Large Miami Cash Seizure Highlights Mexican Cartel Money Laundering Tactics

By Sylvia Longmire
Contributor, In Homeland Security

Mauricio Vargas is no stranger to drug deals or dirty money. His arrest in late August after police detectives said they found over half a million dollars in drug cash inside his Jeep was not his first run-in with the law. According to the Miami Herald, Vargas was busted in 2011 driving to Orlando, Florida to pick up 124 kilograms of cocaine that originated in Texas. He served five years in prison. He also did previous stints in prison for having counterfeit money.

People like Mauricio Vargas are a key component of Mexican drug cartel operations. In this particular case, prosecutors believe Vargas is part of what is known as the “black-market peso exchange,” a drug-fueled underground lending system that props up hundreds of South Florida businesses. Miami-Dade police told the Herald the $537,435 in cash, hidden in a book bag and a box, was proceeds from a cocaine shipment that crossed the U.S. southwest border “originating from the Gulf Cartel.” Drug cartels deal in huge quantities of cash, often in several different nations’ currencies, and require various methods to legitimize (or launder), exchange, and/or deposit drug sale proceeds.

The Black Market Peso Exchange

PBS.org explained that, as banks around the world became stricter about money laundering laws, Colombian traffickers began avoiding using the legitimate bank system and started infiltrating the black peso exchange to launder their drug money. This sophisticated method would eventually become known as the Black Market Peso Exchange, and is still one the most successful money laundering methods ever devised.

A money broker gets a call from a Mexican or Colombian drug trafficker or U.S.-based counterpart, they negotiate a currency exchange rate (usually 40 percent below market rates), and the broker takes possession of the bulk cash that needs laundering. That broker maintains a large staff of runners who take the cash and deposit it into hundreds of U.S. bank accounts in amounts of less than $10,000 per transaction to avoid Currency Transaction Report (CTR) requirements that raise red flags. Once the money is in a bank, it can be moved and manipulated.

Where this system gets truly disturbing is in the moving and manipulating process. Several big-name U.S. banks and corporations have touched their fair share of drug dollars. According to PBS, Customs and Border Protection and DEA cases reveal that legitimate companies such as General Electric, Whirlpool, Phillip Morris, and Intel Computers have all become involved in this system in the past. At the local level, Mexican drug dollars are routinely infused into local businesses along the border and beyond, front companies, and real estate deals.

An Uphill Battle

U.S. authorities are fighting an uphill battle when it comes to mitigating money laundering efforts. On August 22, the U.S. Treasury Department announced it would extend and expand a temporary initiative designed to uncover criminals laundering money through real estate. According to a separate Miami Herald report, the decree targets secretive shell companies — corporations that don’t have to reveal their true owners — buying luxury homes. Such rules have been issued before, but this decree is supposedly much stronger. Previously so limited in scope that they applied only to a few hundred deals, the rules will now cover every big-ticket cash transaction by shell companies in seven major markets in South Florida, all five boroughs of New York City, San Antonio, Honolulu, Los Angeles, San Diego, and San Francisco.

However, it is difficult to be optimistic regarding anti-money laundering measures, considering the United Nations reports that authorities are only detecting 1 percent of all dirty money being laundered worldwide. Despite the challenge, hitting drug traffickers in their pockets seems to hurt them more than product interdiction efforts, so hopefully this kind of initiative will be followed by many more.