Financial Crime World

Peru’s Financial Crime Landscape: AML Challenges and Risks in the South American Nation

Amidst the vibrant landscape of Peru, an essential player in Latin America’s economy, lies a complex web of financial crime. Understanding the AML (Anti-Money Laundering) landscape in Peru is crucial for organizations looking to assess customer, geographic, or matter risk. In this article, we explore Peru’s AML challenges, focusing on key risks, enforcement weaknesses, and the legal framework.

Key Risks in Peru

  1. Enforcement and Investigations: Despite Peru’s commitment to AML legislation and strong national plans, enforcement remains a major issue. Investigations and prosecutions often fail to meet expected standards.

  2. Informal Economy: Before the Covid-19 pandemic, around 70% of Peruvians were part of the informal economy. Tax evasion, corruption, and money laundering are significant risks associated with such a vast informal sector.

  3. Illegal Mining: Over 60% of Peru’s exports originate from illegal mining activities. This significant sector is a primary contributor to money laundering and corruption.

  4. Drug Trafficking: Peru ranks second in cocaine production globally and serves as a vital transit point for drug smuggling into Europe and North America.

  5. Porous Borders: Long, porous borders enable illegal goods and cash to transit with ease.

Criminal Proceeds

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

AML Policy Summary

Peru is often criticized for its high levels of corruption and lack of knowledge in the fight against financial crimes. While it may not be as strong in terms of prosecution, it possesses stronger prevention methods.

AML Laws and Regulations

Peru has taken steps to combat money laundering with laws such as:

  1. Legislative Decree 1106: Primary legislation that outlines money laundering, illegal mining, and organized crime regulations.
  2. Law Decree 25475: Regulations for terrorist financing prevention methods.
  3. Law 30737: Legislation focusing on reparations to the state in the case of corruption.
  4. Law 28950: Human trafficking prevention laws.
  5. Law 22095: Drug trafficking laws.
  6. Legislative Decree 1327: Protection for corruption whistleblowers.
  7. Legislative Decree 1372: Establishment of beneficial ownership registers.

Challenges and Weaknesses in Peru’s AML Framework

While these measures are essential, they are not without their weaknesses and challenges:

  1. Cash Traders, Banks, and Real Estate: Key channels for financial crimes and laundering cash.
  2. Remittances from Abroad: Increasing opportunities for money laundering due to a substantial amount of cash in the informal economy.
  3. Insufficient Knowledge and Resources: Limited awareness and expertise in financial crime cases make it difficult for regulatory authorities and law enforcement to tackle money laundering effectively.
  4. Publicly Financed Projects: Susceptible to money laundering and corruption, alongside government assistance to vulnerable populations and political campaigning.
  5. Cryptocurrency: Peru is among the top three countries in Latin America for cryptocurrency use, leading to increased money laundering challenges.
  6. Legal Mining Companies: Some companies engage in illegal or informal mining practices, fostering an environment for increased risks such as trafficking of people, sex work, drug trafficking, and money laundering.

Addressing these challenges is essential for organizations looking to operate in Peru or expand into new areas within Latin America and the Caribbean. By staying informed of the unique compliance risks and legal frameworks, organizations can mitigate financial crime risks more effectively.

To help organizations navigate the complex AML challenges and legal frameworks in Latin America and the Caribbean, VinciWorks has developed a comprehensive guide. Download a free copy here.