Ecuador Struggles to Combat Money Laundering Amidst Drug Trafficking Boom
QUITO, Ecuador - A recent study by the Ecuadorian Observatory of Organized Crime has revealed that money laundering is a significant problem in Ecuador, with the country’s use of the US dollar, booming drug market, and underlying structural issues hindering efforts to combat this crime.
Money Laundering: The Second Most Prevalent Criminal Economy
The study found that money laundering is heavily concentrated around industries such as:
- Real estate
- Secondhand car sales
- Construction
- Online gambling
These industries are frequently used by money launderers due to their ability to disguise illicit funds and facilitate the movement of cash.
Ecuador’s Role in the Drug Trade
Ecuador’s role as a drug transit country has led to an increase in capital flows, strengthening local criminal organizations and fueling violence. In 2022, the country seized the second-highest volume of drugs in Latin America, with cocaine produced in Colombia and Peru transiting through Ecuador before reaching international markets.
The Use of the US Dollar Facilitates Money Laundering
The use of the US dollar has also facilitated money laundering, as it allows drug trafficking profits to flow directly into Ecuador without conversion. Around 88% of global foreign exchange transactions in April 2022 involved the dollar, according to the Bank for International Settlements.
Ecuador’s Banking System Susceptible to Money Laundering
The study highlights the permeability of Ecuador’s banking system, with:
- Limited formal mechanisms to investigate cases
- Limited human and technological resources
These limitations have allowed money laundering to occur on a large scale, with the Latin American Financial Action Task Force estimating that around $3.5 billion was laundered through Ecuador’s financial system in 2021.
Addressing Structural Issues Crucial to Combating Money Laundering
Experts say that addressing these structural issues is crucial to tackling money laundering in Ecuador. “We need to strengthen our institutions, improve coordination between different agencies, and increase transparency in financial transactions,” said an OECO researcher.
Overall, the study emphasizes the need for Ecuador to address its underlying structural issues in order to effectively combat money laundering and drug trafficking.