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Pending global evaluations, the designations of eight crime syndicates in Latin America as terrorist organizations and identification of three local institutions as conduits of illicit finance topped the agenda of the latest ACAMS-hosted gathering in Cancun, Mexico.

Katie Stana, director of international narcotics and law enforcement at the U.S. Embassy in Mexico, opened this year’s The Assembly LATAM on Monday with a staggering estimate that cartels in the country now launder as much as $44 billion a year from drug trafficking, arms smuggling and human trafficking.

“This is an incredible number,” Stana told attendees. “This money weakens our institutions and feeds corruption.”

With the spotlight on Mexico, Alberto Bringas, a senior compliance officer at Banco Azteca, which runs more branches in the country than all other lenders, said that Mexican banks are creating “red lists” of clients potentially linked to the Sinaloa cartel and other newly designated foreign terrorist organizations, and more closely monitoring their accounts.

“Previously, Mexico’s risk of exposure to terrorist financing was inherently low,” Bringas said, referring to the State Department’s identification of six local cartels as FTOs in February. “Since cartels have been designated as such, our exposure has majorly increased.”

Mexico may have dominated the headlines in recent weeks, but compliance officers and others should take care not to falsely assume that crime syndicates limit their operations to their country of origin, or to a single type of scheme, Juan Carlos, a brigadier general with the Colombian national police, said Tuesday.

“We are now witnessing a convergence of illicit economies, and this is evident in the behavior of transnational criminal organizations, which have evolved from engaging in one crime to managing diversified portfolios of criminal income, ” said Carlos, who likened black markets in Latin America to a “thousand-headed hydra.”

Mexican cartels over the past two decades have ventured from drug trafficking into human smuggling, extortion, kidnapping, illegal mining and logging, arms trafficking and fuel theft, and formed new connections with insurgents in Colombia and the Lebanese militia Hezbollah, which maintains a presence in the tri-border region of Brazil, Paraguay and Argentina.

“Criminal organizations … use the same routes, the same logistics,” said Victor Guerra, global head of compliance at the ICC Institute of World Business Law. “We must push for cooperation … because this is a cross-border phenomenon.”

Evaluate

GAFILAT, the Financial Action Task Force’s regional affiliate in Latin Amerca, will commence a fifth round of mutual evaluations next year, with a focus on how effective each country’s laws, regulations and overall efforts against illicit finance work in practice.

Nearly 90 percent of the countries that GAFILAT assessed in the fourth round showed a large rate of compliance with FATF’s 40 technical recommendations.

“Things start to look more complicated” when measuring the efficacy of their laws, regulations and overall campaigns against financial crime, Gustavo Vega, deputy executive secretary of GAFILAT, told attendees Monday.

“The next round will be much more focused on results,” said Vega. “We will pay more attention to local nuance, with higher risks requiring stronger measures.”

Improve

Panama, historically a top venue for corrupt politicians, drug traffickers and other criminals to hide their wealth, has created a near-comprehensive private database of corporate beneficial owners “in record time,” Ana Velasco, director of regulation at the Superintendency of Banks of Panama, told attendees Tuesday morning.

More than 90 percent of all entities required to share the names and other details of their beneficial owners pursuant to legislation enacted in March 2020 have done so, Velasco estimated.

“It [previously] wasn’t part of the legal culture to ask: ‘Who will use this company? Who is the true owner?’ ” said Velasco, who has witnessed a “cultural shift” over the past five years. “Ultimately, many lawyers resigned from anonymous companies because they often had no idea what they were even used for anymore.”

Panama, which exited FATF’s gray list of countries with strategic deficiencies against financial crime for the second time in 2023 and the EU’s list of high-risk third countries in June, has time to prepare for GAFILAT’s next evaluation, scheduled for 2028.

The organization will evaluate Mexico and Bolivia next year.

“Based on recent events, Mexico has now moved from high to very high risk,” said Sandro Garcia, an academic at the Panamerican University of Mexico and former vice president of supervision at the Mexican Banking and Securities Commission, or CNBV, during a roundtable discussion Tuesday.

The challenges Mexico faces with organized crime and illicit finance prompted an attendee to ask participants in the roundtable whether the country has a chance of ending up on the gray list.

“Almost zero,” said Mireya Valverde, a senior advisor at Mexico’s National Banking and Securities Commission, or CNBV. “Why? Because out of roughly 196 countries in the world, only 40 are full FATF members, which means we have already passed the technical, legal and procedural hurdles to join this very selective global network.”

Mexico rated only “partially compliant” with 15 of FATF’s 40 technical recommendations in 2017 and “non-compliant” with the group’s recommendation for regulating and supervising designated non-financial businesses and professions for anti-money laundering purposes.

The country now rates partially compliant with only five recommendations but still rates non-compliant with FATF’s standards for DNFPBs.

“We’ve done well in terms of technical compliance, and we’ve begun working on effectiveness,” Valverde said. “The goal is not just to comply, but to comply well.”

And that’s a wrap.

Contact Chelsea Carrick at ccarrick@acams.org