Article content taken from La Prensa Libre newspaper.

The use of real estate transactions and shell companies are two of the most common money laundering methods in Costa Rica, and they are often carried out by small real estate brokerage firms operating in red-hot housing markets such as Tamarindo in Guanacaste. Such were the statements recently made by analysts from the Costa Rica Banking Association (Spanish initials: ABC), although it is not clear if one method is used more often than the other.

According to a local consultant for the United Nations in matters pertaining to responsible business and industry practices, Costa Rica is a magnet for money laundering due to her geographic position, high level of education and relatively low levels of crime; these are factors conducive to money laundering, and what makes this situation even more ironic is her nickname: “the Switzerland of the Americas.”

The ABC has been looking at account reports from the last few years and has detected suspicious activity tantamount to money laundering, such as large incoming wire transfers initiated overseas on the SWIFT network. These wire transfers, however, are never made in amounts that would trigger Know Your Customer (KYC) due diligence by the banks. In this regard, banks in Costa Rica are monitoring accounts and applying KYC practices to learn more about their account holders.

Luis Amador, president of the Compliance Committee of the ABC, explained that real estate transactions can help launder significant amounts of money. Back in March, online news daily CRHoy.com reported on a money laundering mechanism in some hotels in Guanacaste, whereby bookkeeping records and deposits are cooked to reflect full occupancy during the green (rainy) season despite the hotel being nearly empty.

The most common money laundering scheme involving real estate consists of straw man purchases, but even legitimate transactions can be used to this effect. For example, a small real estate office in a busy market such as Tamarindo lists a property for $100,000 and waits for a buyer who will agree to purchase the property for $80,000 as long as he or she agrees to use a certain law firm for the closing. The sale goes on public records as having been settled for $100,000, although the buyer only paid $80,000. This gives launderers the opportunity to wash $20,000.

Earlier this year, federal law enforcement agents from the United States raided the offices of Liberty Reserve, a digital currency transmitter once based in Costa Rica, which was allegedly a billionaire money laundering operation. Banking analysts in Costa Rica worry that too much money laundering could further weaken the U.S. dollar.