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Abstract
Chile began its re-democratisation process in 1990 with a profound lack of counter- money laundering standards. Over time, the nascent political order was compelled to build institutions and generate norms in light of the security principles promoted by foreign actors. However, Chile’s reluctance, for instance, to not create a financial intelligence unit (FIU) until 2003, put the country in a particular stance for assessing criminal proceedings. This article reviews the construction of Chile’s governance of money laundering and focuses specifically on the role played by the Unidad de Análisis Financiero (UAF, Chile’s FIU) in maximising inter-institutional governing relations. The paper reviews three periods of time: the institutionalisation era (1990–2002), the UAF’s formative years (2003–2008) and the policy-building phase (2009–2014). The research concludes by exploring how Chile’s case adds to our qualitative knowledge on democratic network governance.
Notes
1. This point is discussed in both the academic literature and policy documents. See, for instance, Contraloría, Segundo Foro Internacional, December 2009; Farías and De Almeida, “Does Saying Yes to Capital Inflows”; Reuter and Truman, “Chasing Dirty Money”; Mares, “Institutions”; Machado, “Similar in their Differences.”
2. See Law Nº 19.913.
3. Such an understanding is taken from Dupont, Grabosky, and Shearing, “The Governance of Security,” 336.
4. For this point, we build on Dupont, “Security in the Age of Network,” 80.
5. Dupont, “Security in the Age of Networks.”
6. Hertting, “Mechanisms.”
7. Peters, “Virtuous and Vicious Circles,” 62.
8. For this point, the article builds on theoretical approaches thoroughly explained in Sørensen and Torfing, Theories of Democratic Network Governance; Peters, “Virtuous and Vicious Circles,” 74.
9. See a thorough discussion in Sørensen and Torfing, Theories of Democratic Network Governance.
10. Bevir and Rhodes, Interpreting British Governance; Bevir and Rhodes, Governance Stories.
11. Peters, “Virtuous and Vicious Circles,” 74.
12. Finlayson et al., “The Interpretive Approach,”135.
13. Bevir and Rhodes, “Interpretive Theory,” 132, 134)
14. Ibid.
15. Richards and Smith, “Interpreting,” 781.
16. Such an approach is suggested in Yanow, Conducting, 37.
17. In the search for governmental transparency and accountability, most of Chile’s public institutions allow open data access to the public. In the case that further official documentation is needed, there is online petition system available at http://www.gobiernotransparentechile.cl
18. The researcher wishes to thank El Mercurio’s newspaper documentation centre and its editor in charge for giving time and space to conduct such an investigation. From El Mercurio’s database, it was possible to read articles from other newspapers, such as La Tercera or La Segunda, which provided with different accounts of facts and events.
19. Finlayson et al., “The Interpretive Approach,”135–136.
20. See Appendix.
21. Bevir and Rhodes, “Author’s response,” 176.
22. A more detailed discussion on the limits of such research methods can be found in Marsh and Furlong, “Ontology and Epistemology”; Smith, “Recentring”; and Finlayson et al., “The Interpretive Approach.”
23. Schneider and Windischbauer explained the process of money laundering as ‘the intended purpose of the transformation is to wash illicit assets in a form of legal usability’. Since most lawless transactions are done in cash, and cash leaves no information or evidence behind, money laundering makes ‘black’ cash go ‘white’ as it creates a veil over it, averting investigations and possible seizure. See Schneider and Windischbauer, “Money Laundering”; Van Duyne, Groenhuijsen and Schudelaro, “Balancing.”
24. It was considered that drug trafficking organised criminality took up an important share of the illegal proceedings going into or through these countries. See FATF, “Report on Money Laundering.”
25. Wechsler, “Follow.”
26. Mares, “Institutions,” 213, 229.
27. Ibid.
28. One of the reviewers brought this useful point to my attention. Authors that have discussed the relationship between capital flight and money laundering in Latin America include, among others, Hinterseer, Criminal Finance, 40–43; Grosse, Drugs and Money, 88; Reuter and Truman, Chasing Dirty Money, 181.
29. Gardner, “Fighting,” 329. For a recent report on the FATF global regime, see Halliday, Levi, and Reuter, Global Surveillance.
30. FATF, “Report on Money Laundering,” 17.
31. Nieves, “Colombian Cocaine.”
32. Ibid, 32; International Crime Control Strategy, “Countering International Financial Crime,” 32.
33. Gelemerova, “On the Frontline,” 34, 37. Over the subsequent years, the United States became a strong enforcer of similar units abroad, and until recently has continued urging the design of policies and training throughout Latin America and the Caribbean. See also, Zagaris, “Selected Developments.”
34. Sharman, “Power and Discourse,” 636.
35. See Chile, Ley No. 19.366.
36. Huneeus, The Pinochet Regime.
37. Dumbacher, “The Fight,” 182.
38. See Chile, Decreto No. 683. Despite strong initial support by UN member countries, a decade later, less than 50 nations had actually ratified the Vienna convention. See Arlacchi, “Introduction.”
39. Insights on the relevant gradual pressure imposed by foreign bodies on Latin American countries since early 1990 are accounted, for example, in FAFT, Annual Report 1999–2010.
40. See Chile, Decreto No. 1508.
41. Godson and Olson, “International Organized Crime.”
42. Levi, “Money Laundering.”
43. In fact, bilateral agreements were co-supervised between foreign and national representatives. As an example, the 1994 agreement between the United States and Chile emphasised that the embassy in Santiago had to supervise its completion in alliance with the CONACE.
44. See Chile, Decreto 88.
45. Dumbacher, “The Fight Against,” 185.
46. Gardner, “Fighting Terrorism,” 329.
47. Gelemerova, “On the Frontline,” 36.
48. Bliblioteca, Historia de la Ley, 171.
49. The term ‘money laundering’ is nothing more than a colloquial paraphrase first used in 1973 during the Watergate scandal to describe the process of transforming illegal into legal assets. See Schneider, F. and U. Windischbauer, “Money Laundering,” 392.
50. GAFILAT, Chile, 15.
51. See Chile, Decreto No. 213.
52. Dumbacher, “The Fight Against,” 180; Reuter and Truman, “Chasing Dirty Money.”
53. Morris-Cotterill, “Money Laundering.”
54. Galvez, “Colombia y Chile.”
55. The creation of GAFISUD came after a memorandum of understanding signed in late 2000 by Argentina, Bolivia, Chile, Colombia, Ecuador, Paraguay, Peru and Uruguay. Mexico joined in 2006, Panama and Costa Rica in 2010, Cuba in 2012, and Guatemala, Honduras and Nicaragua in 2013. GAFILAT, data taken from the website.
56. UNODC, “Convention,” 22–23; UNODC, “After Palermo.”
57. Brashear, “Chile’s Criminal Law Reform.”
58. El Mercurio, “CDE Denuncia.”
59. See article 27 in Chile, Ley No. 19.913.
60. Wechsler, “Follow,” 49.
61. Hampton and Christensen, “Offshore Pariah’”; Reuter and Truman, “Chasing Dirty Money.”
62. Gardner, “Fighting Terrorism.”
63. Levi, “Money Laundering,”; Deneault, “Tax Havens.”
64. Huneeus, The Pinochet Regime.
65. Root, “The Fujimiri Effect”; Van Dun, “The Drugs Industry.”
66. UAF, Reporte de Gestión año 2004.
67. Gelemerova, “On the Frontline”; Egmont Group, “Annual Report June 2009- July 2010.”
68. FIUs of the administrative type are the most common in the Southern Cone. Besides Chile, Argentina and Peru also follow this model. However, their organisational patterns have different corporate structures and depend very much on each country’s legal framework.
69. UAF, “Balance Gestión Institucional 2004,” 27
70. Ibid.
71. UAF, “Reporte de Gestión 2004–2007.”
72. UAF, “Balance Gestión Institucional 2008.”
73. Gardner, “Fighting Terrorism,” 331.
74. See UAF, “Circular Nº0008.”
75. UAF, 2005.
76. Later in 2007, the UAF also became president of the experts’ groups for money-laundering control in the CICAD/OAS. UAF, 2006.
77. Annual suspicious reports increased from 53 in 2004 to 419 in 2007. In the latter year, 140 reports were sent to the Ministerio Público and the CDE for further investigation, and over 50 information requests were exchanged with foreign FIUs. UAF, “Reporte de Gestión 2004–2007,” 38–47. In 2014, there were 2175 suspicious reports, a 26% increase on the previous year. See UAF, Balance Gestión Integral año 2014. For comparative purposes, annual data can be found at http://www.uaf.cl/acerca/balance.aspx
78. GAFILAT, 2006, 30–31.
79. UAF, “Convenio de Colaboración,” 9 October 2008.
80. UAF, “Balance Gestión Integral año 2008,” 2.
81. Ibid., 4.
82. UAF, “Balance Gestión Integral año 2009,” 7.
83. Annual reports identified the UAF’s ‘clients/ beneficiaries/users’ according to its overall corporate strategy. In 2004, there were only five, and they included regulated entities, foreign FIUs, Ministerio Público, CDE and the Finance Committee of the Chamber of Deputies. The number doubled due to the UAF’s increasing flow of collaborative effort with relevant public and private actors. See UAF, “Balance Gestión Integral año 2009,” 4–6.
84. See Orden Nº1421, 22 December 2009.
85. UAF, “Informe Estadístico Enero-Septiembre 2010,” 22–23.
86. UAF, “Convenio de Colaboración,” 15 November 2011.
87. UAF, “Informe Estadístico Anual Año 2011.”
88. UAF, “Balance Gestión Integral año 2009”; UAF, “Informe Estadístico Anual Año 2011.”
89. UAF, “Alianza Estratégica,” 15 November 2012.
90. FATF, “International Standards on Combating Money Laundering.”
91. UAF, “Estrategia Nacional Para la Prevención y Combate al Lavado de Activos.”
92. Hertting, “Mechanisms of Network Governance,” 44.
93. Hertting, “Mechanisms of Network Governance.”
94. Ibid., 48.
95. O’Toole, “Governing Outputs and Outcomes,” 215.
96. Sørensen, “Metagovernance,” 100.
97. Ibid., 100–102.
98. Sørensen and Torfing, “Theoretical Approaches to Governance,” 95.
99. This idea builds on Sørensen and Torfing, “Theoretical Approaches to Governance,” 97.
Additional information
Notes on contributors
Carlos Solar
Carlos Solar is a PhD student in the Department of Politics in the University of York. His current research in the governance of security will also appear in a forthcoming peer-reviewed article in Latin American Policy.