Countries/Jurisdictions of Primary Concern - Guatemala
Guatemala is not considered a regional financial center. 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. However, beginning in April 2015 numerous corruption cases at the highest levels have shed a new light on money laundering, launched new criminal investigations, and forced a sitting president, vice president, and other leading lawmakers to resign and await criminal trials from prison. The scandal known as “La Linea” involved trade-based money laundering and customs fraud; importers paid millions of dollars in bribes to avoid huge customs tax payments.
With the “La Linea” corruption scandal acting as a catalyst, the UN-backed anti-impunity body, the International Commission against Impunity in Guatemala (CICIG), and the Public Ministry turned their attention toward pursuing more regional politicians who have long enjoyed impunity, despite multiple accusations of malfeasance. In a 2015 report, the CICIG asserts that Guatemala’s political parties derive half of their financing from corruption or from criminal groups. Politicians create corrupt networks sourcing illicit funds from kickbacks, bogus public works contracts, and occasional alliances with local drug traffickers. Over the last few decades, organized crime groups – particularly those involved with narcotics trafficking – have infiltrated politics through money and violence. Meanwhile, wealthy elites and businesses have privately financed candidates and political parties to gain access to public resources and pursue special interests. Money collectors the CICIG calls “recaudadores” are responsible for handling dirty money within these networks, in order to influence both local and national politics.
According to law enforcement agencies, narcotics trafficking, corruption, and extortion are the primary sources of money laundered in Guatemala; however, the laundering of proceeds from other illicit activities, such as human trafficking, firearms, contraband, kidnapping, tax evasion, and vehicle theft, is substantial. Money laundering occurs in the real estate sector, ranching, and concert business. Law enforcement agencies report money laundering occurs via groups of air travelers heading to countries, such as Panama, with slightly less than the amount of the Guatemalan reporting requirement ($10,000), and through a large number of small deposits in banks along the Guatemalan border with Mexico. In addition, lax oversight of private international flights originating in Guatemala provides an additional avenue to transport bulk cash shipments directly to South America.
Guatemala’s geographic location makes it an ideal haven for transnational organized crime groups, including human and drug trafficking organizations. The Central America Four Border Control Agreement among El Salvador, Guatemala, Honduras, and Nicaragua allows for free movement of the citizens of these countries across their respective borders without passing through immigration or customs inspection. As such, the agreement represents a vulnerability to each country for the cross-border movement of contraband, trafficked persons, and illicit proceeds of crime. As a result of this agreement, Guatemalan customs officials are not requiring travelers crossing their land border to report cash in amounts greater than $10,000, as required by law.
There is a category of “offshore” banks in Guatemala in which the customers’ money (usually Guatemalans with average deposits of $100,000) is legally considered to be deposited in the foreign country where the bank’s head office is based. In 2014, there were six “offshore” entities, with head offices in Panama, the Bahamas, Barbados, and Puerto Rico. These “offshore” banks are subject to the same AML/CFT regulations as any local bank. Guatemala has 17 active free trade zones (FTZs). FTZs are mainly used to import duty-free goods utilized in the manufacturing of products for exportation, and there are no known cases or allegations that indicate the FTZs are hubs of money laundering or drug trafficking activity. A significant number of remittances are transferred through money service businesses and may be linked to the trafficking of persons.
Casinos are currently unregulated in Guatemala and a number of casinos, games of chance, and video lotteries operate, both onshore and offshore. Unregulated gaming activity presents a significant money laundering risk.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: YES
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks and offshore banks; credit unions; finance, factoring, and leasing companies; bonded warehouses; credit card companies, cooperatives, issuers, or payment agents; stock brokers; insurance companies; Institute of Insured Mortgages; money remitters and exchanges; pawn brokers; public accountants and auditors; raffles and games of chance; nonprofit entities; dealers in precious metals and stones, motor vehicles, and art and antiquities; real estate agents, lawyers, notaries, and other independent legal professionals; and churches that receive funds from the Government of Guatemala
Number of STRs received and time frame: 1,013: January 1 - October 31, 2015
Number of CTRs received and time frame: 8,194,138: January 1 - September 30, 2015
STR covered entities: Banks and offshore banks; credit unions; bonded warehouses; finance, factoring, and leasing companies; credit card companies, cooperatives, issuers, or payment agents; stock brokers; insurance companies, brokers, and independent agents; Institute of Insured Mortgages; money remitters and exchanges; pawn brokers; public accountants and auditors; raffles and games of chance; nonprofit entities; dealers in precious metals and stones, motor vehicles, and art and antiquities; real estate agents; armoring services and rental of armored vehicles; providers of fiscal domicile and other corporate services
money laundering criminal Prosecutions/convictions:
Prosecutions: 41: January 1 – November 13, 2015
Convictions: 41: January 1 – November 13, 2015
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Guatemala is a member of both the Caribbean Financial Action Task Force (CFATF) and the Financial Action Task Force of Latin America (GAFILAT), FATF-style regional bodies. Its most recent mutual evaluation can be found at: https://www.cfatf-gafic.org/index.php?option=com_docman&task=cat_view&gid=344&Itemid=418&lang=en.
Enforcement and implementation issues and comments:
As a result of the “La Linea” corruption scandal, banks are increasingly facing pressure and fines for failing to complete suspicious transaction reports, in some cases allegedly directly linked to money laundering activities and customs fraud. However, fines for irregular bank activities are small. Additionally, the Special Verification Agency (IVE), which is the Guatemalan financial intelligence unit, and banks themselves are taking a more careful look at bank transfers. The IVE is also looking into money wiring services for suspicious activities.
Recent multiple arrests for corruption and more aggressive law enforcement appear to be bringing down the levels of illicit cash moving through the international airport in Guatemala City. The recent appointment of a full-time prosecutor assigned to the airport has helped in these efforts. Additionally, there is a special police unit that works at the airport 24/7. There is no indication of terrorist financing activities.
A 2010 regulation establishes limits for cash deposits in foreign currency. According to law enforcement authorities, banks’ purchases of foreign currency declined 6.8 percent in 2014 and 6.9 percent during the first nine months of 2015 in relation to the same period in the previous year. Structuring of transactions to avoid cash reporting requirements is not against the law in Guatemala.
Guatemala’s AML law does not cover all designated non-financial businesses and professions (DNFBPs) included in international standards, in particular, lawyers. Notaries are covered under the CFT law, but no implementing procedures have been adopted for them. Under the CFT law, STR filing is optional for notaries. Reportedly, covered entities expressed fear that there may be repercussions if they file reports. Tipping off is not criminalized.
Although staffing of the IVE has increased over the last several years, as has the number of filed Suspicious Transaction Reports (STRs), there are still relatively few convictions for money laundering, most of which are for illegal transport of cash. The limited capacity and number of both law enforcement officials and Public Ministry, i.e., the Attorney General’s Office (AGO), staff may hamper these authorities from enforcing the law and successfully prosecuting more cases. Furthermore, the AGO has too many cases and no case management system, leading to a lack of prioritization and years-long backlog of cases and seized assets. Currently, $15.1 million of seized cash sits in a vault at the Public Ministry, related to cases dating back to 2008.
The Government of Guatemala should put into force a gaming law to regulate the industry and reduce money laundering. A draft gaming law has been under consideration by Congress for the last few years. Guatemala should amend its AML/CFT legislation to criminalize structuring of transactions and tipping off, cover all applicable DNFBPs, and protect filers of STRs from liability. The Government of Guatemala should continue its efforts to shed light on entrenched corruption and investigate and prosecute organized criminal groups and others that attempt to exert control over politicians and political parties via tainted funds.