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. 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. Law enforcement agencies report that money laundering continues to increase, especially by 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. There is no indication of terrorist financing activities.
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 between 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 and illicit proceeds of crime.
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 seven “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 16 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. There are no reported hawala or other money or value transfer services operating in Guatemala. A significant number of remittances are transferred through banks and appear to pose little risk for money laundering.
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: //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: 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; and real estate agents
Number of STRs received and time frame: 774: January 1 - October 31, 2014
Number of CTRs received and time frame: 8,345,729: January 1 - September 30, 2014
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; insurance brokers; independent insurance 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: 33: January 1 – October 31, 2013
Convictions: 47: January 1 - October 31, 2013
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 in 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:
Although staffing of the FIU, the IVE, increased over the last several years, as has the number of filed 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, staff may hamper these authorities from enforcing the law and successfully prosecuting more cases. Structuring of transactions to avoid cash reporting requirements is not against the law in Guatemala.
A 2011 law prevents new businesses from issuing bearer shares of stock. The law required any existing business with bearer shares to convert the shares to nominative by June 2013. According to information from the Mercantile Registry, about 97 percent of businesses that issued bearer shares prior to the entry into force of this law made the conversion to nominative shares by the June 2013 deadline. Shareholders of businesses holding bearer shares after June 2013 are not able to exercise their rights nor carry out any procedure with the Mercantile Registry.
A 2010 regulation establishes limits for cash deposits in foreign currency. According to law enforcement authorities, banks’ purchases of foreign currency declined 0.4 percent in 2013 and 9 percent during the first nine months of 2014 in relation to the same period in the previous year.
Guatemala’s AML law does not cover all designated non-financial businesses and professions (DNFBPs) included in the 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.
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 review by members of Congress for the last two years, and it is unlikely action will be taken in the near term. Tipping off is not criminalized, and there is no provision to protect STR filers from liability. Guatemala should amend its AML/CFT legislation to include such provisions and to cover all applicable DNFBPs. Furthermore, Guatemala should enact its proposed gaming law.