Financial Crimes Haunt Ecuador’s Economy, Experts Warn
Ecuador is facing a significant challenge in combating money laundering, with experts warning that the country’s efforts are hindered by its use of the US dollar, a booming drug market, and underlying structural issues.
Money Laundering: A Growing Concern in Ecuador
According to a recent study by the Ecuadorian Observatory of Organized Crime (Observatorio Ecuatoriano de Crimen Organizado – OECO), money laundering is the second-most prevalent crime in the country after drug trafficking. The study found that money launderers are frequently using industries such as real estate and secondhand car sales to facilitate their activities.
Common Money Laundering Methods
The research, which was based on fieldwork and interviews with 116 state security officials, revealed that certain economic activities, including:
- Construction
- Real estate
- Online gambling
are commonly used by money launderers. The study also highlighted the role of foreign criminal organizations in Ecuador’s money laundering landscape, with Balkan networks operating in the country.
The Dollarized Economy: A Facilitator of Money Laundering
Ecuador’s adoption of the US dollar in 2000 has been successful in combating fiscal indiscipline and reducing poverty, but it has also facilitated the laundering of assets from illicit economies. The global dominance of the dollar makes it easy for dirty money to flow into Ecuador without the need for conversion.
Vulnerabilities in Ecuador’s Banking System
The country’s banking system is particularly vulnerable to money laundering due to:
- A lack of formal mechanisms to investigate cases
- Limited human and technological resources
- A lack of knowledge of money laundering within the judiciary
In 2021, an estimated $3.5 billion was laundered through Ecuador’s financial system, nearly three times the amount moved annually between 2007 and 2016.
Experts Warn of a Dire Situation
The situation is dire, with many suspicious transaction reports linked to the financial sector not being investigated by the prosecutor’s office due to a lack of articulation between the justice system and administrative units. The OECO researcher told InSight Crime that “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.”
The Need for Comprehensive Action
The Ecuadorian government must address these structural obstacles and take a comprehensive approach to combat money laundering if it is to make progress in tackling this crime. The country’s economic stability and security depend on it.