Notaries who handle property transactions have been told that they must register and provide reports to the nation’s financial watchdog. The order means that information about purchasers and sellers will be more widely available.
Resolution number 814-2007 of the Notary Directorate, published June 22, advises that all notaries dealing in financial transactions must register with the Superintendencia General de Entidades Financieras. This includes, but is not limited to, purchase and sale contracts, mortgages, liens, and trusts.
This institution is the one that is supposed to oversee financial organizations. It is the one that is getting so much flak for not doing its job with regards to the Brothers Villalobos, the collapsed Banco Elca, among others.
This news is bad for expats buying property in Costa Rica and trying to hide the transaction from their home country’s tax authorities. This mandate means notaries will need to register as any bank or financial house would and turn in all their paperwork regarding financial transactions — with names, addresses and phone numbers — for review and entry into a database.
They also will have to fill out those “know your customer” forms that financial institutions now fill out. “Know your customer” is a code name for getting financial information from people based on international agreements.
This further means people’s lives will be more of an open book for everyone else’s snooping pleasure.
This announcement is clearly a reaction to the events of the times and the country’s efforts to control financial transactions so it can get a piece of each pie.
But a call to the Superintendencia’s office by a public notary seeking to sign up as ordered by the official notice in the Boletin Judicial met with a surprising result. The official on the other end of the phone knew nothing about the published resolution from the notary directorate. His response was “They did what? The notice says what? Do you have a copy?”
The notary sent a copy of the resolution to the superintendent’s office and followed up with a phone call. In the follow-up call, the official stated that office did not know about the published announcement and that it did not make sense. In theory, notaries do not handle money they just record events. The governmental office is concerned with entities that actually handle money based on Article 15 of Law 8204, which is a law to control drug trafficking and money laundering.
The Superintendencia General originally was part of the Banco Central de Costa Rica and was a bank audit department. In November 1995, the department turned into what it is today. Its mandate is to guarantee transparency, bolster fiscal strength and promote financial development of the country.
In fact, many notaries do handle money. They use their personal accounts as escrow accounts in financial transactions, and they do no reporting to anyone. They even earn interest on the funds, which is a big no-no in other parts of the world where bona fide escrow accounts cannot earn interest.
Very few notaries actually do sign up with the banking authority through an L.L.C. or S.A. corporation created for the sole purpose of being an escrow agent. They have their clients fill out “know your customer” forms.
Who is right? Do notaries need to sign up or not? Well, the official at the financial watchdog’s office said maybe his office better have a meeting with the notary directorate and discuss the dilemma.
This delay is probably good for everyone because it lets them get the financial house in order before the country begins to track all financial transactions very closely.
