IIEffective Insolvency and Creditor Rights Systems
According to the 2007 report by the Superintendency of Companies and the Ministry of Commerce, Industry, and Tourism, Law No. 1116 was passed in 2006 to establish a new framework for corporate insolvency procedures in Colombia. The new law introduced modifications to the previous legislation, mainly to Law No. 550 of 1999, which overly protected debtors and thereby negatively affected bank lending and the Colombian financial market. The World Bank website discloses that the reform legislation was expected to follow the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems issued in 2001, as well as the UNCITRAL Model Law on Cross-Border Insolvency. However, there is insufficient information publicly available as to the compliance of the adopted law with the World Bank´s Principles.
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IDInternational Financial Reporting Standards
The World Bank's 2003 assessment of Colombia's accounting and auditing standards reports that the country's Generally Accepted Accounting Principles (GAAP), established by Decree No. 2649 in 1993, are based on International Accounting Standards (currently International Financial Reporting Standards, or IFRSs) and the U.S. GAAP. However, the assessment adds that Colombia's GAAP fail to incorporate many areas covered by the international standards and have not been updated since 1993 to reflect developments in either the IFRSs or the U.S. GAAP. Moreover, the World Bank points out that there is no concept of general-purpose financial reporting. Instead, multiple agencies issue separate accounting rules for the entities falling under their jurisdictions. The World Bank recommends the full adoption of IFRSs, the establishment of a High Council to oversee this adoption process, and the creation of an enforcement body focused on accounting and auditing standards within these professions. A 2008 article in Dinero Magazine discloses that, as of March 2008, Colombia's congress was considering Bill No. 165, submitted in 2007, which would require all large companies in Colombia to fully adopt IFRSs by 2010 and which would impose an adoption deadline for 2012 for full adoption by small and medium companies.
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ENPrinciples of Corporate Governance
Since 1995 Colombia has made progress with its corporate governance regime, particularly for listed companies. A new set of corporate governance provisions was established with the Securities Market Law of 2005, introducing the concept of independent directors among other regulations. Then, in 2007 the Superintendency of Finance (SF), with the collaboration of private entities, published the Country Code. The Code incorporated international best practices and aimed to improve the enforcement of corporate governance rules. The code follows a "comply or explain" model. Prior to that, in 2001, Colombia had established a minimum corporate governance disclosure regime for companies that wished to be eligible for pension fund investments. It has encouraged institutional investors to assume the role of active shareholders. However, weaknesses in the corporate governance regime remained and led to an official proposal for reform in this area. Colombia needs to adopt internationally accepted auditing and accounting standards, improve minority shareholder rights, and strengthen the enforcement of rules in certain areas such as insider trading. As of April 2008, Congress was analyzing draft Bill No. 165 of 2007, which proposes the adoption of IFRS, previous International Accounting Standards. This would take place by 2010 for larger companies and 2012 for small and medium enterprises. Private sector efforts in Colombia have been led the Confederation of Chambers of Commerce through a number of activities designed to raise private-sector awareness as to the importance of adopting good corporate governance practices.
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IDInternational Standards on Auditing
In its 2003 assessment of accounting and auditing practices in Colombia, the World Bank commended the Colombian authorities for initiating a number of reforms aimed at implementing international best practices in Colombia, including the reform of corporate financial reporting framework. The World Bank noted, however, that there is no legal requirement for external audit in Colombia, no auditing standards, and no concept of independent audit. It therefore recommended that Colombia fully adopt International Standards on Auditing (ISAs), establish a Higher Council responsible for the adoption of ISAs, promulgate a new law to improve auditing requirements and regulate the functions of the auditor, and create a body for enforcing auditing standards and regulating audit profession. In a 2005 report, the International Monetary Fund observed that Colombia still did not comply with international best practices in the area of auditing. It, too, recommended adopting ISAs. According to a 2007 publication by the Superintendency of Companies and the Ministry of Commerce, Industry and Tourism, the Colombian Congress passed Law No. 1116 in 2006. Article 122 of this Law requires the government to review accounting and auditing standards in order to align them with international standards.
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IDAnti-Money Laundering/Combating Terrorist Financing Standard
In October 2004, the Financial Action Task Force of South America (GAFISUD) conducted a mutual evaluation of Colombia to assess the country's compliance with the Financial Action Task Force's (FATF) 40+8 recommendations and special recommendations on anti-money laundering and combating the financing of terrorism. The results were released in a 2004 report, in which GAFISUD stated that Colombia is "non-compliant" with three recommendations and six special recommendations (SR). The report also found Colombia to be "partially compliant" with ten recommendations and one special recommendation, "largely compliant" with fifteen recommendations and "compliant" with twelve recommendations and one special recommendation. However, the GAFISUD report identified several shortcomings and areas in which improvements were needed. Most significantly, the report noted that Colombia was non compliant with the special recommendations relating to terrorist financing. The country did not comply with the FATF's requirements on the criminalization of the financing of terrorism. Procedures to freeze terrorists' assets were not efficient and financial institutions were not required to report suspicious transactions relating to terrorism. However, according to several reports, subsequent to the 2004 GAFISUD report, Law No. 1121 of 2006 amended the criminal code to establish terrorist financing as a separate crime, following recommendations from the GAFISUD and the Egmont Group. However, there is no publicly available assessment of this law's effectiveness or its compliance with the FATF requirements. Furthermore, according to a 2005 report by the International Monetary Fund, the Colombian authorities are deeply committed to combating money laundering.
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IDCore Principles for Systemically Important Payment Systems
There are a variety of entities that provide payment services in Colombia, and these, in turn, are subject to regulation by different organizations. According to a 2003 report by the Central Bank of Colombia (CBC), the Deposit Account System (CUD) is a particularly relevant system. It is the Colombian high-value system for the management of resources deposited in CBC accounts. It is a real time gross settlement system and, according to the 2004 CBC report, settled 88.7 percent of the total value of transactions in 2004. Moreover, according to the 2004 CBC report, Colombia has a high degree of compliance with the Committee on Payment and Settlement Systems' (CPSS) Core Principles for Systemically Important Payment Systems (CPSIPS). In its 2005 Financial System Stability Assessment (FSSA) Update, the International Monetary Fund observed that, most of the weaknesses identified in the legal framework for payment systems in Colombia would be addressed once the Securities Market Law came into effect. As reported on the Financial Information and Analysis Unit website, this law (Securities Market Law No. 964) was approved by Congress in 2005. Nonetheless, there is no third party assessment or detailed self assessment corroborating this statement in the 2004 CBC report and, since the 2005 FSSA Update, there has been no publicly available source addressing Colombia's compliance with the CPSS's CPSIPS.
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