The kleptocratic networks that dominate Honduras may not be reaping the type of fabulous booty that has come to light in other afflicted countries—especially those with oil endowments, such as Nigeria, where as much as $1 billion per month may have disappeared from oil revenues for several years during Goodluck Jonathan’s presidency.456 No one, indeed, has sought to estimate the total take in Honduras. Such an enterprise would be doomed in any case. Not only are pains taken to hide and disguise the money that results from the activities detailed here for obvious reasons, but that money derives from a combination of sources that are often considered separately: undue profits accruing to private companies thanks to individual favoritism or an inordinately preferential regulatory regime; old-fashioned bribery, fraud, and kickbacks; and the proceeds of out-and-out crime.
There is some debate as to whether money is in fact the objective of governing networks like those of Honduras, or if what they are after instead is power. The two are intertwined, and the balance between them may be different in different countries. The IHSS scandal provides direct proof that some of the revenues captured by the public-sector element of Honduran networks are indeed invested in electioneering, and private-sector network members and drug-trafficking organizations are both believed to make campaign contributions.457
And yet, with some select exceptions, the Levantine-origin business elite has not made a significant effort to colonize the political arena. Similarly, where drug-trafficking organizations’ leaders have placed a nephew or a brother in local office, the aim has been to guarantee a friendly environment for their ventures, not to sate an appetite for power. If anything, descriptions of social relations in these towns suggest that cartels treat local office-holders as subordinate. Even within the public sector, agencies and Congress have so (embarrassingly) little autonomy as to make it implausible that power is what attracts people to those positions. Rather they are enticing because of the money to which they give access.
The phenomenon is visible around the world: money, rather than courage, selflessness, intellectual achievement, or service to the public, seems to have gained pride of place as the yardstick by which social status is measured.
Despite the increase in attention devoted to high-level corruption internationally, organizations that study and assess the risks of laundering illicitly acquired money remain focused on terrorist financing and drug trafficking, not corruption. Nevertheless, their reviews of Honduras offer some suggestions as to where the proceeds are going. Real estate and automobiles top the list both for the U.S. Department of State and the Caribbean Financial Action Task Force.458 Moreover, “laundered proceeds,” according to the State Department Report on Countries/Jurisdictions of Primary Concern, “typically pass directly through the formal banking system,” as well as “remittance companies, currency exchange houses, and the construction sector.”459 The U.S. nongovernmental organization Global Financial Integrity, which calculates illicit financial outflows, estimates these to total some 20 percent of GDP for Honduras.460 The group’s methodology is conservative—cash, for example, is left out of its calculations—so the real amount may be greater.
Given the likelihood discussed above that the entire Honduran banking sector is awash in drug money, such comparatively less tainted sources as undue profits, inflated contracts, and even out-and-out bribes must raise fewer eyebrows. Reports on money-laundering unanimously note that nonfinancial businesses, such as real estate agents and law firms, escape anti-money-laundering supervision altogether. “It can be inferred that they consider that this problem does not concern them and that money laundering activities are carried out in other sectors,” concluded the Financial Action Task Force of Latin America in a 2016 report.461 As the Panama Papers and recent reporting on the property market in London and New York have made plain, lawyers and real estate companies may be as important as banks in providing money laundering services to the criminal and the corrupt.462
It is fair to assume from the above and from on-the-ground observation that much of the proceeds of Honduras’s networked corruption is spent on conspicuous consumption at home: fancy cars, luxurious houses and farms, retinues, fine food and entertainment, and travel.463 Indeed, our team found little direct evidence of property or bank accounts held outside Honduras.
But given the proximity and regional stature of the United States, and the expansive and ill-regulated Florida and Texas real estate markets, it is likely that a significant amount of Honduran corruption money does wind up in the United States. This hypothesis may be tested in the near future, given the placement of two new kleptocracy initiative investigators in the Florida FBI field office and the added anti-money-laundering scrutiny being applied to the Florida real estate market on an experimental basis.464 It would be another important angle for deeper study.
456 Financial Times provided excellent coverage of this scandal. The central bank governor who was fired for revealing the shortfall wrote an op-ed in that newspaper more than a year later: Lamido Sanusi, “Unanswered Questions on Nigeria’s Missing Oil Revenue Billions,” Financial Times, May 13, 2015. At the 2015 International Anti-Corruption Conference, Transparency International Chairman Jose Ugaz highlighted the rising objective scale of corruption, wondered out loud if no one bothered to steal less than a billion dollars any more.
457 Multiple interviews; and Dudley, “Honduran Elites and Organized Crime”; and Hernández’s own admissions regarding money funneled into his campaign coffers by companies that benefited from the IHSS scandal. Additionally, testimony in the 2017 trial United States of America v. Fabio Porfirio Lobo provides abundant support for this presumption; see http://bit.ly/2nnr0K3.
458 Caribbean Financial Action Task Force, “Mutual Evaluation Report”; see also Bureau of International Narcotics and Law Enforcement Affairs, “2014 International Narcotics Control Strategy Report,” U.S. Department of State, 2014, https://www.state.gov/j/inl/rls/nrcrpt/2014/supplemental/227875.htm.
460 See Dev Kar and Brian LeBlanc, “Illicit Financial Flows From Developing Countries: 2002-2011,” Global Financial Integrity, December 11, 2013, http://www.gfintegrity.org/report/2013-global-report-illicit-financial-flows-from-developing-countries-2002-2011/.
461 “Mutual Evaluation Report of the Republic of Honduras,” Financial Action Task Force of Latin America, October 2016, http://www.fatf-gafi.org/media/fatf/documents/reports/mer-fsrb/GAFILAT-MER-Honduras-2016-English.pdf.
462 See, for instance, Matteo de Simone et al., “Corruption on Your Doorstep: How Corrupt Capital is Used to Buy Property in the UK,” Transparency International UK, February 2015, http://www.transparency.org.uk/publications/corruption-on-your-doorstep/; or the New York Times series on the Time-Warner towers, “Towers of Secrecy: Piercing the Shell Companies,” New York Times, February 2015, https://www.nytimes.com/news-event/shell-company-towers-of-secrecy-real-estate; or the International Consortium of Investigative Journalists’ expose on “The Panama Papers: Politicians, Criminals and the Rogue Industry That Hides Their Cash,” ICIJ, https://panamapapers.icij.org/.
463 In one case, a crocodile farm: Ollie Gillman “More Than 11,000 Crocodiles and Lions Starving to Death on Honduran Farm After US Freezes Assets of Elite Family and Workers Refuse to Feed Animals Until They’re Paid,” Daily Mail, November 3, 2015, http://www.dailymail.co.uk/news/article-3302177/More-11-000-crocodiles-starving-death-farm-Honduras-freezes-assets-elite-family.html.
464 E-mail exchange with one former and one current FBI investigator from the Kleptocracy Asset Recovery Initiative, March 15 and 17, 2017; and Nina Lincoff, “BREAKING: Regulators Expand Real Estate Money Laundering Dragnet in South Florida,” South Florida Business Journal, July 27, 2016, http://www.bizjournals.com/southflorida/news/2016/07/27/breaking-regulators-expand-real-estate-money.html.