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Crime and Criminology from Michael_Novakhov (10 sites): InSight Crime: From Worst to Best – Anti-Money Laundering Capabilities in Latin America

From Worst to Best – Anti-Money Laundering Capabilities in Latin America

The latest Basel Institute Anti-Money Laundering (AML) Index bookends its Americas’ rankings with two Caribbean islands while leaving the traditional organized crime havens in the middle of the pack.

The 2022 index placed Haiti in the second-worst position worldwide, unsurprising given how many of its current and former political leaders have faced international sanctions for corruption and financing gangs. The Caribbean, in general, fared poorly with the Bahamas and Saint Kitts and Nevis, also ranking towards the bottom — except for the tiny nation of Dominica, which topped the Americas’ rankings.

The report also had Ecuador, Brazil, and Mexico in the middle of the pack, despite their longstanding role in regional crime. And it showed how the likes of Chile, Uruguay, and Costa Rica have kept the tide at bay, through investments in financial-crime units, specially trained prosecutors, and regular asset seizures. Even Colombia acquitted itself honorably, finishing in a better position than a number of European Union countries.

The Basel Institute says the Anti-Money Laundering (AML) Index is a ranking of 203 countries and jurisdictions based on their respective efforts and capacities to mitigate money laundering. Below, InSight Crime looks at the big winner and the big loser, and a few in between.

The Worst: Haiti

For Basel, Haiti had the worst score in the region in terms of anti-money laundering efforts as well as the second-worst in the world, behind only the Democratic Republic of the Congo.

It was not surprising. Allegations of money laundering have circled Haiti’s political elites at the highest levels. The country’s previous president, Jovenel Moïse, who was assassinated in July 2021, was embroiled in money laundering investigations before he even began his term.

In 2019, the Financial Action Task Force’s (FATF) last evaluation of the country noted that Haiti had “not recorded any successful prosecutions and convictions for money laundering offenses for the past five years.”

And in November last year, both the United States and Canada sanctioned top Haitian politicians over links to drug trafficking and financing gangs. Canada specifically cited money laundering as the motive behind the financial sanctions.

Global Financial Integrity (GFI) drew attention to structural problems that allow Haiti’s politicians to engage in such wanton criminal activity in its 2021 report.

“The constitution grants members of parliament immunity while they are in office, and it cannot be waived by the state in order to prosecute them,” GFI wrote.

SEE ALSO: How Latin America’s Synthetic Drug Traffickers Launder Dirty Cash

One expert told GFI that this results in criminal actors “increasingly running for office and running their criminal enterprises from the top levels of government.”

In fact, according to GFI, the only issue more pervasive in Haiti than money laundering is its corruption, given the two typically work hand-in-hand.

Middle of the Pack: Ecuador, Brazil, and Mexico

The Basel Institute said Ecuador, Brazil, and Mexico shared two key points in common: corruption and bribery accounted for the worst score in each country, while public transparency accounted for the highest.

While Ecuador’s struggles with a very rapid rise in gang violence are well-documented, its money laundering problems remain less understood. The amount of money being laundered in Ecuador reached $3.5 billion in 2021, three times higher than in 2016, according to a newly published report by the Latin American Geopolitical Strategy Center (Centro Estratégico Latinoamericano de Geopolítica – CELAG).

CELAG added that money laundering in the country could account for up to 5 percent of Ecuador’s gross domestic product. The rise in drug trafficking has fuelled most of this rise, said the think tank, with drug proceeds now so plentiful they far outpace Ecuador’s financial investigation capacity.

Brazil also finished in the middle of Basel’s index. Money laundering accusations constantly dogged the presidency and family of Jair Bolsonaro. The former president was embroiled in allegations that he was part of a scheme, known as rachadinha, where a portion of staffers’ salaries would be held back as a bribe in order for them to keep their jobs. His son, Flavio, his ex-wife, and several other Bolsonaro allies have also been under investigation for money laundering.

On a larger scale, the country had to contend with high-profile money laundering cases involving one of its largest cryptocurrency trading companies. And militia groups in Rio de Janeiro — criminal structures often made up of active and retired police — laundered up to three billion reais ($582 million) obtained from a variety of criminal economies over the course of three years, according to statistics from Council for Financial Activities Control (Conselho de Controle de Atividades Financeiras – Coaf), the government’s money-laundering investigative body.

Brazil’s new president, Luiz Inácio Lula da Silva, has faced money laundering scandals of his own, in connection with the sweeping Lava Jato (Car Wash) investigation, which found extensive corruption between Latin American politicians and Brazilian construction giant, Odebrecht, among other schemes. He currently faces a political battle as he tries to reform oversight and accountability for Coaf.

Public transparency and accountability were Mexico’s saving grace. The country’s stringent laws for personal asset declarations and election financing transparency were ranked among the best in the world, at least on paper, by Basel’s anti-money laundering index. But for corruption and bribery, Mexico was judged to be worse than the likes of Russia or Myanmar.

The perceived slowness of Mexico’s investigations into the Odebrecht scandal, when other countries have jailed or impeached a number of suspects, did not help. A lack of big-name convictions and threats made against investigators have only furthered the absence of progress.

And a rise in the trafficking of fentanyl, largely reliant on chemical precursors from China, has also led to Mexican groups pouring millions of dollars into financial schemes with Chinese partners, which are very hard to trace given the lack of support from Chinese authorities.

The Best: Dominica

The small Caribbean island of Dominica had the region’s best overall score in the Basel index, outpacing the world average on political and legal risk, as well as for the risk of corruption, bribery, and general money laundering risk.

However, the experts were not unanimously in agreement on Dominica’s success. While Dominica had the highest ranking for AML effectiveness, according to the Basel Institute’s Index, GFI ranked its effectiveness at 2.5 out of 5, placing it firmly in the middle of the pack for the region.

GFI noted that Dominica’s Financial Services Unit (FSU), which regulates banks and financial institutions as well as fighting against financial crime, has just six staff.

Understaffing and a lack of resources are big problems for the country’s AML preparedness. Still, between 2016 and 2018, Dominica managed to conduct 21 money laundering-related asset seizures and prosecuted seven of the ten money laundering investigations initiated during that time period.

What’s more, Dominica is sparsely populated, is a developing economy, and lacks real estate infrastructure, the most common vehicle for money laundering in Caribbean jurisdictions. The country also engages in relatively little trade, another well-known channel for money laundering, with its combined exports and imports barely exceeding $400 million, according to CIA estimates in 2021.

Notwithstanding its top ranking, Dominica is one of many Caribbean transshipment points for illegal narcotics en route from South America to the European continent. According to the US International Narcotics Control Strategy Report from 2022, this is the primary driver for money laundering on the island.

The post From Worst to Best – Anti-Money Laundering Capabilities in Latin America appeared first on InSight Crime.

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