Countries/Jurisdictions of Primary Concern - 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).
Casinos, the postal money order market, the smuggling of bulk cash, gasoline, liquor, household appliances, wire transfers, remittances, the securities markets, games of chance and other lottery schemes, electronic currency, prepaid debit cards, and prepaid cellular minutes are other techniques used to repatriate illicit proceeds to Colombia or to launder illicit funds within Colombia’s borders. The trade of counterfeit items in violation of intellectual property rights is another method to launder illicit proceeds. The 104 free trade zones in Colombia present opportunities for criminals to take advantage of inadequate regulation, supervision, and transparency.
Criminal organizations with connections to financial institutions in other countries smuggle merchandise to launder money through the formal financial system using trade and the non-bank financial system. In the black market peso exchange (BMPE), goods are bought with drug dollars from abroad and are either smuggled into Colombia via Panama, Venezuela, and other neighboring countries or brought directly into Colombia’s customs warehouses, avoiding taxes, tariffs, and customs duties. Counterfeit and smuggled goods are readily available in well-established black markets in most major cities in Colombia, with proceeds from the sales of these goods directly benefiting criminal enterprises. In other trade-based money laundering schemes, goods are over- or under-invoiced to transfer value. According to experienced BMPE industry workers, evasion of the normal customs charges is frequently facilitated by the complicity of corrupt Colombian customs authorities.
COLJUEGOS is a relatively new organization charged with regulating the gaming industry and all national and departmental lotteries. Indications are that much money laundering activity has moved to regionally-run lotteries called “Chance,” which are easily exploitable due to weaknesses in the reporting system of these games to central government regulators. COLJUEGOS is currently undertaking studies to better understand the incidents of suspicious transactions in “Chance” games.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.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: List approach
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, stock exchanges and brokers, mutual funds, investment funds, export and import intermediaries (customs brokers), credit unions, wire remitters, money exchange houses, public agencies, notaries, casinos, lottery operators, car dealers, gold dealers, foreign currency traders, sports clubs, cargo transport operators, and postal order remitters
Number of STRs received and time frame: 6,943: January – November 2014
Number of CTRs received and time frame: 17,641,361: January – November 2014
STR covered entities: Banks, securities broker/dealers, trust companies, pension funds, savings and credit cooperatives, depository and lending institutions, lotteries and casinos, vehicle dealers, currency dealers, importers/exporters and international gold traders
money laundering criminal Prosecutions/convictions:
Prosecutions: 46: January - October 2014
Convictions: 57: January - October 2014
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Colombia is a member of the Financial Action Task Force in Latin America (GAFILAT), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.gafisud.info/pdf/InformedeEvaluacinMutuaRepblicadeColombia_1.pdf
Enforcement and implementation issues and comments:
Key impediments to developing an effective AML/CFT regime are underdeveloped institutional capacity, lack of experience, and an inadequate level of expertise in investigating and prosecuting complex financial crimes. Colombian laws are limited in their respective authorities to allow different agencies to collaborate and pursue financial crimes, and there is a lack of clear roles and responsibilities among agencies. Despite improvements, regulatory institutions have limited analytical capacity and tools, and lack the technology to effectively utilize the vast amount of available data.
The Colombian Penal Code lays out a framework for an oral accusatory criminal justice system. Under the 2014 reorganization of the Colombian Attorney General’s Office (Fiscalia), the Antinarcotics and Money Laundering Unit (DFALA) is responsible for investigating the country’s money laundering and narcotics trafficking cases with support from the Colombian National Police (CNP) and the Prosecutor General’s investigative body, the Technical Investigation Corps (CTI). In addition, the newly created Economic and Financial Police (PEF), housed within the Attorney General’s Office and comprised of prosecutors, judicial police, investigators, and analysts, intends to, for the first time, create a truly specialized investigative body with the technical, financial, and investigative expertise to successfully detect, investigate, and prosecute money laundering/terrorist financing (ML/TF) cases. In addition, PEF considers the development of a successful methodology for use by all Colombian government entities involved in the regulation of the Colombian financial system, or tasked with investigating violations of the laws that regulate the financial system, as one of its primary objectives. Despite these positive institutional steps, the legal framework requires that all cases be investigated, creating a resource challenge for the limited number of prosecutors, who focus on the most serious cases. Misallocation of training resources has limited the pool of prosecutors, police, and investigators outside of Bogota who have the ability to successfully investigate and prosecute ML/TF cases. Additional training is required and investigators should have additional specialized financial training. Colombia should increase the number of judges specifically assigned to money laundering and asset forfeiture cases both in Bogota and in the regions where many of these cases occur.
COLJUEGOS has made some gains in the last year, adding analytic capacity through technology purchases and training. However, the agency still has difficulty completing its regulatory obligations due to a lack of resources, unfamiliarity with how to process and share information with prosecutors and judicial police, and a lack of information sharing agreements with other regulatory and intelligence agencies. COLJUEGOS will seek to address the reporting by “Chance” games and other regulatory weaknesses by introducing stronger regulations in 2015.
Colombian law limits the effectiveness of law enforcement by restricting the disclosure of financial intelligence from Colombia’s financial intelligence unit (FIU), the Unit for Information and Financial Analysis (UIAF), to the Attorney General’s office only. New UIAF leadership has worked to improve interagency cooperation and successfully proposed a legislative change to designate the unit as an intelligence agency, allowing it to share information with other intelligence agencies. Colombia took steps to foster better interagency cooperation -- including improved case coordination among the UIAF, prosecutors, and the CNP’s specialized judicial police units. Despite these improvements, the legal requirement that prosecutors conduct investigations means that many cases already investigated by UIAF must be re-examined by the Attorney General’s office. This increases case processing time and adds unnecessarily to prosecutor caseloads. The UIAF, in addition to regulatory agencies, should develop a mechanism for including prosecutors in their investigations from the very start to ensure greater prosecutor participation and that the information gathered will be of use to the prosecutors during their own investigation and prosecution of a case.
In 2013, the UIAF implemented an assessment methodology to proactively generate tangible results in identifying criminal money laundering networks. This methodology allowed it, over a two-year period, to detect illicit assets related to 251 Colombian investigations, with an approximate commercial value of $4.4 billion. In 2013, Colombia seized more than $800 million of assets associated with drug trafficking and money laundering activities, more than double the value of seized assets in 2012.
Colombia is developing as a regional AML/CFT leader, and is a key component of a regional FIU initiative to establish greater information sharing to combat transnational financial crimes. The UIAF is working with FinCEN and Mexico’s FIU, while the PEF will seek to foster the establishment of similar units in other Latin American countries, especially those where criminal organizations have strong ties to Colombian counterparts and aid in the two-way flow of illicit goods and money.
Colombia’s 2014 Asset Forfeiture Reform Law, Law 1708, which entered into force on July 21, 2014, streamlines the asset forfeiture process and is expected to reduce forfeiture case processing time. Law 1708 also authorizes Colombian prosecutors and courts, for the first time, to register and enforce foreign (including U.S.) judgments of forfeiture against assets located in Colombia, and provides the first legal authority for Colombia to share a portion of the assets it forfeits with other countries that have facilitated the Colombian forfeitures. While the law gives Colombian authorities a strong tool, lack of familiarity with the law, especially outside of Bogota, continues to challenge the judicial sector. In 2014 the Colombian government reorganized the body in charge of managing seized assets, which should increase the speed by which these assets can be discharged and the funds disbursed to the appropriate government entities.
The Government of Colombia should pass legislation that broadens respective authorities among agencies to foster collaboration in pursuing financial crimes. Agencies should have a clear delineation of roles and responsibilities, and regulatory institutions should have expanded analytical capacity and tools, including technology, to utilize successfully the vast amount of available data. Colombia should ensure appropriate training is provided to all officials involved in supervising, investigating, and prosecuting money laundering and terrorism financing.