Financial Crime World

Money Laundering Challenges and Compliance in Honduras: A Media Perspective

In the intricate world of money laundering and financial regulatory compliance, it’s essential for organizations to understand the unique risks and responsibilities of various jurisdictions. This article delves into the money laundering challenges and regulatory landscape in Honduras – a country renowned for its drug trafficking and deeply entrenched corruption.

Key Challenges

Honduras was once perceived as merely a transit country for illegal drugs; however, it has evolved into a production hub due to state-sponsored corruption and organized crime. These challenges pose significant risks to financial institutions and organizations operating within Honduras.

  • State-sponsored drug trafficking Former President Juan Orlando Hernández has been implicated in drug trafficking allegations, and his successor, Xiomara Castro, is married to a man accused of accepting $500,000 in bribes from drug traffickers. (The Economist, 2022)
  • Corruption Honduras ranks 146th out of 180 countries in the Corruption Perceptions Index, with corruption costing approximately $2 billion a year – 12.5% of the country’s GDP. (Transparency International, 2021)
  • Organized crime Honduras is one of the most violent countries in the region, with frequent violence from local drug trafficking groups, criminal gangs, drug cartels, and even corrupt security forces. Extortion is a widespread problem, with an estimated value of over $200 million a year.

Money Laundering and Regulatory Landscape

An estimated $351 million to $878 million is laundered annually in Honduras. (Global Financial Integrity, 2019) The country has a weak regulatory framework with concerns over political will, weak institutions, and regressing laws.

Strengths and Weaknesses

Strengths:

  1. The election of leftist President Xiomara Castro could mark a turning point for Honduras, as she acknowledges the influence of drug gangs on state institutions and aims to dismantle deeply embedded criminal structures.
  2. Honduras has stronger detection and prevention measures in place.

Weaknesses:

  1. Endemic corruption at all levels hampers efforts to combat money laundering, resulting in corruption within key institutions like the government’s procurement agency.
  2. Drug money is deeply ingrained within the financial system, particularly in politics, with a lack of beneficial ownership information and ownership of assets used for drug smuggling.
  3. The justice system often sides with the corrupt, with several high-profile corruption cases being overturned by the courts, and former officials charged in vast corruption schemes avoiding prosecution.
  4. Lawyers are seen as gatekeepers to the financial system, making them an easy point of entry for money laundering. Honduras is involved in extensive money laundering schemes using real estate in Panama and the US.

Regulatory Summary

Lawful measures to combat money laundering in Honduras include:

  1. The 2015 Special Law on Asset Laundering, designed to combat money laundering and establish prevention systems.
  2. The 2015 Law Regulating Designated Non-Financial Activities and Professions (DNFBPs), aimed at regulating DNFBPs.
  3. The 2010 Law on Definitive Deprivation of the Domain of Goods of Illicit Origin, focusing on identifying, locating, and securing assets with illicit origins.

Conclusion

Organizations conducting business in Honduras or planning expansion into the country must address significant money laundering risks. Stay informed on these challenges and adapt your Anti-Money Laundering (AML) policies accordingly.

For more information on AML risks and laws in Latin America and the Caribbean, download our free guide: Click here.

References

  1. Global Financial Integrity. (2019). Illegal Financial Flows to and from Developing Economies: 2001-2018.
  2. The Economist. (2022). A Tale of Two Presidents: Manuel Zelaya and Juan Orlando Hernández.
  3. Transparency International. (2021). Corruption Perceptions Index 2021: Results for Honduras.
  4. The Washington Office on Latin America. (2022). Honduras: Key Human Rights and Anti-Corruption Concerns.