Business Verification in LATAM: KYB Challenges, Regulations & Solutions

A wave of beneficial ownership registry laws has been implemented in Latin America. According to the legislation of many countries, such as Mexico, Argentina, Chile, and Colombia, the ultimate beneficial owners (UBOs) of companies need to be reported to their national authorities.

However, this situation contains one particular element that creates difficulties. On paper, the region had finally aligned itself with FATF Recommendation 24.

In practice, compliance teams trying to verify a corporate counterparty across these same jurisdictions still face many issues. These include

• Inconsistent enforcement
• Fragmented registry access
• Ownership structures that are deliberately built to resist scrutiny

That gap, between regulatory intent and operational reality, is where financial crime in LATAM lives.

For banks, financial institutes or payment platforms, client onboarding has become a hassle.

Why LATAM Is a Distinct Business Verification Challenge

The region of Latin America holds a greater percentage of worldwide trade-based money laundering activities. The Tri-Border Area, which connects Brazil, Argentina, and Paraguay, has been identified by the international police organization INTERPOL as a major center of organized crime.

Furthermore, the 2021 National Risk Assessment of Brazil identified front companies as the primary mechanism for hiding the proceeds of drug trafficking, corruption, and environmental law violations.

That context matters when

1. A compliance officer is reviewing a Brazilian holding company whose sole shareholder is an entity registered in Uruguay.
2. It matters when a Mexican fintech is trying to onboard a payment services business whose parent is incorporated in the Cayman Islands.

Therefore, for companies that are operating in LATAM, there is a very high risk of inadequate business verification.

The Regulatory Landscape, Country by Country

LATAM does not function as a single compliance jurisdiction. Each country has three different aspects.

• They all maintain their own corporate registry infrastructure,
• Their own UBO disclosure thresholds
• Their own enforcement mechanisms.

Brazil

“Brazil’s AML framework is governed by Law No. 9,613/1998. It tasks COAF with receiving and analysing suspicious transaction reports. Businesses must release information about their beneficial owners according to regulations, yet FATF discovered through its 2023 mutual evaluation that COAF does not have proper data access to this data in practice.

The Central Bank of Brazil uses Public Consultation to create its licensing framework for VASPs. The system requires strong KYC/AML controls, which need to include entity-level verification.

Since Brazil drives over 55% of regional M&A activity, financial institutions must verify a high volume of Brazilian corporate counterparties.

Mexico

Mexico’s Federal Law for the Prevention and Identification of Operations with Illicit Funds mandates customer due diligence across financial institutions and DNFBPs. And the UIF oversees suspicious activity reporting.

Additionally, new CNBV rules (June 2024) require fraud prevention plans and more stringent internal controls. On top of that, high cross-border remittance volumes, driven by US ties, make trade-based money laundering a key regulatory focus.

Colombia

“Colombia’s SARLAFT (Sistema de Administración del Riesgo de Lavado de Activos y Financiación del Terrorismo) framework requires FIs to determine beneficial owners(BOs) with ownership above 25%.”

Moreover, Colombia launched its Bre-B real-time payment system in September 2025, which is modelled on Brazil’s PIX. This means fintech onboarding volumes are rising at the same time as regulatory expectations.

Chile

Chile’s Fintech Law (Law No. 21.521, enacted in 2023) serves as one of the most comprehensive frameworks in the region. The Financial Market Commission (CMF) will supervise crypto-asset platforms and custodians through this regulation.

The CMF issued secondary rules in 2024, which establish the registration requirements and disclosure standards and AML/KYC compliance duties for organizations that provide crypto-related financial services.

Argentina

The regulatory environment in Argentina currently undergoes changes because of the implementation of a deregulation agenda. The UIF continues to enforce anti-money laundering (AML) requirements. Peru is implementing two-factor authentication requirements through SBS Regulation No. 2286-2024 while enhancing its payment system.

On the contrary, Uruguay, Panama, and Peru are all drafting or debating VASP and AML laws expected between 2025 and 2026.

Beneficial Ownership Opacity in Practice

The Inter-American Development Bank conducted an analysis of beneficial ownership regulation across 26 LATAM and Caribbean jurisdictions.

It found that while most countries have definitions of beneficial ownership in place, those definitions don’t always comply with international standards.

To understand this better, think of a fintech in Bogotá that onboards a Colombian trading company. Here are the conditions.

• The company’s registration is current.
• Its directors are named.
• Its sole shareholder is a holding entity in Panama.
• That Panamanian entity is owned by a trust registered in the British Virgin Islands.
• The trust lists a corporate trustee.
• The beneficial owner is a politically exposed person with ties to a government procurement process.

However, here’s the catch. This won’t be identified because standard registry checks stop at the Colombian record.

This is not an unusual structure. Shell companies, nominee directors, and offshore holding layers are widely used across LATAM for legitimate tax efficiency reasons. They are also used to conceal the proceeds of corruption and organised crime.

However, the compliance obligation, distinguishing between the two, requires ownership data that goes well beyond what national registries typically publish.

Where Standard KYB Checks Break Down

The specific failure modes in LATAM business verification are worth naming precisely, because they determine what a verification approach actually needs to solve.

1. Registry Fragmentation And Language Barriers

Chile, Peru, and Uruguay require navigation of Spanish-language portals. This means registry access is inconsistent. There are some digital and current, and others requiring manual intervention to confirm that a business is currently active and not dissolved. Navigating through different setups can overwhelm compliance teams.

2. Nominee Director Structures

In most jurisdictions that have weak disclosure requirements, the nominee directors are documented across the region. Where a nominee director is listed as the only named individual on a registration, entity-level checks return the nominee’s name.

This means it will not return the name of the natural person who controls the business. Without ownership traversal that goes beyond the first legal layer, the check is incomplete.

Other prominent areas where standard kyb checks break down

• Cross-jurisdictional UBO chains obscure ownership without full registry access and automated traversal.
• Inconsistent UBO thresholds create blind spots for de facto controllers below disclosure limits.
• Stale aggregated data leads to incomplete or unreliable beneficial ownership verification.

How The KYB Addresses the LATAM Verification Gap

The KYB’s business verification platform is built around direct data access from official registries and government sources across 250+ countries and states. This includes the LATAM jurisdictions where aggregated databases consistently underperform.

For LATAM counterparty verification specifically, this means registry-level entity data sourced from official sources in Brazil, Mexico, Colombia, Chile, and across the broader region. Moreover, the UBO identification through the KYB automates the traversal of layered ownership structures.

It maps subsidiaries, holding companies, and nominee arrangements to identify the natural persons who ultimately own or control a business. Moreover, our Corporate screening covers the entity, its directors, and its beneficial owners against global sanctions lists, PEP databases, adverse media, and enforcement actions.

The KYB’s risk assessment layer scores entities on jurisdiction risk, ownership complexity, and industry exposure — allowing compliance teams to apply enhanced due diligence in proportion to each entity’s risk, rather than applying the same process to every onboarded entity regardless of risk.

Perpetual KYB replaces periodic manual refresh cycles with continuous monitoring. When a director change, ownership restructuring, or sanctions designation occurs post-onboarding, The KYB triggers an alert — rather than leaving the compliance team exposed until the next scheduled review.

The data authority argument matters here. Regulators checking an institution’s KYB files will look at the same official registries that The KYB sources from.

When the data matches because it comes from the same source, the audit trail is defensible. When it doesn’t — because the KYB provider was working from an aggregated database — the exposure falls on the institution.