September 7, 2022
WASHINGTON D.C. September 8th, 2022 (@IllicitFlows) – Proceeds from extortion in Guatemala, Honduras and El Salvador amount to more than US$1.1 billion annually according to a new study by Global Financial Integrity (GFI). The report, which examined data for individuals and businesses, also reveals that an estimated 330,000 people in the Northern Triangle region of Central America fall victim to extortion each year. Extortion against individuals is estimated at US$40 million – $57 million a year in Guatemala, US$190 million – $245 million a year in El Salvador, and $30 million – $50 million a year in Honduras. Data on extortion paid by businesses is not comparable across countries due to significant gaps in data availability.
The report, titled Extortion in the Northern Triangle of Central America: Following the Money, assesses the value of this activity and seeks to better understand how the proceeds of extortion are used and laundered. It also considers whether anti-money laundering and counter-terrorism financing (AML/CFT) strategies are being effectively utilized to combat extortion.
“The human and societal costs of extortion far exceed the financial cost of these crimes,” according to Tom Cardamone, President & CEO of GFI. “Extortion causes significant harm to individuals, communities and businesses by damaging social networks, limiting economic growth, undermining faith in institutions, and causing displacement.”
For this report, GFI conducted in-depth interviews with subject matter experts from the private sector, including financial institutions, as well as from governments, international organizations and civil society groups. GFI also reviewed publicly-available information on law enforcement operations and legal cases to identify trends and typologies. Finally, it analyzed a variety of data sources, including victimization surveys, to understand current trends in extortion and to estimate the financial value of this illicit activity.
This report is part of a larger project by GFI that analyzes financial crimes in Latin America and the Caribbean. The project’s first report, Financial Crime in Latin America and the Caribbean: Understanding Country Challenges and Designing Effective Technical Solutions covered financial crime trends throughout the hemisphere. In particular, it looked at illicit proceeds from corruption, drug trafficking, mineral trafficking, trafficking in persons, and smuggling of migrants. While these are important sources of criminal proceeds for the Western Hemisphere as a whole, there are other emerging and sub-regional dynamics that deserve closer attention. This is the case of extortion in Guatemala, El Salvador and Honduras.
Additional findings of this report include:
- Extortion leads to a variety of financial crimes including money laundering, terrorism financing and corruption;
- Among experts interviewed, there was widespread consensus that extortion proceeds end up in financial institutions;
- Some of the most common methods used to launder extortion proceeds include commingling funds with cash-intensive local businesses and opening accounts in the name of third parties in an attempt to conceal the illicit origin of the funds and their connection to criminal networks;
- Financial institution compliance officers who report extortion-related activity to government authorities frequently face threats and intimidation.
Key recommendations for governments in the region include:
- Leverage AML as part of existing efforts to combat extortion;
- Ensure financial institutions have information needed to identify red flags for extortion;
- Implement beneficial ownership registries to address the prominent role of front companies in extortion-related money laundering;
- Improve data quality in official extortion statistics to measure effectiveness of policy and programmatic interventions;
- Engage telecommunications companies in finding solutions to phone extortion schemes;
- Promote digital financial inclusion, particularly for the transportation sector, to transition from cash payments that are prone to extortion;
- Incorporate anti-corruption measures in all anti-extortion programming.
GFI recognizes ongoing regional efforts to combat extortion and hopes this report will promote further discussion on prevention and next steps to address crimes as a region. GFI looks forward to continued collaboration with governments, civil society and the private sector to address these challenges in a constructive manner.
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ABOUT GFI: Global Financial Integrity is a Washington, D.C.-based think tank, producing high-caliber analyses of illicit financial flows, advising developing country governments on effective policy solutions and promoting pragmatic transparency measures in the financial system to promote global development and security.
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