Misuse of AML/CFT Tools as a Mechanism of Economic Pressure: A Structural Risk Assessment for Latin America

This independent analytical report examines structural risks associated with the misuse of anti-money laundering and counter-terrorist financing (AML/CFT) tools as mechanisms of economic pressure within Latin America’s financial and regulatory environment. While AML/CFT frameworks play a critical role in safeguarding financial systems, increasing automation of compliance processes, expanding data sources, and cross-border information flows have created conditions in which risk signals and reputational flags may generate disproportionate economic consequences for entities not formally subject to sanctions or criminal findings. The report analyzes recurring misuse patterns, escalation mechanisms from initial risk signals to financial exclusion, and the broader systemic implications for banking access, investment climate stability, and institutional trust. Special attention is given to the interaction between financial intelligence units (FIUs), banks, regulators, and third-party data providers, as well as the amplification of reputational risk through automated screening systems and international compliance databases. The study outlines early warning indicators, institutional stress-testing approaches, and a package of safeguards aimed at strengthening proportionality and resilience without weakening AML/CFT effectiveness. Prepared by ARGA Observatory, this report is intended for regional and international regulators, financial intelligence units, financial institutions, compliance professionals, multilateral organizations, and academic researchers engaged in financial governance, AML/CFT policy, and cross-border regulatory risk analysis in Latin America.