Honduras Banks Face Compliance Risks Amid Widespread Corruption
Tegucigalpa, Honduras - A New Era of Challenge
As the new government of President Xiomara Castro takes office, concerns over corruption and organized crime remain a major challenge for banks operating in Honduras. The country’s banking sector is facing significant compliance risks due to its reputation as a hub for money laundering and drug trafficking.
State-Sponsored Drug Trafficking: A Major Concern
The US has designated former President Juan Orlando Hernández as a “state-sponsor” of drug trafficking, with allegations that he received bribes from traffickers. The new government faces the daunting task of dismantling entrenched corruption and organized crime networks that have infiltrated state institutions.
Corruption Endemic in Honduras
- Honduras ranks 146th out of 180 countries in terms of corruption
- Estimates suggest that the country loses around $2 billion annually to corrupt practices
- This has led to a lack of trust in institutions and anti-corruption efforts
Money Laundering: A Growing Concern
- An estimated $351 million to $878 million is laundered every year in Honduras
- The country’s banks face significant compliance risks due to its reputation as a hub for money laundering
Weak Institutions and Lack of Political Will
Honduras has weak institutions and a lack of political will to tackle corruption and organized crime. The new government faces the challenge of rebuilding trust in institutions and addressing the root causes of corruption.
Key Money Laundering Laws in Honduras
- The 2015 Special Law on Asset Laundering
- The 2015 Law Regulating Designated Non-Financial Activities and Professions
- The 2010 Law on Definitive Deprivation of the Domain of Goods of Illicit Origin
Weaknesses in Honduras’ Anti-Money Laundering Framework
The country’s anti-money laundering framework is weakened by endemic corruption, a lack of beneficial ownership information, and the use of aircraft and boats to facilitate drug smuggling. Lawyers are seen as key gatekeepers to the financial system, giving an easy point of entry for money launderers.
New Government Offers Hope
The election of President Xiomara Castro offers hope for reform and a renewed commitment to tackling corruption and organized crime. However, dismantling entrenched networks will be a major challenge.
Businesses Operating in Honduras Must Take Note
Companies operating in Honduras must take note of the significant compliance risks associated with money laundering and corruption. A free guide from VinciWorks provides an overview of key anti-money laundering challenges and issues, including a country-by-country assessment of AML risks and laws.