Financial Crime World

Money Laundering Takes Center Stage in Ecuador as Drug Trade Booms

Ecuador is facing a growing problem of money laundering, with a recent study revealing that it has become the second-most prevalent crime in six states, surpassing only drug trafficking. This article explores the complex challenges facing Ecuador in tackling this issue.

Ecuador’s Role as a Drug Transit Country

As a key transit point for cocaine from Colombia and Peru, Ecuador is heavily impacted by the global narcotics trade. The country has become a crucial link in the supply chain, with significant capital flows fueling local criminal organizations and increasing violence.

  • In 2022, Ecuador seized the second-highest volume of drugs in Latin America, according to the Latin American Financial Action Task Force (GAFILAT).
  • This surge in drug trafficking has led to a growth in illicit financial flows, making it easier for dirty money to move across borders.
  • The global dominance of the US dollar facilitates these transactions, with around 88% of foreign exchange transactions involving the dollar in April 2022.

The Permeable Banking System Hinders Efforts to Combat Money Laundering

Ecuador’s banking system is vulnerable to money laundering due to a lack of formal mechanisms to investigate cases, limited resources, and a lack of knowledge about money laundering within the judiciary. This has resulted in an estimated $3.5 billion being laundered through the financial system in 2021.

  • The study highlights the need for improved articulation between the justice system and administrative units.
  • Strengthening institutions and addressing structural issues are crucial to combating this crime effectively.

Structural Issues Undermine Efforts to Combat Money Laundering

The research identifies several key obstacles that restrict Ecuador’s ability to pursue money launderers:

  • Lack of articulation between the justice system and administrative units
  • Limited human and technological resources
  • Lack of knowledge about money laundering within the judiciary

Experts Cite Growing Presence of Foreign Criminal Organizations

A researcher from the OECO notes the growing presence of Albanian citizens in Ecuador, who are buying banana companies that are about to go bankrupt. This allows them to launder drug money and control the transit of drugs to Europe.

As Ecuador continues to grapple with the challenges of money laundering, experts emphasize the need for a comprehensive approach that addresses these structural issues and strengthens institutions. Only through concerted efforts can the country effectively combat this crime and reduce its impact on society.