money laundering

Shortcomings flagged in corruption fight

Activities related to drug trade, tax fraud valued at US $58.5 billion

The Mexican government is worried about its own ability to tackle corruption, according to a report published today by Reuters.

In a classified report — seen by the news agency —the government flags serious shortcomings in its own fight against the scourge.

The report was prepared as Mexico awaits an evaluation by the Financial Action Task Force (FATF), a global intergovernmental organization, of its efforts to combat money laundering

That evaluation has been completed but while it is not yet public, the government said on Thursday that it showed it had made “significant” progress.

However, the 321-page undated report that was completed using data from 2014 paints a less positive picture.

Illegal activities including those related to the drug trade and tax fraud were worth at least 1.13 trillion pesos (US$58.5 billion) annually, the report said, concluding that the entire amount is susceptible to money laundering.

That amount represents 6.6% of the Mexican economy, a figure that highlights the extent of the problem. The possibility of it being subjected to money laundering is also very high, a point further emphasized in the report through the use of capital letters.

“The view is that the risk represented by illicit funds susceptible to money laundering in Mexico generated within the jurisdiction is HIGH,” the report reads.

The report concluded that “more efficient mechanisms” were required to put an end to corruption in the country, a task that will be no easy feat.

A National Anti-Corruption Commission was established in 2014 but is still without a prosecutor to head it up while the list of state governors being investigated for corruption has continued to grow steadily.

According to one report, the money stolen by former governors could easily cover the costs of rebuilding after the two devastating earthquakes in September.

In September, a joint investigation by the digital newspaper Animal Político and anti-graft group Mexicanos Contra la Corrupción y la Impunidad (MCCI, or Mexicans Against Corruption and Impunity) revealed that 11 federal agencies had diverted more than 3 billion pesos during 2013 and 2014 in a massive swindle labelled “The Master Fraud.”

In addition, a recent report completed by anti-corruption coalition Transparency International concluded that Mexico was the worst offender when it came to paying bribes to access public services among 20 countries it surveyed in Latin America and the Caribbean.

But despite the mounting evidence of widespread corruption, the classified report said that public policies still required an overhaul in order to “better understand the phenomenon of corruption in Mexico,” presumably so it can be better tackled.

President Enrique Peña Nieto has been widely criticized for calling corruption in Mexico a “cultural” phenomenon and while he has signed off on laws to strengthen the national anti-corruption system, he has also been implicated in corruption scandals himself.

Last year, he made a public apology for the so-called casa blanca scandal in which a contractor that won important government contracts built a mansion for him and his family, calling it a mistake that “damaged the institution of the presidency.”

A member of his campaign team and the former CEO of Pemex, Emilio Lozoya is also currently embroiled in a corruption scandal involving Brazilian company Odebrecht.

Mexico is ranked 128th out of 137 countries for ethics and corruption, according to the World Economic Forum’s Global Competitiveness Index for 2017-2018 and last year MCCI calculated that corruption accounted for between 2% and 10% of Mexico’s gross domestic product (GDP).

The federal Attorney General’s office (PGR) reported that it had seized US $11.4 million and 543.2 million pesos (US $28.2 million) pesos in its anti-money laundering operations between September 2016 and June 2017.

However, compared to the amount in excess of $1 trillion pesos identified in the report as being generated annually in the illegal economy and subject to corruption practices, the seizures are minuscule, especially considering the total did not include white-collar crimes including embezzlement, people and arms trafficking, pipeline theft and sexual exploitation.

Source: Reuters (en)

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