Alaco

12.02.2016 | Argentina on the hunt for drug smugglers’ assets

President Mauricio Macri is intensifying domestic anti-money laundering efforts as part of a wider crackdown on drug trafficking, which has proliferated in recent years and led to increased levels of violence throughout the country.

Traffickers are increasingly exploiting Argentina’s porous borders and ports to smuggle drugs to North American and European markets.  Organised crime groups from Mexico, Colombia and even further afield are said to have established a presence in Argentina in recent years, while both the number of local gangs and domestic drug consumption have grown considerably.  

Turf wars have led to a surge in violence.  Although Argentina has one of the lowest homicide rates in Latin America, murders have been rising steadily in recent years.  The city of Rossario, a trafficking hotspot, has become one of most violent areas of the country, with the murder rate in 2014 reaching four times the national average.

Corruption and police shortcomings appear to lie at the heart of the authorities’ failure to counter the traffickers.  A number of high-level officials have been implicated in drug trafficking and although Argentinian papers regularly feature reports of drug seizures, police tend to arrest small-scale traffickers rather than key figures within the major gangs.  Money laundering linked to narcotics smuggling is said to pervade the financial system, despite the recent introduction of legislation to counter it.

Concerned that the evolution of criminal networks has put “the security of the population at risk”, last year the Supreme Court set up a special judicial commission to look into legal cases related to drug trafficking and organised crime.  Then in January newly elected president Mauricio Macri took steps to address the problem head on by introducing a series security measures, including stricter controls of borders, ports and airspace.  He also stepped up efforts to target the finances of smuggling gangs.

To bolster Argentina’s anti-money laundering controls, Macri appointed former IMF official Mariano Federici as head of the Financial Information Unit, FIU.  Federici recently said that “drug traffickers like to move to Argentina as they feel safe bringing their assets here”.  He wants to change this by improving cooperation with local banks and the US authorities in order to track down the criminals’ funds.  Federici has been critical of what he describes as the previous government’s confrontational approach towards banks; he regards financial institutions as key allies in the hunt for traffickers’ assets.

Argentina’s prolonged economic crisis led to the widespread use of cash and created a thriving black market for US dollars, both of which have made the country vulnerable to money laundering.  The number of suspicious transaction reports (STRs) received by the FIU has increased dramatically in recent years, but officials have had difficulty converting them into actionable intelligence.  Of the 90,000 reports submitted to the FIU between 2000 and 2014, just 7,000 have led to inspections, with only 18 offenders fined and 4 convicted.  The FIU has been attempting to improve its record by taking steps to enhance the quality of STRs and collaborating with other government agencies on investigations, but it is not clear how effective these measures have been.

The growing sophistication of the Argentinian drugs trade represents a major challenge for investigators and prosecutors.  This was highlighted by a recent trial, which involved the smuggling of Bolivian cocaine, disguised as charcoal, from Argentina to Portugal.  Profits from the operation are said to have been laundered through scores of businesses, construction projects and the purchase of footballers.  In a 2015 report by the Attorney General’s Office, federal prosecutor Pablo Di Loreto said investigations had been complicated by “better organised criminal structures that divide labour and criminal tasks”, with different groups responsible for the various steps in the drug trafficking chain.  

Federici says he plans to professionalise the FIU in order to combat the drug traffickers more effectively.  He clearly understands the scale of the challenge and his efforts, together with a tougher confiscation of assets law, might help the government start delivering results.