Is a Nicaraguan company laundering money for the FARC?

Recent testimony before the US Senate revived allegations that a Venezuela-owned company in Nicaragua may have laundered money for Colombia's demobilizing FARC guerrillas, once again raising the question of whether foreign governments may have been complicit in washing the fighters' dirty cash.

On September 12, Douglas Farah, the president of the national security consulting firm IBI Consultants, testified before the Senate Caucus on International Narcotics Control regarding adapting US counternarcotics efforts in Colombia. 

In his testimony, among other things, Farah discussed "key elements of the ... foreign financial infrastructure" of the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia - FARC), which signed a historic peace agreement with the Colombian government in 2016.

Specifically, Farah pointed to ALBA Petróleos and Albanisa, two subsidiaries of Venezuela's state-owned oil company Petróleos de Venezuela S.A. (PdVSA), which operate in El Salvador and Nicaragua, respectively. 

According to Farah, Albanisa is controlled by the "inner circle" of Nicaragua's ruling Sandinista National Liberation Front (Frente Sandinista de Liberación Nacional - FSLN) and President Daniel Ortega, who has been accused of providing weapons and other support to the FARC in the past. 

Albanisa was allegedly set up as a "vehicle for social development" financed by PdVSA, which agreed to sell the company discounted oil if the profits were then used for social development. However, Farah said that "as much as $4 billion" had been "redirected for 'privatization,'" which often ended up "supporting political campaigns and enriching officials" in Nicaragua.

According to Farah's testimony, Albanisa has experienced continued "inexplicable and irrational economic growth," with "notable" financial irregularities in their revenues and expenses. 

Unnamed sources within Albanisa cited by Farah reportedly said these so-called irregularities are the proceeds of "money laundering" and a "financial support cycle" involving "corrupt Venezuelan officials and drug trafficking organizations," including the FARC.

SEE ALSO: Coverage of FARC Peace 

President Ortega has claimed publicly that Albanisa generates between $400 and $500 million per year. But according to a 2009 income statement analyzed by the Nicaraguan investigative news website Confidencial, Albanisa sells crude oil and its derivatives at a price "equivalent to its cost without any kind of profit margin."

Throughout the first eight months of 2009, Albanisa reported sales of $352,941,116 while their reported cost of sales was almost identical, $352,851,677, a difference of just under $90,000, according to Confidencial. 

"This type of economically irrational behavior is generally seen when illicit money is being laundered into financial systems in order to justify its origin," Farah said in his testimony, adding that the funds flowing through Albanisa are "at least in significant part the FARC economic resources now being laundered into the world's financial system."  

Furthermore, Farah explained that "mounting evidence" suggests that Albanisa's structures are "systematically" going out of business after "fulfilling their purpose" of laundering money. 

Farah cited as one example the Albanisa-controlled Nicaragua Airways, which "only flew for four months after a multimillion-dollar investment." He also stated that "more than 60 Albanisa projects in Nicaragua have been shelved over the past year." 

Officials in Nicaragua have demanded an investigation into these alleged FARC money laundering activities, while officials in El Salvador have demanded the United States open a similar investigation. 

InSight Crime Analysis 

The recent testimony by Farah has generated a spate of media interest in the allegations that high-level officials in leftist governments in Venezuela, Nicaragua and El Salvador helped the FARC launder money. These suspicions are not necessarily new, however. They began to surface in earnest in 2008 after the discovery of a computer belonging to FARC commander Raúl Reyes, and were alluded to by Farah in 2014 testimony before the US House of Representatives.

As far back as 2009, the US Treasury Department's Office of Foreign Assets Control (OFAC) alleged that the FARC's extensive transnational money laundering network used several companies based in Venezuela and Costa Rica to manage the group's assets. And in 2015 Colombia's Prosecutor General's Office confirmed that money reportedly laundered by the FARC had reached Costa Rica.

Farah told InSight Crime that two parallel money laundering structures were set up in El Salvador and Nicaragua, although the latter's was more difficult to trace because "they've been good at removing documents and making public record trails more difficult to trace." 

"We essentially extrapolated what we saw in El Salvador, which was a very large amount of money flowing into companies that was economically irrational. We saw the same thing in Nicaragua," he said.

SEE ALSO: Coverage of Money Laundering

As an example of this irrationality, Farah pointed to the El Supremo Sueño de Bolívar oil refinery in Nicaragua, which Albanisa was contracted to build in 2007 in large part from a $4.16 billion investment from Venezuela. Farah told InSight Crime that on paper it looks like the refinery is spending millions of dollars each year to refine Venezuelan petroleum, but in reality there is "no evidence of economic development." 

"One of the clearest indicators [of illicit activity] is when things make no economic sense," Farah told InSight Crime. "What we saw in Nicaragua was this company [Albanisa] suddenly flushed with cash and setting up a whole host of companies overnight, but the purpose of these activities can't be generating profit; it is money laundering. Money laundering doesn't require investment to make profit, just to move large amounts of money though the system." 

Although Farah said he could not know with complete certainty if the money flowing through these companies was linked to the FARC's finances, he said his sources helped him put the pieces together. 

"We've had multiple conversations over the course of four years with people directly involved with setting these companies up, and putting in motion how they would move money in and out," he said. 

Farah told InSight Crime that given the parallel structures observed in El Salvador and Nicaragua, and information from those directly involved, he feels "very confident" that Albanisa is directly tied to the FARC's illicit financial flows and constitutes a "significant part" of their international criminal enterprise.

Investigations

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