Transborder Crime, Corruption, and Sustaining Illegal Armed Groups in Latin America

Luz E. Nagle

Transborder crime and corruption combine to sustain criminal syndicates, illegal armed groups and terrorist organizations that operate within Latin America or use Latin America as a source of funds, weapons, and other contraband to stage operations elsewhere in the world. Despite efforts undertaken by national, regional, and international authorities to confront corruption and combat transborder crime related to armed conflict and terrorism, the situation in Central and South America is for all intents and purposes uncontained and unchecked. The positive assessments of country conditions we receive from government actors and international organizations are at odds with what members of impacted communities assert is happening on the ground. This article attempts to make some sense of what is occurring in Latin America by addressing the following questions: What are some of the most pressing transborder crime issues facing Latin America with regards to armed conflict; how does corruption sustain domestic and transnational criminal organizations and terrorist groups?

What are some of the most pressing transborder crime issues facing Latin America with regards to armed conflict?

Walk the streets of any major Latin American city and relatively isolated rural enclave and look beyond the bucolic settings depicted in tourism magazines and websites. What one sees hiding in the open are Asian mafias, Hezbollah and al-Qaeda operatives,[i] Russian “wise guys”, Nigerian smugglers, central American street gangs, Israeli organ traffickers, and, yes, unscrupulous American, European and Canadian entrepreneurs engaged in all manner of illicit activities that involve exploiting weaknesses in the civil society and/or pillaging vast natural resources. Even what we think of as benign groups can be deceptive, such as for instance, an assemblage of Mennonites in the Mexican state of Chihuahua that engaged in trafficking marijuana and cocaine to Canadian Mennonite communities, relying on the sect’s strong religious ties in Mexico, the U.S. and Canada to move the drugs across international borders.[ii]

Latin America is very lucrative for organized crime and terrorist groups engaged in some form of illicit activity. We already know ad nauseam the extent and importance of illegal narcotics production and drug trafficking as the primary criminal enterprises that characterize the region. However, the utilization of long-established transborder and transcontinental drug trafficking corridors to sustain armed groups and foment terrorism seems less well recognized.[iii] Contraband and laundered money pass by land, sea, sky, and cyber networks through, over, and around every country south of the United States border, and hopscotch through island chains in the Western and Eastern Caribbean. Drug-laden vessels originating in Colombia ply the high seas hundreds of miles off the Pacific coast of South America bound for Guatemala, Honduras, and Mexico, where the shipments are then staged into the United States and Canada. In the other direction, illicit drugs move from origin countries through the transit countries of Argentina, Brazil, and Paraguay to destinations in Africa, Europe, and the Middle East where the drugs are sold and the proceeds used to engage in other illicit and often violent pursuits. Drug money purchases weapons to sustain low intensity insurgency, internal armed conflict, and terrorism in weak and failing states; it buys women and children to produce income as human chattel in sex slave markets or as child soldiers and irregular combatants. Proceeds of drugs are also laundered and inserted back into formal economies, especially in the construction industry and in high end consumer retail such as electronics, sporting goods, leisure services, and designer label fashion—all preferred venues for illegal armed groups to hide their assets and mask resources.

While Latin American source countries have long been associated with transborder narcotrafficking, we see, with increasing distress, that Latin American states are now contending with widespread domestic use of locally produced illegal drugs. For example, only Brazil lags the United States in illegal drug consumption per capita, and the internal drug market in Colombia alone is estimated at around US$2 billion in 2017.[iv] Consequently, these growing domestic and regional markets are compelling sources of revenue for local gangs and smaller provincial criminal organizations and illegal armed groups. The resulting competition between these entities and the large international drug trafficking syndicates appear to be exasperating social and political violence that governments in the region are ill-prepared to confront.

For instance, I am aware of reports that well-armed urban gangs (known as BACRIMs and combos) that control poor neighborhoods (comunas) in the hills above Medellín, Colombia have been emboldened by their ill-gotten gains to challenge directly government authority in ways not previously encountered. This includes putting police officers on their payroll as enforcers and informers, and threatening to burn down entire neighborhoods if the municipal government does not meet their demands to improve infrastructure and social services. In Brazil, tenacious prison gangs that control drug trafficking within the country are now moving into Bolivia and Paraguay, forming alliances with similar criminal syndicates. Not content to terrorize its own territory, the violent Zetas of Mexico are believed to be thriving in Guatemala, while the equally violent Mara Salvatrucha (MS-13) and its Marero derivatives continue efforts to expand into North America, Spain, and other EU states. Returning to Colombia, a shaky peace arrangement between the government and FARC (Fuerzas Armadas Revolucionarias de Colombia) guerrillas has caused a split within the FARC’s ranks over members of the high command command benefiting from government largess while most of the combatants and isolated fronts have largely been abandoned to their fate. The result is that these groups remain under arms and are emerging as new criminal organizations, violent, and in full control of many of the criminal enterprises that kept FARC forces in the field for decades.[v]

The growth of human trafficking at the hands of transborder criminal organizations and illegal armed groups throughout the Americas has had a profound impact particularly among indigenous communities where traffickers resort to such means as preying on victims’ superstitious beliefs in witchcraft to control them. Latin American women are particularly susceptible to international criminal organizations engaged in sex trafficking due in part to the aura of Latin women as desirable sex objects in other parts of the world. Recently, I was involved in efforts to gain refugee status in the United States for a Colombian woman who was brutally attacked and had her throat slashed on the sidewalk right in front of her university after she refused multiple attempts by a South Korean gang operating in Bogotá, Colombia to recruit female college-age students to work as models in South Korea (which of course was nothing more than a front for luring young women into sex slavery and forced servitude).[vi]

Let us turn to other transborder crimes that are not getting the same level of attention as drug trafficking and human trafficking. While these crimes are less salacious and less adaptable for mini-dramas and television series, their impact on the Latin American region are proving to be even more devastating and destabilizing for the governments in which these activities are occurring—often right under the noses of government officials who are either unable to do anything about it, or are actively involved as corrupt actors.

Who are the Actors?

There is no one monochromatic entity engaged in transborder crime in Latin America. What we may think of as traditional or conventional mafia organizations certainly have a strong presence throughout the region. We know that Japanese yakuza, Chinese triads, other Asian gangs, Cosa Nostra, and Russian mobsters are all present and accounted for. But there are also groups that are something of a hybrid, namely insurgency groups that through many years of smuggling contraband and weapons through cross-border corridors have slowly morphed into international criminal organizations, particularly as their political ideologies and zeal to overthrow governments waned in favor of just getting rich. A particularly notorious example of this would be the FARC guerrillas of Colombia. This opportunistic pseudo-revolutionary-turned-transborder criminal syndicate can now be found throughout Central and South America, the Caribbean, in Western Africa, and as far away as Scandinavia. Some other illegal armed groups that have chosen or have been forced to demobilize in certain Latin American hotspots have also transformed into criminal organizations, motivated by the need to retain control of the communities they terrorized for years, to gain wealth, and in some cases, to preclude being swept into the dustbin of history. These derivative illegal armed groups take on certain characteristics and assume acronyms such as the Colombian BACRIMs and combos to help them self-identify. From localized bases of operations the reach of these emerging groups increasingly extends across international boundaries to form alliances with larger international criminal organizations. BACRIMs are every bit as lethal and motivated as the “big boys” and must be taken very seriously.

Finally, but not exclusively, we know that radical Islamic terrorist organizations have a significant foothold in several regions of South America as well as in Central America, where reports of a clandestine Hezbollah training camp in Nicaragua, close to the Honduran border, surfaced in 2014.[vii] Islamic terrorist organizations are also well known to be ensconced in Muslim communities in what is known as the tri-border region that comprises the confluence of Paraguay, Argentina, and Brazil. This is an area of territory akin to the Old West of the United States where government authority is all but impotent and/or colluding with terrorist groups.[viii]

Islamic terrorist organizations, including Muslim Brotherhood and Hezbollah have also long been embedded on the Venezuelan island of Margarita, which is a popular Caribbean tourist destination known for its world-class windsurfing.[ix] It is also known for being one of the money laundering and foreign currency counterfeiting capitals of South America, specializing in cleaning money for drug traffickers and terrorist organizations through the free trade port set up on the island.[x] Moreover, there are many allegations and reports that Venezuelan politicians collude with organized criminal groups and terrorist organizations. The current vice president, Tareck El Aissami, is suspected of being engaged in drug trafficking and has alleged ties to Hezbollah groups in Iran, Syria, and Lebanon.[xi] One investigative report alleges that El Aissami is one of Latin America’s most accomplished corrupt actors, having developed “a sophisticated, multi-layered financial network that functions as a criminal-terrorist pipeline bringing militant Islamists into Venezuela and surrounding countries, and sending illicit funds and drugs from Latin America to the Middle East.”[xii] In written testimony submitted before the United States House Foreign Affairs Committee in 2015,[xiii] Joseph Humire, founder of the Center for a Secure Free Society, noted:

[Aissami’s] financial network consists of close to 40 front companies that own over 20 properties with cash, vehicles, real estate and other assets sitting in 36 bank accounts spread throughout Venezuela, Panama, Curacao, St. Lucia, Southern Florida and Lebanon. This network became integrated with the larger Ayman Joumaa money laundering network that used the Lebanese Canadian Bank to launder hundreds of millions of dollars and move multi-ton shipments of cocaine on behalf of Colombian and Mexican drug cartels as well as Hezbollah. This immigration scheme is suspected to also be in place in Ecuador, Nicaragua and Bolivia, as well as some Caribbean countries.[xiv]

Moreover, additional regional and international security concerns were raised beginning in 2007 when Venezuela and Iran began regular flights between Caracas and Tehran, with a stop in Damascus, Syria on which only authorized government officials could fly. Then-President Hugo Chavez is said to have referred to the air route as “Aeroterror,” and it is believed that the flights were used to transport drugs, cash, and terrorists between the three countries.[xv]

Each criminal and terrorist group operating in Latin America has its own goals and motivations, but together they form a web of transborder crime that takes advantage of decades and even centuries of political and social instability and unrest that characterize much if not all Latin America. These groups also take advantage of the unique geographical features that form the region, namely a continent and subcontinent surrounded by two vast oceans that bridge the Western World with the Orient, warm weather island archipelagoes that allow for limitless smuggling opportunities, vast jungles and mountainous terrain that hide criminal operations, thousands of miles of riverine systems for clandestine transport,[xvi] and vast natural and mineral resources that are easily exploited illegally due to the absence of government authority and incapacity to protect those resources.[xvii]

Illegal Acts:

Illegal Logging

The rain forests of Central America and the Amazonian basin are being denuded to the last leaf by the illegal cutting of highly valuable hardwoods that are then transported through surreptitious means to lumber mills in places like Japan, the United States, and throughout Europe.[xviii] In Peru alone, it is estimated that some 600 mi.² of forest woods are illegally harvested each year (as much as a startling 88 percent of all timber production).[xix] Despite there being an anti-illegal logging law enacted in 2015 that carries an eight year maximum prison sentence, not a single person has yet been convicted.[xx]

In Guatemala, it is believed that upwards of 35 percent of the country’s annual commercial timber production is of illegal origin, which is about the same as the level of illegal harvesting occurring in Colombia’s national parks (around 42 percent).[xxi] Political corruption and lack of law enforcement capacity that allows criminal syndicates to operate in isolated areas with impunity are considered among key contributing factors to such wanton and uncontrolled destruction.

Illegal Mining

The Global Initiative against Transnational Organized Crime has stated that “the intersection of organized crime with illegal mining has taken a terrible toll” on both the environment and the people of Latin America.[xxii] Illegal gold mining constitutes an environmental and human rights catastrophe in Andean states and Brazil that is now of such proportion that remediation of the destroyed territory may never be achieved.[xxiii] Not only are forests and topsoil destroyed to get to deposits, but the dangerous chemicals used to extract gold without any form of safeguard have polluted vital water resources and riverine areas that drastically impact wildlife, vegetation, and the indigenous communities that have relied on the water and complex ecosystem for millennia. Illegal mining carried out by several armed groups contributes to political instability not only within the national territory but in transboundary areas. Such is the case along the Colombia-Peru border area where groups that include the FARC, the ELN, and derivative criminal gangs (BACRIMs) use illegal gold extraction to conduct other criminal activities such as money laundering and engaging in human trafficking for sexual and labor exploitation.[xxiv] In fact, it is estimated that the FARC obtains 20 percent of its funding from illegal gold mining, and that its 34th Front earns over US$1 million per month through extortion of illegal miners.[xxv] Yet, the challenge to confronting illegal mining is that world-wide demand and less restrictive globalization trade policies allow black market minerals to mix seamlessly into the formal economy and encourage illegal operations to fly under the radar or simply be ignored by corrupt or incompetent government authorities.

According to Verité, an international non-government organization concerned with supply chain social responsibility and sustainability, illegal gold mining occurs “in blatant violation of the law with no intention of formalizing,” violates labor and tax laws, and happens in environmentally protected areas where there is little government presence. There is also a misperception about the character and scope of illegal mining operations that renders a regulator and law enforcement response problematic:

Verité’s research has found that while illegal and informal mining are often lumped together under the auspices of artisanal small-scale mining (ASM), many of the illegal mining operations in Latin America . . . were far from artisanal or small-scale, involving millions of dollars of investment and revenue, heavy machinery, and workforces of hundreds of migrant workers. Small-scale, informal artisanal miners are often treated similarly to criminal groups that control large-scale illegal mining operations and oftentimes extort small-scale miners under the threat of violence. The workers employed by illegal mines are often frequently treated as criminals rather than as potential victims of human trafficking. Such criminalization increases their vulnerability to human trafficking, and takes attention away from the real problem: the criminal actors that control huge swaths of territory and contribute to conflict, environmental devastation, and human trafficking. Precisely because illegal mines operate clandestinely and failed to abide by the law, the workers employed in these mines are generally poorer, more marginalized, and more vulnerable to extreme forms of labor exploitation, including forced labor and human trafficking.[xxvi]

The proceeds of illegal mining in Colombia, Peru, and elsewhere in Latin America enrich criminal organizations (and by extension illegal armed groups) around the world, including Italian, Mexican, Chinese, and Russian crime syndicates. In Peru alone, it is estimated that between February and October 2015, 1,435 tons of contraband gold valued at more than US$1 billion was trafficked through Lima to Switzerland[xxvii] and the United States where some of the illegal gold made its way into the U.S. Federal Mint.[xxviii]

The criminal organizations and illegal armed groups involved in illegal mining rely on intricate links to corruption involving government officials and private actors. This corruption occurs when mined ore passes into the supply chain through the hands of transporters, intermediaries, exporters, trade officials and regulators, bankers and finance houses. The nature of the product also renders itself to corrupt activities because it is difficult to trace its origin to any specific company or mining enterprise. Moreover, refineries and other processing facilities profit from the lack of transparency upstream in the supply chain and melt down illegal gold indiscriminately with gold acquired through legitimate concessions. This process renders any type of accountability largely moot. So much illegally mined gold coming out of Latin America makes its way into the formal economy that it is assumed to be present in supply chains that feed “major electronics and machinery manufacturers, auto makers, retailers, and telecommunication and IT services.”[xxix]

Illegal mining also creates an additional revenue stream for criminal groups in the form of women and girls being recruited through false job offers and trafficked into mining areas to be forced into sex work. In Peru, for example, police have estimated that more than 4,500 Peruvian and Bolivian girls have been trafficked to La Riconada mining area to work in bars and brothels frequented by miners.[xxx]

Cattle Rustling and Ranching

Illegal cattle ranching and cattle rustling are a growing concern in the Americas as well as in many other parts of the world, including in Kenya, South Sudan, and the Philippines, where illegal armed groups steal cattle as a means of generating income and asserting control over rural areas in the absence of government authority.[xxxi] In Costa Rica, cattle-related crime is on the rise and includes both theft of livestock and whitecollar fraud in the cattle trading and futures markets. Many cattle are slaughtered where they are stolen and sold as contraband on the black market, which poses a significant public health hazard. The most brazen level of illegal cattle ranching and rustling occurs in the southern and eastern territories of Colombia by the FARC and other illegal armed groups that have become modern day cattle barons, controlling tens of thousands of hectares of stolen land for managing tens of thousands of head of stolen cattle bound for domestic and foreign markets. The impact by these illegal armed groups on legitimate agribusiness has been devastating. An estimated 71 percent of legitimate ranchers have lost cattle that end up mixed into herds controlled by these groups, and this occurs out in the open and right under the noses of government authorities.[xxxii] It is believed that the FARC is managing some 27,000 cattle on an estimated 42,000 hectares (103,800 acres) of stolen ranchland in southern Colombia alone, and the cattle are sold at steeply discounted prices.[xxxiii] Flooding the market with cattle at 20 to 30 percent below market value has an adverse impact on both Colombian and U.S. ranchers trying to take advantage of trade arrangements between both countries.[xxxiv] While the FARC and other illegal armed groups profit, legal producers and brokers suffer futures prices deteriorating by as much as 8.8 percent on the Colombian mercantile exchange, according to livestock fund managers in Bogotá. As futures prices on cattle have risen significantly in the U.S. in the last several years, American ranchers now have difficulty exporting stock at a profit to Colombia under the trade regime because so many stolen and illegally ranched cattle are keeping prices down.

Gasoline Smuggling

Gasoline smuggling often occurs in areas involving internal armed conflict or impacted by insecurity. The Venezuela-Colombia border has experienced a high level of gasoline smuggling, which has become a highly lucrative black market commodity. In August 2016, the Colombian government broke up what authorities claimed to be the largest gasoline transborder smuggling network. It was just one group of smugglers among many following a similar modus operandi, and despite claims by the government, there is no reason to think that the enforcement effort has any significant impact. The smuggling operation goes something like this: the gasoline is collected into convoys of trucks, nicknamed “caravans of death”, in Maracaibo, Venezuela, and moved at high-speed along clandestine border crossings and rural roads to porous border crossings.[xxxv] Once across the border, the gasoline is redistributed along black market corridors in the eastern Colombian Department of César. This large-scale form of smuggling grew after Colombia and Venezuela closed the border for nearly a year due to increasing political tensions between the two governments involving armed insurgents. Before the borders closed, smalltime smuggling of all manner of goods and consumables were flowing from Colombia into Venezuela (for generations), taking advantage of an easing of border restrictions under globalization policies. The small-time smuggling, referred to as “smurfing,” went away when the borders were closed, which made large-scale movement of contraband far more profitable, especially for organized crime and illegal armed groups.

Gasoline smuggling from Venezuela has also moved east into Guyana, where fuel and other contraband supports formal economies throughout Guyana’s rural territories.[xxxvi] Much of the Guyana-Venezuela border is demarcated by the Orinoco River that passes through dense and unpopulated jungle areas where there is very little government presence, if any, making the border region a smuggler’s dream. According to one investigative report in 2015, the Guyanese authorities not only looked the other way with smuggling, but actually embraced the practice to support rural populations living along the Orinoco and its tributaries. Cheap black-market gas solves many problems for a government unable to provide the critical components of infrastructure. Gasoline powers land and water transportation, fuels electrical generators for homes and businesses, and makes commercial enterprise more viable. The downside, however, is that while local populations benefit from contraband fuel coming from Venezuela, this essentially makes significant sections of Guyana’s population and its economy dependent on a border neighbor rather than on its own government. This also renders Guyana territory susceptible to renewed efforts by Venezuela to claim Guyana territory.[xxxvii]

Document Trafficking

Criminal syndicates and terrorist organizations are also involved in document counterfeiting and document trafficking throughout Latin America, and reports suggest that this criminal act is widespread. In one instance, five Syrians bound for the United States were intercepted in Honduras while traveling under fake Greek passports, claiming to authorities that they were “students.”[xxxviii] The United States State Department raised concerns in early 2015 that Hezbollah operatives are now moving freely about the Americas using bogus Venezuelan and Ecuadoran passports issued by a government contractor or contractors in Cuba at the direction of the Venezuelan government. According to Antony Dakin, the former Venezuelan Interior Minister, now living in the United States, “Venezuela has become a hub for granting passports for Iranian groups and members of Hezbollah, in order to facilitate their travel.”[xxxix] Dakin also confirmed the connection between government officials in Caracas and Cuban companies to produce mechanized and biometric passports—after they gained access to data of around 80 million citizens from government contracts made with Argentina and Ecuador.[xl] According to the London-based newspaper Asharq Al-Awsat,[xli] these passport producing contracts “allow Havana to issue identification papers without forgery and by using other people’s data.”[xlii] Another former Venezuelan diplomat now in hiding has alleged that Venezuelan President Maduro also sells visas, passports, and falsified birth certificates out of the Venezuelan Embassy in Baghdad to thousands of Middle Eastern residents, including at least one confirmed Hezbollah terrorist. It is believed that Maduro has provided Venezuelan passports to some 300 Hezbollah operatives that will give them easier entry into Canada and the United States.[xliii]

This allegation has been corroborated as well by Misael Lopez, a former legal advisor to the Venezuelan Embassy in Iraq. According to an investigation conducted by CNN and CNN en Español, Lopez became a whistleblower in uncovering serious irregularities in selling Venezuelan passports and visas in Baghdad for thousands of dollars.[xliv] He became aware of this black-market business in 2013 when the Venezuelan ambassador gave him an envelope full of visas and passports, telling him the documents were worth US$1 million. He thought it was just a joke until an Iraqi employee working as an interpreter at the Embassy “told him she made thousands of dollars selling Venezuelan passports and visas” and that he could make a lot of money, as well.[xlv] Undertaking his own investigation, Lopez discovered among other things, that an Iraqi convicted drug dealer was issued a Venezuelan passport that said he was born in Venezuela. Lopez fired the employee involved in issuing fake documents and sent his report to the ambassador. After doing what he thought was the right thing, nothing came of his report, and he soon found himself the subject of an investigation that led to his removal, ostensibly for revealing “confidential documents or secrets.”[xlvi] Lopez then went to the United States FBI at the US Embassy in Madrid to report on his investigation, and he relocated to Spain where he has citizenship.[xlvii] More recently, Venezuela’s opposition National Assembly is investigating whether individuals who did not work in any diplomatic capacity received specialized diplomatic passports, which allow them greater travel freedom. The allegations surfaced after an anonymous government employee claimed that the Venezuelan government had issued diplomatic passports to high-ranking drug traffickers to facilitate their business.[xlviii]

Money Laundering

In March 2017, the U.S. Department of State blacklisted 37 Latin American countries for money laundering.[xlix] Even if nations have implemented anti-money laundering regimes, the presence of corruption, the serious lack of enforcement, and high demand for money laundering services combined with no lack of individuals and institutions willing to engage in money laundering all present tremendous challenges. Financial institutions have largely had a free hand in engaging in money laundering in Latin America, and the money to be earned in such activity outweighs the penalties for getting caught. In 2013, London-based international bank HSBC (Hongkong and Shanghai Banking Corporation) agreed to pay a US$1.9 billion fine to the United States to resolve charges that the bank enabled Latin American drug cartels to launder billions of dollars.[l] Specifically, HSBC was accused of failing to monitor more than US$670 billion in wire transfers and more than US$9.4 billion in purchases of U.S. currency from HSBC Mexico in an elaborate money laundering conspiracy.[li]

Organized crime, illegal armed groups and terrorist organizations use many methods to make their illegitimate earnings appear legitimate. The most conventional and expedient method is smuggling the money to avoid a paper trail. There are multiple ways to smuggle the money, like secreting bundles of currency beneath the floorboards of a Mexican passenger bus crossing an international border, or stuffing millions of dollars in duffel bags and balancing them atop the heads of smugglers wading across the Rio Grande into the United States.[lii]

Generally speaking, money laundering uses middlemen to transform dollars into some form of commodity or to electronically effect movement from one location to another. For example, criminal syndicates commission actors to make money transfers through wire services like Western Union, or make deposits of money into a U.S. bank account that is then accessed from an ATM elsewhere in the world. Another form of money laundering involves schemes to move money to shell companies, which then buy durable goods like bicycles in the United States and ship them to South America where they are resold and the proceeds of the sales are converted into clean money.[liii]

Well-established organized criminal groups use more sophisticated money laundering schemes, such as initiating fictitious or fraudulent loans, buying out existing businesses to serve as front companies, and using offshore companies to purchase real estate. Some of these groups “already own or use legal cash-intensive front businesses, often in the entertainment, food, retail and trade sectors, which allow them to comingle licit and illicit proceeds.”[liv] This is exemplified by a recent sting operation in the suburbs west of Miami, inside the Sevilla Trading Corporation.[lv] There, money was wired to Colombian drug cartels by different existing export businesses engaged in computer and cell phone sales.[lvi] Businesses utilized for money laundering can include spas, childcare centers, health clubs,[lvii] construction businesses,[lviii] and shopping centers, hospitals, pharmaceutical companies, agribusiness.[lix] Business activities susceptible to money laundering include real estate sales and ventures,[lx] importing European and used automobiles, dealing in insurance, art sales and brokerage, casinos and gaming, jewelry and precious mineral sales/trading, and importing fabric and textiles.[lxi]

The following countries are prominent in Latin America for their money laundering into real estate: Argentina, Colombia, Mexico, Panama, Uruguay, and Venezuela.[lxii] In Uruguay, it is believed that 90 percent of money laundering occurs through real estate transactions.[lxiii]

A derivative of money laundering long utilized in Latin America is known as trade-based money laundering. This is defined as “the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origins.”[lxiv] Through this method, organized crime (and possibly terrorist organizations) masks money through “legitimate” commercial transactions. In the 1980s the Colombian drug traffickers used trade-based schemes to disguise as much as US$4 billion in annual narcotics profits.[lxv] This technique is growing in the region and is a concern in Belize, Brazil, Canada, Colombia, the Dominican Republic, Mexico, Panama, Paraguay, Uruguay, and Venezuela.[lxvi]

There are four trade-based money laundering methods: (1) over and under invoicing; (2) over and under shipments, (3) falsely describing goods and services, and (4) multiple invoicing goods or services.[lxvii] Trade-based money laundering provides criminal organizations with a low-risk way to clean money, and allows them to “recoup all their expenses by selling the merchandise”—even at a profit[lxviii] and without sacrificing a portion of their earnings.

Trade-based money laundering often includes the “collusion of manufacturers and export/import firms.” The goods involved are usually high end and subject to higher taxes, and are in higher consumer demand, like electronics, luxury cars, fine textiles, precious metals and counterfeit goods.[lxix] This money laundering technique now “accounts for the highest percentage of laundered money in the world,”[lxx] and increases with the growth of globalized trade arrangements and online commerce.

Nexus of Terrorist Groups and Organized Crime

Collaboration between organized crime, criminal gangs and terrorist groups is highly likely.[lxxi] To support their operations, such groups exploit the “permissive environment” and may utilize the same key facilitators such as money launderers, document forgers, and of course, corrupt officials.[lxxii] Terrorist organizations can also exploit organized crime capabilities and smuggling routes terminating in the United States and Canada.[lxxiii] We know, for instance, that ISIS is seeking inroads into the Caribbean, Central and South America,[lxxiv] with an eye on radicalizing vulnerable youth in the region, including those already involved in gangs.[lxxv] Nowhere is the ground more fertile for recruitment than in Central America, which is awash in narcotrafficking and weapons smuggling by notorious transnational gangs such as MS-13 and its mara progeny.[lxxvi] The danger of mara gangs is such that the Supreme Court in El Salvador designated these street gangs as terrorists in 2015,[lxxvii] declaring that maras “as well as those that financially support them, will be classified as terrorists.”[lxxviii]

This recognition by the Salvadoran judiciary is not a new epiphany and follows a similar trajectory as Colombian insurgent groups that began in the 1950s but over the decades transformed into transborder criminal organizations—eventually landing on the United States list of international terrorist organizations. One of these groups was the Autodefensas Unidas de Colombia (AUC), a right-wing paramilitary group that waged war against Marxist insurgents for two decades. In 2003, some AUC members went to jail, others demobilized, and many others created their own paramilitary/organized crime groups that continue to be involved with trafficking, illegal mining, and other criminal enterprises. Some of the offshoots of the AUC are the Gaitanista Self-Defense Forces of Colombia (AGC) (authorities call it Clan del Golfo),[lxxix] Puntilleros, la Constru. These groups, having thousands of members, now dispute territorial control over key trafficking corridors.[lxxx]

Colombia’s notorious leftist FARC insurgents entered into an unpopular peace arrangement with the government of President Juan Manuel Santos that can be described as tentative at best, and woefully ill-conceived at worst. It is a process that reacts to the political environment like a chameleon, partly because the FARC long ago transitioned from a rebel army into a transborder criminal organization of such wealth that its high command has little incentive to make peace with the Colombian state. At last guess, FARC is believed to control 70 percent of the cocaine business in Colombia, [lxxxi] and earns more than $3.5 billion in drug revenue annually.[lxxxii] Such illicit wealth does not trickle down to the rank and file, however, and some FARC fronts have elected to continue fighting while holding onto their own regional criminal activities. Other FARC members, having little hope of reintegration into Colombian society, have been recruited into other criminal organizations like Clan del Golfo (a.k.a. Los Urabeños).[lxxxiii] Another leftist force, the ELN[lxxxiv] has fiercely assumed control over the lucrative cocaine business in areas where the FARC demobilized.[lxxxv] Drug lords, as well, have overrun some former FARC territory. The result is that instead of peace breaking out in Colombia, violence and criminality are increasing, extortion in many towns has skyrocketed, and several coffee farmers have had their trucks stopped by armed individuals on the highway and looted.[lxxxvi] Meanwhile, the police and the military are being accused of “taking it easy”[lxxxvii] and have generally lost what confidence the civil society had in them.

The convergence of organized crime and terrorist organizations also plagues the Tri-Border area of Argentina, Brazil and Paraguay,[lxxxviii] which has been touted as the “largest illicit economy in the Western Hemisphere.”[lxxxix] These relationships are symbiotic, allowing for mutual exploitation of resources, assets, and skills. According to Walt Purdy adjunct faculty at George Mason University, Hezbollah and al-Qaeda operatives use the Tri-Border for fundraising, logistics, and for safe haven,[xc] and constitutes “a terrorist’s paradise” because many criminal groups operate there in anonymity and with relative impunity.[xci] Ciudad del Este, the commercial hub of the Tri-Border, has “close to 55 different banks and foreign exchange shops,” and one may assume that these financial institutions are doing more than opening checking accounts and consumer loans. In fact, billions of dollars are assumed to be cleansed through the region’s businesses and money changers[xcii] for remission back to the Middle East to finance terrorist operations in that part of the world.[xciii]

How does corruption sustain domestic and transnational criminal organizations and terrorist groups?

Open the pages of any Latin American newspaper and one will see that articles abound detailing the latest scandals involving corrupt officials and private businessmen. The stories make for good copy, and lively conversation and moral outrage, but it seems that the corrupt actors are never held accountable for their deeds. There is an old saying in Latin America, “Hierba mala nunca muere” (bad grass never dies), which accurately reflects the laissez faire attitude of citizens who know that their officials are corrupt and that businesses are engaged in corrupt practices, but such misconduct is so widespread as to be considered standard operating procedure throughout the region. There is also a widely accepted view that corruption is only held accountable when a corrupt actor engages in egregious conduct that in some way offends the prerogatives of the ruling elite.

Nearly every member state of the Organization of American States (OAS) has ratified the Inter-American Convention Against Corruption (IACAC), which entered into force in March 1997,[xciv] as well as the United Nations Convention on Transnational Organized Crime of 2000.[xcv] Yet, while the legal framework in Latin American states to fight corruption seems “strong,” the laws are little more than paper tigers. Lack of implementation is due in large part to the lack of political will to establish and enforce an effective mechanism that would create a check on the political class, the private sector, and organized crime whose dealings have become so interconnected and co-dependent in the region. Because it is so deeply embedded in the folds of the formal economy and political institutions, tackling corruption does not result from sudden reforms, but requires a dedicated long-term effort by everyone in the government and constant pressure from the civil society to end impunity. Realistically, that is almost too much to ask of Latin American society.

Corrupt acts come in all shapes and sizes. They are not exclusively small scale, or petty, or isolated,[xcvi] such as a government official taking a bribe to fix a traffic violation. Rather, grand forms of corruption are prevalent,[xcvii] and in some cases even celebrated, in all Latin American countries in the form of public and private malfeasance, misuse and abuse of power, and the tangled web of traditional patronage arrangements.[xcviii] Economic and political institutions may wag a finger at corruption, but no less depend on a complex relationship with those who engage in corruption to keep the wheels of commerce spinning and bureaucracies functioning. Laundering money depends on murky relationships with legal financial institutions, which are guaranteed by State governments. Banks, businesses and industries provide all manner of opportunity to clean the proceeds of crime inside the formal economy. It is small wonder that organized crime, illegal armed groups, and terrorist organizations find the region such fertile ground.

Cattle rustling syndicates, like the FARC, moving thousands of head of cattle depend on collusion with government officials, veterinarians, truckers, and feedstock providers who may know that something is amiss, but benefit from it anyway. Likewise, the owners of the freighters waiting in port for lumber to carry from Central America and the Amazon to distant lands are not concerned that the wood was harvested illegally by criminal organizations; their only concern is that their cargo holds are full and that they can make profits to stay in business. Their role is not to ask questions and to be discerning about the origin of cargoes, but to fulfill contracts and deliver goods wherever they need to go.

Individuals engaged with organized criminal groups transporting gasoline illegally across borders have little, if any, concern about the geopolitical ramifications, or the legality of the operations, or the proclivities of the criminal groups setting up and running the operations. Their concern is that they are making money to feed their families and clothe their children by driving tankers and trucks with gasoline drums—income they would not have if the illegal activity was not occurring.

The same is true for illegal mining. Though it is backbreaking, dangerous and unhealthy, and the miners know they are being exploited by having to pay “taxes” to the criminal groups that control the land in which the illegal mining occurs, the alternative may be starvation, displacement, and continued victimization in various ways by forces completely beyond their control. Their entire worldview occupies the muddy hole in which they are digging.

The result of so much illegal activity occurring in weak and failing Latin American states has created a dynamic in which corruption is not a problem within socio-political systems, but IS the socio-political system. The resulting correlation between legality and illegality is determined by the capacity of traditional and economic elites to engage in corrupt acts as a means to preserve their social status and retain control over political reform efforts, such as agricultural land reforms, access to social services and any benefits that would lead to a loss of political power.

Elites and Corruption

For centuries, reaching back to colonial rule, Latin America’s rich and powerful have been protected by a culture of impunity. The elites have been implicated in the most astonishing corruption schemes that only rarely are held to account. For instance, in Brazil, the Operation Car Wash corruption scandal ended with the removal and impeachment of President Dilma Rousseff,[xcix] brought investigations against former President Luiz Inácio Lula da Silva,[c] and entangled many top corporations along with many prominent politicians,[ci] including President Michael Temer.[cii] Rousseff was chairman of Petrobras between 2003 and 2010 when much of the corrupt acts allegedly took place, it is believed that Rouseff’s and Temer’s election campaigns were funded by corruption.[ciii] Another scandal in Brazil in which many of the country’s elites were implicated, the Odebrecht case, involved a Brazilian construction company accused of paying billions of dollars in bribes worldwide.[civ] Odebrecht admitted making unlawful political donations and influencing government contracts.[cv] In addition, many more members of the political-elite class in Brazil were implicated,[cvi] along with elites in other nations, including Peru, Panama, Argentina, Colombia, Panama.[cvii] To make matters worse, after receiving threats against his family,[cviii] the Supreme Court judge who played a crucial role in the investigation died in a mysterious plane crash[cix] and was replaced by an aid to the President.

In the meantime, Brazilian politicians are pushing back in order to remain unaccountable and unpunished, refusing orders to step down from their positions while being investigated, and corrupt lawmakers are “trying to ban plea bargains and to pass an amnesty law that would allow many of them to evade punishment.”[cx]

The traditional elites have also benefited from the growing power of organized criminal groups. Some elites choose to “throw their lot in with the new narco-elites and hitch a ride to power on the national scale as senators, governors, or party leaders.”[cxi] This relationship between organized criminal actors and the political class appears to be the situation with the already mentioned illegal logging in Peru where former President Ollanta Humala fired Peru’s head of forest inspection while several important investigations were underway, claiming that the official’s dismissal was “motivated by the need for ‘fresh face.’”[cxii] To make matters more murky, the current Peruvian president dissolved the office of the illegal logging czar all together, essentially eviscerating the teeth of the illegal logging law:

When the regional political class obtains financing from an inexhaustible source of capital, and when it receives the armed support of private armies that regulate a significant portion of the social order, then they achieve a level of political influence never before seen in the country’s center.[cxiii]

Corruption in weak and failing states impedes the ability of governments to counter the press of transborder criminal organizations and can lead to direct government involvement. This appears to be the case with our example of illegal logging in Peru, where the World Bank asserts that 80 percent of timber exports are illegal.[cxiv] Reports also indicate that since 2015, the legal logging industry has lost nearly US$140 million in sales due to bad publicity surrounding illegal logging, including reports of indigenous individuals being murdered by illegal loggers when they attempted to protect their land.[cxv]

Colombia

In Colombia, allegations persist that former President Alvaro Uribe and his close circle of collaborators and some family members had alliances with organized crime (paramilitary groups) and used his office for all types of institutional corruption.[cxvi] Some were extradited to the U.S.,[cxvii] including Uribe’s sister-in-law and her brother, who were allegedly working with Joaquín “El Chapo” Guzman and the Sinaloa Cartel.[cxviii] Also, Uribe’s niece and entities tied to her were included on the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC)’s Specially Designated Nationals List (SDN).[cxix]

Honduras

Devis Leonel Rivera Maradiaga, the leader of the Cachiros drug-trafficking organization implicated several Honduran politicians during testimony in a New York federal court, including the brother of President Juan Orlando Hernández and the son of the previous president, Porfirio Lobo.[cxx] Rivera claimed that he met with an Honduran Congressman, Antonio “Tony” Hernández to set up a scheme in which a company that Rivera and his family owned and operated could receive money from the government for services rendered. Rivera would then pay a bribe to President Hernández’s brother.[cxxi]

Mexico

Connections between the ruling elites and organized crime are a longstanding “tradition” in Mexico. Government officials at all levels of national, state, and local politics have been accused of sundry crimes of corruption, including taking bribes from drug cartels and armed groups to allow them to operate freely in their states, embezzlement, and money laundering. Arrests only seem to occur when an opposition party operative takes over and cleans the slate, or someone within the ruling party does something to make the party look bad. For example, the arrest of an ex-governor from the ruling Institutional Revolutionary Party (PRI) took place after “one of the least serious searches in history.”[cxxii] The government was reportedly “loath to arrest one of its own, a man who both reflected badly” on the PRI and “who may have held sensitive information on other corrupt officials.”[cxxiii]

Whichever party is in power at the time protects its own. Corrupt governors and party operatives are unencumbered. They take “bribes from legitimate business and cash from drug gangs, and use it to ensure the election of a successor who won’t investigate them.”[cxxiv] In this manner, the country’s governors sustain “de-facto immunity because they are major sources of illegal financing for their party’s campaigns.”[cxxv] Ex-governors who are caught even “negotiate exactly how much prison time they will face and how much of their illegal fortunes will be seized.”[cxxvi] According to Edgardo Buscaglia, the “governors are the main architects of this mafia-style financing for electoral campaigns” and if they become public embarrassments “the prosecutors will act under international pressure, but they have a lot of information that could bring down half of the ruling class.”[cxxvii] The military is also susceptible to corruption. A recent investigation against nine major officers revealed collusion between several government officials and El Cartel de Jalisco and Los Zetas to steal gasoline from PEMEX, the national oil company’s pipelines.[cxxviii]

Venezuela

Nearly 80 percent of cocaine in the world now passes through Venezuelan territory, and there is a great deal of evidence that the government of President Nicolás Maduro is closely linked with organized crime.[cxxix] Colombian drug cartels have long associated with Venezuelan groups tied to great political and economic power.[cxxx] International drug trafficking through Venezuelan territory is suspected to rest in the hands of the armed forces, the national guard, the police and many members of the national government. This is due largely to legal reforms enacted in 2005 and 2010[cxxxi] that gave the armed forces a full role in investigating and combating drug trafficking, which in turn prompted the development of a powerful criminal enterprise that is believed to have reached the highest ranks in Venezuela’s military. This enterprise extended to links between the corrupt military members and the Colombian FARC and gave rise to a “military cartel.”[cxxxii] Known as the “Cartel of the Suns,” it is thought currently to control most large-scale drug smuggling in Venezuela.[cxxxiii]

Government Collusion with Terrorist Groups

Cuba and Venezuela appear to share a dubious symbiotic relationship as Latin America’s most troublesome pariah states. Cuba has long been a fomenter and backer of insurgencies throughout the region, particularly in Central America in support of the Sandinistas of Nicaragua in the 1970s-80s,[cxxxiv] and Colombian narcoterrorist organizations going back several decades beginning with material support to the FARC in about 1964 and later the ELN.[cxxxv] In addition to supporting the Colombian and Latin American insurgency, Cuba has played host and gives safe haven to international terrorist organizations and organized criminal groups.[cxxxvi] According to statements given by Joseph Cofer Black, a distinguished former U.S. State Department Coordinator for Counterterrorism, “Members of the Basque terrorist group Euzkadi Ta Askatasuna (ETA) reside in Havana as privileged guests, and IRA terrorist Niall Connolly lived in Cuba for five years before he was arrested in Colombia for providing explosives training to the FARC.”[cxxxvii]

Conclusions and Recommendations

Cattle rustling, illegal mining and lumbering, and gasoline smuggling may seem to be only domestic problems for the countries in which this is occurring. However, these acts, together with other well-established illegal activities such as drug trafficking and money laundering threaten to create a perfect storm for further destabilizing all Latin American states. Assuming the political elites are even willing to do so, how could Latin American governments fight and win a multi-front war against corruption and so many illegal actors operating throughout the region?

It is said that the road to hell is paved with good intentions, and one may argue that Latin America has been the end of that road for billions of dollars and millions of man-hours of good intentions over decades of reform and nation-building efforts. Some actions do take root and do bring about positive change. But stronger laws on the books only have force if they are enforced by officials willing to do the right thing and resist the corrosive influences of corruption and coercion. Who knows if the resolve even exists in Latin American states at this time? However, we cannot throw in the towel and simply abandon the region to its fate. There are some steps that can be implemented that can begin to make a difference if such efforts are institutionalized and continually fortified and updated.

There are two goals that must be achieved in the region: security and accountability. Law enforcement and the military must be trained better to implement effective techniques to confront illegality and illegal groups. Corrupt officials and private actors must know that they will be held accountable for their illicit actions. This could be accomplished through several ways. For example, investigators and first responders must be trained to secure crime scenes, preserve evidence using current technology and management solutions, protect victims, identify and interview witnesses, take statements accurately, and perform identity checks. Prosecutors (fiscales) need to update their skills continually and develop a corpus of best practices that are then implemented institution-wide and result in moving cases along the judicial process for faster outcomes. They need to be part of a reform agenda that addresses deficiencies from the top down. They need to be vetted and monitored to mitigate potential corruption. They must somehow be made more impervious to the influence of corruption.

The criminal justice system needs new innovations and thinking “outside the box” to breathe new life and motivation into institutions badly in need of reform. For instance, unique prison rehabilitation programs, such as the chef school in the women’s prison in Cartagena, Colombia, modeled after a program begun in Brazil, shows encouraging results with improving rehabilitation and reducing recidivism.[cxxxviii] Programs could be introduced into Latin American prison systems for training customer service professionals in technology, or teaching coding skills that could result in meaningful jobs in the technology sector that pay a living wage. Diversion programs targeting at-risk individuals and communities could blunt the allure of organized criminal and illegal armed groups that need recruits to remain viable. This would be critical in the poor neighborhoods that are breeding grounds for illegal armed groups and terrorist organizations.

Technical advances in forensics and data collection can be employed to combat many of the transborder criminal activities occurring in Latin America. For instance, DNA analysis, molecular identification, and electronic verification can be used to trace illegally harvested lumber back to its source. This analysis can help law enforcement concentrate interdiction efforts on areas of origin, investigate smuggling corridors, and build cases against businesses that knowingly use black market wood. DNA analysis is also available for combatting cattle rustling. In Costa Rica, the Ministry of Science and Technology is studying DNA markers to track and identify stolen cattle.[cxxxix] Such DNA methods could prove effective for tracking either live cattle or processed meat across international borders. Combined with enhanced border enforcement and security, authorities could conceivably develop a transborder database to monitor and investigate the movement of stolen cattle anywhere in the world and trace that movement back to crime syndicates and illegal armed groups.[cxl] Such an international database could be funded through regional and international agriculture organizations, national cattle producer collectives representing ranchers, and law enforcement agencies using earmarks from asset forfeitures and proceeds of crime.

The high-tech use of drones the real-time surveillance could also be utilized to monitor the movement of contraband. Although this could be an expensive undertaking, the cost could be shared by mutual legal assistance arrangements between Latin American states and the U.S. and Canada with an outcome that all members of a joint program would benefit by improved security and interdiction.

Contending with corruption, however, will remain the greatest challenge to reforming government institutions, changing the way business is done in the private sector, and confronting the many illegal activities of organized crime, illegal armed groups, and terrorist organizations. The lack of resolve by government officials to confront corruption only encourages illegal groups to flourish and expand. After all, the FARC simply cannot “hide” a cattle operation that covers 10,000 hectares with 20,000 head of cattle grazing. Likewise, it would not be difficult to do an aerial survey of open pit mining operations to determine which are licensed and which are illegal. It is not like the government officials can claim they had no idea these activities were occurring right under their noses. This makes corruption by far the greatest threat to regional security, and in the case of international terrorist groups present in Latin America extends that threat to other continents.

A long-term solution requires a multifaceted approach that cannot be implemented unless the political elites first decide that sustaining corruption as an institution is no longer viable or in their best interests. That goal is unrealistic at this time, and may never be fully achieved. Rather, we should look at more near-term methods that involve containment, incentives, and sanctions that will prod officials into enforcing the laws and making life uncomfortable for the criminal organizations and illegal armed groups.

Containment would involve isolating the areas/territories where illegal activities are occurring. Enforcement might not stop activities, but could slow down operations and add undesirable costs to the profit margins. For example, the Tri-border region could face tougher transportation regulations to control commerce moving in and out of the area. Banking institutions and money changing houses in the area could lose access to currency and goods used to launder money. Isla Margarita off the Venezuelan coast could be blockaded so that nothing goes in or leaves the island as long as terrorist groups and money laundering operations reside there. The gold and other minerals from illegal mining operations could be interdicted if the areas in which the operations are located could be isolated. Illegal lumber harvests could undergo far greater scrutiny with the aid of government, non-government, and international bodies working cooperatively to prevent wood products from leaving the areas where the wood originates. Containment operations could also be undertaken in neighborhoods where criminal gangs currently have free rein. Authorities that have little success going into the neighborhoods would not have to do so if access and egress is more tightly controlled. The idea would be to make operating in a zone or neighborhood such a hassle that they would either give up the operations or attempt to leave, which would be fraught with new perils, such as confronting rival organizations.

International sanctions are another tool that could get the attention of corrupt government officials and private actors who collude with organized crime, illegal armed groups, and terrorist organizations. If corrupt actors are hurt enough in their pocketbooks, then sanctions become a strong disincentive to continue engaging in corrupt acts. The problem is that, too often, the individuals most impacted by economic-based sanctions are the ones who can least afford it—the poor and disaffected sectors of the civil society. It is possible that a targeted response to corruption and its interaction with illegal armed groups and terrorist organizations might be more effective in the near term, but this is dependent upon the will of government officials.

Isolation in the form of preventing corrupt officials and private actors from traveling abroad could also be a strong deterrent. Suspending travel visas would certainly get the attention of Latin American bureaucrats and politicians who would no longer be able to travel to their condos in Miami. For some Latin American elites, there is no greater affront to one’s status among peers than being barred from going to Florida.

Diversion programs for young offenders and stronger commitment to youth education, sports programs, and technical training could reduce the recruiting capabilities of illegal groups. This would take considerable funding resources, although successful asset forfeitures and proceeds of crime operations could go a long way for funding diversion and social justice projects.

One growing problem is the dilemma over what to do with MS-13 and other Latin street gang members that are being deported from the United States back to their countries of origin. How can weak states in the region contend with the influx of violent career criminals that are tied into transborder criminal networks no matter where they may reside? This is for further discussion, but law enforcement and security experts need to pay urgent attention to the rapidly changing conditions, particularly in Central America, involving the repatriation of gang members.

There is no one size fits all solution to ending corruption and curtailing the activities of international crime organizations, illegal armed groups and terrorist organizations that have taken root in Latin America. The best we can do in the near term is to chip away at the problems where we can do so with measurable results. We cannot end corruption entirely, but we might be able to make it so uncomfortable to engage in corrupt acts as to make individuals think twice about doing so. We can bring far greater international pressure on Latin American states to enforce the laws already on the books or face real sanctions that compel politicians and the elites to weigh whether continuing the status quo is worth it. Appeasement and concessions to illegal groups are not the solutions to preserving the rule of law. All this achieves is to embolden criminals to take more. The laissez faire approach to dealing with security, corruption, and illegality in Latin America simply cannot continue.

End Notes