Ecuador Grapples with Money Laundering as Drug Trade Booms
Money laundering has become a significant concern in Ecuador, with the country’s banking industry reporting an increase in financial crimes. A recent study by the Ecuadorian Observatory of Organized Crime (Observatorio Ecuatoriano de Crimen Organizado – OECO) sheds light on the issue.
The Rise of Money Laundering in Ecuador
According to the research, money laundering is the second-most prevalent criminal economy in Ecuador, after drug trafficking. The study found that certain economic activities, including:
- Construction: frequently used by money launderers
- Real estate: often involved in illicit financial transactions
- Online gambling: a popular means of hiding and transferring dirty money
Ecuador’s Role as a Transit Country
Ecuador’s position as a transit country for cocaine from Colombia and Peru has driven the demand for money laundering services. Many local criminal groups have turned to foreign organizations for assistance, taking advantage of Ecuador’s use of the US dollar.
The Vulnerability of 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 and limited human and technological resources. The most recent estimate by the Latin American Strategic Center for Geopolitics reported that around $3.5 billion was laundered through Ecuador’s financial system in 2021, nearly three times the annual amount between 2007 and 2016.
Structural Obstacles
The study highlights structural obstacles to addressing money laundering, including:
- Lack of knowledge: within the judiciary about money laundering
- Inadequate articulation: between the justice system and administrative units
These issues have hindered efforts to combat financial crimes. The OECO researcher emphasized that there is no effective investigation into suspicious transactions raised by banking authorities, highlighting the need for reform to strengthen Ecuador’s anti-money laundering framework.
Challenges Ahead
The study suggests that Ecuador faces significant challenges in addressing money laundering, which is closely linked to the booming drug trade and the use of the US dollar. To effectively combat financial crimes, Ecuador needs to address these underlying structural issues and strengthen its institutions to prevent the flow of dirty money.