Colombia Watch: Money laundering risk; community banks

Colombia, Chile present lowest money laundering risk in LAC

Colombia and Chile present the lowest risks for money laundering and terrorism finance (ML/TF) in Latin America and the Caribbean, according to the Basel Institute on Governance.

In its sixth annual review, the Basel Institute established an anti-money laundering (AML) index where Colombia scored an AML of 4.57, positioning it as the 125th riskiest nation out of the 146 countries surveyed. Chile scored a 4.94, placing it at number 120.

LAC nations with the next highest AML indices were Dominica (5.12), Uruguay (5.16), Peru (5.25) and El Salvador (5.48).

"In the region, Paraguay, Haiti, Bolivia, Panama, Trinidad and Tobago and Argentina are considered the nations at highest risk," reads the AML index report, adding, "Peru, Ecuador, Trinidad and Tobago have registered the greatest deterioration in the region."

The director of Chilean financial crime watchdog (UAF), Javier Cruz Tamburrino, touted in a statement the country's system for fighting ML/TF, saying: "In Chile, we have an [anti-ML/TF] system that is real, where the private and public sector are required by law to report suspicious operations to the UAF, an entity that, through the activity of financial intelligence processes, sends reports with indicators of both crimes to the justice department, so that justice can pursue prosecution."

Chilean courts issued 88 guilty verdicts for money laundering between 2007 and 2016, with those cases involving 172 individuals, the official said.

Community banking takes root in Cali

The Colombian city of Cali has proven to be fertile ground for financial inclusion initiative Bankomunales, having generated 130 community banks in the last two years.

Through the Bankomunales model, 19 individuals able to make a minimal investment and agreeing to the investment terms can create such a bank, reports local daily El País.

Cali's Bankomunales program is supported by Latin American development bank CAF, the Foundation for Rural Financing (Fundefir), Cali-based community development organization Cedecur and Cali's local government. The program has drawn particular interest from women, as heads of households, where there is strong interest in financial education.

The Fundefir website states that the program exists in more than 10 countries on four continents, including in Brazil, Bolivia, Dominican Republic, Haiti, Argentina and Peru.

According to World Bank data, 39% of persons aged 15 or higher in Colombia possessed an account at a financial institution in 2014, falling well below the LAC's 51% regional average.

Loan terms and services vary widely by community bank; however, in general, beyond the initial contribution, members must make minimum monthly deposits, which in turn, act as "shares."

One bank founded in the community of El Valladito requires a minimum of 5,000 pesos (US$1.68) in monthly contributions.

Depending on the bank, members can make additional voluntary contributions, thereby acquiring more shares. The amount of shares contributed can be used to establish a line of credit for the individual, where higher limits are available to those with more shares.

Banks also offer a low return for the invested savings of each individual. In the case of the Valladito bank, profits are distributed on an annual basis.

Other community banks, such as Bankomunal Republibank, are more investment focused, where funds are used to make small investments on a regular basis. Republibank offers loans ranging from 50,000 pesos to 2mn pesos.