The United States has blacklisted nearly all Latin American countries for money laundering in 2017. InSight Crime explores why this is the case, and discusses some of the achievements and failings of regional anti-money-laundering efforts over the past year.
Of the 88 countries and territories included in the US State Department’s annual list of “Major Money Laundering Countries,” 37 are located in Latin America — 42 percent of the total. Compared to 2016, this adds 17 Latin American jurisdictions to the list, which is published in the United States’ International Narcotics Control Strategy Report (INCSR), a copy of which is embedded at the end of this article. Of the Caribbean jurisdictions included on the list, 11 of them (6 of which were new in 2016) couldn’t be highlighted in the map below.
Meanwhile, the number of countries and territories outside of Latin America included on the list went from 47 to 51.
According to State Department officials consulted by InSight Crime, this does not correspond to a worsening in money laundering activities in the newly added territories — which include Cuba, Ecuador, Peru and Trinidad and Tobago — but rather to a changed methodology that focused more closely on the core concern of the INCSR reports: drug trafficking.
SEE ALSO: Coverage of Money Laundering
This means that countries of primary concern are selected based on their importance in the international drug trade, a process that mainly considers whether or not they are included in the first volume of the INCSR, on “Drug and Chemical Control”. This stands in contrast to the broader focus of past years, when jurisdictions were also selected for their role in laundering money from other serious crimes.
State Department officials added that the decision to modify the report was made before the new US administration came into office.
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Even though the State Department’s new classifications may not have been motivated by worse results, it nonetheless doubles down on its message to Latin America in particular: that countries deeply affected by the narcotics trade must focus their efforts not only on interdiction, but on where the drug money goes. While targeting drug networks’ finances has always been crucial to law enforcement efforts, it has taken on renewed importance over the past year.
Firstly, the INCSR’s prioritization of Latin American territories is particularly conspicuous as it relates to the same year of the notorious “Panama Papers” — a huge leak of confidential documents that exposed the elites behind countless shell companies. While such schemes do not necessarily imply illegal activity, their secrecy means they lends themselves for use by criminal organizations or corrupt individuals to hide ill-gotten gains.
The scandal renewed international scrutiny on the dubious activities occurring in financial “havens.” It ultimately prompted Panama to improve its transparency procedures, namely adhering to standards on tax information exchange. However, the INCSR notes that financial corporations continue to prioritize client secrecy over cooperation with authorities, who still lack the resources needed to effectively monitor possible illegal activity.
Many Caribbean territories are considered “havens” for offshore banking, and their proximity to the United States heightens the risk of them being used to launder US currency. The 2017 INCSR’s new list has put many of these islands under the spotlight — including St. Kitts and Nevis, and St. Vincent and the Grenadines — which may add pressure to their governmentsto crack down on banking secrecy.
SEE ALSO: Coverage of Panama
In Colombia, criminal finances have also been a key focus: last year, the government demanded that the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia – FARC) rebels turn over all of their assets if they are to benefit from a peace deal signed in late 2016. But the guerrillas will probably not offer full transparency regarding their vast wealth, and the Attorney General’s Office has taken extra measures to track and confiscate it. Among these is a new asset sharing agreement signed with the United States in November 2016, as the INCSR states. This should facilitate cooperation over Colombian assets laundered abroad; one comparable agreement between Colombia and Costa Rica led to what was reportedly the first ever seizure of FARC assets abroad in late 2016.
But the State Department’s new methodology has also led to the inclusion of some countries that do not generally appear to play a “major” role in moving illicit funds. Cuba, for example, was added to the 2017 list despite its country profile being rather favorable. “The risk of money laundering is low” in Cuba, the report reads, with tight government control making it “an unattractive location for money laundering through financial institutions.”
The US State Department’s 2017 INCSR, Volume 2: