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National Drug Threat Assessment 2004
April 2004

Money Laundering

Traffickers of illicit drugs, primarily Colombian and Mexican criminal groups, launder their drug sale proceeds to minimize the risk of detection or seizure when using the funds. A principal method used to launder drug proceeds is the physical transportation of bulk currency and monetary instruments, such as money orders and checks, to destinations outside the United States. Drug proceeds also are laundered through money service businesses, including money remittance, money exchange, and check cashing firms. In addition, traffickers introduce their illicit proceeds into the U.S. financial system by structuring currency transactions in amounts that fall under threshold reporting requirements established by the Bank Secrecy Act, by co-opting small cash-intensive businesses to commingle drug proceeds with legitimate funds, and by purchasing real estate, vehicles, and businesses. These approaches represent the three defined methods of money laundering: placement, layering, and integration. Another approach is for traffickers to consign their proceeds to money brokers who launder the funds for a fee or commission. This approach frees DTOs and criminal groups of responsibility for the security and transportation of bulk proceeds and separates traffickers from the laundering process.

The amount of bulk cash shipped, as well as the vehicles, techniques, and routes used, varies, depending on the level of experience and organization of the trafficking groups involved. In most cases bulk currency is transported overland in shipments ranging from thousands to hundreds of thousands of dollars from drug markets to staging areas in large cities with well-established financial infrastructures or near U.S. borders. In other cases the money is transported to a nearby airport or seaport before being smuggled out of the country. Therefore, while money laundering occurs throughout the country, activity generally is concentrated in many of the primary market areas identified in this assessment for the primary substances of abuse and in cities close to the U.S.-Mexico border. Bulk currency typically is transported in private and commercial vehicles via the U.S. highway system. Concealment techniques include false compartments in vehicles, dummy luggage and packages, and wrapped gifts and parcels.

Drug proceeds transported to the border area in bulk often are broken into smaller shipments in cities such as San Diego, Tucson, and El Paso before being smuggled into Mexico through POEs. According to EPIC seizure data, for example, drug proceeds often are transported by vehicle to border area cities in amounts exceeding $100,000; however, inspectors at the border often encounter amounts less than $30,000. Smugglers of both illicit drugs and currency are aware of manpower and time constraints at the border and usually cross at the busiest POEs to decrease the likelihood that they will be stopped. They also use spotters and runners on both sides of the border to coordinate the timing of crossings. Smugglers also cross the border between POEs to avoid law enforcement detection.

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Cocaine. Colombian, Mexican, and Caribbean DTOs and criminal groups are actively involved in smuggling, transporting, and distributing wholesale cocaine in the United States and rely primarily on the bulk shipment of cash and monetary instruments to transport their illicit proceeds to foreign destinations. To a lesser extent, they use money service businesses and various money laundering techniques to disguise the source of their funds.

Colombian DTOs are a principal cocaine-related money laundering threat. Cocaine proceeds often are smuggled to Colombia via couriers aboard commercial flights and in cargo shipments on maritime vessels from the eastern United States. Colombian DTOs also reportedly use Mexican bulk currency smugglers to transport cocaine proceeds from the United States into and through Mexico en route to Colombia. Colombian traffickers also use money service businesses, particularly money transmitters (casas de cambio, giro houses, and remittance companies), and the Black Market Peso Exchange (BMPE). The BMPE is an informal value transfer system whereby Colombian traffickers sell U.S. drug dollars to black market brokers in the United States and Colombia in exchange for pesos in Colombia.

Mexican cocaine traffickers typically transport their illicit proceeds overland via the U.S. highway system, particularly Interstates 5, 10, 35, 40, 70, 75, 80, and 95. They collect and store the proceeds in cocaine primary market areas such as Atlanta, Chicago, Houston, and Los Angeles as well as in border area cities such as El Paso, Phoenix, San Antonio, San Diego, and Tucson before smuggling them across the border into Mexico.

Caribbean cocaine traffickers typically transport their cocaine proceeds via couriers on commercial flights from Miami and New York. Dominican, Haitian, Jamaican, and Puerto Rican criminal groups sometimes provide money laundering services to larger DTOs.

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Methamphetamine. Mexican DTOs and criminal groups are the primary producers, smugglers, transporters, and wholesale distributors of foreign-produced methamphetamine in the United States. Consequently, they are the principal launderers of methamphetamine proceeds. These organizations and groups rely on the bulk shipment of cash and monetary instruments and, to a lesser extent, the use of money service businesses, cash-intensive businesses, and structured currency transactions to launder their illicit proceeds.

Mexican methamphetamine traffickers transport bulk methamphetamine proceeds to the U.S.-Mexico border from consolidation cities primarily in the western United States, including the primary market areas of Los Angeles, Phoenix, San Diego, and San Francisco, via private and commercial vehicles. Frequently used routes include Interstates 5, 8, 10, 40, and 70. Mail services, buses, and trains are used as well.

Traffickers of Southeast Asian methamphetamine doubtless smuggle their illicit proceeds out of the United States to foreign destinations. However, available information regarding the limited distribution of Southeast Asian methamphetamine is not sufficient to determine the specific methods or routes these traffickers use to launder their proceeds.

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Marijuana. The traffickers primarily responsible for smuggling foreign-produced marijuana into the country are also the principal smugglers of the money derived from the sale of that marijuana to source countries. These include Mexican and Colombian DTOs, Jamaican and Asian criminal groups, and OMGs.

Marijuana typically is transported to drug markets in bulk, and the methods used to transport the drug to drug markets generally are the same methods used to transport bulk marijuana proceeds from markets. Reporting from state and local law enforcement agencies suggests, for example, that when traffickers transport marijuana to a drug market by commercial truck, the proceeds from that marijuana also are transported by commercial truck. Despite their heavy reliance on bulk currency smuggling, marijuana traffickers use other money laundering methods such as money service businesses, the BMPE, and cash-intensive businesses.

As the smugglers, transporters, and wholesale distributors of most foreign-produced marijuana in the United States, Mexican DTOs are the principal launderers of marijuana proceeds. They use Interstates 5, 10, 35, 40, 70, 75, and 80 among other highways to transport marijuana proceeds overland to the U.S.-Mexico border. Canada-based criminal groups often transport the proceeds from the sale of Canada-produced marijuana via State Highway 99 in California, Oregon, and Washington or via Interstates 75, 87, and 90 in Michigan and New York. Colombian and Jamaican marijuana trafficking groups smuggle marijuana proceeds, primarily by air carrier, to Colombia and Jamaica from the eastern United States. Cities where marijuana proceeds are consolidated before being transported out of the country or transferred through the financial system include Chicago, El Paso, Houston, Los Angeles, Miami, New York, Phoenix, San Diego, and Tucson.

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Heroin. Asian, Caribbean, Colombian, Mexican, and West African DTOs and criminal groups are actively involved in smuggling, transporting, and distributing heroin in the United States and thus are the primary launderers of heroin proceeds. Overall, these organizations and groups rely primarily on the bulk shipment of cash and monetary instruments to move their heroin proceeds out of the United States to foreign financial systems. They also transfer funds through money service businesses, place funds in the financial system through cash-intensive businesses, and disguise funds through the purchase of tangible assets.

Heroin traffickers also transfer heroin proceeds to foreign destinations through underground banking systems or informal value transfer systems. Such systems include the China-based hui khan, the India-based hawala, the Pakistan-based hundi, and the Colombia- and U.S.-based BMPE. Each is based on trust and anonymity and generally involves simple bookkeeping transactions between underground bankers, who periodically reconcile accounts through the bulk transfer of assets, currency smuggling, wire transfers, and precious metal shipments.

The primary destination of bulk heroin proceeds smuggled out of the United States is Mexico. Mexican DTOs transport heroin proceeds overland via the U.S. highway system, particularly Interstates 5, 10, 35, 40, 70, 75, 80, and 95, to the U.S.-Mexico border from areas throughout the United States. Most heroin trafficking groups, including Asian, Colombian, Dominican, Mexican, and Nigerian groups, often consolidate their groupsí proceeds at stash houses or place the proceeds in the banking system in large cities, such as Boston, Chicago, Los Angeles, and New York, and in cities closer to the border including El Paso, Houston, San Diego, and Tucson. Other destinations for heroin proceeds smuggled out of the country include Colombia, the Caribbean, Asia, Africa, and Europe.

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MDMA. MDMA traffickers--including Israeli, Russian and, to a lesser extent, Asian DTOs and criminal groups--frequently smuggle their illicit proceeds in the form of bulk cash and monetary instruments to foreign destinations. The use of couriers traveling aboard commercial flights is the predominant method used by these traffickers to smuggle MDMA proceeds out of the United States.

Within the United States MDMA proceeds are transported via private and commercial vehicles, mail services, aircraft, buses, and trains, usually to the MDMA primary market areas of Los Angeles, Miami, and New York. Traffickers consolidate and count the proceeds at stash houses in these cities before smuggling them out of the country.

Israeli MDMA traffickers generally use couriers on commercial flights to transport their illicit proceeds to Europe; however, they also launder funds through money service businesses, diamond markets, front companies, and large-scale real estate investments. Russian MDMA traffickers typically wire transfer their illicit proceeds to Europe through shell corporations and front companies. Asian MDMA traffickers most often use couriers on commercial flights to transport MDMA proceeds, in bulk, to Asia. They also launder their illicit proceeds through money service and cash-intensive businesses as well as through the hui khan, hawala, and hundi underground banking systems.  


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