Study: Mexican drug cartels avoid banks, opt to stash money or spend it at home

Wednesday, June 2, 2010

Study: Mexico drug cartels avoid bank deposits

MEXICO CITY — A first-ever study targeting the exorbitant wealth of Mexico’s drug lords shows more than half the money smuggled out of the U.S. each year is cash that never passes through a bank, making it nearly invisible to law enforcement.

That cash is either stashed away or directly spent in Mexico, where 75 percent of business is done in cash. Drug moguls can buy real estate, cars, airline tickets and just about everything else in cash, allowing their powerful businesses to easily launder the estimated $19 billion to $29 billion they earn each year selling cocaine, heroin, methamphetamine and marijuana in the U.S.

“Now that we see what a cash-based economy there is here, we can see why it’s going to be important for Mexico have restrictions on how cash can be used, or to require that large purchases are accompanied with notary certificates reported to the Treasury,” said U.S. Ambassador to Mexico Carlos Pascual.

In the U.S., by contrast, just 20 percent of all transactions are conducted in cash.

U.S. Immigration and Customs Enforcement Assistant Secretary John Morton unveiled some of the findings Wednesday in Mexico City, saying that neither country has done enough to get at the money supporting Mexico’s drug cartels.

“Until now, we didn’t know enough about this problem in the U.S. or Mexico,” he said. “Simply arresting people won’t be a complete solution. We have to undermine the organizations and businesses, we have to identify, seize and forfeit their profits.”

Drug gang violence has soared since President Felipe Calderon launched a crackdown on traffickers in late 2006. More than 22,700 people have been killed. Their leaders are some of the richest men in the world, including fugitive drug lord Joaquin “El Chapo” Guzman.

The study, which was conducted by several U.S. and Mexican government agencies, suggests law enforcement agents interested in breaking up drug gangs should target cartel treasurers in Mexico who supervise the movement of the cash as it’s carried from street dealers in U.S. cities to safe houses in Mexico.

Based on interviews with law enforcement officials on both sides of the border, along with confidential information, the study also describes routes the money often takes: Smaller dealers throughout the U.S. send cash to consolidators in five cities: Los Angeles, Chicago, New York, Charlotte and Atlanta. The money is then trucked overland to four secondary hubs — Phoenix, El Paso, Dallas and Houston — to be broken into smaller amounts and prepared for smuggling across the border.

The most common border crossings for cash smugglers are in San Diego, Nogales, Arizona, and the Texas cities of McAllen, Laredo and Brownsville, according to the report.

The report itself was not released to the media because of concerns about confidential law enforcement information. Mexican officials did not respond immediately to requests for comment.

Details provided to the media show strict banking and wire transfer regulations in the U.S. are forcing cartels to physically haul almost all of their profits back to Mexico.

Department of Homeland Security counternarcotics director Grayling G. Williams said he was encouraged that for the first time in U.S.-Mexico relations, top financial crime investigators are working together.

“We’re taking a completely different approach,” he said. “With this study, and our resulting tactical response, we send a resounding message: We intend to cut the financial lifeline of these criminal organizations.”

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