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Costa Rica: A Hub for Money Laundering

$4.2 Billion Annual Flow

According to Mariano Figueres, head of Costa Rica’s intelligence agency DIS, a staggering $4.2 billion in illicit funds is laundered through Costa Rica every year. The nation’s financial openness and growing role in the regional drug trade have created an environment ripe for money laundering.

Money Laundering Phenomenon

Figueres stated that money laundering is a ubiquitous phenomenon in Costa Rica, with “everyone seeing it every day and in different forms.” The majority of laundered funds are channeled through the country’s nascent construction industry, where criminal organizations invest in real estate or construction to bring illicitly obtained income into the legitimate financial system.

Methods Used

Financial institutions, casinos, and currency exchange houses are also used to wash illegal profits. Costa Rica’s position as a transshipment point for drugs moving from South America to the United States and money flowing back down poses a significant threat to the country’s economy.

Connection to Criminal Organizations

A 2011 investigation by InSight Crime found that money laundering in Costa Rica is largely connected to criminal organizations and drug trafficking, with arms and human trafficking activities also playing a role. One notable example is the shutdown of online currency exchange Liberty Reserve in 2013, which was described as the “bank of choice for the criminal underworld” and had $6 billion in transactions.

Regulatory Challenges

Despite efforts to improve anti-money laundering regulations, Costa Rica still faces challenges. The country submitted to an audit by the Financial Action Task Force for Latin America (GAFILAT) in January and has enacted all but two of the 21 recommended regulations designed to combat money laundering, according to the US State Department’s International Narcotics Control Strategy Report.

Lax Regulations

However, both Costa Rica and Panama remain on the State Department’s list of countries of “primary concern” for money laundering due to lax regulations and a high degree of financial openness.