Summary:
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The recent Private Investment Funds in Latin America: Money Laundering & Corruption Risks research from Global Financial Integrity (GFI) looks at the money laundering risk factors connected to these regional private investment funds.
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The report examines AML regulations for private investment funds in Brazil, Mexico, Chile, and Argentina through several case studies.
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In addition, Private Investment Funds in Latin America provide several case studies to illustrate the hazards of money laundering, corruption, and organised crime in this region.
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The risk factors include a clientele that is frequently politically exposed individuals who are also wealthy; a close relationship between fund managers and their clients (i.e., investors); the use of shell companies and trusts to manage investments; outsourcing operations and risk management; a lack of transparency regarding the source of wealth and authority of funds; and investment structures that may include multiple accounts in different jurisdictions, including secrecy.
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In this report, GFI makes the following salient suggestions:• The Brazilian government, which oversees the most significant amount of assets in the area, ought to be the first to enact AML laws that will address potential problems in the future.
The author is the policy director for Global Financial Integrity (GFI), a think tank with Washington, D.C. offices focusing on research, lobbying, and advisory services. Private investment funds have become a multi-trillion-dollar business over the past few decades. Due to several structural risk factors that aid in masking illegal activity, private investment funds are susceptible to money laundering.
Criminals were employing “private placement funds, including investments offered by private equity firms and hedge funds, to avoid the anti-money laundering (AML) processes of other financial institutions and launder money,” according to a 2020 FBI alert that was leaked.
The recent Private Investment Funds in Latin America: Money Laundering & Corruption Risks research from Global Financial Integrity (GFI) looks at the money laundering risk factors connected to these regional private investment funds.
It examines the network of participants and facilitators, how the offenders made contact, and the routes to transfer illegal funds. The report examines AML regulations for private investment funds in Brazil, Mexico, Chile, and Argentina through several case studies.
Tom Cardamone, President and CEO of GFI, observed that “family offices” have little to no regulatory control in most of the world despite the size of the wealth they handle. “Given the close connection between money and corruption in many parts of the world, this is highly troubling. These funds are especially helpful as a cover for the proceeds of corruption or money laundering because they are not regulated.
In addition, Private Investment Funds in Latin America provide several case studies to illustrate the hazards of money laundering, corruption, and organised crime in this region.
The risk factors include a clientele that is frequently politically exposed individuals who are also wealthy; a close relationship between fund managers and their clients (i.e., investors); the use of shell companies and trusts to manage investments; outsourcing operations and risk management; a lack of transparency regarding the source of wealth and authority of funds; and investment structures that may include multiple accounts in different jurisdictions, including secrecy.
In this report, GFI makes the following salient suggestions:
• The Brazilian government, which oversees the most significant amount of assets in the area, ought to be the first to enact AML laws that will address potential problems in the future. Additionally, authorities focus more on the design of family offices and do a risk analysis of the industry.
• Since intermediaries and enablers play a crucial role in enabling the movement of illegal monies through the regional financial system and into private investment funds abroad, Latin American authorities should strive to regulate these professions for AML/CFT due diligence.
• The private investment fund sectors of the US, Switzerland, Malta, the Cayman Islands, and other EU nations should undergo thorough risk assessments for money laundering.
• Investigations into organised crime, drug trafficking, and corruption in Latin America should encompass training for law enforcement personnel on the complexity of private investment funds and how they might be utilised to conceal illicit assets.
Global Financial Integrity is a Washington, D.C.-based think tank that conducts in-depth investigations of illegitimate financial flows, counsels developing nation governments on sensible policy changes, and advocates for practical transparency measures in the financial system to advance international security and development.
Analysis by: Advocacy Unified Network
