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Peru Targets Crypto Regulation with Aim of Thwarting Money Laundering

Last Updated March 4, 2021 2:39 PM
Jose Antonio Lanz
Last Updated March 4, 2021 2:39 PM

Peru’s race to evolve its legal system and adapt to the challenges of a “crypto society” has only just begun. In an interview granted to JusticiaTV , the official channel of the Peruvian judicial system, the Superior Judge of that country, Bonifacio Meneses Gonzales, asked Congress to regulate crypto to combat money laundering.


Legal Gaps Need to be Filled With Proper Regulation

The well-known jurist explained that although the country has made progress in legal matters, there are still specific gaps that are exploited by criminals to launder money. The lack of proper regulations and other conflicts of competence have allowed some crimes to go unpunished:

“It is urgent that the legislative authorities dictate the adequate laws in money laundering so that whoever uses crypto is clearly identifiable; this scenario must have a legislative regulation.”

The judge explained that in Peru, the adoption and trading of crypto is a growing trend, mainly thanks to the bitcoin community. But the rising wave of criminals has tarnished the reputation of this group.

“The traffic of bitcoin exists, and the criminals are identified. But because it is out of our jurisdiction, digital assets can be used in shady businesses.”

In Peru, money laundering is considered an autonomous crime, which means that this conduct is punishable by itself and prosecutors do not have to prove any preexisting crimes. This new ruling was possible thanks to the combined efforts of legislators and judges, culminating in the Legislative Decree No. 1106 and the Plenary Agreement 01-2017 of the Supreme Court of Justice.

Money laundering is prevalent among corrupt politicians. The judge explains that many of them have managed to obtain funds without adequate justification via unregulated operations in crypto exchanges and similar methods involving digital assets.

“How is a campaign of three, four million dollars or more going to be supported with the contribution of people unable to justify – a mechanic or a housewife – contributions of $10,000, $50,000?”

This modality is known as “pitufeo” (which could roughly be translated as “smurfing”). It consists of simulating social events such as cocktails, raffles, barbecues, and meetings to receive “donations” or give instructions to supporters to transfer money out of traditional channels.

Peru: Using Blockchain to Combat Corruption

Peru is a country where corruption is practically an everyday thing. This year, former president Alan Garcia committed suicide  after the police arrested him upon revealing that he was involved in the infamous Odebrecht Affair. Just a few days later, his successor, Pedro Pablo Kuczynski, was sentenced to three years in prison for also being involved in the same corruption scandal.

To fight this situation, the Peruvian government began a pilot program to use blockchain technologies in the control of its bidding processes. The project, promoted by Peru Compras, relies on LAC-Chain technology to prevent politicians from using their influence to alter contracts and purchase public goods.

In addition to government initiatives, ordinary citizens are also increasingly relying on the use of crypto and blockchain technologies. According to data provided by CoinDance , peer-to-peer trade in bitcoin has risen sharply since 2017, going from 54,000 Peruvian soles to more than 3,000,000 Peruvian soles in less than two years.