Uruguay’s Financial System Under Scrutiny: Money Laundering Cases Surge Amidst Lax Regulations

According to a recent report from the National Secretary Against Money Laundering and Terrorism Financing (SENACLAFT), Uruguay’s vulnerability to financial crimes, particularly money laundering, is drawing international attention due to a significant increase in cases.

Alarming Rise in Money Laundering Investigations

The number of investigations into money laundering connected to drug trafficking nearly doubled from 1,597 in 2018 to 3,021 in 2022, as revealed in SENACLAFT’s report. This figure denotes a consistent annual increase in such cases.

Key Areas of Concern

The report was compiled from various state institutions, with a focus on five key areas:

1. Financial intelligence
2. International cooperation
3. Preventative systems
4. National cooperation
5. Investigations and convictions

Uruguay’s Susceptibility to Money Laundering

Financial crime experts have long warned of Uruguay’s susceptibility to money laundering. One evaluation of Uruguay’s anti-money laundering capabilities was carried out by Alejandro Aparicio Montesdeoca, a financial consultant. Montesdeoca concluded that Uruguay’s lack of resources is the “common denominator” that has allowed criminals to launder drug trafficking profits through corporate structures and properties.

International Implications

The issue of Uruguay’s role in international money laundering was exemplified in Punta del Este, where Los Cuinis, who ran the finances of Jalisco Cartel New Generation (CJNG), laundered millions through the Uruguayan financial system. Similarly, Uruguayans linked to massive international cocaine shipments have utilized Uruguay’s financial system to launder profits.

Loopholes and Lack of Resources

Despite a surge in suspicious financial operations, Uruguay’s government passed a law in 2020 that increased the limits on cash payments from $4,000 to $100,000, citing financial freedom. Critics argue that this law is a step backwards in the fight against money laundering, as it allows large purchases to go unchecked.

Montesdeoca noted that there are only 12 people investigating financial operations and strategies, plus a few supervisors in specific sectors. In comparison, other countries in the region have at least 50, 60, or 70 people dedicated to this work.

Comparison with Paraguay

Montesdeoca used Paraguay as a leading example. Despite the country’s struggles with corruption and a large informal economy, it invested significant resources towards investigating money laundering following an investigation by the Latin America Anti-Money Laundering Group (GAFILAT). Since then, Paraguay has seen a substantial increase in seizures and convictions related to money laundering.

Addressing the Challenge

Uruguay faces a unique challenge: the country is not widely associated with criminal activity. By neglecting investigations into money laundering, Uruguay risks under-detecting the crime, which reinforces the notion that it is not a significant problem. The first steps to address this issue have already been taken, including SENACLAFT funding Montesdeoca’s evaluation and the establishment of a prosecutor’s office dedicated to money laundering in early 2023. The country’s legislative branch is currently discussing changing the 2020 law that raised the limit for cash payments. The next step: assuming money laundering as a critical problem and implementing methods beyond just laws and regulations.