Guatemala has become an excellent money-laundering stopover for at least two reasons: its traditionally lax regulatory system, which allows for tax evasion, and its position as a regional shelter for drug cartels and organized crime. For example, Guatemala's tolerance for corruption invites masses of dirty money from Mexican and Central American narcotraffickers by failing to subject the country's wealthiest fortunes to solid accountability requirements. As proof of this tolerance, court trials between 2009 and 2010 resulted in less than two dozen convictions, the most of which were against mules caught open-handed carrying hundreds of dollars in cash while traveling through La Aurora International Airport.
Money Laundering in Guatemala
Traditional capital, licit emergent capital, and illegal emergent capital are the three origins of Guatemalan capital. During the colonial era, indigo cultivation provided conventional, aristocratic riches. These riches diversified into coffee, sugar, and bananas in the nineteenth century and then into concrete and beer in the twentieth century. Traditional wealth is now concentrated in textile manufacturing, finance, and international enterprises. Its riches now range from agro-export to global finance.
Drug Trafficking in Guatemala
The FBI and DEA have been conducting significant and frequent investigations into Drug Trafficking Organizations ("DTOs") in Guatemala since at least 2013. Both agencies have emphasized Guatemala's strategic importance for large-scale DTOs because it is a key transportation hub in the cocaine trafficking pipeline that begins in Colombia and travels through Central America and Mexico before branching off into various locations throughout the United States. Colombian and Mexican DTOs often acquire and sell multi-ton amounts of cocaine in Guatemala to evade discovery by US law enforcement, creating many chances for Guatemalan DTOs to act as intermediates receiving and re-selling cocaine. To take advantage of this opportunity, Guatemalan traffickers depend on the cooperation of government officials and members of the country's corporate sector.
AML Regulator of Guatemala: CICIG
The Foreign Commission Against Impunity in Guatemala (CICIG — Comisión Internacional Contra la Impunidad en Guatemala) is a hybrid agency supported by the United Nations (UN) that consists of Guatemalan and international investigators and prosecutors. It was established in 2007 to dismantle organized criminal networks and prevent money laundering inside the security and judicial systems. To date, its activity has resulted in the incarceration of a former president, generals, colonels, and wealthy business people who were previously untouchable in terms of national justice. The commission is regarded as a role model for the region to put an end to criminal impunity in Guatemala. Its current leader, Costa Rican Francisco Dall'Anese, views the wealth that Mexican cartels are shifting to investment and money-laundering hubs in the area as the region's most significant danger. The amount of cash that can be gained by laundering is undeniably appealing. Approximately 10% of the proceeds from the 400 tons of cocaine carried yearly from South America to the United States stay in Guatemala. This equates to around $500 million, or 2% of GDP. Furthermore, about $400 million of the national budget is spent without adhering to international transparency rules, raising the chance that part of it may be corrupted.
AML Regulations
Guatemala passed the Act Against the Laundering of Money in 2001 to prevent, regulate, oversee, and penalize money laundering. Furthermore, the Guatemalan Congress passed the Act to Prevent and Punish Terrorist Financing in 2005.
Although both money laundering and terrorist funding are classified as crimes, the legislation governing them was passed sixteen and twenty years ago, respectively. The vehicles used to commit both crimes have evolved, utilizing other currently unregulated economic actions, new instruments, technologies, systems, and, in general, higher levels of sophistication, which were not anticipated in the aforementioned bills, rendering them outdated and inapplicable in many cases.
In November 2020, a new bill was introduced in Congress to modernize and unify the Act Against the Laundering of Money or Other Assets and the Act to Prevent and Punish Terrorist Financing, to incorporate into Guatemalan legislation the most current practices and international standards outlined in the Financial Action Task Force (FATF) Recommendations. For example, assessing risks and applying a risk-based approach, money laundering crime typified as including the broadest range of predicate offenses, confiscation, and provisional measures, terrorist financing typified as not only by financing terrorist acts but also by financing terrorist organizations and individual terrorists even if there is no connection to a specific terrorist act or acts.
Furthermore, because the terms of the list of persons considered to be Obliged Persons are broadly defined, companies that provide digital wallet services or services related to cryptocurrencies may be regarded as to be Obliged Persons and, as a result, required to comply with the reporting obligations and refrain from the prohibitions established by the bill. Digital wallets and digital currencies are presently unregulated under Guatemalan law, and this legislative proposal seeks to bring them to the forefront for further regulation.
