News

COVID-19 may have crippled global trade, but a spate of arrests and seizures in Belgium show that drug trafficking and related cash flows in Europe have not stopped as a result, according to the country’s financial intelligence unit, CTIF.

Belgian authorities seized nearly 17 tons of cocaine at the port of Antwerp, Europe’s second-largest, in the first four months of 2020, a volume in line with previous years’ seizures that, according to the financial intelligence unit, suggests that the lockdown has not yet materially impacted the drug trade.

The drastic reduction in container traffic from Asia has deprived ecstasy and amphetamines traffickers of precursor chemicals mainly produced in China, but cocaine smuggling appears to have continued unimpeded as trade between South America and Europe has avoided severe disruptions, forcing the port of Antwerp to temporarily reinforce its anti-narcotics surveillance.

“Customs believe that organized crime saw the lockdown coming in March and placed tons of cocaine on ships bound for Europe,” CTIF told ACAMS moneylaundering.com. “At the end of March, 1.6 tons of cocaine were seized, always in large packages of 300 to 700 kilograms at a time, which is quite unusual for the season.”

On the other hand, according to CTIF, no major money-laundering operation has been identified since the onset of the pandemic in March.

Authorities instead believe that government-imposed restrictions on retail outlets, restaurants and other businesses in response to the lockdown have forced drug traffickers to stockpile their illicit banknotes in unprecedented volumes and search for other channels through which to launder them, including real estate.

The record seizure of €12.5 million by Dutch authorities in Eindhoven, just 60 miles east of Antwerp, suggests a postponement of the money-laundering phase until those restrictions are eased.

“It is likely that restrictive measures initially forced criminal organizations to take the most urgent action, i.e. to ensure the maximum supply of drugs before the lockdown, while money laundering would occur at a later stage,” CTIF said.

Business as usual

Money launderers operating on behalf of traffickers will have several opportunities to place, layer and integrate cash as soon as commercial activity renews in full, especially with businesses in economic sectors that the pandemic has pushed to the brink of bankruptcy, such as hospitality and dining.

Criminals may also respond by routing a larger share of their funds through a largely unregulated industry: real estate.

“Economic insecurity is likely to lead to a decrease in property prices … the laundering of money from drug trafficking through real estate investments will therefore be carried out more efficiently,” CTIF warned. “This effect will be felt at both national and international levels.”

After 40 years of remarkably steady growth, the aggregate value of Belgium’s housing market may finally be due for a dip. ING Bank Belgium predicts a 2 percent drop in the property market in 2020, while analysts at KBC Bank forecast a 3 percent drop this year and a 2 percent decrease in 2021.

The downturn may motivate desperate sellers and struggling real estate agents to enter into deals with shady buyers and close their eyes to payments in cash of unknown origin.

CTIF does not intend to supervise and regulate the property market for AML purposes more thoroughly in response to the increased threat of illicit finance, the agency told moneylaundering.com.

“Provided that it is correctly applied, the prevention system currently in force is sufficient,” CTIF said. “Nevertheless, we will assist reporting entities as much as possible, in particular through the publication of warnings.”

The threat is not limited to Belgium, according to CTIF, which also identified Spain, Morocco, Turkey and especially the United Arab Emirates as possible destinations for illicit real-estate investments.

“The number of suspicious transaction reports related to the UAE is likely to increase due to the [Financial Action Task Force’s] reclassification of the territory as particularly risky,” CTIF said. “This will allow us to refine our understanding of the laundering methods used in connection with this territory.”

Contact Gabriel Vedrenne at gvedrenne@acams.org