By Stanley Foodman, CEO, Foodman CPAs & Advisors
Regulatory Shift
In May 2025, Costa Rica amended Article 32 of its Constitution to allow the extradition of Costa Rican nationals for cases of international drug trafficking and terrorism. For decades, nationals were constitutionally shielded from extradition. Non-citizens were already extraditable under treaty arrangements.
Though narrowly framed, the reform is a historic legal shift. It demonstrates that constitutional protections can be revised to enable greater cross-border cooperation. For institutions in LATAM and the Caribbean, it serves as a warning signal: legal environments are evolving in ways that will test governance, oversight, and defensibility.
Why It Matters
Even limited reforms alter enforcement dynamics. Costa Rica’s decision raises the probability that other jurisdictions may revisit their own frameworks. For financial institutions, this means AML, FATCA, and CRS deficiencies could come under sharper scrutiny when regulators and foreign authorities coordinate more closely. Reputational, operational, and legal risks will converge.
Key Risk Areas
- Beneficial ownership discrepancies – inconsistencies between AML files, FATCA/CRS data, and control structures
- PEP monitoring weaknesses – incomplete escalation of politically exposed persons with cross-border exposure
- Fragmented reporting systems – siloed AML, FATCA, and CRS processes producing conflicting outputs
- Incident response delays – unclear escalation channels for treaty-driven requests
- Forensic gaps – absence of a verifiable evidence trail across AML, FATCA, and CRS reporting
Strategic Response Framework
- Map client structures and treaty exposure to identify extradition-related risks.
- Reconcile beneficial ownership data across AML, FATCA, and CRS frameworks.
- Strengthen protocols for mutual legal assistance and urgent foreign requests.
- Integrate monitoring and reporting systems to reduce inconsistencies.
- Embed enforcement and extradition scenarios into governance and training.
Readiness Priorities
- Refresh KYC for high-risk clients and PEPs with cross-border profiles
- Validate beneficial ownership documentation against reporting outputs
- Centralize AML, FATCA, and CRS workflows to eliminate silos
- Establish governance linking compliance, legal, and operational oversight
- Conduct forensic file reviews to ensure audit defensibility
- Train staff to anticipate treaty-based requests and enforcement cooperation
Closing Insight
Costa Rica’s amendment is limited in scope but broad in signal. Institutions across LATAM and the Caribbean should treat it as an early warning that constitutional and legal frameworks can change quickly to support international enforcement. Those that reinforce AML, FATCA, and CRS controls now will be better positioned to withstand cross-border pressure.
Author Attribution
Stanley Foodman advises financial institutions, legal professionals, and family offices across LATAM and the Caribbean on governance, audit readiness, and regulatory risk. His work focuses on strengthening cross-border compliance frameworks and aligning documentation with evolving international standards.
Contact CTA
For inquiries or to request a strategic consultation with Stanley Foodman, contact info@foodmanpa.com.
