From Caribbean News Now

WASHINGTON, USA — Fourteen nations in the wider Caribbean have been named by the US as “major money laundering” countries in the 2016 International Narcotics Control Strategy Report (INCSR) released by the US State Department on Wednesday.

A major money laundering country is defined as one “whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking”.

Antigua and Barbuda
Antigua and Barbuda is an offshore centre that continues to be vulnerable to money laundering and other financial crimes. Its relatively large financial sector and internet gaming industry add to its susceptibility. According to the Antiguan Office of National Drug Control and Money Laundering Policy (AONDCP), the collaborative efforts between Antigua and Barbuda and United States law enforcement agencies have brought about a decrease in drug trafficking activity.

Bahamas
The Bahamas is a regional and offshore financial centre. The country’s economy is heavily reliant upon tourism, tourism-driven construction, and the offshore financial sector. The Bahamas remains a transit point for illegal drugs bound for the United States and other international markets. The major sources of laundered proceeds are drug trafficking, firearms trafficking, gambling, and human smuggling.

Money laundering trends include the purchase of real estate, large vehicles, boats, and jewelry, as well as the processing of money through a complex web of legitimate businesses and international business companies (IBCs) registered in the offshore financial sector. Drug traffickers and other criminal organizations take advantage of the large number of IBCs and offshore banks registered in The Bahamas to launder significant sums of money.

Belize
Belize is not a major regional financial centre; however, it has a substantial offshore financial sector. Belize is a transshipment point for marijuana and cocaine, and human trafficking is a concern. There are strong indications that laundered proceeds are increasingly related to organized criminal groups involved in the trafficking of illegal narcotics, psychotropic substances, and chemical precursors. The government of Belize continues to encourage offshore financial activities that are vulnerable to money laundering and terrorist financing, including offshore banks, insurance companies, trust service providers, mutual fund companies, and international business companies.

British Virgin Islands
The British Virgin Islands (BVI) is a UK overseas territory. The economy is dependent on tourism and the offshore financial sector. BVI is a well-established, sophisticated financial centre offering accounting, banking, and legal services; captive insurance; company incorporation; mutual funds administration; trust formation; and shipping registration. The BVI is advertised as the world’s leading offshore centre with more offshore companies than any other country. As of September 2015, the banking sector has assets valued at $2.4 billion.

Cayman Islands
The Cayman Islands, a UK Caribbean overseas territory, is an offshore financial centre. Most money laundering that occurs in the Cayman Islands is primarily related to foreign criminal activity and involves fraud, tax evasion, and drug trafficking, largely cocaine. The offshore sector is used to layer or place funds into the Cayman Islands financial system. Due to its status as a zero-tax regime, the Cayman Islands is also considered attractive to those seeking to evade taxes in their home jurisdictions.

Colombia
Despite the government of Colombia’s fairly strict AML/CFT regime, the laundering of money, primarily from Colombia’s illicit drug trade and illegal mining, continues to penetrate its economy and affect its financial institutions. Money laundering is a significant avenue for terrorist financing in geographic areas controlled by both the Revolutionary Armed Forces of Colombia (FARC) and the bandas criminales (BACRIM). In 2015 there was a reported uptick in the use of dirty money to influence local and national elections.

Costa Rica
Transnational criminal organizations increasingly favour Costa Rica as a base to commit financial crimes, including money laundering, as a result of its geographic location and other factors, including limited enforcement capability. This trend raises serious concerns about the Costa Rican government’s ability to prevent these organizations from further infiltrating the economy. As Costa Rica has shifted from a transit point to an operations base for regional narcotics trafficking organizations, the laundering of proceeds from illicit activities has increased.

Proceeds from international narcotics trafficking represent the largest source of assets laundered in Costa Rica, although human trafficking, financial fraud, corruption, and contraband smuggling also generate illicit revenue. In 2015, the head of Costa Rica’s intelligence agency, said that approximately $4.2 billion annually is laundered in Costa Rica.

Curacao
Curacao is an autonomous country within the Kingdom of the Netherlands that defers to the Kingdom in matters of defence, foreign affairs, final judicial review, human rights, and good governance. Curacao is considered a regional financial centre and, due to its location, it is a transshipment point for drugs from South America bound for the United States, the Caribbean, and Europe. Money laundering is primarily related to proceeds from illegal narcotics.

Money laundering organizations take advantage of the availability of US dollars, banking secrecy, offshore banking and incorporation systems, two free trade zones (airport and harbour), an expansive shipping container terminal with the largest oil transshipment center in the Caribbean, and resort/casino complexes to place, layer, and launder illegal proceeds.

Money laundering occurs through real estate purchases and international tax shelters. Laundering activity also occurs through wire transfers and cash transport among Curacao, the Netherlands, and other Dutch Caribbean islands and illegal underground banking. Bulk cash smuggling is a continuing problem due to Curacao’s close proximity to South America.

Dominican Republic
The Dominican Republic (DR) is not a major regional financial centre, despite having one of the largest economies in the Caribbean. The DR continues to be a major transit point for the transshipment of illicit narcotics destined for the United States and Europe. The six international airports, 16 seaports, and a large porous frontier with Haiti present Dominican authorities with serious challenges. Corruption within the government and the private sector, the presence of international illicit trafficking cartels, a large informal economy, and weak financial controls make the DR vulnerable to money laundering and terrorism financing threats.

Guatemala
Guatemala is not considered a regional financial centre. It continues to be a transshipment route for South American cocaine and heroin destined for the United States, and for cash returning to South America. Smuggling of synthetic drug precursors is also a problem. Reports suggest the narcotics trade is increasingly linked to arms trafficking. Historically weak law enforcement agencies and judiciary, coupled with endemic corruption and increasing organized crime activity, contribute to a favorable climate for significant money laundering in Guatemala.

Haiti
Haitian criminal gangs are engaged in international drug trafficking and other criminal and fraudulent activity, but do not appear to be involved in terrorist financing. While Haiti itself is not a major financial centre, regional narcotics and money laundering enterprises utilize Haitian couriers, primarily via maritime routes. Much of the drug trafficking in Haiti, as well as the related money laundering, is connected to the United States. Further, most of the identified money laundering schemes involve significant amounts of US currency held in financial institutions outside of Haiti or non-financial entities in Haiti, such as restaurants and other small businesses.

A great majority of property confiscations to date have involved significant drug traffickers convicted in the United States. Illicit proceeds are also generated from corruption, embezzlement of government funds, smuggling, counterfeiting, kidnappings for ransom, illegal emigration and associated activities, and tax fraud.

Panama
Panama’s strategic geographic location; dollarized economy; status as a regional financial, trade, and logistics centre; and lax regulatory system make it an attractive target for money launderers. Money laundered in Panama is believed to come in large part from the proceeds of drug trafficking due to the country’s location along major drug trafficking routes. Tax evasion, financial fraud, and corruption also are believed to be major sources of illicit funds.

Numerous factors hinder the fight against money laundering, including the existence of bearer share corporations, a lack of collaboration among government agencies, lack of experience with money laundering investigations and prosecutions, inconsistent enforcement of laws and regulations, and a weak judicial system susceptible to corruption and favoritism.

Money is laundered via bulk cash and trade by exploiting vulnerabilities at the airport, using commercial cover and free trade zones (FTZs), and exploiting the lack of regulatory monitoring in many sectors of the economy. The protection of client secrecy is often stronger than authorities’ ability to pierce the corporate veil to pursue an investigation.

St Maarten
St Maarten is an autonomous entity within the Kingdom of the Netherlands. St Maarten enjoys sovereignty on most internal matters and defers to the Kingdom of the Netherlands in matters of defense, foreign policy, final judicial review, human rights, and good governance. Money laundering is primarily related to proceeds from illegal narcotics trafficking.

Bulk cash smuggling and trade-based money laundering may be problems due to the close proximity to other Caribbean islands and Saint Martin, the French part of the shared island, which is also a free trade zone. St Maarten does not have an offshore banking industry. Many hotels operate casinos on the island, and online gaming is legal and subject to supervision.

St Maarten’s favourable investment climate and rapid economic growth over the last few decades have drawn wealthy investors to the island. Many invested money in large scale real estate developments, including hotels and casinos. In St Maarten, money laundering of criminal profits occurs through business investments, purchases of real estate, and international tax shelters. Its weak government sector continues to be vulnerable to integrity-related crimes.

Venezuela
Conditions in Venezuela make for ample opportunities for financial abuses. Venezuela’s proximity to drug source points and its status as a drug transit country, combined with weak AML enforcement and lack of political will, limited bilateral cooperation, and endemic corruption, make Venezuela vulnerable to money laundering and financial crimes. The porous border between Venezuela and Colombia has also created a burgeoning black market.

Furthermore, Venezuela’s highly distorted multi-tiered foreign exchange system and strict price controls open numerous opportunities for currency and goods arbitrage, including to facilitate money laundering. Although the Venezuela-Colombia border was closed in August 2015 under the auspices of the Venezuelan government’s “state of exception,” nevertheless a robust black market continues to function in the border regions.

Colombian law enforcement and customs officials reported that more than 90 percent of commerce in the border region was related to black market goods and services. Illicit trade and illegal financial activity are common in the border regions. Laundered funds primarily come from drug trafficking, but informal traders offering products ranging from shampoo to gasoline are also profiting through currency manipulation. A series of recent US legal actions against Venezuelan citizens have exposed questionable financial activities related to money laundering and terrorism finance.

Money laundering is widespread in Venezuela, and can be seen in a number of areas, including government currency exchanges, commercial banks, gambling, real estate, agriculture, livestock, securities, metals, the petroleum industry, and minerals. Trade-based money laundering remains a common and profitable method.

The full report may be downloaded here: http://www.state.gov/documents/organization/253655.pdf

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