By: Garland M. Baker B. and
Licda. Xochilt Quezada López
July 28, 2025, Update
Exclusive to CostaRicaExpertise.net
The long lines, the constant requests for the same documents, the sudden threat of a frozen account—it's a shared frustration for many.
The answer lies in a massive global shift. Costa Rica has traded its old reputation as a secretive tax haven for a new role as a transparent financial partner. This transition, finalized with its removal from the EU's 'grey list' in early 2025, is the reason for the paperwork, the endless questions, and the new rules at your local bank.
This isn't just a political victory; it's a fundamental shift in how banking and finance operate within the country's borders. For expatriates and locals alike, this new chapter brings both new responsibilities and a more secure financial environment. The days of unquestioned banking privacy are over, replaced by a system that demands clarity and compliance.
The Global Shift to Transparency: FATCA and CRS
The driving force behind this change is a global movement against tax evasion and illicit financial activities. Two key acronyms now govern the flow of banking information in Costa Rica:
- FATCA (Foreign Account Tax Compliance Act): This U.S. law requires Costa Rican financial institutions to report information on accounts held by U.S. citizens and residents to the Internal Revenue Service (IRS). Under a formal intergovernmental agreement, this reporting is not optional; it is a mandatory, automated exchange of information.
- CRS (Common Reporting Standard): Think of it as the global version of FATCA. Developed by the OECD, the CRS is an agreement for the automatic exchange of financial account information between more than 100 countries, including Costa Rica. In short, your bank here reports your account details to the tax authorities in your country of tax residency.
These agreements have dismantled the legal walls that once shielded banking information, creating a transparent international network designed to ensure everyone pays their fair share of taxes.
SUGEF: The Engine of Enforcement
At the heart of these changes is the Superintendencia General de Entidades Financieras (SUGEF), Costa Rica's primary financial regulator. SUGEF's role has been significantly strengthened to ensure all banks and financial institutions adhere to these new global norms.
This is why your bank is so persistent about keeping your information current. These “Know Your Customer” (KYC) policies are now strictly enforced by SUGEF, and banks are legally required to maintain a detailed profile for every client.
Pro-Tip: Keep updated digital and physical copies of your documents ready. This allows you to respond quickly to bank requests and avoid potential account freezes.
The required profile includes:
- Verified Identity: A current passport and residency card (DIMEX) are essential.
- Proof of Address: Recent utility bills or rental agreements are required.
- Source of Funds: Banks must understand and document where your income comes from (e.g., a pension, employment letter, or business financial statements). This is crucial for verifying that the funds are legitimate and not tied to illicit activities, a core part of their anti-money laundering (AML) duties.
These stringent checks are a direct result of robust anti-money laundering (AML) and counter-terrorism financing (CFT) laws. SUGEF is proactively working to prevent financial crimes, a mission that now extends to regulating emerging sectors like virtual assets (cryptocurrencies).
The New Reality for Expats and Businesses
For expats, particularly those who have been in Costa Rica for a long time, this represents a significant cultural shift. The "old ways" of operating with a degree of financial anonymity are gone. Unreported rental income, off-the-books business activities, and undeclared foreign earnings are now squarely in the sights of both local and international tax authorities.
Navigating this new landscape is straightforward with a few proactive steps:
- Declare All Income: Ensure any income generated from Costa Rican sources (rentals, online work, etc.) is properly declared to the relevant tax authorities.
- Organize Your Documents: Keep a dedicated file with up-to-date copies of your DIMEX, passport, proof of income, and utility bills.
- Consult a Professional: If you run a business or have complex assets, consider speaking with a local accountant to ensure full compliance.
This change isn't a threat, but a new standard of security. The increased scrutiny ultimately leads to a safer and more stable banking system, reducing the risk of fraud and the large-scale financial scams that have occurred in the past.
While the era of financial secrecy in Costa Rica is over, an era of greater financial security has begun. Embracing these changes doesn't just keep you compliant; it protects your assets. By being prepared and transparent, you can navigate the modern banking system with confidence and focus on what truly matters—enjoying your life in paradise. Ultimately, a little organization ensures your financial life here is as tranquil as the landscape.
This article is an update to a topic first explored by Garland M. Baker B. in A.M. Costa Rica on August 1, 2005, and then again on June 8, 2009. The information provided is for informational purposes and does not constitute legal or financial advice. Consult a qualified Costa Rican professional for your specific situation. ©2004-2025 Costa Rica Expertise. Free use permitted with attribution (CC BY 4.0). 1050801 ZZ! 1090608 ZZ!
