$4.2 Billion Laundered Annually in Costa Rica, Says Government Official
Costa Rica is plagued by a staggering amount of money laundering, with an estimated $4.2 billion being laundered through the country’s financial systems every year. According to Mariano Figueres, head of the country’s intelligence agency (DIS), this amount is a significant blow to the country’s economy.
Causes of Money Laundering in Costa Rica
The high degree of financial openness and growing involvement in the regional drug trade have created a perfect storm for money laundering. Almost everyone in Costa Rica sees money laundering on a daily basis, often in various forms. The majority of laundered funds are channeled through the country’s burgeoning construction industry, where criminal organizations invest in real estate or construction projects to bring illicitly obtained income into the legitimate financial system.
Methods Used
Other common methods used for money laundering include:
- Using financial institutions
- Casinos
- Currency exchange houses
Costa Rica’s Vulnerability
Costa Rica’s strategic location as a transshipment point for drug routes moving from South America to the United States has also contributed to its money laundering problem. The nation’s relatively small economy makes it particularly vulnerable to the influx of illegal funds.
History of Financial Laxity
Figueres’ comments come as no surprise, given Costa Rica’s history of financial laxity. In 2011, a joint investigation by InSight Crime found that money laundering in Costa Rica was largely connected to criminal organizations and drug trafficking activities, with arms and human trafficking also playing a significant role.
Notable Example
One notable example is the 2013 shutdown of online currency exchange Liberty Reserve, which US authorities described as the “bank of choice for the criminal underworld.” Despite being shut down, the operation had already amassed a $6 billion business, making it one of the largest online money laundering operations in history. The owner was able to establish the business by marrying a Costa Rican citizen, highlighting the country’s lax regulations for online businesses.
Efforts to Improve Anti-Money Laundering Regulations
Costa Rica has since attempted to improve its anti-money laundering (AML) regulations, submitting to an audit from the Financial Action Task Force for Latin America (GAFILAT) in January. However, despite enacting 19 of 21 recommended AML regulations, Costa Rica remains on the US State Department’s list of countries of “primary concern” for money laundering.
Comparison with Panama
In its 2015 International Narcotics Control Strategy Report, the US State Department noted that Panama, another country known for its financial laxity, had enacted all but three of the recommended AML regulations. Both Costa Rica and Panama remain on the department’s watchlist due to concerns over their ability to combat money laundering.
Overall, Costa Rica’s struggle with money laundering highlights the need for stricter regulations and increased cooperation between countries to combat this global issue.