Brazilian criminal gangs were able to use official currency exchanges in Paraguay to launder over $1.5 billion in drug money, showing how the country continues to be a paradise for organized crime groups seeking to hide their profits.
An investigation in early August by Brazilian police in the city of Foz do Iguaçu revealed that four gangs managed to launder 6.5 billion reais (around $1.5 billion) and use it to pay for a wide range of contraband goods, especially cigarettes and drugs acquired in Paraguay between 2010 and 2018.
The gangs created bank accounts with fake identification or through ghost companies to deposit large amounts of money, according to the police statement. The gangs used a network of currency exchanges inside Paraguay. These would certify the money in reais had been deposited and then deliver the equivalent amount in US dollars to Paraguayan suppliers, thus legalizing the “dirty” money.
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To make this sophisticated operation work, the exchange houses used “black dollars,” legal US tender which circulates in the country parallel to the currency officially registered with the Central Bank of Paraguay while maintaining the same value.
InSight Crime Analysis
Official currency exchanges being used to launder over $1.5 billion with impunity will do nothing to improve Paraguay’s reputation as a money-laundering hub.
The government is seemingly unable or unwilling to bring money laundering to heel despite Paraguay having faced accusations as serious as helping the likes of Hezbollah launder funds.
The success of these four Brazilian gangs, who were not all acting together, was at least partially based on lax controls within Paraguay’s money laundering supervision body, Seprelad. It was only in late July that the country’s central bank began demanding that currency exchanges track and record the origin of funds used in their cross-border operations.
Worse, Paraguay’s leadership has sometimes seemed to pride itself on its lack of fiscal controls. Speaking at the 2019 World Economic Forum in Davos, President Mario Abdo Benitez called his country “almost a fiscal paradise.”
The continued boom in the cross-border illegal cigarette trade is another sign of institutional apathy towards this black market. Former president Horacio Cartes has been repeatedly linked to the sale of illegal cigarettes in Brazil and across Latin America.
This problem is beginning to have a serious impact on Brazil. This investigation was carried out by Brazilian police against Brazilian gangs, but as long as Paraguay refuses to crack down on money laundering, it will remain a convenient staging point for its neighbor’s criminal groups to hide their loot.