draining development.pdf - Khazar University

Illicit Capital Flows and Money Laundering in Colombia 149percent of Colombians have been displaced internally or left the country.Colombia is the most important producer of cocaine in the world (despitethe many other possible competitors), and, during the last 15 years, it hasalso been the largest producer of coca. Colombia also has the distinctionof being among the foremost countries in the world in number of kidnappings,assassins for hire (sicarios), child warriors, landmines and victimsof landmines, producers of counterfeit U.S. dollars and other foreignexchange, exporters of Latin American prostitutes, and so on (Rubio 2004;Child Soldiers International 2008; United Nations 2009). 2 It is the countrywhere the term desechable (throw away) was coined to refer to indigentsand other undesirables who have been socially “cleansed,” where “Not forSale” signs are used widely to prevent fraudulent transactions aimed atstripping property from the legal owners, and where contraband is asocially valid way of life to the point that, in border regions, there havebeen public demonstrations to demand the right to smuggle.All these facts have shaped the way in which markets and law enforcementorganizations operate. Indeed, Colombians colloquially refer toColombian capitalism as savage, in contrast with capitalist markets inEurope, the United States, and even developing countries such as Chile. Astudy of illegal capital flows in Colombia that does not take into accountthe particular characteristics of Colombian markets and transactionsruns the risk of reaching contradictory or erroneous conclusions.The next section shows how Colombian institutions are an obstacle tolaw enforcement and help propagate illegal economic activities. The sectionthat follows explains how these institutions represent an obstacle forthe enforcement of AML legislation. The penultimate section describescapital flows in and out of Colombia and shows the role of the illicit drugindustry. The final section presents a summary and conclusions.Institutional Obstacles to Law Enforcementand the Upsurge in Illegal Economic ActivitiesThe Spanish Conquest that began in 1492 was never completed in Colombia.Large areas of the country have still not been settled. Local loyaltiesare strong, and the development of a national identity has been slow andremains unfinished. An important U.S. historian of Colombia refers tothe country as “a nation in spite of itself” (Bushnell 1993).