Costa Rica Hosts Workshop on Money Laundering, Terrorist Funding
By Dialogo December 03, 2012
SAN JOSÉ — Officials from across Latin America are sharing ideas in an effort to combat the twin problems of money laundering and the financing of terrorist activities.
Two institutions, the South American Financial Action Task Force [Grupo de Acción Financiera de Sudamérica, or GAFISUD] and Costa Rica’s Alcohol and Drug Dependency Institute [Instituto sobre Alcoholismo y Farmacodependencia, or IAFA], co-sponsored a Nov. 3-4 workshop in the Costa Rican city of Puntarenas to discuss the issue.
Delegates from 14 nations — Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Mexico, Panama, Paraguay, Peru, Uruguay and Venezuela — offered legislative models for combating money laundering in their respective countries.
“GAFISUD is important not only for the government but also for the private sector,” said Mauricio Boraschi Hernández, Costa Rica’s presidential vice-minister and national anti-drug commissioner. “Signs of deficiencies could be detrimental for a country’s image internationally, and could curtail investment and cooperation.”
Organizers noted that while attracting foreign investment is crucial, governments across the region fear a link between money laundering and international terrorism. Most legislation is aimed at both crimes, since the methods used to launder money are similar to those used to hide the sources of terrorism funding.
The main objective of the two-day Puntarenas workshop was to give delegates the skills and information they need to meet new standards for legislation and enforcement laid out last February by the international Financial Action Task Force (FATF). The seminar focused on 40 of the new recommendations, as well as the benefits of anti-money laundering legislation.
Money laundering already a big regional problem Latin America already has the world’s highest incidence of money laundering, according to the Inter-American Development Bank, with as much as 6.3 percent of the region’s GDP devoted to illegal activities.
The U.S. State Department, in its annual money laundering report, named every country in Central and South America as an area of concern for money laundering — with 12 of these countries, including Costa Rica, on the “primary concern” list. The report also estimates that nearly $4.47 billion in illegal funds finds its way through Costa Rica every year.
“At this point, it’s not possible to tell which part of the economy is illegitimate and which part is legitimate,” said Jorge Chavarría, Costa Rica’s attorney general. “They are so mixed together, it’s hard to distinguish.”
Like most Latin American countries, Costa Rica’s largest source of laundered cash comes from drug trafficking, said Chavarría.
A much smaller portion of the money comes from domestic crime, say local officials — noting that Costa Rica’s popular beach towns are particularly vulnerable due to their proximity to the coast and the prevalence of cash-only businesses like restaurants and bars.
Online casinos generates billions annually
Another major concern is Costa Rica’s huge gambling industry. In addition to bricks-and-mortar casinos, the nation is home to one of the world’s largest online betting industries, with the FATF estimating that such activities rack up untold billions of dollars in revenues very year.
Because online gambling is illegal in many countries, entities involved in the business use various methods to conceal their identities on bank statements. The report says the secretive nature of these dealings exposes these companies to abuse by money launderers.
The actual process of money laundering is made easy in Costa Rica due to the prevalence of both legitimate and illegitimate money-transfer businesses. These services began as a way to cater to Costa Rica’s large Nicaraguan immigrant population, estimated by the nonprofit Academy of Central America (ACA) at around 237,000 people.
In 2011, Nicaraguans living in Costa Rica sent about $172 million in remittances back home — translating into an average $134 per month to relatives and friends, said ACA. But his has also become a boon for criminals smuggling dirty money across the border.
In fact, international organizations designated Costa Rica a high-risk money laundering country in 2010 — the same year it was added to the list of the world’s top drug transit countries.
“Costa Rica has updated all of its legislation with the goal of developing a new methodology based on risk analysis,” said Boraschi. “We want to prevent and control [money laundering] in financial institutions and other unregulated bodies.”
New unit deals exclusively with money laundering
Two years ago, the Costa Rican government established its Economic Crimes, Taxation and Money Laundering Bureau. The new unit began working in 2011 and has seen the number of cases related to money laundering rise dramatically since then, said Celso Gamboa, the vice-minister of public security.
“It is becoming more evident every day that we need international investigations,” Gamboa said at an August press conference. “We need tools that do not stop working at the border.”
These new protocols were put to the test following the killing of Argentine singer Facundo Cabral, who was shot after a July concert in Guatemala.
The homicide was traced to Costa Rican gang leader Alejandro Jimenez, nicknamed “El Palidejo” or paleface. A subsequent raid of the criminal’s house turned up evidence that he had been transferring cash between Costa Rica and Nicaragua for years.
In addition to fighting money laundering abroad, Costa Rica took major steps this year to battle domestic crime. Since July, foreigners residing in Costa Rica must show a foreign personal identification document, or DIMEX card, in order to open a bank account. In October, the Ministry of Public Security took the regulations a step further, requiring any foreign national receiving payments or money transfers online to also have such a card.
“It is our way of seeing who does what in the banking system,” Security Minister Mario Zamora said. “In this process, foreigners must give the Immigration Administration information including their immigration history. In case there are ever investigations into their banking transactions, it makes it easier to track their spending over time.”