Financial Crime World

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Money Laundering in Guatemala: Understanding the Challenges

Guatemala, a Central American country with a complex and outdated anti-money laundering (AML) system, faces significant challenges in combating financial crimes. The nation’s AML framework is seen as weak, with uneven implementation and strict regulations for ordinary citizens, but lax enforcement for those in power.

Key Risks

  • Extortion, a major problem in Guatemala, drives migration and is estimated to generate $400 million annually.
  • Political interference, corruption, and economic inequality also contribute to the country’s AML challenges.
  • President Morales’ expulsion of CICIG, an international anti-corruption body, and his dismissal of special prosecutors tasked with tackling corruption and money laundering have raised concerns.

Criminal Proceeds

  • An estimated $1.1 billion to $2.7 billion is laundered annually in Guatemala, making it a significant hub for money laundering activities.

AML Policy Summary

Guatemala’s AML system is seen as seriously corrupt, with weak institutions, outdated laws, and limited prevention and detection capabilities. However, the country’s investigation and prosecution systems are considered stronger.

  • In 2020, lawyers and notaries were designated as obligated subjects regarding AML.
  • Guatemala lacks beneficial ownership legislation, a fintech law, and some financial institutions remain unregulated.
  • The country’s main money laundering laws include:
    • Law 67-2001
    • Law 58-2005
    • Law 55-2010
    • Law 58-2020

Weaknesses

  • Credit unions, vehicle sales, real estate, NGOs, and armored car services are key vulnerabilities in Guatemala’s economy for money laundering.
  • A wide range of channels are used to launder money, including:
    • Banks
    • Political campaigns
    • Shell companies
    • Construction and infrastructure projects
    • Misinvoicing
    • Supermarkets
    • Gas stations
    • Churches

Complex Web of Facilitators

  • A complex network of facilitators, including bankers, lawyers, notaries, politicians, and political operatives, makes money laundering relatively easy in Guatemala.
  • President Morales’ efforts to undermine anti-corruption and AML efforts demonstrate criminal collusion at the highest political levels.

Challenges Ahead

  • Guatemala’s lack of regulation over critical financial institutions, such as:
    • Microfinance
    • Credit unions
    • Fintech
    • Mobile money providers
    • Remittance services poses significant challenges in preventing financial crime.
  • The country’s judiciary is also seen as highly corrupt, with bribery allegations against the guild responsible for nominating judges.

Strengths

  • The US has a significant role in supporting Guatemala, although aid was cut during the Trump administration, which harmed anti-corruption efforts.

Conclusion

Understanding the AML challenges and laws in Guatemala is crucial for businesses operating or planning to operate in the country. VinciWorks’ guide provides an overview of key AML issues and a country-by-country assessment of AML risks and laws. Download our free guide to learn more about navigating AML compliance in Guatemala.