Money Laundering Crisis in Guatemala: Unequal Rules, Corruption, and Extortion
Guatemala, a Central American nation, is recognized as a high-risk jurisdiction for money laundering, presenting unique challenges for financial institutions operating in the region. In this article, we delve into the key Anti-Money Laundering (AML) issues and risks in Guatemala, along with the laws and regulations in place.
Key Risks: A Complex and Uneven AML Environment
Guatemala’s AML system is complex and unevenly implemented. While regulations may seem strict for the average citizen, they are often lax and flexible for the powerful. Moreover, the country faces significant challenges such as:
- Extortion
- Political interference
- Corruption
- Economic inequality
Extortion: The Dark Side of Guatemala
Extortion is a pressing issue in Guatemala, with amounts estimated to reach around $400 million annually, making it the highest-rated in all of Central American countries. Extortion is a primary driver of migration.
Political Interference and Corruption: The Power Elite
Guatemala’s political landscape has been marred by interference and corruption:
- In 2019, President Morales expelled the International Commission against Impunity in Guatemala (CICIG), an international body tasked with investigating serious crime.
- Dismissal of special prosecutors appointed to tackle corruption and money laundering.
- Corruption extends to all levels of Guatemalan society, involving an opaque network of private companies, public contracts, and government officials.
- Eleven past ministers of communication and housing have been accused or convicted of serious corruption.
Criminal Proceeds: The Staggering Numbers
An estimated $1.1 billion - $2.7 billion is laundered every year in Guatemala.
AML Policy Summary: From Weaknesses to Strengths
Guatemala’s severely corrupt environment, lack of political will, weak institutions, and outdated legal framework persist. However, investigation and prosecution systems are considered comparatively stronger:
- In 2020, lawyers and notaries were designated as obligated subjects under AML regulations.
- Guatemala lacks beneficial ownership legislation, a fintech law, or regulations for some financial institutions.
Key Vulnerabilities: From Credit Unions to Churches
Money laundering in Guatemala is perpetuated through various channels, including:
- Banks
- Political campaigns
- Shell companies
- Construction and infrastructure projects
- Misinvoicing
- Supermarkets
- Gas stations
Even churches have been involved in money laundering schemes.
Efforts to Undermine Anti-Corruption and Anti-Money Laundering Efforts
President Morales’ efforts to undermine anti-corruption and anti-money laundering efforts indicate serious criminal collusion at the highest political levels. Guatemala does not regulate a wide range of financial institutions, including:
- Microfinance
- Credit unions
- Fintech
- Mobile money providers
- Some remittance services
These services are essential for over half the population, which remains unbanked.
US Support and Anti-Corruption Efforts
The US plays a significant role in supporting Guatemala, but anti-corruption efforts have been hindered by the cut in aid during the Trump administration.
Download our free guide for businesses operating or planning to expand in Latin America and the Caribbean. It offers an overview of the key issues and includes a country-by-country assessment of AML risks and laws.