Financial Crime World

Honduras Struggles with Money Laundering Amid Corruption and Organized Crime

Tegucigalpa, Honduras - As one of the most violent countries in Latin America, Honduras is facing a severe money laundering problem, estimated to be between $351 million and $878 million annually. The country’s weak institutions, endemic corruption, and organized crime have created an environment conducive to money laundering.

State-Sponsored Drug Trafficking and Corruption

  • Former President Juan Orlando Hernández was named as a “state-sponsor” of drug trafficking by the US.
  • New President Xiomara Castro has vowed to tackle corruption and dismantle criminal structures deeply embedded in the state.

The Scale of Money Laundering in Honduras

  • Estimated annual money laundering: $351 million - $878 million
  • Corruption costs around $2 billion a year, equivalent to 12.5% of the country’s GDP

Organized Crime and Extortion

  • Local drug trafficking groups, criminal gangs, and corrupt security forces contribute to violence and extortion.
  • Estimated value of extortion: at least $200 million annually.

Challenges in Combating Money Laundering

  • Lack of political will to deal with money laundering
  • Weak institutions hinder efforts to combat the issue
  • Endemic corruption hampers efforts
  • New criminal code lowers sentences for corruption and drug trafficking cases.
  • Stricter slander and defamation laws have muzzled reporting about crimes and corruption.

Money Laundering Laws in Honduras

  • 2015 Special Law on Asset Laundering
  • 2015 Law Regulating Designated Non-Financial Activities and Professions
  • 2010 Law on Definitive Deprivation of the Domain of Goods of Illicit Origin

Weaknesses in the System

  • Endemic corruption has hampered efforts to combat money laundering.
  • High-ranking officials accused of taking bribes from drug traffickers and embezzling government funds.

Justice System Criticisms

  • Convictions being overturned or dropped due to corruption.
  • Lack of beneficial ownership information and transparency over assets used to facilitate drug smuggling.

Key Gatekeepers to the Financial System: Lawyers

  • Lawyers are vulnerable to exploitation by money launderers.

Large-Scale Money Laundering Schemes Involving Honduras

  • Real estate in Panama and the US involved in large-scale money laundering schemes.

A Turning Point for Honduras?

  • The election of President Castro could mark a turning point for Honduras.
  • Her administration will need to tackle entrenched corruption and organized crime.

Staying Compliant in Latin America and the Caribbean

  • VinciWorks’ free guide provides an overview of key AML challenges and laws in Honduras, as well as a country-by-country assessment of AML risks and laws.
  • Download the guide now to learn more about how to stay compliant in this region.