Columbia

Global Financial Regulations 2022

Financial Regulations In Colombia

The COVID-19 pandemic, political instability and social unrest have devastated Colombia, which grappled with poor healthcare infrastructure and economic inequality even before the health crisis.

Country Overview

The COVID-19 pandemic, political instability and social unrest have devastated Colombia, which grappled with poor healthcare infrastructure and economic inequality even before the health crisis. Protests have erupted in response to corruption and proposed tax hikes, a subsequent crackdown has resulted in violence and death,1 a third wave of infections has engulfed the country and 3.6 million Colombians have been driven into poverty.2 The economy plunged by 6.8% in 2020,3 and although it has shown signs of a rebound, the highly infectious Delta variant lends uncertainty to its recovery. Meanwhile, increases in poverty and economic inequality could take years to reverse.

Digital transformation will be key in safeguarding economic growth, promoting financial inclusion and boosting transparency in government. Colombian regulators have already made strides toward cultivating innovation, helped by a young, tech-savvy population4 and shifting consumer preferences. In 2020, the Ministry of Finance and Public Credit issued a decree establishing Latin America’s first fintech regulatory sandbox, which allows unlicensed startups the opportunity to test business models over a two-year period.5 Digital banking in Latin America has soared since 2017, and neobanks in Colombia serve 1.5 million users.6 The rate of unbanked individuals remains high, but slipped from 30.4% in 2015 to 23.3% in 2020, driven in large part by the pandemic.7

Colombia’s 2021 digital agenda follows a broad pattern across Latin America as regional governments seek to modernize payments and introduce open banking while promoting financial inclusion, innovation and the digitalization of government services. Colombian regulators, in partnership with private sector entities,8 are drafting an open banking regulatory regime to debut in late 2021 or 2022.9 Colombia is also rolling out a national digital ID, which will allow citizens to vote electronically, obtain a driver’s license, receive notifications and more.10 In spearheading digitalization efforts, regulators must ensure that the digital divide does not widen, especially in rural and low-income communities. Internet penetration stood at a mere 65% in 2019,11 although it has doubled in the past ten years,12 and Colombia ranks as one of the globe’s most expensive countries for mobile data use.13

Financial Regulatory Authorities

The Central Bank of Colombia is the primary financial policymaker and central bank of the country, issuing currency and regulating exchange rates. One of the bank’s primary functions is to promote financial inclusion. It is a member of the international Financial Inclusion Alliance.

The Superintendence of Industry and Commerce (SIC) is a government regulatory agency that ensures fair competition and promotes economic growth in the private sector. Among its functions, the SIC  issues technical standards and ensures compliance. It is divided into six departments, three of which are Consumer Protection, Personal Data Protection, and Technical Regulation.

The Financial Superintendence of Colombia (SFC) is an independent government agency that monitors and supervises the financial, insurance, and securities markets in Colombia, including implementing and enforcing financial data protection measures. The agency also provides investor protection.

The Ministry of Finance and Public Credit is the government ministry responsible for implementing financial policies approved by Congress and developing its own policies geared toward financial inclusion.

Other Regulatory Authorities

The National Directorate of Taxes and Customs (DIAN) seeks to support fiscal security and is responsible for tax collection in Colombia.

The Superintendence of Corporations oversees commercial companies in Colombia.

Policy, Laws and Regulations

E-Signatures in Electronic Invoicing System, 01 August 2021

On 09 February 2021, the National Tax and Customs Directorate (DIAN) issued Resolution 000012, which amends Resolution 000042. Resolution 000042, issued 05 May 2020, established a regulatory framework for electronic invoicing, and Resolution 000012 stipulates the addition of mandatory electronic signatures in electronic sales invoices.14 The update seeks to ensure the authenticity of invoices. The resolutions went into effect 01 August 2021. The Resolution also mandates that electronic billers create and submit a “Documente Soporte” (support document) in the case that they purchase goods or services from a seller who is not mandated to issue electronic invoices.15 Resolution 000063, issued 30 July 2021, postponed the implementation date of the support document requirement to 31 January 2022.16 Colombian regulators have been quick to push for paperless services. The Organization for Economic Cooperation and Development (OECD) ranked Colombia third in its Digital Government Index (DGI) 2019 results, which include most OECD member and four non-member countries. Colombia, which ranked the highest in Latin America for digital government, scored high on the “user-driven” and “proactiveness” dimensions.

Legality of E-Signatures in Colombia

Legality of E-Signatures in Colombia

Electronic signature adoption in Colombia continues to accelerate and is one of the key foundational technologies that is enabling Colombian businesses to process digital transactions remotely. Get an update on the key considerations for enforceability.

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Blockchain Bond Pilot, 22 July 2021

The Central Bank announced its participation in a pilot experiment testing a blockchain bond through the use of smart contracts. Per the bank’s press release, “This innovative pilot seeks to verify the benefits of this new technology in the life cycle of a security, from issuance to expiration. The benefits include the potential reduction of operational costs, the optimization of process times, greater efficiencies in the traceability and security of operations, the elimination of information asymmetries and a better management of financial risks, among others.” The experiment will be conducted on the LACChain platform, developed by the Inter-American Development Bank Group’s innovation lab IDB Lab. The IDB Group consists of the Inter-American Development Bank, the Multilateral Investment Fund and the Inter-American Investment Corporation; Banco Davivienda is also a participant.

Open Banking Regulatory Regime, May 2021

The Finance Ministry’s financial regulations research unit Unidad de Proyección Normativa y Estudios de Regulación Financiera (URF) led a series of workshops with private sector entities from March to May 2021 on the development of an open banking regulatory regime. The voluntary regime is expected to be introduced in late 2021 or the beginning of 2022. In December 2020, the URF released a white paper addressing the benefits and risks of open banking alongside an overview of various implementation models. The paper notes that the existing national data protection framework is sufficient for the rollout of open banking. Colombia will likely be the third Latin America country to introduce open banking, after Mexico and Brazil.

Open Banking and Security: How to Ensure a Safe User Journey

Open Banking and Security: How to Ensure a Safe User Journey

“Security in open banking is a topic that is not focused on often enough. When it comes to open banking, financial institutions usually have their focus on the technical or business possibilities. But data security is just as important – and maybe even more so.”

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Pilot Project on Crypto Platforms and Banking Services, 29 January 2021

The Financial Superintendence of Colombia (SFC) issued a press release announcing that its Evaluation and Monitoring Committee had selected nine cryptocurrency exchange platforms—including Binance—to partner with banks for a yearlong pilot on crypto use cases. The pilot, which began in March 2020, seeks to “measure the effectiveness of recent technological developments in the verification of digital identity and traceability in transactions” and will test cash-in and cash-out operations through the use of the crypto platforms. The program gives the SFC the opportunity to gather information in the development of future regulations.17

Circular on AML Guidelines for Financial Institutions, 24 December 2020

The Superintendence of Corporations issued AML guidelines for financial institutions in line with Financial Action Task Force (FATF) recommendations. The guidelines note that obliged entities must take a risk-based approach to due diligence, and certain sectors—including the virtual asset sector—must apply the “Enhanced Due Diligence process to know your Counterparty and Virtual Assets.” Requirements of due diligence include ongoing due diligence, transaction monitoring, identification of the ultimate beneficiary of the counterparty, and obtaining information on the purpose and nature of the commercial relationship. Obliged entities must institute a “comprehensive risk management system” against ML/TF, referred to as SAGRILAFT and outlined in Chapter 10. SAGRILAFT must include, at the minimum, the identification of risk factors, the qualitative or quantitative evaluation of risk factors, the application of a risk matrix toward defining control mechanisms and their applications, monitoring  the risk landscape, due diligence, enhanced due diligence, risk alerts, documentation of SAGRILAFT activities and suspicious operations reports.


Reference:

1. Daniels, Joe Parkin. “‘They can’t take it any more’: pandemic and poverty brew violent storm in Colombia.” The Guardian, 07 May 2021. https://www.theguardian.com/global-development/2021/may/07/colombia-protests-police-covid-poverty-violence.

2. “Pandemic pushes 3.6 million Colombians into poverty.” The City Paper Bogota, 01 May 2021. http://thecitypaperbogota.com/news/pandemic-pushes-3-6-million-colombians-into-poverty/27316

3. “Colombia: Overview.” World Bank, 24 March 2021. https://www.worldbank.org/en/country/colombia/overview

4. Lustman, Stu. “Colombia: Land of Fintech Opportunity.” Colombia Fintech, 08 September 2021. https://www.colombiafintech.co/novedades/colombia-land-of-fintech-opportunity

5. “Latin America Sees Booming Digital Banking Sector with Brazil at the Lead.” FintechNews, 19 July 2021. https://fintechnews.ch/latin-america/latin-america-sees-booming-digital-banking-sector-with-brazil-at-the-lead/47312

6. “Latin America Sees Booming Digital Banking Sector with Brazil at the Lead.” FintechNews, 19 July 2021. https://fintechnews.ch/latin-america/latin-america-sees-booming-digital-banking-sector-with-brazil-at-the-lead/47312

7. Yansura, Julia et al. “Is Online Banking Reducing Poverty in Latin America?” The Dialogue: Financial Services Advisor, 02 December 2020

8. “Colombia reportedly takes voluntary approach to Open Banking.” The Paypers, 28 April 2021. https://thepaypers.com/online-mobile-banking/colombia-reportedly-takes-voluntary-approach-to-open-banking--1248657

9. Seminario, Fabiola. “Open banking in Colombia is getting ready to take off.” iupana, 08 February 2021. https://iupana.com/2021/02/08/open-banking-in-colombia/?lang=en

10. García Santiago, Héctor José. “Transition to the digital ID card: closing the digital divide in Colombia.” Digital Future Magazine, 20 January 2021. https://www.digitalfuturemagazine.com/2021/01/20/transition-to-the-digital-id-card-closing-the-digital-divide-in-colombia

11. “Individuals using the Internet (% of population) – Colombia.” World Bank, 2019. https://data.worldbank.org/indicator/IT.NET.USER.ZS?locations=CO

12. Ozores, Pedro. “Colombia betting on digital transformation to drive economic recovery.” BNamericas, 30 April 2021. https://app.bnamericas.com/article/section/all/content/xolluh3kd-digital-transformation-colombias-bet-to-fuel-economic-recovery

13. “The cheapest (and most expensive) mobile data packages.” Telecom Lead, 09 August 2021. https://www.telecomlead.com/broadband/the-cheapest-and-most-expensive-mobile-data-packages-101215

14. “Updates to Electronic Invoicing in Colombia: Digital Signature and New Technical Rules.” Edicom, 31 March 2021. https://www.edicomgroup.com/en_US/news/15026-updates-to-electronic-invoicing-in-colombia-digital-signature-and-new-technical-rules.html

15. “E-invoicing & Digital Reporting Global Updates.” KPMG, 11 August 2021. https://assets.kpmg/content/dam/kpmg/us/pdf/2021/03/e-invoicing-digital-reporting-global-updates.pdf

16. “E-invoicing & Digital Reporting Global Updates.” KPMG, 11 August 2021. https://assets.kpmg/content/dam/kpmg/us/pdf/2021/03/e-invoicing-digital-reporting-global-updates.pdf

17. Handagama, Sandali. “Colombia’s Crypto Use Soars, and Local Regulators Step In.” CoinDesk, 30 April 2021. https://www.coindesk.com/colombias-crypto-use-soars-and-local-regulators-step-in


*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