Costa Rica Extradition Reform: What It Signals for AML, FATCA, and CRS Compliance

Regulatory Shift

In May 2025, Costa Rica amended Article 32 of its Constitution to allow the extradition of Costa Rican nationals in cases of international drug trafficking and terrorism. This historic shift ends a decades-long prohibition on extraditing nationals. Non-citizens were already subject to extradition under treaty arrangements.

The reform coincides with FATF’s increased scrutiny of jurisdictions in Latin America and the Caribbean, where deficiencies in AML oversight and beneficial ownership transparency have triggered monitoring actions. It also comes as jurisdictions prepare to implement CRS amendments beginning in 2026, with first information exchanges expected in 2027.

While narrowly scoped, Costa Rica’s reform is a warning signal. It demonstrates that constitutional barriers can be revised to support greater cross-border enforcement in serious financial and criminal matters.

Why It Matters

For financial institutions and legal counsel, the development highlights a broader enforcement trajectory. Even though Costa Rica’s amendment is limited to drug trafficking and terrorism, it reflects the growing willingness of jurisdictions in LATAM to align legal frameworks with international expectations.

This shift increases pressure on financial institutions to ensure AML, FATCA, and CRS programs are defensible under foreign scrutiny. Weak controls that once led only to regulatory remediation or reputational exposure may now intersect with criminal investigations carried out in parallel across jurisdictions.

Key Risks

• Beneficial ownership discrepancies – inconsistencies between client files, FATCA/CRS reporting, and actual control structures
• PEP monitoring failures – incomplete escalation of politically exposed persons with cross-border exposure
• Fragmented reporting systems – siloed AML, FATCA, and CRS workflows producing conflicting data
• Incident response weaknesses – unclear protocols for mutual legal assistance or urgent foreign requests
• Forensic gaps – lack of evidence trails connecting AML monitoring to FATCA/CRS reporting outputs

Strategic Framework

Financial institutions should adapt governance to reflect both the Costa Rica amendment and the broader trend it represents:

1. Map cross-border client structures and treaty exposures that could trigger foreign requests.
2. Reconcile beneficial ownership data across AML, FATCA, and CRS systems.
3. Strengthen escalation protocols for treaty-driven or mutual legal assistance demands.
4. Integrate reporting platforms to reduce siloed outputs and increase consistency.
5. Embed cross-border enforcement scenarios into governance, training, and forensic audit reviews.

Assessing Readiness

Authorities increasingly require operational evidence, not policy statements. Institutions that cannot demonstrate alignment across AML, FATCA, and CRS frameworks risk regulatory findings that can escalate into reputational crises or criminal exposure.

Common vulnerabilities include:

• Beneficial ownership data that diverges across jurisdictions
• KYC refresh cycles that fail to capture cross-border risks
• Weak adverse media and PEP escalation procedures
• Lack of reconciliation across IT and reporting systems

Strategic Priorities

• Reconcile and validate beneficial ownership data across frameworks
• Refresh and escalate KYC for high-risk and cross-border clients
• Centralize AML, FATCA, and CRS reporting to eliminate silos
• Establish governance linking compliance, legal, and risk oversight
• Validate records against independent data sources for forensic defensibility
• Train compliance and legal teams to anticipate treaty-driven requests and cross-border inquiries

Closing Statement

Costa Rica’s constitutional reform is a reminder that extradition can be redefined to support international enforcement priorities. Institutions that integrate AML, FATCA, and CRS oversight under a unified governance framework will preserve defensibility and remain resilient as cross-border cooperation intensifies.