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Extortionists turn to cash intensive businesses to launder proceeds

By Mark Ford on September 14, 2022

Cash intensive local businesses are used to funnel proceeds of extortion into apparently legitimate business bank accounts according to a new report published by Global Financial Integrity (GFI).

Proceeds of extortion have also been used by criminals to purchase businesses according to the report, Extortion in the Northern Triangle of Central America: Following the Money.

Predicate offence

Extortion is a predicate offence, meaning that it generates illicit proceeds and forms part of financial crimes such as money laundering, terrorism financing, or corruption the report by the Washington-based non-profit focused on illicit financial flows explains.

It says funds illicitly raise by extortion, as well as being placed in cash intensive local businesses and their bank accounts, can also be reinvested in criminal or terrorist groups and used to bribe law enforcement, the judicial sector, and political leaders.

Typical businesses

The report, which focuses on extortion in the Central American Northern Triangle comprising Guatemala, Honduras and El Salvador, identifies cash intensive local businesses used in extortion.

Vehicle sales and rental firms, car washes, restaurants, cafes and bars as well as beauty salons and internet cafes are amongst the less surprising businesses used to mask the proceeds of extortion.

More surprisingly perhaps, the report found that funeral parlours and even churches are used to launder funds obtained through the wrongful use of actual or threatened force, violence or fear.

Prison-based operations

The report examines the origins of extortion in the Northern Triangle, which it says is at least a 40 year history. Gangs of Central American youth, formed in Los Angeles in the 1980s, arrived in Central America through a wave of deportations in the 1990s and early 2000s.

Gangs in and outside of prison increasingly turned to extortion, which lent itself to being carried out from behind bars, and it provided gang members in prison with a source of income as well as a means to maintain territorial control according to the report.

For gangs, extortion is perceived as high-reward and low-risk, particularly compared to homicides or drug trafficking it concludes.

The GFI report, Extortion in the Northern Triangle of Central America: Following the Money, can be found here.