Drug war - the money
Published: Sunday | December 20, 2009
A highly touted US Treasury Department programme aimed at starving Mexican drug cartels of that cash is currently blocking just US$3 million, an Associated Press investigation has found.
That's in addition to US$58 million seized under a new initiative at the US-Mexico border. The figures suggest that $99.75 of every $100 the cartels ship south is getting through - money that is fuelling a brutal war that has killed 14,000 people in three years.
Bundles of $100 bills that add up to billions are sneaked in each year and then laundered into ostensibly legitimate funds at car dealerships, banks, pharmacies, restaurants and resorts.
That money pays Mexican farmers to grow more marijuana and Colombian smugglers to sneak in more cocaine. It bribes Mexican soldiers and US border patrol agents, and pays assassins and mercenaries to take out rival smugglers or would-be prosecutors.
"This is the brilliance of the drug cartels. They pay ordinary people to get cash across the border for them, and then easily launder it into working capital to build and expand their violent and illicit operations," said Louise Shelley, who directs the Terrorism, Transnational Crime and Corruption Center at George Mason University.
money is everywhere
Unlike drugs and weapons, money is everywhere: We stuff bills in our wallets, give it to our kids and legally carry it through airports, into banks and across borders every day.
US law-enforcement agents have recently tried to get tough on controlling the money, searching southbound cars at the border and freezing bank accounts of cartel bosses.
"We recognise that focusing on drugs and weapons, without stopping the money, is not going to stop the cartels," Assistant US Treasury Secretary David Cohen told the AP.
The Foreign Narcotics Kingpin Designation Act, enacted 10 years ago, allows the president to designate individuals and corporations as drug traffickers, freezing their bank accounts and penalising people for doing business with them. Dozens of cartel-related businesses and individuals - including billionaire cartel boss Joaquin 'El Chapo' Guzman - have been named.
Mexican drug cartel chief Arturo Beltran Leyva, killed in the shoot-out recently in Cuernavaca, just south of Mexico City, had been designated a narcotics kingpin by President Bush in May 2008.
The act lets the US "strike the kingpins' international networks of front companies, facilitators and straw men", Associate Treasury Director J. Robert McBrien recently told Mexican bankers.
minimal results
But results, in terms of blocking assets, have been minimal.
After the AP filed a Freedom of Information Act request and made repeated queries for six weeks, a US Treasury official, on the condition that her name not be used, gave the AP records showing $16 million had been blocked - including US$13 million that was seized - from Mexican drug cartels over the past decade. Of that, $3 million is currently being blocked.
The Treasury official played down the importance of the low returns, saying the act is designed mostly as a deterrent to keep drug organisations out of the US financial system.
That's ridiculous, said Raymond Baker, director of the Washington-based non-profit Global Financial Integrity, which works to curtail the cross-border flow of illegal money.
"They seized US$16 million in 10 years? That's absolutely nothing. That doesn't amount to a deterrent. That is an unsuccessful effort," he said. "We haven't begun to curtail the flow of illicit money generated by the cartels, and as a consequence of that we have not begun to curtail the drug trade."
And while the law also allows criminal penalties of up to US$10 million and civil penalties of up to $1 million for doing business with the cartels, the records show just three fines related to Mexican drug cartels.
In 2005, Casa de Cambio Delgado Inc of Jackson Heights, NY, was fined US$40,160.46. In 2006, a financial services firm was fined $12,260.86. And in 2007, an unnamed violator was fined $422.43.
Though estimates vary, many federal law-enforcement agencies and analysts believe that US$25 billion in drug proceeds are smuggled out of the US each year.
halting profits
This compares to just US$61 million seized over the past year - the $3 million blocked in banks through the Narcotics Kingpin Designation Act and another US$58 million seized by border inspectors. That means authorities are halting just 25 cents of every $100 in cartel profits.
With eight major drug cartels operating in Mexico, their methods for moving cash south are surprisingly similar, according to AP interviews with law-enforcement agents and a review of court records on both sides of the border.
US dealers are given drugs on credit and, under threat of kidnapping, attacks on their family or even death, they sell their inventory and pay the smugglers back within a week or two. The smugglers then pay someone to drive the cash to a 'stash house' near the border, typically in Phoenix, San Diego, El Paso or Houston.
There, the cash is broken into increments of $50,000 to $300,000, lowering the risk of losing an entire load in one bust, and farmed out to trusted couriers.
They use the same methods people use smuggling drugs north: Money is hidden in the floorboards of buses and inside vehicle panels, tucked behind vehicle firewalls and inside spare tyres, or stashed in custom-made compartments. Couriers wear loose-fitting clothes and tape stacks of $100 bills to their bodies.
If caught by Customs and Border Protection agents, the couriers often can forfeit the money and simply drive on; Mexican officials don't normally arrest people for failing to report money coming in. For the cartels, that risk is part of the cost of doing business.
