Financial Crime World

Money Laundering Techniques in Colombia Exposed

Colombia’s complex security situation and strategic location have made it a hub for money laundering activities. Experts warn that the country’s financial system is vulnerable to various techniques used by organized crime networks to launder billions of dollars annually.

The Extent of Money Laundering in Colombia

According to estimates, $14.7 billion to $17 billion is laundered every year in Colombia, making it one of the most significant money laundering hotspots in Latin America and the Caribbean. The majority of these funds are generated from drug trafficking, with cocaine being a major problem for anti-money laundering (AML) efforts.

Common Money Laundering Techniques

False Invoicing

One common method used by money launderers is false invoicing, particularly in the banking and trade sectors. This technique involves creating fake invoices to disguise the origin of illicit funds, making it challenging for authorities to track the flow of money.

Dollar Economies Pose a Challenge

Colombia’s neighbors, such as Venezuela and Peru, operate de facto or de jure dollar economies, presenting a key challenge in bulk cash smuggling. This has made it easier for organized crime networks to move illicit funds across borders without being detected.

Despite having a relatively weak legal framework, Colombia is considered to have strong prevention and detection methods. However, the country’s corruption levels are high, and prosecution rates for financial crimes are low. The Financial Action Task Force (FATF) has described the implementation of Colombia’s AML laws as not fully or optimally implemented.

Key Money Laundering Laws in Colombia

The main money laundering laws in Colombia include:

  • Law 190 of 1995: Criminalizes asset laundering and includes over 60 predicate offenses.
  • Law 1121 of 2006: Outlines the ways to prevent, detect, and prosecute terrorist financing.
  • Law 1941 of 2018: Created a Center for Coordination on Financing by Criminal and Terrorist Groups to enhance inter-agency collaboration.

Weaknesses in the System

There are several weaknesses in Colombia’s AML system, including:

Conflicting Definitions of Beneficial Ownership

  • There is no clear definition of beneficial ownership.
  • No registry exists to track shell and front companies.

Severe Lack of Whistleblower Protections

Whistleblowers face severe consequences for reporting financial crimes.

Insufficient Training for Staff Working on Financial Crime Cases

Staff working on financial crime cases often lack the necessary training, leading to a higher likelihood of organized criminals remaining intact.

Strengths in the System

Despite these weaknesses, Colombia has some strengths in its AML system, including:

Collaboration with the United States on Counternarcotics

Colombia has a strong track record of collaborating with the United States on counternarcotics efforts.

Detailed Suspicious Activity Reports (SARs)

SARs track illicit enrichment and provide valuable insights into money laundering activities.