draining development.pdf - Khazar University

Illicit Capital Flows and Money Laundering in Colombia 165indifferent to the rule of law. The decision about whether to respect a lawhas become similar to an investor’s portfolio decision in which the risksof various actions are weighed to determine what to do.Not surprisingly, law enforcement has become a constant struggle,which reflects the gap between the law and socially acceptable behavior.Many government officials either do not believe in the laws or are unableto enforce them. Thus, although the country’s AML legislation is one ofthe most advanced in the world, the results have been meager, and thereis little need to take illegal capital abroad to protect it.Controlling internal and external illegal capital flows presents adaunting policy problem given that a large proportion of the populationconsiders the law as a grey area that one may or may not respect. As longas the conflict between the formal (legal) and informal (social) normspersists, illegal economic activities will flourish in Colombia. Closingthis gap requires significant institutional and cultural change.Notes1. For example, Pablo Ardila, former governor of Cundinamarca Department,who was sentenced to jail in 2007 on kleptocracy charges, had transferred substantialassets abroad, but, his lifestyle in Colombia was incongruent with hisreported income and caught the attention of the authorities. He regularlybrought money from accounts in Panama and other offshore centers back toColombia to support his high living standard (“Las cuentas del Gobernador,” ElEspectador, November 27, 2007).2. “Colombia is a major source country for women and girls trafficked to LatinAmerica, the Caribbean, Western Europe, Asia, and North America, includingthe United States, for purposes of commercial sexual exploitation and involuntaryservitude” (U.S. Department of State, Trafficking in Persons Report, June 2009[Washington, DC, 2009], 107).3. “Because of its geography, Colombia was until the early XX century the LatinAmerican country with the lowest per-capita international trade. Palmer (1980,p. 46) shows that as late as 1910 Colombian exports per capita were 77% of thesecond lowest country (Honduras), 67% of those of Peru, 52% of those ofRepública Bolivariana de Venezuela, 12% of those of Argentina and 9% of thoseof Uruguay. Only the development of the coffee industry modified this condition”(Thoumi 1995, 18).4. These data are consistent with a graph in Marulanda (2006, 50) that, unfortunately,does not provide numbers. In the graph, the ratio of deposits to GDPfollows a similar path.