Guatemala, with its traditionally lax regulatory system and status as a regional haven for drug cartels and organized crime, has unfortunately become a prominent destination for money laundering. This guide sheds light on the issues of money laundering and drug trafficking in Guatemala, highlighting their origins, consequences, and the efforts being made to combat them.
Money Laundering in Guatemala
Origins of Guatemalan Capital
Guatemala's capital can be categorized into three types: traditional capital, licit emergent capital, and illegal emergent capital. Historically, conventional wealth stemmed from indigo cultivation during the colonial era, evolving into coffee, sugar, and banana industries in the 19th century and later diversifying into concrete and beer in the 20th century. Today, traditional wealth is concentrated in textile manufacturing, finance, and international enterprises, covering everything from agro-export to global finance.
Money Laundering and Tax Evasion
Guatemala's lenient regulatory system has facilitated money laundering and tax evasion, inviting significant inflows of illicit funds. The lack of stringent accountability requirements for the country's wealthiest individuals has perpetuated this issue, as evidenced by the low number of convictions in court trials between 2009 and 2010, primarily targeting low-level individuals carrying small amounts of cash through the La Aurora International Airport.
Drug Trafficking in Guatemala
Guatemala has assumed a strategic role in the drug trafficking pipeline, acting as a crucial transportation hub for cocaine trafficking originating in Colombia and passing through Central America and Mexico before entering the United States. Colombian and Mexican drug trafficking organizations often use Guatemala to acquire and distribute large quantities of cocaine, creating opportunities for local drug trafficking organizations to serve as intermediaries. This reliance on Guatemala's cooperation underscores the involvement of government officials and corporate entities in the drug trade.
AML Regulation in Guatemala
The Role of CICIG
The Foreign Commission Against Impunity in Guatemala (CICIG) is a hybrid agency backed by the United Nations (UN) dedicated to dismantling organized criminal networks and combating money laundering within Guatemala's security and judicial systems. Established in 2007, CICIG has achieved remarkable success, including the prosecution of former presidents, high-ranking military officers, and wealthy business figures who were previously untouchable. CICIG serves as a model for curbing criminal impunity in Guatemala.
Challenges and Opportunities
The flow of wealth from Mexican cartels into investment and money-laundering hubs in the region is a significant concern, as it results in substantial amounts of illicit cash. Approximately 10% of the proceeds from the annual transport of 400 tons of cocaine from South America to the United States stay within Guatemala, equivalent to around $500 million or 2% of the country's GDP. Moreover, a significant portion of the national budget, approximately $400 million, lacks transparency and is susceptible to corruption.
Modernizing AML Regulations
Guatemala introduced the Act Against the Laundering of Money in 2001 and the Act to Prevent and Punish Terrorist Financing in 2005 to combat money laundering and terrorist funding. However, these laws are outdated, failing to address evolving methods and technologies used in these crimes. In November 2020, a bill was proposed in Congress to modernize and unify these laws, aligning them with international standards outlined in the Financial Action Task Force (FATF) Recommendations. The proposed bill aims to expand the definition of money laundering and terrorist financing, encompassing a broader range of offenses while also bringing digital wallet services and cryptocurrencies under regulatory oversight.
Guatemala's struggle against money laundering and drug trafficking involves multiple facets, from the historical origins of its capital to the modernization of its legal framework. Efforts by organizations like CICIG, combined with updated legislation, offer hope for mitigating these challenges and curbing criminal activities in the country.