draining development.pdf - Khazar University

154 Draining Development?these categories varies across social groups. The issue is how large thenumbers of illegal but legitimate activities are and who agrees with theassessment. As these numbers grow, the effectiveness of law enforcementagencies declines, and, if the numbers are large, law enforcement becomesineffective and the risk associated with lawbreaking is low.The Failure of Enforcement: The Gap between Formaland Informal NormsColombia has one of the most advanced AML legislative frameworks inthe world. It is focused on attacking the assets of drug traffickers. However,enforcement has faced huge obstacles, and the results have beenmeager.The Financial Information and Analysis Unit has developed a systemto manage the risk of asset laundering and the financing of terrorism.The system has been used effectively in the financial sector. However, inColombia, the financial sector is not the main laundering venue becauseof its closed and oligopolistic structure and the limited penetration ofbanking services. 11 The unit acknowledges, for example, that contrabandplays a more important role as a means of laundering, and this is why theunit is now turning its attention to the real economy. 12The unit has also detected a significant increase in the number ofbusinesses that have been established specifically to provide specializedmoney laundering services. 13 The Fiscalía finds a similar evolution, notingthat, 10 years ago, trafficking organizations were pyramidal. Today,they are fragmented and more collegial. Money laundering firms haveincreasingly become specialized and offer their services to meet manytypes of needs. In the past, they were part of the main contraband traffickingstructures; today, they are independent. Many of these firms havelicit fronts and provide diverse services. In one case, for example, a firmhad 1,500 cédulas, the Colombian national identity cards, that it used tomake financial transactions (smurfing) for various clients. 14Additionally, substantial logistical obstacles impede the adequateimplementation and enforcement of AML legislation. The Fiscalía has alarge backlog of cases. They have few prosecutors, and the Judicial Policehas only 40 officers assigned to fight money laundering. Prosecutorialprocesses are time-consuming and labor intensive. Because of the preva-