Peru Sees Growth in Money Laundering

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Authorities in Peru have observed a sharp increase in the number of budget hotels, gambling houses, and other small businesses in the Lima metropolitan area used to launder criminal revenues, sparking concerns about whether Peru’s illicit economy is growing just as fast as its legal one.

Criminal groups have taken advantage of Peru’s growing economy and the subsequent growth in the service, entertainment, tourism, and construction sectors to launder money from drug trafficking, reported Reuters. According to police, stores that appear to turn a high profit while offering extremely low prices are one of the quickest and easiest ways to launder money.

One of the main methods used is through low-rent hotels. Anti-drug prosecutor Jorge Cotrina told Reuters there has been a rapid increase in the number of hotels with rooms priced between $10 and $30, which often report they are fully booked on the registers they give to authorities, when in fact many rooms are empty.

Official data indicates that illicit funds may make up 3.5 percent of Peru’s Gross Domestic Product. According to an intelligence report from the Office of the Superintendent of Banking obtained by Reuters, the number of financial operations considered “suspicious” due to connections with illicit activities increased more than 80 percent in the past two years. Of the operations, 71 percent had suspected ties to drug trafficking.

InSight Crime Analysis

Peru, South America’s fastest growing economy, has struggled to reign in money laundering. President Ollanta Humala’s administration initially took an aggressive stance on the issue, passing a series of financial reforms to increase banking and gambling regulation in 2011, including the National Plan to Combat Money Laundering and Financing of Terrorism. However, despite frequent promises by officials such as Peru’s justice minister to take greater action, as of March 2013 the government had yet to achieve any money laundering convictions.

Most disturbingly, allegations of money laundering have reached all the way to the top. Two of Peru’s former presidents, Alejandro Toledo and Alan Garcia, have recently faced accusations of money laundering and illicit enrichment after their lavish real estate purchases raised eyebrows, prompting Peru’s Attorney General’s Office to open investigations into both men’s finances.

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