Financial Crime World

Ecuador Struggles to Tackle Money Laundering Amid Booming Drug Trade and Dollarized Economy

Quito, Ecuador - A New Study Reveals the Extent of the Problem

A recent study by the Ecuadorian Observatory of Organized Crime (OECO) has shed light on the alarming extent of money laundering in Ecuador. The country’s use of the US dollar and underlying structural issues have hindered efforts to combat this crime, which is driven primarily by large-scale drug trafficking.

Money Laundering: A Growing Concern

The study found that money laundering is the second most prevalent criminal economy in Ecuador, with around $3.5 billion laundered through the country’s financial system in 2021 - nearly three times the amount moved annually between 2007 and 2016. The majority of suspicious transaction reports were linked to the financial sector, with many taking place in the banking sector.

Key Findings

  • Large-scale drug trafficking is the main driver of money laundering in Ecuador.
  • The country serves as a major transit point for cocaine produced in Colombia and Peru.
  • Certain economic activities such as real estate, secondhand car sales, construction, and online gambling are frequently used by money launderers.
  • The use of the US dollar has facilitated the laundering of assets from illicit economies.
  • Around 88% of global foreign exchange transactions involving the dollar took place in April 2022.

Challenges in Combating Money Laundering

The study highlighted several challenges in combating money laundering in Ecuador:

  • Lack of formal mechanisms to investigate money laundering cases
  • Limited human and technological resources
  • Lack of knowledge of money laundering within the judiciary

As a result, Ecuador’s banking system is particularly susceptible to money laundering. Experts say that criminal groups have identified loopholes in the banking system and are taking advantage of them to launder their proceeds.

Quotes from OECO Researchers

“Although the banking authorities have raised alerts in the face of suspicious operations, these do not end up in any type of investigation by the prosecutor’s office,” said an OECO researcher. “This happens because there is no articulation between the justice system and the administrative units that raise alerts.”

The study’s findings underscore the need for Ecuador to strengthen its efforts to combat money laundering and improve cooperation between law enforcement agencies, financial institutions, and the judiciary.