The fight against money laundering: This is the international story and the case of Colombia

Magdalena Ovalle

Líder de Comunicaciones Internas @ Kushki

October 13, 2020

4 min read

Many of us have seen the series and movies that show the history of criminal groups and how these networks launder large sums of money. The truth is that these scripts are not completely removed from reality, and it is that when illegal activities are carried out, the immediate need to camouflage the origin of all those funds and to make them unnoticed by the auditors also emerges. Many of the cases are concentrated in the region: Latin America and the Caribbean are at the riskiest ends of the Anti-Money Laundering Index 2020, published by the Basel Institute for Governance, a study center located in Switzerland.

The history, though, started much earlier and more to the north of the continent. In 1920, the term “money laundering” began to be used when American mafias created networks of laundries to hide the origin of illegal funds that came from criminal activities. For these groups, led by some of the most famous gangsters, such as Al Capone or Meyer Lanski, the reason was simple and without much science: Since most of the laundries payments were made with cash, it was the easiest way to camouflage money and not to be able to track all of its origins.

The starting point

What is the problem based on? All starts with the principle that, what is born unlawful or unlawfully acquired, may never be lawful. At the most, it could achieve a certain appearance of legality. The States of different countries prosecute money laundering based on that basic principle.

In 1970, a normative effort against money laundering was inaugurated in the United States. It was the so-called Bank Secrecy Act. Until that moment, criminals had learned to easily tap confidentiality to hide all types of activities. The American Congress raised its voice, and the duty to know the customer was established, report transactions and monetary securities, to name a few, was enacted. All that, accompanied by sanctions if not fulfilled.

A little later, in 1973, President Nixon created the mythical DEA (Drug Enforcement Administration), which is pictured in many big-screen productions. That same year, Time magazine published an article that pointed to Colombia as “the new drug hub”. Journalist Alberto Llera claimed that, from the coffee country, drugs were distributed to Jackson Heights in New York.

Colombia and Money Laundering

It turned out that Time magazine was not very wrong. In Colombia, drug trafficking was taking force in the 1980s and 1990s. One of the world’s most famous drug trafficking kingpins was Pablo Escobar, the Medellin cartel’s head. According to international figures and estimates, it is estimated that the Colombian came to be among the ten richest people in the world.

In the Colombian criminal code, anyone who acquires, safeguards, invests, transports, transforms, stores, preserves, protects or manages assets that have a mediate or immediate origin in criminal activities, such as smuggling of migrants, drug trafficking or terrorist financing, Among many other crimes, might be subject to a sentence from ten to thirty years of imprisonment, and a fine from a thousand to fifty thousand enforceable minimum monthly legal salaries; that is, any person who is involved in the chain that is used to launder money, knowingly or not, can be affected.

Therefore, every October 29, the National Day for the Prevention of Money Laundering and Terrorism Financing is celebrated in Colombia. The event is organized by the Bogotá Chamber of Commerce, the United Nations Office on Drugs and Crime, and Responsible and Safe Businesses (NRS in Spanish), as space to nationally promote anti-money laundering culture and education. At Kushki, we endorse the National Day for the Prevention of Money Laundering and Terrorism Financing.

Latin America in the Crosshair

In the year 2000, the Latin America Financial Action Task Force (Galifat in Spanish) is created to tackle money laundering, the financing of terrorism and the proliferation of weapons of mass destruction. The entity covers 17 countries in South America, Central America, North America and the Caribbean. In 2019, they released a Money Laundering Regional Threat Report. On it, seven current threats were identified:

  • Illicit trafficking in narcotic drugs and psychotropic substances
  • Illicit Cross-Border Transportation of Cash
  • Tax Crimes (direct and indirect taxes)
  • Participation in organized criminal groups
  • Smuggling (including taxes and customs charges)
  • Corruption and bribery
  • Trafficking in Human Beings and Migrant Smuggling

Also, the Anti-Money Laundering Index AML 2020, of the Basel Institute of Governance, evaluates the vulnerabilities of countries and their capabilities to react to these crimes. Scores are calculated based on data from large institutions, such as the Financial Action Task Force, Transparency International, the World Bank and the World Economic Forum. In the 2020 version of the report, Chile’s score reached 3.82, being placed at 125 of 141 countries, being the best evaluated in Latin America and the Caribbean. Venezuela and Mexico were some of the worst rankings in the region, falling in the “high risk” section, with scores of 6.56 and 5.20 respectively.

What do we do in Kushki to fight it?

In the world, approximately two trillion dollars are laundered each year. That’s why in Kushki, we are very aware of the threats that this activity entails for our region. We have a risk management system to prevent money laundering and terrorism financing. We ensure that we know our customers, and verify that they work transparently, in a way that can detect any type of behavior that is out of normal. If this malpractice was easy to attack only by controllers, it would already have been ended years ago. Unfortunately, it is not so, and the techniques are becoming sophisticated year after year, so it is necessary for each link in the chain to do its part.

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