The Central Bank of Argentina (the “BCRA”) issued Communication “A” 7340/2021 on 12 August 2021 (the “Communication 7340”). This Communication 7340 prohibits the settlement of purchase and sale transactions of securities with settlement in foreign currency through payment in foreign currency cash, or through their deposit in custody accounts or accounts of third parties.
Communication 7340 provides that securities purchase and sale transactions settled in foreign currency (known as “cash with settlement”) must be paid by one of the following mechanisms:
- By transfer of funds to and from demand accounts held in the customer’s name with local financial institutions;
- Against wire transfers on bank accounts in the customer’s name with a foreign entity that is not incorporated in countries or territories where the Recommendations of the Financial Action Task Force do not apply, or do not sufficiently apply.
With respect to market makers, settlement and clearing agents (the “S&CA”) we note that, as the BCRA lacks the power to regulate them, it is up to the National Securities Commission (the “NSC”) to rule on the scope of Communication 7340, as it is addressed only to financial institutions and foreign exchange dealers.
The NSC has the competences and powers of a capital market regulator, with the express power to issue rules to be complied with by S&CAs, which means that, so far, Communication 7340 does not prohibit or restrict any of the transactions detailed above for S&CAs.
According to the press release issued by the BCRA, the regulation aims to combat money laundering and tax evasion.