Every year, the US State Department releases a detailed policy breakdown for countries considered major hubs for money laundering and other financial crimes. This year, Latin America has 14 countries and one constituent country on the list, all of which have been identified as having a long way to go in terms of improving their anti-money laundering policy.
Below is InSight Crime’s summary of some of the most important issues in each Latin American country when it comes to money laundering, as identified by the US State Department. Click through the table of contents below to go to a country of interest.
Mexico, Central America, and the Caribbean
Mexico, Central America, and the Caribbean
– Despite strengthening anti-money laundering legislation, the units charged with investigating cases are seriously understaffed. The country’s financial intelligence unit, for example, only has one “less-experienced” prosectuor.
– Major money laundering cases have a tendency to go nowhere in Belize’s highest courts. In 2014, the US — in collaboration with Belize — indicted six businessmen and six corporate entities for alleged involvement in a $500 million money laundering scheme. However, Belize’s Chief Justice ruled that the case could not go forward due to insufficient evidence.
– Costa Rica’s increased importance in transnational drug trafficking has led to increased money laundering. Notably, in 2014 the head of the country’s intelligence agency said an estimated $4.2 billion is laundered in the country every year. Much of the cash earned from illicit activies is laundered in Costa Rica’s construction trade, according to the US State Department report.
– Few are successfully convicted of money laundering. In 2014, there were just 21 people convicted on money laundering related charges.
– The Caribbean island is considered a major hub for laundered drug money. Its proximity to other major drug transit points, such as Venezuela and Colombia, helps contributes to this, as well as lax regulations.
– One of Curacao’s biggest money laundering investigations suggests that local elites are involved in this crime. In 2014, Curacao opened a probe into a major lottery operator who is reportedly a major donor to a political party. A former prime minister and a current member of parliament are also currently under investigation for alleged money laundering crimes, the US State Department report says.
– The country’s large informal economy facilitates the smuggling of illicit goods and helps make the Dominican Republic vulnerable to financial crimes. More specifically, a major problem is ongoing under-reporting of imports and exports, which the report describes as “a relatively common practice for those seeking to avoid taxes and customs fees.”
–The Dominican Republic’s financial intelligence unit thinks it has improved enough to be re-admitted in a major intelligence network that cooperates on financial crime. The country was first kicked out of that network, known as the Egmont Group, in 2006.
– The “La Linea” corruption scandal has increased pressure on banks to report suspicious activity. The scandal, which forced the country’s president and vice president to resign, involved millions of dollars of bribes paid by importers.
– One major issue is bulk amounts of illicit cash smuggled out of the country by plane. Law enforcement agencies say that air travelers will smuggle cash in shipments smaller than $10,000 — Guatemala’s official reporting requirement — to countries like Panama. The report identifies “lax oversight of private international flights originating in Guatemala” as another problem.
– More than half of all bank deposits in Haiti may be made up of foreign currencies, a possible sign of the country’s vulnerability to money laundering, the report states. During the first eight months of 2015, foreign currency made up 60 percent of all bank deposits in the country, a three percent increase from the previous year.
– Haiti’s judicial sector has a weak record when it comes to investigating money laundering. The country’s financial intelligence unit was looking into 15 cases in 2015, but did not send any to the judiciary.
– After Mexico restricted dollar cash deposits in 2010, criminal groups began laundering their wealth via traded goods rather than cash. One example of this trend was the Sinaloa Cartel using fashion businesses in Los Angeles for trade-based money laundering.
– In 2014, the Mexican government said that border businesses could make larger cash deposits if they agreed to let authorities monitor their financial transactions. However, according to the US State Department report, few in Mexico have taken advantage of this. It’s unclear whether this is due to fear of the additional reporting requirements, or because there’s “lack of interest” in receiving larger deposits of US cash.
– Panama’s limited regulation of bearer shares is a major reason why the country remains a hub for money laundering. As InSight Crime has reported, those who own, buy, or sell bearer shares aren’t required to keep any sort of record of the transaction. However, a law which came into effect in December 2015 restricts use of these shares.
– While Panama has made advances in its enforcement of anti-money laundering legislation, there is still much more to be done. Panama was removed from an international money laundering watchlist earlier this year, but the judicial branch still has little capacity to successfully prosecute and convict money launderers, the reports states.
– The US must decide whether it will resume sharing information with Argentina’s financial intelligence agency. The US Treasury Department’s Financial Crimes Enforcement Network, known as FinCen, suspended information sharing with Argentina in June 2015, after Argentina’s government allegedly used US financial intelligence for political purposes. FinCen had previously suspended sharing intelligence with Argentina between 2009 to 2012.
– Money laundering convictions remain low. Since 1999, only seven such cases have been successfully prosecuted in Argentina.
– The size of Bolivia’s informal economy means there are plenty of opportunities for laundering money via smuggled goods. Most of these illicit goods are smuggled in from Chile and then informally exported to Brazil and Argentina, the report states
– While Bolivia’s financial intelligence unit has gained greater independence, there is less transparency when it comes to money laundering-related statistics. Since 2014, the financial intelligence unit has reported to the Ministry of Economics rather than Bolivia’s main financial regulatory body, a move that was meant to make the unit more independent. However, since then, the unit has no longer released statistics about financial crime online.
– Lack of statistics makes it difficult to assess Brazil’s process in combating money laundering. The government does not maintain up-to-date numbers of money laundering prosecutions or convictions.
– Improved investigation of money laundering cases may yet unveil other corruption scandals in Brazil. The country’s ongoing Petrobras scandal initially began in 2014 as a money laundering investigation involving a gas station.
– Investigations are hampered by a law that requires Colombia’s financial intelligence unit to report only to the Attorney General’s Office. This lack of coordination with other law enforcement bodies “increases case processing time and adds unnecessarily to prosecutor caseloads,” the report states.
– The formal process by which government agencies can seize criminal assets still isn’t streamlined enough. Colombia passed a law in 2014 that was supposed to make it easier to seize criminal assets, but many remain unfamiliar with the law, the report notes.
– Paraguay took some important steps in 2015, including creating an anti-money laundering unit within the Attorney General’s Office. The country also passed a law requiring better regulations of bearer shares, which, as in Panama, are considered highly vulnerable to money laundering. Nevertheless, the country is still considered a major money laundering hub, partly due to its giant contraband cigarette trade.
– Uruguay is cracking down dramatically on bearer shares, especially when compared to efforts in Paraguay and Panama. The government eliminated about 85,000 bearer shares in 2015 after the owners failed to come forward and identify themselves.
– While the US State Department does not see Uruguay as a major hub for money laundering, the country remains vulnerable due to its highly dollarized economy, among other reasons. According to the report, some 80 percent of all banking deposits in Uruguay are done in US dollars.
– There is ample opportunity in Venezuela for “financial abuse,” due to its foreign exchange system and price controls, its status as a drug transit country, corruption, and its porous border with Colombia, the report states.
– Venezuela’s black market exchange rate has also created many opportunities for money laundering. While the official exchange rate is six bolivares to the dollar, on the black market it is 873 bolivares per dollar.