Ecuador Struggles to Combat Money Laundering Techniques, Report Finds

A recent report by the Financial Action Task Force (FATF) has revealed that Ecuador’s efforts to combat money laundering techniques are inadequate in several areas. The country’s rating on the FATF Recommendations indicates significant shortcomings.

Inadequate Implementation of Anti-Money Laundering Measures

The report found that Ecuador is largely compliant with only 14 out of 40 recommendations, with many areas requiring improvement. Some major concerns include:

Lack of Effective Risk Assessment: Ecuador lacks an effective risk assessment and application of a risk-based approach to prevent money laundering (R.1).
Inadequate National Cooperation: The country falls short in implementing adequate national cooperation and coordination mechanisms (R.2).

Insufficient Laws and Regulations

Ecuador’s laws and regulations are criticized for being unclear or inadequate in certain areas, such as:

Definition of Money Laundering Offense: The definition of a money laundering offense is unclear (R.3).
Confiscation and Provisional Measures: Confiscation and provisional measures are not adequately implemented (R.4).
Terrorist Financing Offenses: Terrorist financing offenses are not clearly defined or penalized (R.5).
Financial Institution Secrecy Laws: Ecuador’s financial institution secrecy laws require revision to prevent abuse (R.9).

Instances of Partial Compliance

The report highlights several instances where Ecuador is partially compliant, including:

Targeted Financial Sanctions: The country has failed to implement targeted financial sanctions related to terrorism and terrorist financing (R.6) and proliferation (R.7).
Beneficial Ownership Transparency: Ecuador lacks transparency in the beneficial ownership of legal persons and arrangements (R.24-25).

Deficiencies in Implementing Anti-Money Laundering Measures

Ecuador’s deficiencies are reflected in its poor ratings across various areas, including:

Correspondent Banking: The country has inadequate correspondent banking practices (R.13).
Money or Value Transfer Services: Ecuador’s money or value transfer services require improvement (R.14).
New Technologies: The country’s anti-money laundering measures for new technologies are insufficient (R.15).

Recommendations to Improve Anti-Money Laundering Regime

The report makes several recommendations to Ecuador, including:

Improve Customer Due Diligence: Enhance customer due diligence and record keeping practices (R.10) and (R.11).
Enhance Supervisory Powers: Strengthen powers of supervisors, law enforcement authorities, and investigative authorities (R.27), (R.30), and (R.31).

Conclusion

Ecuador’s struggle to combat money laundering techniques highlights the need for sustained efforts to improve its anti-money laundering regime. The government must prioritize these reforms to prevent illegal activities from undermining the country’s financial stability and integrity.