Financial Crime World

Colombia Struggles to Combat Money Laundering Amid Corruption and Weak Laws

Colombia’s Ongoing Battle Against Money Laundering

BOGOTA, COLOMBIA - October 10, 2022

Colombia is facing significant challenges in its efforts to combat money laundering. The country has been identified as a key hub for organized crime networks, with an estimated $14.7 billion to $17 billion laundered every year.

Key Methods of Money Laundering in Colombia

The most common methods of money laundering in Colombia include:

  • False Invoicing: This involves creating fake invoices to disguise the origin of illicit funds.
  • Dollar Economies: Businesses and individuals use dollar-denominated accounts to launder money.
  • Mineral Trafficking: The trade of minerals, such as gold and diamonds, is often used to launder money.

Colombia’s legal framework has been criticized by the Financial Action Task Force (FATF) for not being fully or optimally implemented. The country has low numbers of prosecutions and convictions for financial crimes, despite a high level of crime.

  • Lack of Clear Definition of Beneficial Ownership: There is no clear definition of beneficial ownership in Colombia’s AML regime.
  • No Registry of Beneficial Owners: This creates vulnerabilities for shell and front companies used in asset laundering.
  • Lacking Whistleblower Protections: Anti-corruption efforts are hindered by the lack of whistleblower protections.

Main Money Laundering Laws in Colombia

Colombia has several laws aimed at combating money laundering, including:

  • Law 190 of 1995: This law criminalizes asset laundering and includes over 60 predicate offenses.
  • Law 1121 of 2006: This law outlines ways to prevent, detect, and prosecute terrorist financing.
  • Bill 341/20 of 2020: This bill aims to strengthen anti-corruption measures and create a beneficial ownership registry.

Integration with Tax and Customs Authority

The Colombian tax and customs authority is not seen as being strongly integrated into the fight against money laundering. Some authorities have been criticized for acting more like a think tank than a law enforcement agency.

Collaboration with United States on Counternarcotics

Colombia works closely with the United States on counternarcotics and has a strong track record of seizing illicit goods.

SARs: A Detailed but Criticized Effort

Suspicious Activity Reports (SARs) are detailed and track illicit enrichment, although this effort has been criticized as more of a PR effort than a serious fight against criminal gangs laundering money.