A recent case, together with several past investigations, shows how the music and events industry is being used by organized crime groups to launder money.
In early January, Colombian police captured Pedro Pablo Guzmán, alias “Pelomono,” at a concert in the municipality of Necocli, Antioquia, in northern Colombia.
Pelomono is alleged to be a major drug trafficker and member of the Gaitanist Self Defense Forces of Colombia (Autodefensas Gaitanistas de Colombia – AGC), also known as the Gulf Clan or Urabeños.
To cover up his role within the AGC, Pelomono purportedly used his legal companies and businesses, among which is a company in charge of financing and producing musical events in northern Colombia.
“This guy had several commercial activities as a front: a life of partying, dancing, beach trips, international activities, and high-end vehicles,” a member of the Colombian police’s Criminal Investigation and Interpol Directorate (DIJIN) told InSight Crime on condition of anonymity.
A Large Market
One of the largest revenue-generating markets in the world is the entertainment industry, which includes the music industry’s concerts, events, recording studios, and online music playback platforms. In 2022, Latin America saw a 25.9% growth in revenues from the music industry, according to the most recent report by the International Federation of the Recording Industry (Federación Internacional de la Industria Fonográfica).
The Colombian music scene has also seen significant growth in recent years. Not only has the country exported world-class artists, but in major cities such as Medellín, demand for recording studios has increased by 90%, according to Bloomberg.
But the industry’s profits have also attracted the attention of criminal actors and organizations seeking to launder money from illicit activities, such as drug trafficking.
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Several factors make the music industry attractive for money laundering. According to Sergio Reyes Diaz, director of Infolaft Academy, an organization that offers training to anti-money laundering professionals in Latin America, one benefit is that the music industry works with businesses that handle large sums of money, permitting illegal actors to give the appearance of legality to illegal resources.
“We know that the music industry moves a lot of money, and that makes it vulnerable to criminal organizations that may be looking for opportunities to take advantage of its social recognition, infiltrate it, and use it to justify huge amounts of illicit money,” said Reyes.
Another characteristic that facilitates money laundering is that the industry’s supply chain is made up of many actors, some of whom may have internal controls to prevent money laundering, while others may not.
And the more actors involved in the chain, the more complicated it becomes for companies to carry out due diligence and ensure the legitimacy of each of these intermediaries.
“That’s why it’s so important for everyone involved in that industry to implement know-your-customer procedures, so they know who they’re dealing with,” Reyes said.
Front Companies
One of the main ways in which criminal groups launder money is through front companies, or businesses created to give a legal appearance to illegal activities or resources. This strategy is also common within the music industry.
Pelomono’s activities appear to be a case in point. According to the Colombian police official, Pelomono used his various businesses — including his music financing and event production company — to launder money.
The AGC has used this same approach to launder assets in the past. At the beginning of 2021, for example, one of the main money laundering schemes for the AGC led by Jhon Fredy Zapata Garzon, alias “Messi,” came to light. Zapata used various strategies to launder drug trafficking proceeds, including financing musical groups and emerging reggaeton and popular music singers through a conglomerate of front companies.
Event Planning
According to Infolaft Academy’s Reyes, over-invoicing is another known money laundering practice common across industries, whereby businesses report inflated sales in order to launder illegal resources.
In 2012, for example, the partners of the Colombian company Total Conciertos, which organized and produced a series of events, were investigated for allegedly laundering money for Colombian drug traffickers, such as the Calle Serna brothers and Daniel “El Loco” Barrera. According to a complaint that reached the Colombian prosecutor’s office, the producers attempted to launder $30 million through these events, which included concerts by Mexican singer Vicente Fernandez.
SEE ALSO: From Worst to Best: Anti-Money Laundering Capabilities in Latin America
This same firm was investigated in Spain for allegedly laundering money through Argentine soccer player Lionel Messi’s charity matches. According to the investigations, the strategy behind the scheme was called “Fila Cero” and consisted of allowing people to enter the events for free in order to report higher sales than the real ones.
This strategy can be seen in cases throughout the region. A network made up of Argentine and Colombian nationals that trafficked cocaine from Paraguay and Bolivia to Argentina and then shipped it to Europe was dismantled in November 2023. The network laundered money through concerts held in theaters that they owned. Authorities caught on because the group was paying artists three to four times more than elsewhere, which allowed them to report higher-than-actual legal expenses.
