Sean Knoflin/Flickr*

Yesterday, Colombia’s Prosecutor-General, Viviane Morales, spoke about the pervasive role money laundering plays in Colombia’s economy while participating in Pan American Congress on Money Laundering Risk and Terrorism Financing in the city of Cartagena.  She cited statistics from her government that place the scale of money laundering at $8 billion, roughly 3% of GDP.  She also said the government lacked the ability to effectively address the situation.  The eStandards Foundation, which montiors financial standards around the world, had this to say about Colombian compliance programs:

[T]he U.S. Department of State (DoS) reported in 2008 that the banking sector, nonbank financial system, off-shore centers, and trade operations are used for money laundering purposes. Customs officials are not properly equipped and trained to detect cross border cash smuggling, and the government has failed to address corruption and congestion in the court system.

In their 2007 assessment on the AML standards of the Financial Action Task Force, Colombia was “non-compliant” on three of the group’s 40 anti-money laundering benchmarks, and likewise failed to meet 6 of the 8 terrorist financing provisions.  It was only in full compliance with 12 AML standards and one anti-terror.

The major role played by the drug trade in Colombia contributes to the scale of this problem, exacerbated by the ongoing violent activities of FARC, a Marxist revolutionary group.

GFI had estimated the net outflow of illicit funds from Colombia at just under $3.1 billion annually.  While both numbers approach a similar problem, there are a few significant factors contributing to this discrepancy.  GFI measured only the net outflow of illicit funds, accounting for money laundering, but also other factors like trade mispricing, while Morales’ numbers include both inflows of laundered money as well as laundering on a domestic scale.

Worldwide, money laundering reaches a scale of over $1 trillion, often financing the international drug trade, human trafficking, or terrorist organizations.  Strengthening AML regulations in developed countries by making money laundering a predicate offense would not only help nations like Colombia deal with these issues, but also curb the detrimental effect the criminal activities of launderers has around the globe.  More about the Task Force’s money laundering recommendations can be found here.

*Image License: Some rights reserved by (sean)

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