Financial Crime World

AML Compliance in Guatemala: Navigating Complex Risks and Outdated Regulations

Amid the diverse financial landscape of Latin America and the Caribbean, understanding the unique challenges and regulatory frameworks for different jurisdictions is vital for effective Anti-Money Laundering (AML) compliance. This article explores the pressing AML risks and legal landscape in Guatemala, shedding light on the complexities organizations might face when assessing customer, geographic, or matter risk in this growing market. [For a more comprehensive understanding of AML risks and challenges across Latin America and the Caribbean, download our Free Compliance Guide.]

Key Risks

Guatemala is known for its ‘outdated and uneven’ AML system, with strict regulations for the average population but lenient measures for those in power. Some of the main risks associated with AML compliance in Guatemala include:

  1. Extortion: Guatemala has the highest extortion rate in Central America, fueling significant migration and estimated to generate $400 million annually.
  2. Political Interference: The expulsion of CICIG, an international body mandated to investigate serious crimes, and the removal of special prosecutors by President Morales highlights concerns over political interference.
  3. Corruption: Widespread corruption exists at all levels, with past ministers of communication and housing among the most infamous offenders.
  4. Economic Inequality: With less than half the population holding a bank account, around 20% unidentified, and 91% living in poverty, Guatemala’s economic divide creates opportunities for money laundering.

Estimated Criminal Proceeds and Losses: An estimated $1.1 billion to $2.7 billion is laundered annually in Guatemala.

Guatemala’s investigation and prosecution systems are seen as stronger than its prevention and detection capabilities. Some essential elements of the AML policy and legal framework are:

  1. The 2001 Law 67-2001: Guatemala’s foundation AML law.
  2. Law 58-2005: Deals with terrorist financing.
  3. Law 55-2010: Mandates asset forfeiture and requires proof of legally acquired assets for individuals accused of illicit enrichment.
  4. Law 58-2020: Designates lawyers and notaries as obligated subjects under AML.

AML Challenges and Weaknesses

Key economic sectors vulnerable to money laundering in Guatemala include:

  1. Credit unions
  2. Vehicle sales
  3. Real estate
  4. NGOs
  5. Country’s armored car services

Diverse Money Laundering Channels: Money is laundered through banks, political campaigns, shell companies, construction and infrastructure projects, and even churches.

A Complex Network of Facilitators: Politicians, political operatives, lawyers, notaries, and bankers contribute to the prevalence of money laundering schemes in Guatemala.

Lack of Regulation: The absence of regulation of critical financial institutions, such as microfinance, credit unions, fintech, mobile money providers, and some remittance services, leaves millions of unbanked customers vulnerable to potential money laundering and other financial crimes.

Efforts to Combat Financial Crime

Resistance to combatting financial crime has been met with political will and transparency weakening under the Morales administration. The lack of a unified, independent judiciary further complicates matters, as it is known for pervasive corruption.

Strengths and Opportunities

Guatemala benefits from US support and influence, but aid was significantly reduced during the Trump administration, damaging ongoing anti-corruption initiatives.

**For organizations seeking to navigate AML risks and challenges in Latin America and the Caribbean, including Guatemala, download our Free Compliance Guide. This guide provides valuable information on AML laws and issues across countries in the region and contains country-by-country assessments.