Financial Crime World

Peru’s Battle Against Financial Crime: Key Challenges and Policy Landscape

Peru, located in the heart of Latin America, is at a crossroads of economic progress and money laundering risks. From bustling cities to remote mountains where illegal mining operations thrive, the challenges of Anti-Money Laundering (AML) compliance in this South American nation are complex and multifaceted. In this article, we delve into the unique AML risks and Peruvian laws that organizations must understand when assessing customer, geographic, or matter risk in this intriguing country.

Key Risks

The Informal Economy

  • Before the Covid-19 pandemic, an estimated 70% of Peru’s population worked in the informal sector.
  • The informal economy provides jobs for millions but also poses significant risks for tax evasion, corruption, and money laundering.
  • Lack of comprehensive research limits our understanding of the issue’s true scope.

Illegal Mining

  • Mining contributes to around 10% of Peru’s GDP and over 60% of its exports.
  • Weak government oversight enables illegal mining operations, making it a significant risk for money laundering and corruption.
  • Nearly half of the financial intelligence reports in the last decade revealed connections to illegal mining.

Drug Trafficking

  • Peru is the world’s second-largest producer of cocaine and a crucial transit point for drugs heading to North America and Europe.
  • Porous borders make it easier for the illegal trade of goods and money to transpire.

Large Amounts of Criminal Proceeds

  • An estimated $3.2 billion to $7.9 billion is laundered every year in Peru.

AML Policy Summary

  • Despite its reputation for high levels of corruption and a lack of knowledge, Peru has a National Plan Against Money Laundering and Terrorist Financing.
  • Peru’s approach to prevention is robust, but its record on prosecution is weak.

Peruvian Laws Tackling Financial Crimes

  1. Legislative Decree 1106 - Establishes the legal framework regarding money laundering, illegal mining, and organized crime.
  2. Law Decree 25475 - Regulates terrorist financing prevention methods.
  3. Law 30737 - Requires reparations to the state in the case of corruption.
  4. Law 28950 - Addresses human trafficking.
  5. Law 22095 - Concerned with drug trafficking.
  6. Legislative Decree 1327 - Provides protection for corruption whistleblowers.
  7. Legislative Decree 1372 - Established beneficial ownership registers.

Weaknesses

Key Channels for Financial Crimes

  • Cash traders, banks, and real estate are common channels for financial crimes and laundering cash in Peru.
  • Mining, a significant contributor to the economy, is also a hotbed for illegal activities, including people trafficking, sex work, drug trafficking, and money laundering in areas of high mining activity.
  • Insufficient knowledge and resources among supervisory authorities and law enforcement, coupled with the growing popularity of cryptocurrency as a laundering method, create further concern.

Strengths

  • Peru has made strides in complying with most Global Forum on Transparency and Exchange of Information for Tax Purposes (GAFILAT) recommendations.
  • Peru’s commitment to transparency, information sharing, and citizen participation in combating corruption is noteworthy.

More Information

For companies operating or planning to expand in Latin America and the Caribbean, understanding the key AML risks and laws in countries like Peru is essential. VinciWorks has developed a comprehensive guide to provide organizations with valuable insights into the AML challenges and regulations surrounding countries in the region. Download this guide free of charge to learn more.

Please note that the guide referenced in the original text may not be free of charge, and this modification is made for demonstration purposes only.