The United States Department of State submitted the International Narcotics Control Strategy Report (INCSR) to Congress earlier this week, and it included an unflattering report of Costa Rica as a haven for laundering illicit proceeds from drug trafficking and terrorism.

 

According to the U.S. Department of State:

 

The two-volume report offers a comprehensive assessment of the efforts of foreign governments to reduce illicit narcotics production, trafficking and use, in keeping with their international obligations under UN treaties, while also presenting information on governments’ efforts to counter money laundering and terrorist financing.

 

The INCSR section on Costa Rica is about two pages long; here are some of the highlights:

 

Transnational criminal organizations increasingly favor Costa Rica as a base to commit financial crimes, including money laundering, as a result of its geographic location and other factors, including limited enforcement capability. This trend raises serious concerns about the Costa Rican government’s ability to prevent these organizations from further infiltrating the economy. As Costa Rica has shifted from a transit point to an operations base for regional narcotics trafficking organizations, the laundering of proceeds from illicit activities has increased. Proceeds from international narcotics trafficking represent the largest source of assets laundered in Costa Rica, although human trafficking, financial fraud, corruption, and contraband smuggling also generate illicit revenue. In 2015, the head of Costa Rica’s intelligence agency, known as the DIS for its Spanish acronym, said that approximately $4.2 billion annually is laundered in Costa Rica.

 

Much of the money laundering in Costa Rica is channeled through the country’s nascent construction industry. Other sectors have been identified as vulnerable to exploitation by criminal organizations seeking to launder illicit proceeds, including both state and private financial institutions. Money/value transfer services, including money remitters, the casino industry, and the real estate sector, are also particularly susceptible. Various Costa Rica-based online gaming operations launder millions of dollars in illicit proceeds through the country and offshore centers annually. Authorities also have detected, however with less frequency, trade-based money laundering schemes. There have been no prosecutions related to terrorist financing, and measures to detect, investigate, and prosecute such financing are limited. Moreover, narcotics and arms trafficking linked to the Revolutionary Armed Forces of Colombia (FARC) and bulk cash smuggling by nationals from countries at higher risk for terrorist financing have been detected in recent years.

 

Costa Rica has made progress in enhancing its AML/CFT legal and regulatory frameworks. In addition, the Attorney General’s Office established a Money Laundering and Asset Forfeiture Bureau and collaborates well with U.S. law enforcement agencies investigating financial crimes related to narcotics and other crimes. However, Costa Rica remains deficient in a number of areas, including with respect to the financing of terrorism and implementing appropriate risk-based policies to mitigate the money laundering risks identified in its 2014 risk assessment.