Financial Crime World

Ecuador Grapples with Financial Crime as Money Laundering Becomes Second-Most Prevalent Criminal Economy

QUITO, Ecuador - Ecuador’s efforts to combat money laundering are being hindered by a number of factors, including its use of the US dollar, a booming drug market, and underlying structural issues.

Money Laundering: The Second-Most Prevalent Criminal Economy

According to a new study by the Ecuadorian Observatory of Organized Crime (Observatorio Ecuatoriano de Crimen Organizado – OECO), money laundering is the second-most prevalent criminal economy in the country, after drug trafficking. This alarming trend has significant implications for the country’s financial stability and security.

Industries Used for Money Laundering

The study found that money laundering is heavily concentrated around industries that have historically facilitated the appearance of legality, such as:

  • Real estate
  • Secondhand car sales
  • Construction
  • Online gambling

These industries are frequently used by money launderers due to their ability to move large sums of cash and provide a veneer of legitimacy.

Ecuador’s Role in the Drug Trade

Ecuador’s role as a drug transit country has contributed significantly to the rise in money laundering. Sandwiched between Colombia and Peru, two of the world’s biggest coca-growing nations, Ecuador is a key route for cocaine traffickers seeking to move their product to international markets.

The Impact of Dollarization

Ecuador’s use of the US dollar has also facilitated money laundering. The global dominance of the dollar makes it easy for criminals to move dirty money around the world. According to the Bank for International Settlements, around 88% of global foreign exchange transactions in April 2022 involved the dollar.

Structural Obstacles

Ecuador’s ability to successfully pursue money launderers is hindered by a number of structural obstacles, including:

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

These issues have led to a significant increase in capital flows, which has strengthened local criminal organizations and fueled a rise in violence. With murders jumping 82% in 2022, there is an increased need for local criminal groups to launder their illicit proceeds.

The Need for Improved Cooperation

Ecuador’s struggle to combat money laundering highlights the need for improved cooperation between law enforcement agencies, financial institutions, and the judiciary. Without effective measures to address these structural issues, Ecuador will continue to be vulnerable to financial crime.

Conclusion

In conclusion, Ecuador faces significant challenges in its efforts to combat money laundering due to its use of the US dollar, a booming drug market, and underlying structural issues. To effectively address this issue, it is essential that the country implements measures to improve cooperation between law enforcement agencies, financial institutions, and the judiciary.