By Sergio Ramos / ISH
February 13th, 2014 (ISH)
Money launderers offer goods and services at prices lower than those provided by legal businesses, affecting the latter’s ability to compete and hindering the local economy.
“The criminals who launder money, unlike legal businesses, aren’t in business to earn money –they exist only to move illicit funds,” said Antonio Mazzitelli, a representative of the United Nations Office on Drugs and Crime (UNODC) in Mexico.
For instance, there’s the case of Colombian businessman Andrés Barco, the subject of a money-laundering investigation launched in December 2013 by the Spanish Civil Guard (GCE).
Colombian authorities reported that Barco, through his company Total Conciertos, allegedly organized concerts and sporting events in Colombia, Mexico, Peru, the United States and Spain to launder money made from the Colombian drug trade.
The organizers allegedly let people enter the events without paying but reported earning revenue from the unsold tickets that really was money generated form the drug trade, according to the GCE.
The amount of funds laundered by international organized crime represents between 2% and 5% of the global gross domestic product (GDP), estimated at between US$800 billion and US$2 trillion, according to the UNODC.
The top money-laundering countries in Latin America – represented as a percentage of the country’s GDP – are Brazil (5% of a GDP of US$2.9 trillion in 2012), Ecuador (4% of US$70.836 billion), Chile (4% of US$268.278 billion), Peru (4% of US$200.292 billion) and México (3.6% of US$1.1 trillion), according to a 2013 study on money laundering conducted by the General Directorate of Documentation, Information and Analysis Services of the Mexican House of Representatives.
Money laundering encourages illegal activities, promotes corruption among officials and the business community and damages the reputation of financial institutions and governments, according to the World Bank’s Reference Guide to Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).
“The purpose of legal businesses is to invest their resources and working capital to make a profit. But when the goal is laundering money instead of making a profit, the purpose already has been served,” said Carlos Mendoza Mora, a public safety researcher with Universidad Nacional Autónoma de México (UNAM). “Money launderers seek to reduce the price of goods or services that are offered to the public as an incentive, to draw in customers on a recurring basis. That causes a slowdown in the formal economy.”
The stages of money laundering
Criminals follow three steps to launder money: placement, stratification and integration, according to Luis Adrián Hernández, the director of Money Laundering Prevention with Salles, Sainz – Grant Thornton, a consulting firm specializing in financial issues.
“First, they place the money in small quantities in different financial institutions. The next step is stratification, where the funds are deposited into multiple accounts to distance the money from the source,” he said.
The final step is integration, when the funds are used to acquire legal assets, generally real estate, which usually is carried out under other people’s names.
The money laundered by criminal groups comes from the drug trade, piracy, human and migrant trafficking, kidnapping and extortion, the sale of contraband oil and natural resources, and the trafficking of stolen art and cultural artifacts, according to Mazzitelli.
“When it comes to money laundering, there are significant shortcomings in Latin America in terms of the existing laws and their enforcement,” he said.
However, some countries in the region have made progress in introducing legislation to combat money laundering, including Mexico, Brazil and Colombia, according to Mazzitelli.
“While the laws may be more or less suited to the needs of each country, there must be an increase in the institutional capacity to monitor, confiscate and reuse illicit funds,” he added.
Mexico’s government enacted the Federal Law for the Prevention and Identification of Transactions with Illicit Funds last year, which will allow authorities to combat the financial bases of organized crime.
In July 2012, Brazil approved a new law against money laundering that increases the list of people required to send information about suspicious transactions, including currency exchanges, people who sell luxury goods and those who negotiate the ownership rights of athletes.
In the case of Colombia, authorities are determined to carry out campaigns to promote a culture of legality, such as the work being done by Negocios Responsables y Seguros, a public-private initiative to prevent and combat money laundering, terrorist financing and contraband in Colombia’s business community.