Financial Crime World

Peru’s Financial System under Scrutiny: $2.2 Billion in Suspected Criminal Funds Enter Banks

In a groundbreaking investigation, the Peruvian investigative journalism platform, OjoPúblico, uncovered more than $2.2 billion in suspicious transactions linked to apparent criminal activities that entered Peru’s financial system. This revelation implicates the complicity of major banks, regulators, and the Peruvian Superintendency of Banks, Insurance and Pension Funds (SBS), as detailed below.

$2.2 Billion in Criminal Funds Enter Peru’s Financial System

Through leaked documents from Peru’s Financial Intelligence Unit (UIF), OjoPúblico identified transactions linked to drug trafficking, illegal gold mining, tax evasion, and corruption that entered the Peruvian financial system since 1998. In particular, the report focused on clients with suspected ties to criminal organizations serviced by the country’s two largest banks - Banco de Crédito del Perú (BCP) and BBVA Continental. Other cases were also detected at Scotiabank and Interbank.

Banks’ Complicity in Money Laundering Schemes

Both BCP and BBVA Continental failed to respond when contacted by OjoPúblico regarding their acceptance of clients linked to organized crime, citing financial secrecy laws.

Sistema de Distribución Mundial

A prominent example of unlawful operations at these banks involved Sistema de Distribución Mundial, a Peruvian front company for drug trafficker Fernando Zevallos Gonzales, alias “Lunarejo.” Between 2000 and 2004, this firm made suspicious transactions totaling $27 million through its accounts at these banks.

  • Lunarejo, who is currently serving a 20-year sentence for drug trafficking in Peru, faces possible extradition to the United States.
  • The US Treasury Department has designated Sistema de Distribución Mundial as a “derivative designation” under the Foreign Narcotics Kingpin Designation Act.
  • Peruvian investigations have linked Zevallos to overdue witnesses to his criminal activities and the alleged use of Sistema de Distribución Mundial as a vehicle to move funds via BCP, BBVA, and Scotiabank.

Peruvian Currency Exchange Houses

Another notable client connected to organized crime, as revealed by UIF documents, was a network of Peruvian currency exchange houses linked to Chilean Mauricio Mazza-Alaluf. Over 150 people in Peru were involved in this network, which deposited $369 million into accounts at BCP, BBVA, and other financial entities. Mazza-Alaluf has been indicted by the US Justice Department and accused of laundering money for Colombian criminal groups, including the Revolutionary Armed Forces of Colombia (FARC).

The Ineffective Role of the Peruvian Superintendency of Banks, Insurance and Pension Funds

The UIF documents revealed multiple instances of noncompliance with regulations intended to prevent financial transactions with suspected ties to organized crime. Despite their responsibility to enforce these regulations, the Peruvian Superintendency of Banks, Insurance and Pension Funds (SBS), failed to take appropriate action.

The Consequences of Weak Anti-Money Laundering Measures

This investigation highlights the need to strengthen anti-money laundering measures and enforce stricter penalties for financial institutions that fail to comply with these regulations. Moreover, increased transparency and cooperation between financial institutions, regulatory agencies, and law enforcement agencies is crucial in counteracting organized crime’s use of the financial system for illicit activities.

Historic Precedents of Financial Institutions and Laundering

Throughout history, financial institutions in Europe and the United States, including Bank of Credit and Commerce International (BCCI), HSBC, Banca Privada de Andorra (BPA), Meinl Bank, and others, have faced severe consequences due to their association with criminal groups and money laundering activities. Peruvian banks and the SBS might face similar consequences if they fail to address these issues.

Penalties for Banking Irregularities under Peruvian Law

Peruvian legislation imposes fines for banking irregularities to prevent money laundering, but these regulatory measures lack the necessary deterring effect due to lenient fines, with the highest fine being only $130,000. The regulatory requirements necessitate impeccable conduct, diligence, awareness of clients’ public ties to criminal organizations, and strong deterrents are essential.