Financial Crime World

Financial Crime Definition in Peru: Loan Sharks and Extortion on the Rise Amid Economic Uncertainty

Peru has been plagued by widespread financial vulnerability, leading to a surge in criminal activity. According to the Attorney General’s Office, extortion cases have skyrocketed by 370% between 2021 and 2023.

The Rise of “Gota a Gota” Loans

Predatory “gota a gota” loans, which charge extortionate interest rates, are driving the rise in extortion reports. These loans have become increasingly popular among vulnerable individuals seeking financial relief.

  • In 2023 alone, there were 22,396 reported cases of extortion
  • The Interior Ministry’s complaints platform received six times as many reports of gota a gota loan-related extortion than all other forms of extortion combined

The Phenomenon’s Origins and Spread

The phenomenon is not new, having originated in Colombia around a decade ago. It spread to Peru, with Lima accounting for half of all reported cases nationwide between May and December 2023.

Vulnerability Factors

Financial desperation is driving the rise in victimization, with:

  • Around 500,000 people in Peru owing gota a gota loans
  • Many seeking these loans to pay off other debts

Migrant Vulnerability

Venezuelan migrants, who make up over 1.2 million of Peru’s population, are particularly vulnerable to being exploited by loan sharks.

  • 45% of Venezuelans living in Peru were unbanked as of September 2022
  • Only 5% have received credit from formal financial institutions

Peruvian Financial Struggles

Peruvians are also struggling financially, with poverty on the rise due to the COVID-19 pandemic and economic uncertainty. The cap on interest rates for business and consumer loans approved by Congress in May 2021 has exacerbated the situation.

Colombian and Venezuelan Gangs Entering the Market

Colombian groups have traditionally dominated the gota a gota loan market in Peru, but Venezuelan gangs have recently entered the scene, seeking alliances with existing groups or vying for control. The Tren de Aragua transnational gang has taken over the market in at least one region of southern Peru.

A Call to Action

The situation is expected to continue deteriorating unless action is taken to address the root causes of financial desperation and provide alternative credit options for vulnerable individuals.