Mexico is home to several drug trafficking organisations (DTOs): the Sinaloa cartel, La Familia Cartel, Knights Templar Cartel, Juarez Cartel, and others.
Generally, these organisations buy cocaine processed in South America and smuggle it into the United States to sell. After that, however, they need a way to get the money back to Mexico — and secretly.
In a recent money-laundering case against 32 members of a Mexican cartel, special agent with Homeland Security Investigations (HSI) Jill Dennewitz explained how these organisations go about transporting their cash.
While many cartels take the risk of smuggling profits back to Mexico in bulk, more sophisticated groups launder money to avoid seizures by border patrol.
That process comes down to three basic steps, according to Dennewitz.
First, the traffickers could somehow deposit their “dirty money” at a bank. That method, however, risks detection, especially because the IRS requires banks report any deposits over $US10,000. When cartels have millions to transport, any deposits less than that can grow tedious — and even then the IRS could start sniffing around. In 2010, for example, Europe’s largest bank, HSBC was caught moving more than $US881 million in narcotics profits for the Sinaloa cartel, the world largest drug trafficking organisation.
To avoid financial institutions, drug traffickers engage in trade-based money laundering. In the first step of the process, traffickers deliver drug proceeds directly to money launderers in a “money pickup.” In one of these transfers, a broker associated with the cartel arranges for a US conspirator to call whoever has the drug profits. That individual will answer and wait for a code given to the conspirator by the broker. When the two are sure they’re on the same page, the individual hands over the profits.
Second, a process known as “layering” goes down. For traffickers who use the banking system, they will send drug proceeds through various wire transfers to different accounts in different names in different countries, all the while varying the amount of their deposits and withdrawals to make the paper-trail harder to follow.
For traffickers who use trade-based money laundering, the US conspirator would need to exchange their drug-related cash profits for high-value items like gold or diamonds or purchase other over-valued items from a company the launderer already owns.
Finally, the now-laundered money re-enters the mainstream economy, appearing to originate from a perfectly legal transaction. For example, a launderer would sell the gold and diamonds and “invest” the profits into another business.
“I know that the use of trade-based money laundering [such as using gold and/or diamonds] has become increasingly popular with [drug trafficking organisations] due in part to the new restrictions introduced in 2012 by the Mexican government to limit the use of US dollars in the country,” according to Dennewitz.
All in all, the money comes out much cleaner than it came.
The popularity of money-laundering within these organisations has also increased lately due to the Mexican government’s tough restrictions on the US dollar in 2010, Dennewitz explained.
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