Financial Crime World

Guatemala Struggles with Compliance to Anti-Money Laundering Laws

The Guatemalan government faces significant challenges in combating money laundering, which is hindering effective financial crime prevention.

According to estimates, Guatemala loses between $1.1 billion and $2.7 billion annually to money laundering. The country’s anti-money laundering (AML) system is described as “sprawling, diverse, and complex,” with implementation unevenly applied. While AML requirements are strict for ordinary citizens, those in power often operate with impunity.

Extortion and Political Interference

Extortion is a major problem in Guatemala, which could amount to $400 million annually, according to USAID estimates. Political interference has also hindered anti-corruption efforts, with President Morales expelling the international body tasked with investigating serious crime and dismissing special prosecutors.

Widespread Corruption

Corruption is widespread in Guatemala, affecting all levels of society. Anti-corruption laws are often used against political opponents, while an opaque network of private companies, public contracts, and government officials facilitates corruption.

Economic Inequality and AML Challenges

Economic inequality also contributes to AML challenges, with less than half the population having a bank account and around 20% without identification. Ninety-ones percent of the population lives in poverty.

Investigation and Prosecution Systems

Despite these challenges, Guatemala’s investigation and prosecution systems are considered stronger. However, prevention and detection capabilities are weak.

In 2020, lawyers and notaries were designated as obligated subjects under AML regulations. However, the legal framework is severely outdated, lacking beneficial ownership legislation, a fintech law, and with some financial institutions remaining unregulated.

Key Vulnerabilities in the Economy

Key vulnerabilities in the economy for money laundering include:

  • Credit unions
  • Vehicle sales
  • Real estate
  • NGOs
  • Armored car services

A wide range of channels is used to launder money in Guatemala, including:

  • Banks
  • Political campaigns
  • Shell companies
  • Construction
  • Infrastructure projects

Complex Web of Facilitators

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

Unregulated Financial Institutions

Guatemalan law does not regulate a wide range of critical financial institutions, including:

  • Microfinance
  • Credit unions
  • Fintech
  • Mobile money providers
  • Some remittance services

Transparency and anti-corruption efforts have been rolled back by the Morales administration.

Corrupt Judiciary

The judiciary is also seen as highly corrupt, with the guild responsible for nominating judges known for bribery.

US Support for AML Efforts

Despite these challenges, the US has a significant role in supporting Guatemala’s AML efforts. However, aid was cut during the Trump administration, harming anti-corruption efforts.