://www.worldbank.org/en/country/chile/overview.}

^{4. “Chile: focus on reducing inequality to strengthen social and economic recovery from COVID-19.” OECD. https://www.oecd.org/newsroom/chile-focus-on-reducing-inequality-to-strengthen-social-and-economic-recovery-from-covid-19.htm.}

^{5. “The World Bank in Chile.” The World Bank, 08 April 2021. https://www.worldbank.org/en/country/chile/overview.}

^{6. “Chile: focus on reducing inequality to strengthen social and economic recovery from COVID-19.” OECD. https://www.oecd.org/newsroom/chile-focus-on-reducing-inequality-to-strengthen-social-and-economic-recovery-from-covid-19.htm.}

^{7. “OECD Economic Surveys: Chile 2021—2. Making digital transformation work for all in Chile.” OECD, 2021. https://www.oecd-ilibrary.org/sites/4c7db951-en/index.html?itemId=/content/component/4c7db951-en}

^{8. Seminario, Fabiola. “Chile heads towards open finance regulation.” iupana, 19 April 2021. https://iupana.com/2021/04/19/chile-heads-towards-open-finance-regulation/?lang=en}

^{9. Kemp, Simon. “Digital 2021: Chile.” DataReportal, 11 February 2021. https://datareportal.com/reports/digital-2021-chile}

^{10. “Con 67 empresas nuevas, el ecosistema Fintech en Chile crece a un ritmo de 38% anual, llegando a las 179 startups en 2021.” Finnovista, 04 May 2021. https://www.finnovista.com/radar/con-67-empresas-nuevas-el-ecosistema-fintech-en-chile-crece-a-un-ritmo-de-38-anual-llegando-a-las-179-startups-en-2021/}

^{11. Pasquali, Marina. “Statistics and facts on fintech in Chile.” Statista, 02 July 2021. https://www.statista.com/topics/7831/fintech-in-chile/}

^{12. Seminario, Fabiola. “Chile heads towards open finance regulation.” iupana, 19 April 2021. https://iupana.com/2021/04/19/chile-heads-towards-open-finance-regulation/?lang=en}

^{13. “OECD Economic Surveys: Chile 2021—2. Making digital transformation work for all in Chile.” OECD, 2021. https://www.oecd-ilibrary.org/sites/4c7db951-en/index.html?itemId=/content/component/4c7db951-en}

^{14. “Chile to have a National Artificial Intelligence Policy.” InvestChile, 01 February 2021. http://blog.investchile.gob.cl/chile-to-have-a-national-artificial-intelligence-policy}

^{15. “Ministerio de Ciencia abre consulta pública para la Política Nacional de Inteligencia Artificial.” Ministerio de Ciencia, Tecnología, Conocimiento e Innovación, 15 December 2020. https://www.minciencia.gob.cl/noticias/ministerio-de-ciencia-abre-consulta-publica-para-la-politica-nacional-de-inteligencia-artificial/.}

^{16. “Ministerio de Ciencia abre consulta pública para la Política Nacional de Inteligencia Artificial.” Ministerio de Ciencia, Tecnología, Conocimiento e Innovación, 15 December 2020. https://www.minciencia.gob.cl/noticias/ministerio-de-ciencia-abre-consulta-publica-para-la-politica-nacional-de-inteligencia-artificial/}

^{17. “CMF publishes Fintech Act proposal for the securities market.” Comisión para el Mercado Financiero. https://www.cmfchile.cl/portal/principal/613/w3-article-46998.html}

^{18. Guzmán, Francisco and Andrés Latorre. “CMF publishes “Fintech Law” proposal.” Carey y Cía. Ltda, 14 February 2021. https://www.carey.cl/en/cmf-publishes-fintech-law-proposal/}

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^{*DISCLAIMER: This information is OneSpan's interpretation of the compliance requirements as of the date of publication. Please note that not all interpretations or requirements of the applicable laws are well-settled and its application is fact- and context-specific. The information contained in this document should not be relied upon as legal advice or to determine how the law applies to your business or organization. We encourage you to seek guidance from your legal counsel with regard to law applying specifically to your business or organization and how to ensure compliance. This information is provided “as-is” and may be updated or changed without notice. OneSpan does not accept liability for the contents of these materials.}

Last updated: November 2021