Financial Crime World

Ecuador Grapples with Global Efforts to Combat Financial Crime

Financial Crime on the Rise in Ecuador

Efforts to combat financial crime in Ecuador are being hindered by a complex array of factors, including the country’s use of the US dollar, a booming drug market, and underlying structural issues.

  • 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 crime in six states surveyed in Ecuador, after drug trafficking.
  • The study found that money laundering is heavily concentrated around industries that have historically facilitated the appearance of legality, such as real estate and secondhand car sales.

Challenges Facing Ecuador’s Efforts to Tackle Financial Crime

Three key obstacles facing Ecuador in its efforts to tackle financial crime are:

  1. Ecuador’s role as a major transit point for illicit drugs: The country’s position between Colombia and Peru, two of the world’s largest coca producers, makes it an ideal location for drug trafficking.
  2. The use of the US dollar: Ecuador’s adoption of the US dollar has facilitated the laundering of assets from illicit economies, allowing dirty money to move freely across borders.
  3. A lack of formal mechanisms to investigate money laundering cases and limited human and technological resources: Institutional limitations in Ecuador’s ability to pursue financial crime have created a susceptible banking system.

The Impact of Financial Crime on Ecuador

  • In recent years, large-scale seizures of cocaine have increased in Ecuador, with the country seizing the second-highest volume of drugs in Latin America in 2022.
  • An estimated $3.5 billion was laundered through Ecuador’s banking system in 2021.
  • Investigations into suspicious transactions often fail to progress due to a lack of articulation between the justice system and administrative units.

A Concerted Effort Required

As Ecuador grapples with these challenges, it is clear that a concerted effort will be required from government agencies, financial institutions, and civil society to combat financial crime and protect the country’s economy.