Twenty Caribbean and Latin American nations have been named by the U.S. as “major money laundering” countries in the 2016 International Narcotics Control Strategy Report (INCSR) from the U.S. State Department released Wednesday, Mar. 2, 2016.
A major money laundering is defined by statute as one “whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.”
The following countries/jurisdictions have been identified this year in this category:
Antigua and Barbuda: Antigua and Barbuda made the list again because the U.S. government says its offshore center continues to be vulnerable to money laundering and other financial crimes. The State Department report points to Antigua and Barbuda’s relatively large financial sector and Internet Gaming industry as adding to its overall susceptibility to money laundering.
Argentina: The South American nation of Argentina has been slammed for “institutionalized corruption, drug trafficking, high levels of informal and contraband trade, and an active informal exchange market,” putting it again on the US major money laundering list. According to the State Department report, contraband, which is smuggled into Argentina through the tri-border area (Argentina, Paraguay, and Brazil), and a very porous northern border shared with Bolivia and Paraguay, and through changes to shipping manifests designed to disguise the importer and the type of merchandise adds to the general vulnerabilities in the financial system and exposes Argentina to risk of terrorism financing as well.
The Bahamas: The Commonwealth of the Bahamas also made the US’ major money laundering nations list. The US says because The Bahamas remains a transit point for illegal drugs bound for the United States and other international markets, it remains a major sources of laundered proceeds from drug trafficking, firearms trafficking, gambling, and human smuggling. There is also reportedly a black market for smuggled cigarettes and guns while money laundering trends, according to the US State Department, includes the purchase of real estate, large vehicles, boats, and jewelry, as well as the processing of money through a complex web of legitimate businesses and international business companies (IBCs) registered in the offshore financial sector. “Drug traffickers and other criminal organizations take advantage of the large number of IBCs and offshore banks registered in the Bahamas to launder significant sums of money,” the report added.
Belize: Belize also made the list even though it is not a major regional financial center. However, it has a substantial offshore financial sector and being a transshipment point for marijuana and cocaine, and human trafficking, there are strong indications that laundered proceeds are increasingly related to organized criminal groups involved in the trafficking of illegal narcotics, psychotropic substances, and chemical precursors, according to the U.S. State Department. This leaves the country vulnerable to money laundering and terrorist financing, the report added.
Bolivia: Bolivia has been named as one of twenty nations in the Americas – Latin America and the Caribbean that is a “major money laundering” nation. While Bolivia like Belize is not a regional financial center, the U.S. State Department says the country remains vulnerable to money laundering since illicit financial activities are related primarily to cocaine trafficking and include corruption, tax evasion, smuggling, and trafficking in persons. Criminal proceeds laundered in Bolivia are derived from smuggling contraband and from the foreign and domestic drug trade while there is a significant market for smuggled goods in Bolivia, the US report said. In addition, in the informal sector, large amounts of money are split into smaller quantities to avoid detection and review by the financial regulatory agencies and this laundered money then enters the formal market through the financial system, the report added.
Brazil: Also making the list is South American giant Brazil, the second-largest economy in the Americas and among the ten largest economies in the world, by nominal GDP. The U.S. State Department says the fact that Brazil is a major drug-transit country makes it open to money laundering, which is primarily related to drug trafficking, corruption, organized crime, gambling, and trade in various types of contraband and counterfeit goods. “Money laundering channels include the use of banks, real estate investment, financial asset markets, luxury goods, remittance networks, informal financial networks, and trade-based money laundering,” the US report said.
The British Virgin Islands: The UK overseas territory – the British Virgin Islands (BVI) also found its way on the major money laundering list. The US State Department says since the BVI is a favored destination for registering shell companies that can be established for little money in a short amount of time in the BVI’s offshore business as well as its proximity to the U.S. Virgin Islands and the use of the U.S. dollar for its currency makes it vulnerable to money laundering.
The Cayman Islands: Another UK territory also finding its way on to the US’ major money laundering list is The Cayman Islands. The State Department says that “most money laundering that occurs in the Cayman Islands is primarily related to foreign criminal activity and involves fraud, tax evasion, and drug trafficking, largely cocaine.”
Colombia: Money laundering of money, primarily from Colombia’s illicit drug trade and illegal mining, continues to penetrate the Colombian economy and affect its financial institutions, the US report said. They point to money laundering as a present in geographic areas controlled by both the Revolutionary Armed Forces of Colombia (FARC) and the bandas criminales (BACRIM) as well as through criminal organizations with connections to financial institutions in other countries smuggle merchandise to launder money through the formal financial system using trade and the non-bank financial system.
Costa Rica: According to the U.S., much of the money laundering in Costa Rica is channeled through the country’s nascent construction industry. However, other sectors have been identified as vulnerable to exploitation by criminal organizations seeking to launder illicit funds and by transnational criminal organizations who increasingly favor Costa Rica as a base to commit money laundering because of its geographic location and other factors, including limited enforcement capability. In 2015, the head of Costa Rica’s intelligence agency, known as the DIS for its Spanish acronym, said that approximately $4.2 billion annually is laundered in Costa Rica.
Curacao: Curacao, an autonomous country within the Kingdom of the Netherlands that defers to the Kingdom in matters of defense, foreign affairs, final judicial review, human rights, and good governance, also made the list. The U.S. says since they country is a transshipment point for drugs from South America bound for the United States, the Caribbean, and Europe, money laundering is present and primarily related to proceeds from illegal narcotics. “Money laundering organizations take advantage of the availability of U.S. dollars, banking secrecy, offshore banking and incorporation systems, two free trade zones (airport and harbor), an expansive shipping container terminal with the largest oil transshipment center in the Caribbean, and resort/casino complexes to place, layer, and launder illegal proceeds,” the U.S. State Department report said, adding that the laundering occurs through real estate purchases and international tax shelters as well as through wire transfers and cash transport among Curacao, the Netherlands, and other Dutch Caribbean islands and illegal underground banking.
Dominican Republic: The Dominican Republic’s listing as a major transit point for the transshipment of illicit narcotics also makes it vulnerable to money laundering and terrorism financing threats, the U.S. State Department says. The major sources of laundered proceeds stem from illicit trafficking activities, tax evasion, and fraudulent financial activities, particularly transactions with forged credit cards, the report added, noting that U.S. law enforcement has identified networks smuggling weapons into the DR from the United States as well as car dealerships, the precious metals sector, casinos, tourism agencies, and real estate and construction companies as contributing to money laundering activities in the DR.
Guatemala: Guatemala’s money laundering occurs in the real estate sector, ranching, and concert business, the State Department says. In addition, lax oversight of private international flights originating in Guatemala provides an additional avenue to transport bulk cash shipments directly to South America as the country continues to be a transshipment route for South American cocaine and heroin destined for the United States, and for cash returning to South America.
Haiti: In Haiti, according to the U.S. State Department, much of the money laundering is linked to drug trafficking. Most of the identified money laundering schemes involve significant amounts of U.S. currency held in financial institutions outside of Haiti or non-financial entities in Haiti, such as restaurants and other small businesses, said the U.S.
Mexico: In Mexico, the US says much of its money laundering is linked to trafficking of cocaine, heroin and marijuana, and methamphetamine destined for the United States. Other significant sources of laundered funds include corruption, tax-evasion, influence peddling, kidnapping, extortion, intellectual property rights violations, human trafficking, and trafficking in firearms, says the State Department. Additionally, the proceeds of Mexican drug trafficking organizations are laundered using variations of trade-based methods, particularly after Mexico placed restrictions in 2010 on amounts of U.S. dollar deposits.
Panama: Panama’s money is laundered via bulk cash and trade by exploiting vulnerabilities at the airport, using commercial cover and free trade zones (FTZs), and exploiting the lack of regulatory monitoring in many sectors of the economy, according to the US report. Money laundered in Panama is believed to come in large part from the proceeds of drug trafficking due to the country’s location along major drug trafficking routes as well as tax evasion, financial fraud, and corruption.
Paraguay: Paraguay’s money laundering , according to the US, occurs in both the formal financial sector and the non-bank financial sector, particularly in exchange houses. Both sectors move illicit proceeds into the U.S. banking system, according to the State Department report, which notes that large sums of dollars generated from normal commercial activity and suspected illicit commercial activity are also transported physically from Paraguay to Uruguay and Brazil, with onward transfers likely to destinations that include banking centers in the United States making the country also a major drug transit country and money laundering center.
Sint Maarten: The Dutch-Caribbean territory of Sint Maarten also made the list. Here, according to the U.S. State Department, money laundering is primarily related to proceeds from illegal narcotics trafficking. “Bulk cash smuggling and trade-based money laundering may be problems due to the close proximity to other Caribbean islands and Saint Martin, the French part of the shared island, which is also a free trade zone,” the report said, adding that money laundering of criminal profits occurs through business investments, purchases of real estate, and international tax shelters. Its weak government sector continues to be vulnerable to integrity-related crimes.
Uruguay: Uruguay’s money laundering is linked to transnational organized crime originating in Brazil, according to the US. The State Department says, in Uruguay, laundered criminal proceeds are derived primarily from foreign activities related to drug trafficking organizations. “Drug dealers also participate in other illicit activities like car theft and human trafficking, and violent crime is increasing significantly,” the US report added.
Venezuela: Rounding out the list of major money laundering nations is Venezuela. The U.S. says money laundering is widespread in Venezuela, and can be seen in a number of areas, including government currency exchanges, commercial banks, gambling, real estate, agriculture, livestock, securities, metals, the petroleum industry, and minerals. Increased Venezuelan money laundering activity has also been reported in the FTZs of Panama and Ecuador, said the report.
