October 15, 2021
WASHINGTON D.C. – Global Financial Integrity (GFI) is pleased to present a comprehensive survey of 250 financial crime experts in Latin America and the Caribbean. The survey shows that countries in the region need to address significant weaknesses in their effort to combat money laundering if corruption, which generates massive illegal proceeds, is to be curtailed.
These findings are contained in a new report by Global Financial Integrity titled Financial Crime in Latin America and the Caribbean: Understanding Country Challenges and Designing Effective Technical Responses which assesses vulnerabilities and puts forth recommendations to strengthen the regional response to financial crimes in the Western Hemisphere. The same threats that make this region one of the most violent in the world also generate large amounts of illicit proceeds, causing these countries to face complex financial crime landscapes. The report finds that despite important progress on laws and regulations, effective implementation of AML/CFT remains a challenge for many countries in the region.
“This survey demonstrates that while some governments in the region are on the right track many more need to step up their efforts to address corruption and money laundering,” according to Tom Cardamone, President & CEO of GFI. “The scores given to each government are from experts within that country. This internal assessment, in many instances, is a stinging rebuke to claims that corruption is under control.”
In order to fully capture the scope of financial crime in Latin America and the Caribbean while also understanding specific local contexts and conditions, GFI conducted interviews with experts from government, civil society, the private sector and international organizations.
The 300-page report provides a country-by-country overview of the scope of financial crimes and main threats facing individual countries. It includes a regional analysis of illegal activities that generate illicit proceeds, including drug trafficking, mineral trafficking, corruption, and trafficking in persons and smuggling of migrants. Additionally, it assesses current financial crime threats from money laundering, trade-based money laundering, terrorism financing and corruption.
Key findings of this report include:
- Corruption is the most prevalent financial crime affecting the region, according to the 250 expert interviews conducted. It is followed by money laundering, trade-based money laundering and terrorism financing;
- Corruption is also the largest source of illicit proceeds in the region, according to experts interviewed. It is followed by drug trafficking, migrant smuggling and human trafficking, and mineral trafficking;
- The primary channels used to move illicit proceeds within Latin America and the Caribbean include financial institutions, real estate, bulk-cash smuggling and TBML;
- Many countries have made improvements to their AML/CFT laws in recent years; however, implementation is often incomplete and political will varies;
- Experts interviewed were asked to assess the effectiveness of their country’s efforts to combat financial crimes on a scale from 1 (weak) to 5 (strong).The average score for the region as a whole was 2.47/5, reflecting the fact that many experts believe current efforts are insufficient and that additional work is urgently needed.
In addition to looking at these illegal activities and financial crimes, the report examines current national responses to understand what works and how countries can more effectively combat financial crimes. Moreover, it analyzes the role of donor technical assistance by the United States and other stakeholders.
Key recommendations going forward include,
- For the region as a whole, implementing strong, up-to-date and transparent beneficial ownership registries is key to combating a whole host of financial crimes, including money laundering and corruption.
- To address money laundering, national and international authorities should take steps to strengthen the mutual legal assistance treaty (MLAT) process. Moreover, they should ensure that the current focus on narcotics proceeds does not overshadow efforts to address other kinds of money laundering.
- To address TBML, countries need to strengthen awareness and knowledge of TBML within governments and the private sector.
- To address terrorism financing, it is important to update information on threats; a updated, multi-national risk assessment of the Tri-Border Area is recommended as a first step.
- To address corruption, countries in the region should improve transparency surrounding the hiring of public officials and push for meritocratic selection.
- To address human trafficking and migrant smuggling, financial intelligence units and other regional stakeholders should conduct more research on the financial pathways utilized, which are not currently well understood. Moreover, national authorities, including the United States, should recognize that restrictive border and asylum policies contribute to migrant smuggling.
- To address narcotics proceeds, the United States and other stakeholders should support countries in the drafting and/or implementation of asset seizure legislation.
- To address mineral trafficking, national authorities as well as donor countries should expand the focus beyond gold, recognizing the risks associated with other minerals and gemstones.
- For the donor community, it is important to marry ongoing AML/CFT technical assistance efforts with wider programs targeting governance, institutions and development.
- For the United States, it is important to continue to strengthen U.S. AML/CFT efforts, since systemic weaknesses in the U.S. facilitate the movement of illicit proceeds and undermine regional efforts to combat financial crimes.
GFI recognizes regional efforts to combat financial crimes and hopes this report will promote further discussion on prevention and next steps to address crimes as a region. While each country context is unique, there are many shared challenges throughout the continent, and understanding these challenges is an important first step towards effective action. GFI looks forward to continued collaboration with governments, civil society and the private sector to address these challenges in a constructive manner.
ABOUT GFI: Global Financial Integrity (GFI) 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 international financial system as a means to global development and security.