Below is a "CONFIDENTIAL" cable from USAID Director in DR to the State Department. Published by Wikileaks. This was written in 2009 but leaked September 1, 2011.
No wonder there are so many empty malls in the DR that survive with no tenants or customers. Say what Pichardo? Every shopper is a buyer? IN DR they need no buyers, just a place to wash money.
No wonder there are so many empty malls in the DR that survive with no tenants or customers. Say what Pichardo? Every shopper is a buyer? IN DR they need no buyers, just a place to wash money.
see cable: Cable reference id: #09SANTODOMINGO434Reference id aka Wikileaks id #201394 ? ...
Subject Money Laundering In The Dominican Republic
Origin Embassy Santo Domingo (Dominican Republic)
Cable time Wed, 8 Apr 2009 12:15 UTC
Classification CONFIDENTIAL
Source Cable Viewer
Referenced by 09SANTODOMINGO757
History First published on Thu, 1 Sep 2011 23:24 UTC
Extras ? Comments
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INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHWN/AMEMBASSY BRIDGETOWN PRIORITY 2236
RUEHCV/AMEMBASSY CARACAS PRIORITY 0984
RUEHGE/AMEMBASSY GEORGETOWN PRIORITY 1146
RUEHKG/AMEMBASSY KINGSTON PRIORITY 2935
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RUEHPO/AMEMBASSY PARAMARIBO PRIORITY 1270
RUEHPU/AMEMBASSY PORT AU PRINCE PRIORITY 4967
RUEHSP/AMEMBASSY PORT OF SPAIN PRIORITY 1974
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEHUB/USINT HAVANA PRIORITY 0256
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUMISTA/CDR USSOUTHCOM MIAMI FL PRIORITYHide header
C O N F I D E N T I A L SANTO DOMINGO 000434
SENSITIVE
SIPDIS
STATE DEPARTMENT FOR WHA DAS DROBINSON, INL RLEVENTHAL,
ERINDLER, USOAS DCENTO
E.O. 12958: DECL: 04/06/2019
TAGS: KCRM [Criminal Activity], PGOV [Internal Governmental Affairs], KCOR [Corruption and Anti-Corruption], SNAR [Narcotics], KJUS [Administration of Justice], DR [Dominican Republic]
SUBJECT: MONEY LAUNDERING IN THE DOMINICAN REPUBLIC
REF: A. 08 SDO 1959
B. SDO 308
C. 08 SDO 561
Classified By: CDA Richard Goughnour, Reasons 1.4(b), (d)
?1. (C) Summary: Years after appropriate legislation to
combat money laundering was put in place, and with the
support of various Embassy agencies, the GODR has begun
mounting criminal cases involving financial misconduct.
However, the prosecution of money laundering, per se, remains
infrequent despite a widespread belief that hundreds of
millions, perhaps billions, of dollars are laundered in the
DR each year. Several GODR agencies have some role to play
in combating money laundering, but the financial intelligence
unit is not fully functional. In addition, endemic
corruption creates a permissive environment. The greatest
challenge is the tepid political will - as revealed by some
recent Presidential pardons (reftel A) - which, in turn,
feeds widespread cynicism among Dominicans. As one
taxi-driver put it, "In the Dominican Republic there is no
law, just money." Unless the country's leaders show that
crime is not profitable, real concerns exist that both
security and democracy in the DR could be undermined as they
were in Colombia. End Summary.
Scope and Nature of the Problem
-------------------------------
?2. (SBU) Money laundering in the Dominican Republic is
primarily associated with criminal activities such as drug
trafficking, human smuggling and trafficking, car theft and
corruption. Yet the problem of money laundering also may be
seen in terms of three dimensions: The volume or value of
laundered funds; the economic sectors most associated with
money laundering; and the weakness of governmental
institutions.
?3. (C) According to an estimate provided by Post's NAS
Office, two of the six billion dollars spent on construction
in the Dominican Republic in 2007 were not financed by banks.
Given the illicit nature of money laundering, and the various
criminal activities that generate profits in need of
laundering, there is no way to establish unequivocally the
amount of money laundered in the DR. An extremely
conservative estimate, in GODR circles, is that the
equivalent of two percent of the DR's Gross Domestic Product
(GDP) is laundered money. (Note: In 2007 the GDP was $41
billion. End Note.) Certainly, there has been a construction
boom in Santo Domingo, and there is a widespread belief here
that the construction sector is riddled with money laundering
projects.
?4. (C) In addition to the real estate/construction sector -
which may be considered a primary area for money laundering -
casinos and currency exchange houses are reportedly important
vehicles for money laundering in the DR. Moreover, the
relatively high risks associated with using ATMs and credit
cards - due to various schemes to defraud legitimate
customers - reinforces the use of cash, even for expensive
transactions. Political parties and processes are vulnerable
too, given the almost total lack of campaign finance
controls. Indeed, if allegations that narco-traffickers make
donations to political parties are true, then the parties
themselves are - unwittingly or not - excellent money
laundering mechanisms.
?5. (SBU) Institutional weaknesses include a failure to
complete the transfer of financial intelligence unit (FIU)
responsibilities from the original "Unidad de Inteligencia
Financiera" (or UIF, established in 1997) to the "Unidad de
Analisis Financero" (or UAF, established in 2005, pursuant to
the 2002 Anti-Money Laundering Law, 72-02). According to the
October 2007-November 2008 report of the Caribbean Financial
Action Task Force (CFATF), the DR is one of nine CFATF
members that lack Egmont Membership. While the report says
the DR "had yet to attain" such membership, in fact the DR
once had and then lost membership, in part because of the
semi-complete switch from the UIF to the UAF.
Relevant Laws and Institutions
------------------------------
?6. (SBU) In general, legislation may address one of two
issues: anti-money laundering (AML) or combating the
financing of terrorism (CFT). In the DR, legislation to
address money laundering exists, primarily Law 72-02 (the
core anti-money laundering law) and Law 83-02 that provides
for financial sanctions if an institution engages in money
laundering. Law 78-03 allows for the seizure and management
of assets that result from criminal acts for the duration of
judicial proceedings. Similarly, a 1995 anti-narcotics law
provides for the seizure and forfeiture of assets linked to
illegal drugs trafficking. One Senator has also introduced a
draft law to address "unexplained enrichment" - a subject of
much interest.
?7. (SBU) Law 72-02 covers a wide range of institutions and
types of criminal activities. That is, banks, currency
exchange houses, securities brokers, real estate agencies and
certain other commercial entities, such as firearm dealers
and jewelers, must report suspicious transactions.
Activities which can serve as predicate crimes for money
laundering prosecution include kidnapping, embezzlement,
vehicle theft, trafficking in humans or organs, and fraud
against the state, in addition to drug trafficking.
?8. (SBU) With respect to key anti-money laundering
institutions, the UAF should be a primary institution, per
the 2002 Anti-Money-Laundering Act, in the fight against this
crime. In addition, there exist supervisory bodies for
certain industries, such as securities (the
"Superintendenica de Valores" or SIV), and banking
("Superintendencia de Bancos" - SupBanco).
?9. (C) According to a February 2009 analysis by the
Secretariat of the Caribbean Financial Action Task Force
(C-FATF), the GODR has made progress in many areas since a
May 2006 evaluation found that the country deserved a
"non-compliant" or "partially compliant" rating on 83 percent
of FATF recommendations. For instance, since 2006, the DR
criminalized terrorist financing, and the agencies
("superintendencies") responsible for securities, insurance
and pensions have begun both on and off-site supervisions and
related procedures. At the same time, it seems that few
sanctions have been imposed for violations of AML/CFT
obligations. The Superintendency of Banks as not provided
specifics regarding sanctions it may have imposed.
Supervisory agencies in the securities and insurance sectors
currently lack sanctioning powers. Also, while the
superintendencies for banks, securities and pensions have
issued guidelines regarding "politically exposed persons"
(PEPSs), as yet there is no requirement that a financial
institution's senior management approve the establishment of
business relations with a PEP.
?10. (SBU) The December 2008 passage of a law that would
permit the establishment of an "Independent Financial Center
of the Americas (IFCA)," has increased concerns about
oversight in the Dominican Republic of financial
transactions. The proponents of the IFCA want the center to
have its own financial intelligence unit that would, in turn,
report to the fledgling UAF, but this appears impermissible
under Egmont Group rules and would add to the fragmentation
of oversight.
Efforts to Address Money Laundering
-----------------------------------
?11. (SBU) As noted in reftel B, the National District Court
of Santo Domingo imposed, on March 6, a 10-year jail sentence
on the ex-president of the Banco del Progreso for fraud -
totaling some USD 400 million - and money laundering
committed between 1999 and 2005. The court also ordered the
former banker to pay approximately USD 340 million in fines
and restitution.
?12. (SBU) Overall, since 2006 there have been 25 known money
laundering investigations, of which only seven have been
brought to trial. One of the most famous of these was the
BANINTER bank fraud case (reftel C). Although Baninter's
ex-President and vice-president were not convicted of money
laundering specifically, one entrepreneur connected to the
case was. However, in December 2008, President Fernandez
issued pardons to several people convicted of involvement
in the Baninter financial fraud and the Renove corruption
case.
?13. (SBU) In addition to cases addressing bank fraud and/or
money laundering, Dominican authorities have stepped up
efforts to find and arrest bulk cash couriers and those who
fail to declare currency in excess of $10,000 when entering
the DR. For instance, teams of GODR National Police and
Customs officials ran operations in airports around the
country and at the ferry to Puerto Rico during September
2008. Recently, two American citizens from Puerto Rico
were arrested after it turned out that their boat had a
hidden compartment, in which was found tens of thousands
dollars.
?14. (SBU) One of the most important on-going efforts is
spearheaded by a NAS-sponsored consultant who provides
anti-money laundering training to officials from various
agencies. The agencies include those that supervise banks
and the stock market, the pension system, customs,
prosecutors and members of the DNCD (the national drug
control directorate), as well as the UAF. The objectives
include enhancing the professionalism of participants and
creating contacts across agencies that will foster
cooperation.
Remaining Challenges
--------------------
?15. (C) According to the consultant, Beatrice Arenas, the
challenges of addressing money-laundering are legion: Many
public servants have jobs because of connections, not
competence and thus lack motivation; officials rotate
frequently, often shortly after being trained); the tax
agency is virtually uninterested in money laundering; and
little-to-no attention is being paid to the sale and resale
of automobiles as a means of laundering. Moreover, Arenas
notes, Dominican laws are inadequate: the asset seizure law
exists but is not strong enough, and money-laundering "is not
an autonomous crime" - that is, it must be associated with a
predicate crime (such as drug smuggling) to come into play.
She noted the rule of thumb that the equivalent of two
percent of the gross domestic product is
laundered, but believes that that significantly
under-estimates the amount. Indeed, if the figures cited
above with respect to the construction sector are correct,
then the overall two percent estimate must be too low. A
recent news report indicated that at least 15 percent of
construction involved laundered money.
?16. (SBU) The development of a strong financial intelligence
unit is a primary goal. The UAF has the potential, and U.S.
agencies are working to provide both equipment and technical
expertise to the UAF. However, the continued existence of
the UIF and efforts by some to create an FIU for the planned
Financial Center (IFCA) indicate more bureaucratic battles
lie ahead. Moreover, the recent announcement that the GODR
will cut taxes on money returned by Dominicans to the DR from
25 percent to one percent is raising eyebrows: In theory, the
GODR's fledgling institutions will scrutinize the funds that
flow back, but Post is not certain how they will manage it.
Such a dramatic tax cut also signals a desperation for
capital that could cause the GODR to look the other way.
Certainly, a savings of 24 percent is so great that money
launderers will be tempted to recruit overseas Dominicans to
act as fronts to then wire the money to the DR.
Comment
-------
?17. (C) Comment: Far too many Dominicans regard money
laundering as a windfall, rather than as the crime that it
is. These funds derive from corruption, tax evasion, and
violent criminal activity that warp development and undermine
efforts to improve governance. Post will continue its
anti-money laundering programs and looks forward to working
with Washington to consider how multilateral institutions
such as such as CFATF and the Inter-American Convention
against Corruption mechanism might be re-energized. These
institutions could help address the glaring problem of the
Government's tepid political will by creating a regional
political context (or, support group) that would bolster GODR
leaders if they take the tough decisions needed to address
the money laundering problem. End Comment. GOUGHNOUR
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:surprised :bunny: