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). In 2015 there was a reported uptick in the use of dirty money to influence local and national elections.
The postal money order and securities markets; the smuggling of bulk cash, gasoline, liquor, and household appliances; wire transfers; remittances; casinos, 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 used 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 Ecuador, 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 some 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 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 continuing its studies to better understand the incidents of suspicious transactions in “Chance” games, but it is a small organization with limited personnel and resources.
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 U.S. 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: 7,642: January – November 2015
Number of CTRs received and time frame: Not available
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: 73: January - October 2015
Convictions: 29: January - October 2015
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 of Latin America (GAFILAT), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.gafilat.org/UserFiles//Biblioteca/Evaluaciones/Colombia_3era_Ronda_2008.pdf
Enforcement and implementation issues and comments:
Key impediments to developing an effective AML/CFT regime are underdeveloped institutional capacity, limited interagency cooperation, 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. Despite the positive institutional step of a 2014 reorganization of the Colombian Attorney General’s Office (AGO) to, among other moves, create a specialized investigative body with the technical, financial, and investigative expertise to successfully detect and investigate money laundering/terrorist financing cases, 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. There is also a limited pool of trained prosecutors, police, and investigators outside of Bogota who have the ability to successfully investigate and prosecute ML/TF cases. Additional training is required.
COLJUEGOS continues to make limited gains by 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 had stated its intention to address the “Chance” game issues, as well as other regulatory weaknesses, through stronger legislation, but new laws have yet to be passed.
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 AGO only. Although Colombia improved case coordination among the UIAF, prosecutors, and the Colombian National Police’s specialized judicial police units, the legal requirement that prosecutors conduct investigations means that many cases already investigated by UIAF must be re-examined by the AGO. This increases case processing time and adds unnecessarily to prosecutor caseloads.
Colombia’s 2014 Asset Forfeiture Reform Law, Law 1708, was designed to streamline the asset forfeiture process and was expected to reduce forfeiture case processing time. 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. Moreover, a recent decision by the Supreme Court introduces an additional step to the proceedings, requiring prosecutors to first appear before an arraignment judge before the case can continue to the higher courts. This is likely to cause further delays in the process. In 2014, the Colombian government also reorganized the body in charge of managing seized assets obtained under the new asset forfeiture law, which was intended to increase the speed by which these assets could be discharged and the funds disbursed to the appropriate government entities. However, the AGO still retains the right to seize certain assets. A lack of coordination between the two entities, as well as a lack of sound practices and standards in the seizure and management of assets by both organizations continues to be an impediment.
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 better convert the vast amount of available data into actionable information. The UIAF, in addition to regulatory agencies, should develop a mechanism for including prosecutors in its investigations from the start to ensure greater prosecutor participation and prosecutorial utility of the information gathered. Colombia should ensure appropriate training is provided to all officials involved in supervising, investigating, and prosecuting money laundering and terrorism financing. The government should increase the number of judges trained in money laundering and asset forfeiture, both in Bogota and in the regions where many of these cases occur.