Financial Crime Prevention Methods in Ecuador Face Major Obstacles, Study Finds
QUITO, ECUADOR - A recent study by the Ecuadorian Observatory of Organized Crime (Observatorio Ecuatoriano de Crimen Organizado – OECO) has highlighted the significant challenges facing financial crime prevention methods in Ecuador. The country’s efforts to counter money laundering are hindered by its use of the US dollar, a booming drug market, and underlying structural issues.
Money Laundering Hotspots
The study found that money laundering is concentrated around industries that have historically facilitated the appearance of legality, such as:
- Real estate
- Secondhand car sales
- Construction
- Online gambling
These sectors are frequently used by money launderers to conceal their illegal activities.
Drug Trafficking and Money Laundering
Ecuador’s role as a drug transit country is also a major driver of money laundering. The country’s proximity to Colombia and Peru, two of the world’s biggest coca-growing nations, makes it an attractive route for cocaine smugglers. This has led to a significant increase in money laundering activities.
The Role of the US Dollar
The use of the US dollar has facilitated money laundering in Ecuador. Adopted in 2000, the dollar has allowed drug traffickers to launder their profits easily. The global dominance of the dollar makes it easy for dirty money to flow into and out of the country.
Banking System Vulnerabilities
Ecuador’s banking system is also vulnerable to money laundering due to:
- Lack of formal mechanisms to investigate money laundering cases
- Limited human and technological resources
- Lack of knowledge of money laundering within the judiciary
According to estimates by the Latin American Strategic Center for Geopolitics (Centro Estratégico Latinoamericano de Geopolítica – CELAG), around $3.5 billion was laundered through Ecuador’s financial system in 2021.
Coordination Challenges
The OECO researcher warned that the lack of coordination between the justice system and administrative units is also a major obstacle to combating money laundering. “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,” they said.
In conclusion, Ecuador’s efforts to prevent financial crime are hindered by a range of challenges, including its use of the US dollar, booming drug market, and underlying structural issues. Addressing these challenges will require coordinated efforts from all stakeholders to combat money laundering and protect the integrity of the financial system.