Financial Crime World

Peru’s Struggle with Anti-Money Laundering: Understanding the Risks and Regulations

The Challenge of Money Laundering in Peru

The Peruvian economy has long been vulnerable to money laundering, with an estimated $3.2 billion to $7.9 billion laundered every year. Despite its commitment to anti-money laundering (AML) laws and regulations, enforcement remains a challenge, and the country’s informal sector continues to pose significant risks.

Informal Economy: A Breeding Ground for Financial Crimes

Peru’s informal economy, which employed around 70% of the population before the Covid-19 pandemic, is a major concern. The lack of oversight in key areas of natural resources has driven illegal mining, which contributes significantly to GDP and exports.

  • Illegal Mining: This has resulted in nearly half of the country’s financial intelligence reports being connected to illegal mining over the past decade.
  • Informal Sector: The informal economy allows financial crimes to continue undetected.

Drug Trafficking: A Persistent Threat

Peru is the second-largest producer of cocaine in the world and serves as a key transit point for drugs being trafficked into North America and Europe. The country’s porous borders allow illicit goods and money to flow freely, exacerbating the problem.

  • Porous Borders: Illicit goods and money can flow freely across Peru’s borders.
  • Drug Trafficking: Peru is a significant producer of cocaine and a key transit point for drugs being trafficked into North America and Europe.

AML Laws and Regulations: A Summary

Peru has a National Plan Against Money Laundering and Terrorist Financing to address money laundering risks across the economy. Key laws include:

  • Legislative Decree 1106: Sets out the legal framework for money laundering, illegal mining, and organized crime.
  • Law Decree 25475: Regulates terrorist financing prevention methods.
  • Law 30737: Requires reparations to the state in cases of corruption.

Weaknesses

Peru’s weaknesses include:

  • Cash Traders: Cash traders are a key channel for financial crimes and cash laundering.
  • Banks: Banks are vulnerable to money laundering due to inadequate oversight.
  • Real Estate: Real estate is used as a conduit for illicit money flows.
  • Mining: Mining is a significant contributor to the Peruvian economy, with illegal mining operations drawing in organized crime.

Strengths

Peru’s strengths include:

  • GAFILAT Compliance: Peru is considered broadly compliant with most of GAFILAT’s technical recommendations.
  • Commitment to Transparency: The country has committed to strengthening transparency, information sharing, and citizen participation in the fight against corruption.