Napolitano Targets Dirty Money

(International Relations and Security Network, 31/3/2009)


When Department of Homeland Security (DHS) Chief Janet Napolitano visits Mexico during the first two days of April, she will certainly focus on border security, especially north-south gun smuggling. She will also use the media attention to push forward her agenda on fighting bulk cash smuggling because cash is the Achilles’ heel of any organized criminal operation.


Criminals know they’re successful once money laundering becomes a problem. Scrubbing the origins of all those fives, tens and twenties obtained on US streets is not a problem until there are millions of dollars in illicit proceeds to process.


In Mexico, bulk cash smuggling from the US to Mexico has become the preferred method of a low-tech money laundering operation. Once the dirty cash is inside Mexico, large chains of money exchange houses, as well as the smaller, family-owned establishments are easily bribed and can easily “place” the dirty money into the formal financial system.


From there, the next two stages of money laundering - layering and integration - are relatively simple. Money can be transferred from money exchange bank accounts through a number of foreign checking or investment accounts outside of Mexico and then finally sent back home, somewhere in Mexico where members of the Sinaloa, Tijuana or Gulf drug trafficking organizations can freely spend their proceeds on what they need to keep the Mexican government at bay.


When authorities in Colombia and Brazil dismantled money-laundering networks, criminals began swapping guns for drugs - a simple bartering system that alleviated the use of cash. Inside the US, we still have not seen signs of such trades, indicating that it remains fairly easy to move bulk cash from the US into Mexico. 


While ATF agents in Arizona say that dirty money has been used to purchase guns, mostly from private dealers at gun shows, the majority of dirty cash still moves south in trunks, backpacks and trailers.

In March 2007, when the Drug Enforcement Administration (DEA) and Mexican authorities discovered US$207 million in bulk cash inside the house of a Chinese-Mexican who sold precursor chemicals to Mexican methamphetamine super-labs, they announced that it was the largest single cash seizure in history.


This single case highlights the fact that massive amounts of dirty cash remain stashed in secure pockets on both sides of the border.


If it is the demand for drugs inside the US and the availability of guns that keeps the Mexican black market machine running, then it’s dirty cash that greases the parts.


We have not seen more high-profile cash seizures, probably because of the culture of corruption that unfortunately exists in Mexico. A question Napolitano should ask is what happens to the seized cash? Drugs are burned, but no one will burn greenbacks.


Instead, dirty cash is used to pay off all the bribes: It is a cheaper way to get rid of the money when money laundering can cost up to US$0.50 on the dollar. Dirty cash is used to pay unscrupulous car dealers who sell armored vehicles. It funds new recruits and keeps gunmen well compensated. Dirty cash crosses south into Mexico every day at a much larger volume than guns move south and drugs move north.


Napolitano has expressed her desire to focus on stopping the north-south flow of guns and cash, yet everyone wants to focus on targeting illegal gun sales, which means taking the Second Amendment head on. Targeting dirty cash, however, steps on no constitutional toes, and may be more politically palatable. If the US and Mexican governments can agree on one unified policy that will stop organized crime in its tracks, it should be one that focuses first and foremost on joint anti-money laundering efforts. By now, we all know there is no faster way to shut down a business than to restrict its access to cash.