To understand the current state of affairs in Guatemala one needs to remember that it is a country with a new born and fragile democracy, following 36 years of civil war between 1960 and 1996. During the civil war, many human rights were completely violated, the legal order was suspended, and basic laws were nullified. The most tragic outcome was the deaths and disappearances of almost 200,000 people from terrorism and counter-terrorism tactics. Neither the government or paramilitary forces were held accountable for these crimes.
After the civil war, industrial and commercial activities flourished, opening doors for foreign investment and the flow of overseas capital. Debate intensified among Guatemala’s neighbours (who had also suffered from misconduct at an institutional level) as to which measures should be employed to best tackle corruption and impunity.
The socio-political experiences of some emerging markets, especially in Latin America and Asia, suggest that institutional corruption equates to an open invitation to impunity. It involves the collusion of government bodies with cartels and criminal groups that operate at a local, national or international level, and this collusion eventually affects social stability and quality of life.
Yet Guatemala’s recent anti-corruption purge has been non-violent, as protagonists have sought to avoid repeating the previous mistake of entering into a spiral of violence that could jeopardise the integrity of the State.
It is difficult to overstate the significance of the arrest in September of then-president Otto Pérez Molina for corruption and fraud. Many among the Guatemalan general public consider that such an event would not have been possible without the involvement and intervention of the Comisión Internacional Contra la Impunidad en Guatemala, or International Commission against Impunity in Guatemala (CICIG).
The involvement of the CICIG in Guatemalan affairs is the result of an ‘outsourcing’ strategy that had the aim of strengthening the role of the courts and justice tribunals whose actions and decisions were once heavily influenced by the central government. The CICIG has so far investigated and reported numerous incidents of bribery, corruption and embezzlement among other illegal practices within government bodies.
Very few initially thought that such an unprecedented legal and political experiment would succeed. However, they did not take into account the strong will of honest civil servants and society itself. And several institutions, including the police and judicial authorities, began to strengthen, not only in investigating illegal activities but also in determining where responsibility lay.
On 23 April 2015, Pérez Molina asked the United Nations to extend the CICIG’s mandate for another two years following extensive pressure from various national and international non-governmental organisations.
Since then, the legal and political experiment has achieved a key milestone when the CICIG and the criminal prosecution office of Guatemala uncovered a bribery and embezzlement scheme named La Línea (the line). The case involves importers and customs-brokers who have managed to avoid the payment of customs taxes and anti-dumping duties in exchange for bribes. These payments were made in connection with products that arrived from various countries, especially textiles transported from China.
In the La Línea case, it has been proven that Pérez Molina and then-vice-president Roxana Baldetti received approximately US$3.7 million in bribes. Pérez Molina and Baldetti were charged with illegal association, receipt of bribes and customs fraud – crimes for which both high profile politicians, among others, were convicted and imprisoned.
Political turmoil will often have an effect on a country’s compliance culture and there is likely to be a crackdown on customs in response to recent revelations in Guatemala. Companies that have used customs in Guatemala should conduct an audit or investigation to ascertain if they have been linked to any illicit behaviour. A proactive approach to compliance is always recommended rather than waiting for authorities to find possible graft.
Companies need to ensure that their employees or third parties are not paying bribes to speed up import and export processes. An effective way for companies to do this is to audit their distributors. Before embarking on an audit, companies should ask themselves, ‘why are we doing this audit and what do we hope to gain?’ This will help to decide which distributors to examine and what types of information to collect. Companies can collect such information via questionnaires, document reviews, interviews and onsite visits.
Compliance challenges in Guatemala
- Lack of enforceable controls and standards to prevent money laundering (Guatemala has not adopted the Financial Action Task Force (FATF) or OECD standards)
- Financial regulations about deposits, transfers and foreign-exchange operations are considered loose compared to international standards
- The United States Department of State is concerned that Guatemala’s geographical location and border-control agreements with El Salvador, Honduras and Nicaragua, which allow the free transit of citizens and goods, constitute a vulnerable point in restricting narcotics, human-trafficking activities and the transit of counterfeit and other illegal goods
- Gambling and the commercial activity of casinos remain deregulated, posing major risks of money laundering
- Despite the recent impeachment of Guatemala’s president and other high profile officers, as well as the expedited conviction of those prosecuted, more work is urgently needed to tackle institutional corruption, bribery and organised crime
- There are still concerns within the international community about human-rights issues, given Guatemala’s recent history of civil conflict and some of the most infamous violations of human rights in Latin America
Guatemala’s recent anti-corruption war has unexpectedly created a ‘compliance culture’ across the country that is now spreading across Latin America on political, legal, regulatory and even financial level. The hope is that this shift continues and that corrupt practices will no longer be tolerated within the public, private and civil sectors.
International Commission against Impunity in Guatemala
The International Commission against Impunity in Guatemala (CICIG) was established in 2006 during Oscar Berger’s administration and under the mandate of the United Nations. It aims to support the police and judicial authorities with conducting official investigations and legal proceedings against authorities likely to be involved in the commission of felonies.