Money Laundering Could Stifle Latin America’s Response to COVID-19

Money Laundering Could Stifle Latin America’s Response to COVID-19
Members of the National Guard and state police stand guard at Las Americas General Hospital in Ecatepec, a suburb of Mexico City, May 20, 2020 (AP photo by Rebecca Blackwell).

Some of Latin America’s most serious challenges—violent crime, drug trafficking, economic inequality and public corruption—all have one thing in common: money laundering. In Mexico alone, the government’s Financial Intelligence Unit reported that drug cartels and other illicit actors laundered an estimated $50 billion in 2019— crucial revenue for cartels that has also contributed to Mexico’s record-high homicide rate in recent years. Money laundering has helped Brazilian gangs like the Primeiro Comando da Capital, or First Capital Command, expand their criminal networks into neighboring Paraguay and Bolivia. In Venezuela, it has enabled a dramatic theft of public resources by officials tied to President Nicolas Maduro’s government, while the average Venezuelan has starved because of widespread food shortages.

Through money laundering, Latin America’s transnational criminal organizations and guerrilla groups can access substantial funds derived from their illicit operations, ensuring their continued dominance and growth. Money laundering allows criminal groups and shady corporations to easily profit from illegal mining and logging, too, which rob nations of key natural resources and have severe environmental repercussions, as seen in the devastating recent fires in the Amazon. Corrupt officials throughout the Western Hemisphere also deftly exploit money laundering vulnerabilities to conceal bribes and stolen public funds, degrading economic opportunity and the public’s confidence in their leaders.

With the coronavirus pandemic now likely to weaken state capacity across the region, money laundering will continue to flourish, and so will these threats. It will facilitate more corruption and insecurity while undermining the integrity and effectiveness of government efforts to cushion their economies from the fallout of COVID-19. Unscrupulous government officials and their cronies will siphon off vital public funds meant to support health systems and provide economic stability. Since money laundering also facilitates tax evasion, it will deprive states of essential revenue during this crisis. That is why the United States and countries across Latin America should work together to strengthen their financial and trade systems, as well as to bolster regulatory and enforcement frameworks against money laundering, which is a shared threat.

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