Monday 28 November 2022

Are there money laundering networks in the Costa Rica that not even the banks detect?

Funds product of illegal activities is disguised, which through various means are integrated into the economy of a country in order to give them an "appearance of legitimacy"

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26 November 2022 - At The Banks - BCCR

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QCOSTARICA – Money laundering (legitimación de capitales or lavado de dinero in Spanish) should not only cause the alert of the national financial system but also incite actions by banks and economic entities to stop possible effects on the country’s economy.

Funds product of illegal activities is disguised, which through various means are integrated into the economy of a country in order to give them an “appearance of legitimacy”

This is the call of economist Jorge Benavides, who considers that many times banking control in Costa Rica is not the ideal to avoid money laundering.

“There are money laundering networks in the country that not even the banks themselves have been able to detect. The strategies of the national financial system to discover suspicious movements are obsolete and are not working, it is time to take more concrete actions because the banks are not supporting the Judiciary,” explained Benavides.

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The economist pointed out as another great problem the permeability of the Costa Rican state in terms of corruption.

This year alone, two major cases have been presented that include the participation and complicity of public officials to legitimize capital.

“We have a great problem of ethics in the public function. Criminal groups permeate the state buying consciences. Reporting transactions greater than US$10,000 is not enough, we need more controls,” added Benavides.

Money Laundering is a process in which the illegal source, destination or use, of goods or funds product of illegal activities is disguised, which through various means are integrated into the economy of a country in order to give them an “appearance of legitimacy”.

Funds are generated through the exercise of some illegal or criminal activities such as drug or narcotics trafficking, arms smuggling, corruption, fraud, prostitution, extortion, piracy and lately terrorism.

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The 3 stages of money laundering (source Forbes):

  1. Placement: It is the physical disposition of cash from criminal activities. During this initial phase, the money launderer introduces his illegal funds into the financial system and other businesses, both national and international.
  2. Stratification: It is the separation of illicit funds from their source through a series of sophisticated financial transactions, the purpose of which is to blur the original transaction. This stage involves converting funds from illicit activities to another form and creating complex financial transaction schemes to disguise the documented trace, source, and ownership of the funds.
  3. Integration: It is to give a legitimate appearance to illicit wealth by re-entering the economy with commercial or personal transactions that appear to be normal. This phase involves putting the laundered funds back into the economy to create a perception of legitimacy. The launderer could choose to invest the funds in real estate, luxury items, or commercial projects, among others.
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