Ecuador’s Anti-Money Laundering Efforts Hobbled by US Dollar Dominance, Drug Trade
Money laundering is a significant problem in Ecuador, with a new study revealing that it is the second most prevalent crime after drug trafficking. The study, conducted by the Ecuadorian Observatory of Organized Crime (Observatorio Ecuatoriano de Crimen Organizado - OECO), highlights the challenges faced by the country in combating money laundering due to its use of the US dollar, a booming drug market, and underlying structural issues.
Concentration of Money Laundering
The study found that money laundering is heavily concentrated around industries that have historically facilitated the appearance of legality, such as:
- Real estate
- Secondhand car sales
- Construction
- Online gambling
These industries are frequently used by money launderers to disguise the source of their funds.
Large-Scale Drug Trafficking
The study revealed that large-scale drug trafficking is the main driver of money laundering in Ecuador. The country serves as a transit point for cocaine produced in Colombia and Peru, leading to a significant increase in capital flows and strengthening local criminal organizations. This has also fueled a rise in violence.
Impact on Banking System
Ecuador’s adoption of the US dollar in 2000 has facilitated money laundering, allowing drug trafficking profits to flow directly into the country without the need for conversion. The global dominance of the dollar (around 88% of global foreign exchange transactions involving the currency) makes it easier for dirty money to be laundered.
The study also highlighted that Ecuador’s banking system is particularly susceptible to money laundering due to:
- Lack of formal mechanisms to investigate cases
- Limited human and technological resources
Criminal groups have identified loopholes in the system and taken advantage of them to launder their proceeds.
Need for Improved Coordination
According to the OECO researcher, there is a need for improved coordination between the justice system and administrative units that raise alerts about suspicious transactions. “Although the banking authorities have raised alerts in the face of suspicious operations, these do not end up in any type of investigation by the prosecutor’s office,” they said.
Challenges in Combating Money Laundering
Ecuador’s struggle to combat money laundering highlights the challenges it faces in addressing organized crime and corruption. The country’s use of the US dollar, booming drug trade, and structural issues are all contributing factors that make it difficult to effectively pursue money launderers.
Conclusion
The study emphasizes the need for Ecuador to address these underlying structural issues to effectively combat money laundering and organized crime. Improved coordination between law enforcement agencies, enhanced banking regulations, and increased resources are essential in this fight.