Closing the Net on Financial Crime Navigating: anti-money laundering and corruption legislation in Latin America

The fight against money laundering has been a global effort for 30 years now since developed nations began to recognise the increasingly sophisticated methods used by criminals and terrorists to legitimise their earnings.

The group of G-7 nations were the first to respond by creating an international body dedicated to the fight against money laundering, namely the Financial Action Task Force (FATF). Since then the FATF has grown to 37 member countries with a number of associate groups attached, one of which is the Financial Action Task Force of Latin America.

Latin America has long been associated with money laundering and corruption, given its problems with drug trafficking, poverty and civil unrest. The spotlight was only intensified by the Panama Papers ‘Scandal’ that hit in 2015.

Bodies such as the FATF have sought to develop a framework of recommendations for governments to follow in order to combat the money laundering threat, although it has been slow going.

In recent years though, the more progressive Latin American countries have made serious efforts to step up their fight against money laundering and corruption, with some high profile results. The backing of international bodies such as the FATF, plus supra-national organisations like the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), has been crucial to the fight.

Brazil, for example, has developed its own anti-money laundering and corruption legislation, which it has used to prosecute Operation Car Wash since 2014.

The investigation was designed to dismantle tax evasion schemes, money laundering activities and other crimes against the Brazilian financial system. So far, it has led to hundreds of arrests (of top-ranked politicians and businessmen), the downfall of Petrobras and contributed to the eventual impeachment of former President Dilma-Rousseff.

US and UN money is also being used to set up aggressive anti-corruption commissions with police powers, designed to attack the root of the corruption problems in the poorest of Latin American states such as Guatemala and Honduras.

The result of this progressive activity is that doing legitimate business in the region has become more difficult. There is a new raft of legislation to comply with and much greater scrutiny of corporate activities. Companies operating in Latin America must take steps to ensure all their staff are aware of new anti-money laundering policies and trained to implement them effectively.

Failure to do so can lead to significant fines or prison times for responsible individuals, particularly directors and top executives.

In this inaugural IR Global Virtual Series for Latin America, we focus on recent developments in AML and corruption legislation. We have chosen a small group of respected experts from four countries in the region to discuss the topic, debating legislative changes and the influence of foreign policies with the aid of examples. We also consider the steps Latin American countries are taking to improve their image with the rest of the global community.