Changes in Anti Money Laundering Laws in Mexico being Countered by Cartels

Not many experts in Mexico are willing or brave enough to discuss the country’s recently amendedanti-money laundering laws, designed to hamper the drug cartels from trying to legitimize their ill-gotten gains

The foot-dragging reticence is more understandable when you realize that it's about more than just hard feelings or toes stepped upon. Mexico is the largest transit area for illegal narcotics in the world. Northwards flow the tons of drug shipments into the United States, and southwards return bundles of cash and stacks of guns. This illicit trade which has grown and developed into a booming and highly profitable illicit industry is now annually worth well in excess of $40 billion - and counting.

Yet the days of chucking cash around like confetti to buy luxury goods and haciendas, and using so-called safe houses to stack from basement to rafters piles of high denomination banknotes, are numbered.

The new, more carefully tailored laws, which were designed to detect and curb transactions of illegal proceeds or the financing of terrorism, have some very strict parameters and curbs.

Banned transactions, in national or international currencies, include the sale of real estate or property valued at more than 520,000 pesos ($40,000). Boats, cars or planes over 200,000 pesos are on the list, which also includes anything from jewellery, precious metals, gems, watches to artwork.

Insurance and retail services, credit cards, pre-paid cards or a travellers' checks, when not offered by financial institutions, also fall under this category.

Implementing the law

Those who are charged with identifying what is termed the performance of vulnerable acts have to follow a clear set of obligations. These include: To identify clients or users, to retain documentation related to vulnerable activity for five years from the done deed, and to file relevant data to the finance ministry.

Alberto Elias Beltran has been appointed by the finance ministry to implement these laws. And he points out that they're specifically designed to cover the spectrum of money laundering, illegal funds, drug trafficking, arms trafficking and people trafficking. He explains that the aim is to better detect the operations and financial structures of organized crime to be able to squeeze and impact them.

He concedes that by the very nature of the beast, there isn't a methodology to determine just how much money is being laundered in a region, let alone a country. But the number of denunciations to the Attorney General's Office, arrests, convictions jail sentences and seizures of illegal funds by the state, are a reasonable benchmark to start with.

Mexico's drug cartels have been creative with their illicit trade in the past

Omar Fayad, President of the Mexican Senate's Justice Commission, says the new law does make life easier for law enforcement officials.

"If you watch how the money moves, you can do a lot of things, that's the reason Mexico's Congress approved this anti-money laundering legislation. If you can hit the drug cartels' economic power, then certainly their field of action is affected. But I think that they have the capacity to adapt to these new circumstances. That's why it's so important to modify legislation not just once. The government must be dynamic and willing to modify the legislation constantly. It's the first step combined with others to follow, in order to fight against the drug cartels in Mexico. But the cartels are like viruses. They have the ability to change and transform fast."

Tightening the loopholes

Ramon Garcia Gibson is the CEO of Garcia Gibson Consulting - a Mexican firm specializing in the prevention of money laundering and financing of terrorism. He says the new law tightens loopholes: "It establishes measures and procedures to prevent and detect operations involving resources of illicit origin. And definitely with this law, it's going to make life more difficult for organized crime because Mexican authorities will have information about transactions, which limits the use of cash from their illegal activities."

Accountant Jose Raul Alvarez Flores of ASI Contadores says estimates of how much money slips through the net annually add up to the equivalent of $10 billion. That also includes individuals and companies who avoid paying taxes, but the majority of the gigantic overall swindle boils down to the common denominator of organized crime.

It's not just the drug capo who's slammed down 3 million pesos or considerably more on the table to buy a house outright. This new law filters down as far as buying a quality watch or splashing out on jewellery. And the sanction of not complying, reporting and playing the game by the new rules is: "Go to jail, go directly to jail."

More cohesion

The new law also draws the relevant entities together into a tighter and more cohesive team spearheaded by the finance ministry, combined with the Attorney General's Office and with the closer cooperation of the banking industry.

As Ramon Garcia Gibson says, "it establishes a proper coordination between authorities responsible for preventing but also prosecuting money laundering."

All of this sounds like a good idea and appears to be making life more difficult for the drug cartels. But the cartels themselves count amongst their ranks specialists in finance, logistics, forward planning and business.

The days of focusing on cash transactions may be over as the cartels look for new options

One example is the notorious Arellano Felix drug cartel. Five of the seven brothers who ran it are under lock and key and two have been shot dead. Since the arrest of her brother Eduardo in 2008, Enedina, one of their four sisters and a university trained accountant, has taken over the illicit enterprise with her son Luis Fernando.

Accordingly, the focus is much more strictly applied to prudent business practice, financing and various sophisticated methods of money laundering to generate bigger profits.

Not surprisingly, the new methods do not focus exclusively on antiquated cold, hard cash. And the wanton first option of violence has also been refined and adapted. The new-found expertise is going to be considerably more difficult to disrupt and dislodge.

Michael Hearns an Anti Money Laundering specialist with over 27 years of AML experience can also be found at:www.launderingmoney.com and on twitter at :http://twitter.com/#!/LaunderingMoneyas well as his blog at:http://moneylaunderingworld.blogspot.com

Mexican Drug Cartels Laundering Money through Horse Stables

By George H Wittman
American Spectator

In recent weeks Mexican cartel money laundering operations in the United States have been exposed as imaginative and daring. In the two principal cases uncovered, very different devices were used by the drug trafficking managers. These cases are an introduction to the breadth of mechanisms available to turn dirty money clean.
Perhaps the operation that had the most elaborate cover, yet a still relatively simple financial structure, was the most forward-looking. One of the top figures in Mexico's Los Zetas drug organization, Miguel Angel Trevino Morales, had a younger brother who liked horses, needed a job, and was available to manage a ranch (bought through an intermediary with drug profits) south of Oklahoma City.

Along with his wife and three children, young José Treviño Morales set about to establish himself as an owner/breeder of quarter horses. He paid for everything in cash or by using false names and accounts of supposed partners. Treviño Morales and his considerable ranch staff of fourteen built a reputation of fair bargaining and quick payment. The 400-plus horse enterprise was the envy of many other breeders with less deep pockets, but any annoyance was quickly salved by the fair and generous business practices of the Treviño Morales operation.

Meanwhile millions of dollars in cash accrued by the drug trafficking operation of the Zetas was "cleansed" in the accounting for the high maintenance quarter horse breeding and racing business. The stable's reputation grew as it began to turn out serious winners on the track and at the auctions in Oklahoma, Texas, New Mexico, and California. The overall operation was incorporated since 2008 as Tremor Enterprises LLC -- and they paid all their bills on time.

The New York Times once again appears to have had an inside source within law enforcement, for when it broke the story on June 12 citing its "investigations lasting months" and anonymous sources, federal authorities, including FBI Special Agents, swooped in on the ranch the same day. They were able to arrest only 7 of the 14 indicted, including José Treviño Morales and his wife. Whether this was due to the Times's early publication has not been surfaced. At this point, however, the U.S. Government has seized 41 of the choicest horses and is arranging for the care of the other 384.

While the Treviño Morales horse breeding operation reportedly successfully "cleaned" tens of millions of dollars -- and won some very large racing purses on the side -- another less romantic money laundering and drug trafficking dance was in process in nearby Western and Midwestern states. Due to the United States' tightening of controls on the production of chemicals used in the making of methamphetamine, the manufacture and shipment of meth from Mexico has grown exponentially.

Many mid-sized American gangs purchase cargos of meth either directly from Mexican cartel producers or intermediaries who have illegally transported the product over the Mexican/U.S. border using both witting and unwitting truck drivers. The meth is then carried from border sites to middlemen in California, Colorado, and elsewhere central to the customer base. One such operation, according to the DEA, owned both a legitimate trucking company and an import/export firm. The latter carried licenses to import goods from China, thus allowing a legal route for money to flow to China and then return in goods or money transfers to Mexico -- and the cycle would begin again.

While there are several versions of the foregoing used in money laundering, one of the most reliable remains the utilization of the real estate market. Purchase and resale of high-end real estate properties (residential or commercial) has been a natural route for cleaning dirty money. Resale at an appropriate price to a bona fide entity creates a cleansed account and money that can be transferred anywhere in the world.

There are many mechanisms now employed by the drug cartels to clean up the cash they obtain through illicit drug sales in the United States and Canada. All that is needed is an intermediary that can maintain the appearance of a legitimate cash flow (such as service and import/export concerns), and careful accounting takes care of the rest. Casinos and high volume restaurants are always an attractive money laundering target. While new and different mechanisms always become available, funneling money into the American stock and commodity markets remains a high priority objective.

The establishment of a legitimate-appearing identity is the sole criterion for creating an investment account allowing considerable sums to be moved around domestically and internationally. Clean identities have evolved through repeated transfers of money from Mexico and other Latin American sources to the Gulf States of the Middle East, China, Southeast Asia and eventually to the usual small countries with discreet banking and taxation laws. It takes quite a bit of imaginative accounting, but it's worth the effort to cover the original sources.

Thus it is the establishment of an acceptable identity that is the key to all illegal money movement. It need not be as elaborate as horse breeding; it can be as simple as what the KGB used to call a "documented legend" that involves a birth certificate, Social Security number -- or equivalent -- and exclusive club membership plus well-distributed cash. This and a few other accoutrements and the money launderer is ready to have a respected friend call his local hard-charging broker with a new client. The securities business swears it's much harder than that, but the Bernie Madoff case showed how social connections and well-covered accounting make a swindle work. The laundering con works the same way



Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Where the Mob Keeps Its Money

By Roberto Saviano

New York Times

The global financial crisis has been a blessing for organized crime. A series of recent scandals have exposed the connection between some of the biggest global banks and the seamy underworld of mobsters, smugglers, drug traffickers and arms dealers. American banks have profited from money laundering by Latin American drug cartels, while the European debt crisis has strengthened the grip of the loan sharks and speculators who control the vast underground economies in countries like Spain and Greece.

Mutually beneficial relationships between bankers and gangsters aren’t new, but what’s remarkable is their reach at the highest levels of global finance. In 2010, Wachovia admitted that it had essentially helped finance the murderous drug war in Mexico by failing to identify and stop illicit transactions. The bank, which was acquired by Wells Fargo during the financial crisis, agreed to pay $160 million in fines and penalties for tolerating the laundering, which occurred between 2004 and 2007.

Last month, Senate investigators found that HSBC had for a decade improperly facilitated transactions by Mexican drug traffickers, Saudi financiers with ties to Al Qaeda and Iranian bankers trying to circumvent United States sanctions. The bank set aside $700 million to cover fines, settlements and other expenses related to the inquiry, and its chief of compliance resigned.

ABN Amro, Barclays, Credit Suisse, Lloyds and ING have reached expensive settlements with regulators after admitting to executing the transactions of clients in disreputable countries like Cuba, Iran, Libya, Myanmar and Sudan.

Many of the illicit transactions preceded the 2008 crisis, but continuing turmoil in the banking industry created an opening for organized crime groups, enabling them to enrich themselves and grow in strength. In 2009, Antonio Maria Costa, an Italian economist who then led the United Nations Office on Drugs and Crime, told the British newspaper The Observer that “in many instances, the money from drugs was the only liquid investment capital” available to some banks at the height of the crisis. “Interbank loans were funded by money that originated from the drugs trade and other illegal activities,” he said. “There were signs that some banks were rescued that way.” The United Nations estimated that $1.6 trillion was laundered globally in 2009, of which about $580 billion was related to drug trafficking and other forms of organized crime.

A study last year by the Colombian economists Alejandro Gaviria and Daniel Mejía concluded that the vast majority of profits from drug trafficking in Colombia were reaped by criminal syndicates in rich countries and laundered by banks in global financial centers like New York and London. They found that bank secrecy and privacy laws in Western countries often impeded transparency and made it easier for criminals to launder their money.

At a Congressional hearing  in February, Jennifer Shasky Calvery, a Justice Department official in charge of monitoring money laundering, said that “banks in the U.S. are used to funnel massive amounts of illicit funds.” The laundering, she explained, typically occurs in three stages. First, illicit funds are directly deposited in banks or deposited after being smuggled out of the United States and then back in. Then comes “layering,” the process of separating criminal profits from their origin. Finally comes “integration,” the use of seemingly legitimate transactions to hide ill-gotten gains. Unfortunately, investigators too often focus on the cultivation, production and trafficking of narcotics while missing the bigger, more sophisticated financial activities of crime rings.

Mob financing via banks has ebbed and flowed over the years. In the late 1970s and early 1980s organized crime, which had previously dealt mainly in cash, started working its way into the banking system. This led authorities in Europe and America to take measures to slow international money laundering, prompting a temporary return to cash.

Then the flow reversed again, partly because of the fall of the Soviet Union and the ensuing Russian financial crisis. As early as the mid-1980s, the K.G.B., with help from the Russian mafia, had started hiding Communist Party assets abroad, as the journalist Robert I. Friedman has documented. Perhaps $600 billion had left Russia by the mid-1990s, contributing to the country’s impoverishment. Russian mafia leaders also took advantage of post-Soviet privatization to buy up state property. Then, in 1998, the ruble sharply depreciated, prompting a default on Russia’s public debt.

Although the United States cracked down on terrorist financing after the 9/11 attacks, instability in the financial system, like the Argentine debt default in 2001, continued to give banks an incentive to look the other way. My reporting on the ’Ndrangheta, the powerful criminal syndicate based in Southern Italy, found that much of the money laundering over the last decade simply shifted from America to Europe. The European debt crisis, now three years old, has further emboldened the mob.

IN Greece, as conventional bank lending has gotten tighter, more and more Greeks are relying on usurers. A variety of sources told Reuters last year that the illegal lending business in Greece involved between 5 billion and 10 billion euros each year. The loan-shark business has perhaps quadrupled since 2009 — some of the extortionists charge annualized interest rates starting at 60 percent. In Thessaloniki, the second largest city, the police broke up a criminal ring that was lending money at a weekly interest rate of 5 percent to 15 percent, with punishments for whoever didn’t pay up. According to the Greek Ministry of Finance, much of the illegal loan activity in Greece is connected to gangs from the Balkans and Eastern Europe.

Organized crime also dominates the black market for oil in Greece; perhaps three billion euros (about $3.8 billion) a year of contraband fuel courses through the country. Shipping is Greece’s premier industry, and the price of shipping fuel is set by law at one-third the price of fuel for cars and homes. So traffickers turn shipping fuel into more expensive home and automobile fuel. It is estimated that 20 percent of the gasoline sold in Greece is from the black market. The trafficking not only results in higher prices but also deprives the government of desperately needed revenue.

Greece’s political system is a “parliamentary mafiocracy,” the political expert Panos Kostakos told the energy news agency Oilprice.com earlier this year. “Greece has one of the largest black markets in Europe and the highest corruption levels in Europe,” he said. “There is a sovereign debt that does not mirror the real wealth of the average Greek family. What more evidence do we need to conclude that this is Greek mafia?”

Spain’s crisis, like Greece’s, was prefaced by years of mafia power and money and a lack of effectively enforced rules and regulations. At the moment, Spain is colonized by local criminal groups as well as by Italian, Russian, Colombian and Mexican organizations. Historically, Spain has been a shelter for Italian fugitives, although the situation changed with the enforcement of pan-European arrest warrants. Spanish anti-mafia laws have also improved, but the country continues to offer laundering opportunities, which only increased with the current economic crisis in Europe.

The Spanish real estate boom, which lasted from 1997 to 2007, was a godsend for criminal organizations, which invested dirty money in Iberian construction. Then, when home sales slowed and the building bubble burst, the mafia profited again — by buying up at bargain prices houses that people put on the market or that otherwise would have gone unsold.

In 2006, Spain’s central bank investigated the vast number of 500-euro bills in circulation. Criminal organizations favor these notes because they don’t take up much room; a 45-centimeter safe deposit box can fit up to 10 million euros. In 2010, British currency exchange offices stopped accepting 500-euro bills after discovering that 90 percent of transactions involving them were connected to criminal activities. Yet 500-euro bills still account for 70 percent of the value of all bank notes in Spain.

And in Italy, the mafia can still count on 65 billion euros (about $82 billion) in liquid capital every year. Criminal organizations siphon 100 billion euros from the legal economy, a sum equivalent to 7 percent of G.D.P. — money that ends up in the hands of Mafiosi instead of sustaining the government or law-abiding Italians. “We will defeat the mafia by 2013,” Silvio Berlusconi, then the prime minister, declared in 2009. It was one of many unfulfilled promises. Mario Monti, the current prime minister, has stated that Italy’s dire financial situation is above all a consequence of tax evasion. He has said that even more drastic measures are needed to combat the underground economy generated by the mafia, which is destroying the legal economy.

Today’s mafias are global organizations. They operate everywhere, speak multiple languages, form overseas alliances and joint ventures, and make investments just like any other multinational company. You can’t take on multinational giants locally. Every country needs to do its part, for no country is immune. Organized crime must be hit in its economic engine, which all too often remains untouched because liquid capital is harder to trace and because in times of crisis, many, including the world’s major banks, find it too tempting to resist

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Mexican drug kingpin Benjamin Arellano Felix pleads guilty to US charges in San Diego

Mexican drug kingpin Benjamin Arellano Felix pleaded guilty Wednesday to racketeering and conspiracy to launder money, avoiding the spectacle of a trial for the leader of a cartel that once smuggled hundreds of tons of cocaine and marijuana into the United States and dissolved bodies of its rivals in vats of lye.
Under an agreement with federal prosecutors, Arellano Felix, 58, can be sentenced to no more than 25 years in prison — a lighter punishment than ordered for lower-ranking members of his once-mighty, Tijuana-based cartel.
Prosecutors agreed to dismiss other charges that could have brought 140 years in prison if he was convicted.
The half-hour hearing was an anticlimactic finish to the U.S. government’s pursuit of one of the world’s most powerful drug bosses during the 1990s. His cartel, with its iron-tight grip on the drug trade along California’s border with Mexico, was portrayed in the Steven Soderbergh film “Traffic” but has struggled in recent years as other cartels have become more ruthless than ever.
Laura Duffy, the U.S. attorney in San Diego who built much of her career on the case, said Arellano Felix will likely spend the rest of his life in U.S. prison but did not elaborate on the reasoning for the plea deal.
“Today’s guilty plea marks the end of his reign of murder, mayhem and corruption, and his historic admission of guilt sends a clear message to the Mexican cartel leaders operating today: The United States will spare no effort to investigate, extradite and prosecute you for your criminal activities,” Duffy said.
Arellano Felix stood attentively in court, acknowledging his guilt as U.S. District Judge Larry Burns recited parts of a 17-page plea agreement. He told the judge that he has been suffering migraine headaches almost daily but that the problem didn’t impair his judgment to accept the plea agreement.
Anthony Colombo Jr., Arellano Felix’s attorney, said his client could be released from U.S. prison in 20 years if credited for time served in this country and good behavior, assuming he gets the maximum 25-year sentence. As a Mexican citizen, he would then be deported to Mexico, where he still has nine years left on a sentence for related crimes.
Colombo said the government may have agreed to the deal to avoid having to bargain with 21 potential government witnesses for reduced sentences in exchange for their testimony. They also may have wanted to avoid a lengthy trial.
“They have to consider years and years of litigation, plus the expense, is avoided by this resolution,” Colombo told reporters.
John Kirby, a former federal prosecutor who co-wrote the 2003 indictment against Arellano Felix, said the case rested entirely on cooperating witnesses, instead of wiretaps or physical evidence. He said those cases weaken over time as witnesses die, get into more trouble or change their minds about testifying.
“This kind of case is based solely on witness testimony, and it slowly disintegrates,” Kirby said. “Maybe from the time when we put it together and now, it’s not such a great case anymore.”
The cost of a trial was unlikely to have influenced prosecutors, Kirby said.
“The government doesn’t care about the expense, the government cares about winning,” he said.
Francisco Javier Arellano Felix, a younger brother who led the cartel after Benjamin was arrested in Mexico in 2002, was sentenced in San Diego to life in prison in 2007, a year after he was captured by U.S. authorities in international waters off Mexico’s Baja California coast. Jesus Labra Aviles, a lieutenant under Benjamin Arellano Felix, was sentenced in San Diego to 40 years in prison in 2010.
Benjamin Arellano Felix was extradited from Mexico in April 2011 to face drug, money-laundering and racketeering charges, one of the highest-profile kingpins to face prosecution in the United States.
The U.S. indictment said Arellano Felix was the top leader of a cartel he led with his brothers, going back to 1986. It says the cartel tortured and killed rivals in the United States and Mexico as it smuggled Mexican marijuana and Colombian cocaine.
“He was the top of the chain,” Kirby said. “The brothers were at the top, and he was at the very top. He had the final say ... He was like the CEO of the operation.”
The cartel began to lose influence along California’s border with Mexico after Arellano Felix was arrested in 2002. A month earlier, his brother, Ramon, called the cartel’s top enforcer, died in a shootout with Mexican authorities.
Benjamin Arellano Felix was incarcerated in Mexico after his 2002 arrest and was later sentenced to 22 years in prison on drug trafficking and organized crime charges.
Arellano Felix also agreed to forfeit $100 million, a figure that will be difficult for the government to collect.
“Whether there is anything out there that (the government) can seize, I don’t know,” Colombo said.
Sentencing was set for April 2.


Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Leader of Zapata drug trafficking, money laundering organization convicted

By Jim Kouri,

Public Safety Examiner

Pedro Navarro Jr., of Zapata, Texas, pleaded guilty Thursday before U.S. Magistrate Judge Guillermo Garcia to his roles in distributing marijuana and methamphetamine and then laundering proceeds from those drug sales.

The 36-year old Navarro is the leader of a drug trafficking and money laundering organization operating out of the Zapata, Texas, area from approximately June 2006 through June 2011.

During his plea hearing Thursday, Navarro admitted that between February 2008 and June 2011, he was responsible for transporting numerous shipments of controlled substances from the Zapata area to other parts of Texas and beyond.

Some of these drug shipments were interdicted by law enforcement, including numerous loads of marijuana totaling thousands of kilograms and approximately five kilograms of methamphetamine which was seized in Beasley, Texas, on April 5, 2011.

During his plea hearing, Navarro also confessed to being a member and leader of the drug trafficking conspiracy responsible for these marijuana and methamphetamine loads. In addition to being responsible for transporting drugs, he also admitted he used a residence on Falcon Lake to store the marijuana after it had been smuggled from Mexico into the United States.

This marijuana would normally be ferried across the lake from Mexico at night in small boats, which would pull up to his residence on the lake where individuals would then unload the marijuana. Later, Navarro would then ensure the marijuana was loaded into passenger vehicles at the residence which would be driven to wherever the drugs were destined

Navarro also admitted that he conspired with others to launder money, which represented the proceeds of his drug trafficking. He agreed to transport large amounts of United States currency, which were the proceeds of drug trafficking, from the Zapata area to Mexico, and did so with the intention of promoting the continued operation of his drug trafficking business.

Navarro specifically agreed to help transport this money to Mexico, where it would be given to other members of the drug trafficking and money laundering conspiracies.

These persons provided the drugs which were being trafficked as well as provided them the money in question, thereby ensuring their illegal drug trafficking business would continue in operation. One of the specific loads of money for which Navarro was responsible included approximately $23,425 seized at or near Hebbronville, Texas, on March 9, 2010.

Navarro also used some of the proceeds he made from drug trafficking to build a residence in Zapata. During the course of the drug trafficking conspiracy, the members of conspiracy were responsible for generating proceeds from that activity in the amount of at least $18 million.

Navarro's sentencing date has yet to be scheduled.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Money Laundering Crackdown Flounders in Mexico, But Does it Really Matter?

By Patrick Corcoran

Insight Crime

Despite a gathering consensus around the idea of making financial ops a key part of Mexico's anti-drug strategy, cracking down on money laundering will never be able to make a real impact on organized crime in the country.A series of articles published by the Los Angeles Times last weekend illustrate how Mexican criminal groups use the global system to move billions of dollars from the U.S. to Mexico on an annual basis, with both governments thus far unable to make much of a dent in the illicit flow of cash.

As the Los Angeles Times reports:

Even President Felipe Calderon, who sent the army into the streets to chase traffickers after taking office in 2006, an offensive that has seen 43,000 people die since, concedes that Mexico has fallen short in attacking the financial strength of organized crime.

"Without question, we have been at fault," Calderon said during a meeting last month with drug-war victims. "The truth is that the existing structures for detecting money-laundering were simply overwhelmed by reality."

The report also delivers a series of statistics demonstrating the government's failure to crack down on the proceeds of the drug trade. According to the articles’ authors, the amount of illicit cash seized by Mexican authorities peaked in 2008 at $71.4 million. The figure dropped to less than $60 million in 2009, $24 million in 2010, and the government is on pace to seize just $12 million this year. Estimates of the amount of cash laundered in Mexico run from roughly $10 billion to $45 billion annually, which suggests that in its best year in recent memory, the government was able to seize, at best, no more than 0.7 percent of all the illicit cash in the country.

In light of these statistics, the logical conclusion might be that neither the U.S. nor the Mexican government is doing enough to tamp down on money laundering. However, it’s also worth considering another possibility: the figures are so paltry because anti-money laundering (AML) efforts are exceedingly difficult, which makes it unlikely that AML will ever be a significant tool in the fight against organized crime. Therefore, increasing the government resources dedicated to cracking down on dirty money could divert resources away from more fruitful methods of attacking criminal groups.

The impediments to tracking illicit money were documented for InSight Crime by Alejandro Hope several weeks ago: the small size of the drug trade relative to the economy as a whole -- Mexico’s annual GDP is more than a trillion dollars in nominal terms, and almost $1.6 trillion by purchasing power parity -- makes tracking dirty money akin to searching for a needle in a haystack. Furthermore, the fact that gangsters cannot finance their purchases on credit means that they need to immediately reinvest a high proportion of their revenues to keep themselves in operation. This further reduces the amount of dirty money laundered in the legal economy, and further complicates AML efforts.

Another problem is the size of the informal economy. The IMF, for instance, estimates that 30 percent of Mexico’s economy is informal, and other Latin American nations have a similarly high rate. Such a huge space for cash-only, virtually untraceable transactions offers a ready sanctuary for gangs looking to hide the proceeds of drug sales. Not coincidentally, one of the more significant criminal trends in recent years is gangs like the Zetaa increasingly involving themselves in pirate merchandising.

As the LA Times reported, trade between Mexico and the U.S. provides another avenue for gangs looking to pass illicit cash across the border. But with legitimate commerce between the two nations estimated at $400 billion annually, the playing field will always be tilted toward the gangsters who want to move tens of thousands of dollars at a time.

Even beyond the operational obstacles to cracking down on criminal revenues, there are conceptual problems. Neither Mexico nor the U.S. government has adequately defined the goal of AML: is it to reduce the amount of revenues, or is it to dismantle existing gangs?

If it is merely to reduce the profits, it’s worth noting once again the tiny size of the amounts seized thus far. Is the legislation being proposed going to lead to exponentially larger amounts of dirty cash being seized? The seems an unlikely result. This doesn’t make stricter AML laws a bad idea, but government officials and analysts alike would do well to temper their enthusiasm and weigh the potential benefits against the costs to the legitimate economy.

If the primary goal is to dismantle existing groups, then the question becomes whether AML is successful where other law enforcement tactics -- infiltrating smuggling networks, electronic surveillance, etc. -- fail to bring about a criminal group’s demise. While there may be some isolated instances of this dynamic, they are the exception rather than the rule. In any event, no one arguing for stronger AML provisions is making this case.

An alternative argument for AML laws is that captured criminals and their families should be prevented from enjoying ill-gotten wealth. This may be valid, but it means that attacking dirty money is essentially an after-the-fact, punitive measure rather than the head of the law enforcement spear.

Many analysts point to crackdowns on terrorist financing as evidence of the AML’s potential for organized crime, but there is an important difference between the two: money is a terrorist group’s means to the end, i.e. launching terrorist attacks. Governments do not worry about terrorist groups having large bank accounts, per se, but rather about them being more able to carry out attacks on civilians. AML efforts reduce the ability of terrorist groups to kill civilians, even if they don’t necessarily lead to prosecutions.

The dynamic with organized crime groups is fundamentally different. A large bank account is the end in and of itself for a capo like Joaquin Guzman, alias "El Chapo." Therefore, attacking his assets doesn’t reduce his ability to harm society the way it does for a terrorist boss. If anything, in fact, it does the opposite; a capo could very well compensate for a marginal reduction in his profits by ramping up production of illegal drugs and flooding the market with more merchandise.

Most of the contenders for the 2012 Mexican presidential election --including the overwhelming favorite, Enrique Peña Nieto -- have also paid lip service to the idea that stronger AML efforts are a vital part of the next administration’s security strategy. From the standpoint of politics, this makes sense; calling on the government to go after the criminals’ financial networks sounds determined and serious. But advocates of AML have made little effort to justify what remains a relatively novel and untested approach.

With regard to stopping money laundering, neither the "how" nor the "why" have been fully answered.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at www.launderingmoney.com and on twitter at : http://twitter.com/#!/LaunderingMoney

International banks have aided Mexican drug gangs

 

 

Raul Salinas de Gortari, brother of former President Carlos Salinas de Gortari, used a maze of accounts in New York-based Citibank and other U.S. banks to secretly transfer millions of dollars to Switzerland in the 1980s and '90s, when he was employed as a middle-ranking bureaucrat.

Despite strict rules, some banks have failed to 'know their customer' or ask about the source of large amounts of cash, allowing billions in dirty money from Mexico to be laundered.

By Tracy Wilkinson and Ken Ellingwood,
Los Angeles Times

Money launderers for ruthless Mexican drug gangs have long had a formidable ally: international banks.

Despite strict rules set by international regulatory bodies that require banks to "know their customer," make inquiries about the source of large deposits of cash and report suspicious activity, they have failed to do so in a number of high-profile cases and instead have allowed billions in dirty money to be laundered.

And those who want to stop cartels from easily moving their money express concern that banks that are caught get off with a slap on the wrist.

Banking powerhouse Wachovia Corp. last year agreed to pay $160 million in forfeitures and fines after U.S. federal prosecutors accused it of "willfully" overlooking the suspicious character of more than $420 billion in transactions between the bank and Mexican currency-exchange houses — much of it probably drug money, investigators say.

Federal prosecutors said Wachovia failed to detect and report numerous operations that should have raised red flags, and continued to work with the exchange houses long after other banks stopped doing so because of the "high risk" that it was a money-laundering operation.

Wachovia was moving money on behalf of the exchange houses through wire transfers, traveler's checks, even large hauls of bulk cash, investigators said. Some of the money was eventually traced to the purchase of small airplanes used to smuggle cocaine from South America to Mexico, they said.

"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," U.S. Atty. Jeffrey H. Sloman said in announcing the case last year, hailed at the time by authorities as one of the most significant in stopping dirty money from contaminating the U.S. financial system.

Wachovia paid the $160 million in what is called a deferred-prosecution agreement; no one went to prison, and the fines represented a tiny fraction of the money the bank had filtered. In court documents cited by the U.S. Drug Enforcement Administration, Wachovia acknowledged serious lapses.

In a similar case, another banking giant, HSBC Bank, is being monitored by U.S. regulators after a probe last year focused on bulk cash that the bank's U.S. branch received from Mexican exchange houses, money suspected to be drug proceeds.

One of the regulators, the U.S. Office of the Comptroller of the Currency, said HSBC had "critical deficiencies" in its 2006-2009 reporting of suspicious activities and its monitoring of bulk-cash transfers.

The OCC issued a cease-and-desist order against HSBC, noting, "The bank's compliance program and its implementation are ineffective, and accompanied by aggravating factors, such as highly suspicious activity creating a significant potential for unreported money-laundering or terrorist financing."

After U.S. federal prosecutors issued grand jury subpoenas, some believed that regulators might try to use the HSBC case to set an example and prosecute individual bankers. Instead, HSBC agreed to strengthen its compliance program and has said it is cooperating with investigators, without acknowledging wrongdoing, part of a so-called consent order.

Bryan Hubbard, a spokesman for the OCC, said last month that "OCC examiners continue to monitor actions by the bank to correct deficiencies and comply with that [consent] order."

In Mexico, authorities say they have taken steps to control and monitor money-laundering. Banking regulations in force since 1997 require reporting and canceling of suspicious accounts, and additional measures last year that put limits on dollar deposits in banks further tightened the restrictions.

"We have been able to establish a system of prevention that is quite robust," Jose Alberto Balbuena, head of the Finance Ministry's Financial Intelligence Unit, said in an interview. "We have a much clearer picture today of what dollars are entering the financial system, where they came from, where they are."

The restrictions have also forced traffickers and their launderers to channel more money into other sectors, such as real estate and commerce, avoiding banks altogether. Mexican and U.S. officials are looking to plug those gaps.

Complicity by banks has a deep history that still resonates in Mexico.


U.S. congressional investigators alleged that Raul Salinas' wife personally carried check after check to the bank, where Citibank executives asked no questions — despite rampant rumors that linked Salinas to drug lords, and even when Salinas was held on charges that he masterminded the assassination of a top politician. The Salinases claimed that they were victims of a political persecution, the Justice Department and Switzerland investigated, and there were calls for reform of banking secrecy laws.

No criminal charges of money-laundering or illicit enrichment were filed against Salinas. He is a free and wealthy man today. In 2008, Switzerland, which had frozen his bank accounts, returned most of the money.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney

Mexico seeks to fill drug war gap with focus on dirty money

By Ken Ellingwood and Tracy Wilkinson,
Los Angeles Times

The evolving anti-laundering campaign could change the tone of the Mexican government's battle by striking at the heart of the cartels' financial empire, analysts say.

Tainted drug money runs like whispered rumors all over Mexico's economy — in gleaming high-rises in beach resorts such as Cancun, in bustling casinos in Monterrey, in skyscrapers and restaurants in Mexico City that sit empty for months. It seeps into the construction sector, the night-life industry, even political campaigns.

Piles of greenbacks, enough to fill dump trucks, are transformed into gold watches, showrooms full of Hummers, aviation schools, yachts, thoroughbred horses and warehouses full of imported fabric.

Officials here say the tide of laundered money could reach as high as $50 billion, a staggering sum equal to about 3% of Mexico's legitimate economy, or more than all its oil exports or spending on prime social programs.

Mexican leaders often trumpet their deadly crackdown against drug traffickers as an all-out battle involving tens of thousands of troops and police, high-profile arrests and record-setting narcotics seizures. The 5-year-old offensive, however, has done little to attack a chief source of the cartels' might: their money.

Even President Felipe Calderon, who sent the army into the streets to chase traffickers after taking office in 2006, an offensive that has seen 43,000 people die since, concedes that Mexico has fallen short in attacking the financial strength of organized crime.

"Without question, we have been at fault," Calderon said during a meeting last month with drug-war victims. "The truth is that the existing structures for detecting money-laundering were simply overwhelmed by reality."

Experts say the unchecked flow of dirty money feeds a widening range of criminal activity as cartels branch into other enterprises, such as producing and trading in pirated merchandise.

"All this generates more crime," said Ramon Garcia Gibson, a former compliance officer at Citibank and an expert in money-laundering. "At the end of the day, this isn't good for anyone."

Officials on both sides of the border have begun taking tentative steps to stem the flow of dirty money. For Instance, last year Calderon proposed anti-laundering legislation, after earlier announcing restrictions on cash transactions in Mexico that used U.S. dollars.

The evolving anti-laundering campaign could change the tone of the government's military-led crime crusade by striking at the heart of the cartels' financial empire, analysts say. But the effort will have to overcome a longtime lack of political will and poor coordination among Mexican law enforcement agencies that have only aggravated the complexity of the task at hand now.

"If you don't take away their property, winning this war is impossible," said Sen. Ricardo Garcia Cervantes of the Senate security committee and Calderon's conservative National Action Party. "You are not going to win this war with bullets."

The good news for Mexican and Colombian traffickers is that drug sales in the United States generate enormous income, nearly all of it in readily spendable cash. The bad news is that this creates a towering logistical challenge: getting the proceeds back home to pay bills, buy supplies — from guns to chemicals to trucks — and build up the cartels' empires without detection.

Laundering allows traffickers to disguise the illicit earnings as legitimate through any number of transactions, such as cash transfers, big-ticket purchases, currency exchanges and deposits.

Much of that money still makes its way back into Mexico the old-fashioned way: in duffels stuffed into the trunks of cars. But Mexican drug traffickers are among the world's most savvy entrepreneurs, and launderers have proved nimble in evading authorities' efforts to catch them, adopting a host of new techniques to move the ill-gotten wealth.

For example, Mexican traffickers are taking advantage of blind spots in monitoring the nearly $400 billion of legal commerce between the two countries. The so-called trade-based laundering allows crime groups to disguise millions of dollars in tainted funds as ordinary merchandise — say, onions or precious metals, as they are trucked across the border.

In one case, the merchandise of choice was tons of polypropylene pellets used for making plastic. Exports of the product from the United States to Mexico appeared legitimate, but law enforcement officials say that by declaring a slightly inflated value, traders were able to hide an average of more than $1 million a month, until suspicious banks shut down the operation.

The inventive ploys even include gift cards, such as the kind you get your nephew for graduation. A drug-trafficking foot soldier simply loads up a prepaid card with dollars and walks across the border without having to declare sums over the usual $10,000 reporting requirement, thus carrying a car trunk's worth of cargo in his wallet.

Tainted cash is almost everywhere. In western Mexico, a minor-league soccer club known as the Raccoons was part of a sprawling cross-border empire — including car dealerships, an avocado export firm, hotels and restaurants — that U.S. officials said was used by suspect Wenceslao Alvarez to launder money for the Gulf cartel. Alvarez was arrested by Mexican authorities in 2008 in a rare blow against laundering and remains in prison while fighting the charges.

Even the most unlikely street-corner businesses may be used to scrub money. A pair of tanning salons in the western state of Jalisco were among 225 properties seized from drug suspect Sandra Avila Beltran, the so-called Queen of the Pacific and one of the few women allegedly to reach upper cartel echelons.

Avila, arrested in 2007, is still behind bars on the money-laundering charges as she also fights extradition to the U.S., but she has been exonerated of organized-crime and weapons charges.

The salons, with their all-cash, high-volume turnover, were allegedly used to hide drug money. The chain, called Electric Beach, has outlets all over Mexico City.

Mexico's efforts against money-laundering are hobbled by staff shortages, a failure to investigate adequately and skimpy laws that have exempted from scrutiny a number of industries often used to clean dirty money, independent assessments by financial experts and academics have found.

Javier Laynez Potisek, Mexico's fiscal prosecutor, lamented during a September conference on money-laundering, "Our system allows someone to come in with a suitcase full of money and buy four armored pickups for 600,000 pesos [about $42,000], and we don't have a minimum requirement to identify or report them."

A 2009 report issued by the Financial Action Task Force, an international anti-money-laundering agency, noted that Mexican authorities had won only 25 convictions for money-laundering in the two decades it has been a crime. From the beginning of 2009 to mid-2010, as overall drug-war arrests soared, prosecutors won convictions of only 37 people for money-laundering.

Part of the problem is that only Mexico's Finance Ministry has had access to financial data crucial to potential money-laundering inquiries, and prosecutors have not been allowed to open their own money-laundering investigations without a complaint from finance officials.

There is also stubborn resistance among those who profit from their role as middlemen for big transactions.

One such group is notaries, who in Mexico have a function much like attorneys in the U.S. They handle nearly all real estate transactions and have battled a proposal that would require them to report how each purchase was paid for. Notaries say launderers would probably respond by skipping the paperwork altogether when buying cars and houses, only adding to the black-market economy.

"The only thing that worries us notaries is that [the proposed reporting requirements] would create an alternative market … that brings benefits to no one," said Hector Galeano, finance secretary of Mexico's notaries association.

Some observers suggest that one reason previous Mexican governments were slow to attack money-laundering was fear of harming the rest of the economy.

Edgardo Buscaglia, a scholar who studies organized crime, estimates that in a nation where three-quarters of all transactions are cash, drug money has infiltrated 78% of the sectors constituting the formal economy.

In Sinaloa, the prosperous coastal state considered the cradle of the Mexican narcotics trade, economist Guillermo Ibarra estimates that drug money sustains nearly a fifth of the region's economy, from fancy subdivisions dotted with "narco-mansions" to vast farms.

Sinaloa is a well-known produce grower; in fact, its license plate features a tomato. But it would take an awful lot of tomatoes to account for the kind of over-the-top opulence on display in the state.

The moves to turn the tide in dirty money have generally taken place out of public view. But they could mark an important shift in the drug-war strategy.

A year ago, a small group of Mexican officials and U.S. counterparts met and selected six money-laundering cases to investigate jointly in an experimental offensive. U.S. agents here say the first arrests, involving a network in the northern border state of Chihuahua, could come by year's end.

Separately, U.S. Customs officials familiar with sophisticated money-laundering techniques have begun training Mexican tax inspectors who will be assigned to ferret out launderers. In addition, nearly 500 individuals and Mexican companies, from mines to milk producers, have been placed on a U.S. Treasury Department blacklist for alleged laundering activities.

And the Mexican Congress, after years of government inaction on the issue, is weighing a series of legislative proposals based on Calderon's anti-laundering package that would make it more difficult to cleanse dirty money. In the meantime, the restrictions on the use of U.S. cash in Mexico appear to be altering the flow of drug-tainted dollars for the first time, officials on both sides of the border say.

Under the proposed legislation, a specialized unit added to the attorney general's office, with advice from U.S. officials, would be authorized to take the lead in money-laundering cases and inspect a wide variety of businesses in search of illicit profits.

In addition, the government nearly a year ago replaced the Finance Ministry official in charge of such cases with a veteran Washington-based diplomat, Jose Alberto Balbuena, who had spent many months working with U.S. financial officials and is said to have a better grasp of what's at stake and a good working relationship with top prosecutors.

To date, Mexican reporting requirements have applied only to banks. Under legislation approved by the Senate last year and now before the lower Chamber of Deputies, a range of other industries would also be required to report large cash or suspicious transactions using unexplained funds.

These include real estate, car dealerships, betting parlors, art galleries, notaries, and, possibly, religious institutions. Mirroring "know your customer" regulations in the banking world, the rules would require disclosure of cash purchases for more than 200,000 pesos, or about $14,000, of numerous goods and place a cap of 1 million pesos, or about $70,000, on cash purchases of real estate.

Law enforcement experts say the proposed legislation could fill a yawning gap in Mexico's crime fight.

"It's going to counteract the financial and economic power of the criminals," said Ricardo Gluyas, a professor at the National Institute of Criminal Sciences, which trains Mexico's organized-crime prosecutors. "The new law has teeth. It covers a broad spectrum."

One potentially powerful tool, an asset-forfeiture law that allows authorities to seize property and accounts of traffickers and launderers, was approved by Congress in 2008. A similar law made a big difference in crime fights in Colombia and Italy, allowing authorities in those countries to confiscate and resell properties of drug traffickers and Mafiosi.

"Without firing a shot, you can generate a lot more results by seizing the fortunes of the big capos," Gluyas said.

But critics say the Mexican asset-forfeiture law threatens the due-process rights of owners. So far, it has been little used: Courts had approved only two cases by late this summer, with more than a dozen pending.

Perhaps more than any other measure, the government's move last year to restrict bank deposits of U.S. cash appears to have slowed the entry of dollars to Mexico's financial system. Bank-account holders were no longer allowed to deposit more than $4,000 a month.

In response, traffickers and their launderers are shifting tactics, including keeping money in the United States, officials say. And U.S. officials say that since Mexico announced the new rules, more money appears to be going elsewhere, especially to the Caribbean and Guatemala, where officials have detected a surge in circulating U.S. bank notes.

"That's the big question," Balbuena said. "Where is the money?"

A possible explanation can perhaps be gleaned from an Oct. 5 incident: Customs inspectors in Tijuana stopped an armored car full of plastic bags stuffed with $915,000 in cash. There was no documentation for the money, law enforcement sources familiar with the discovery said.

But it wasn't headed into Mexico. It was headed north, into San Diego.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at:
 www.launderingmoney.com 
and on twitter at :
 http://twitter.com/#!/LaunderingMoney

New Mexico possibly new front line for drug trafficking and money laundering

By Leigh Irvin

Daily Times

Mexican drug cartels are operating at increased levels within San Juan County, and they steadily are becoming more violent, according to Region II Narcotics Task Force Director Neil Haws. Speaking to the Bloomfield City Council on Tuesday, Haws outlined recent trends within the cartels and warned that unless aggressive measures such as securing a federal magistrate in the area are taken, the picture looks bleak for stemming drug-related crime and violence. "Drugs and Mexican cartel activities are a real issue in Bloomfield," Haws said. "The cells are already here, and all of the problems that U.S. cities bordering Mexico are now dealing with are going to come this way. It's only a matter of time."

Cartel operations

Haws said that for the past two years the major Mexican drug cartel operating in San Juan County has been the Juarez cartel, but recently the Sinaloa and Michoacan cartels have gained ground.

"What's happening here is reflective of what's occurring in Mexico," said Haws, adding that Region II is concentrating its investigative efforts on individuals three or four levels above the drug addicts, or those who are directly connected to the cartels.Going deeper into how the cartels operate in Bloomfield, Haws said that four to five males are usually sent by the Mexican cartel to Bloomfield to live, and they spend 80 percent of their time in and around the city.The cartel members bring their families with them to try to fit into the community and to be less noticeable, and do not deal directly with drug addicts, which makes them difficult to detect. "These cartel members recruit local gang members to sell drugs to lower-level dealers, who then sell the drugs to the addicts," said Haws. Region II agents rely on background checks and surveillance to identify cartel members, and watch for signs like tattoos and the collection of religious artifacts like shrines.

Recently, the Sinaloa cartel has added Albuquerque as a stepping stone for its drug distribution in New Mexico, and much of the drugs coming into San Juan County are coming from Phoenix, passing through Albuquerque and then being transported into San Juan County via Highway 550. Drugs continue to be transported to the area from Mexico after going through California. Albuquerque is seeing more "enforcers," or cartel members who resort to kidnappings and violence on order of the cartel leaders in Mexico, Haws said. While some of the drugs reaching the county stay in the area and are sold to local drug addicts, much of the drugs are further distributed to other states such as Colorado, Utah, Missouri and the Dakotas. "We are definitely a distribution hub here," said Haws. Addressing why our area makes a good distribution hub, Haws said that the cartel members find it easy to import the drugs via wide-open New Mexico roads and reservation lands, and storage of drugs is also relatively easy here. Obtaining fake documentation is also easy to obtain in this area, despite Bloomfield taking away the ability of illegal aliens to obtain driver's licenses. "One of the best forgers in the area lives in Shiprock and works by the side of the road. For $30, it's possible for someone to get a whole new identity from this person," said Haws.

Drug trends

While Region II has seen a slight increase in the use and distribution of heroin, Haws says methamphetamine remains the drug of choice in San Juan County, and that 98 percent of the drug cases Region II works on involve meth.

What is changing, he said, is the purity of the meth coming into the county. "The purity here in San Juan County amazes the rest of the state," he said. "We're seeing 94-98 percent purity here, and one recent sample sent to the DEA lab was 100 percent pure. The DEA didn't even know this level of purity was possible." One of the challenges for local cartel members is getting the drug money back to Mexico. Bulk cash smuggling is one way to do this, but a relatively recent trend is to utilize money remitters such as Western Union and local businesses. "The cartels know how to stay under the radar, and they'll repeatedly wire $999 back to Mexico to avoid reporting requirements. Since no reporting is required for this amount, the transfers are hard to detect."

Drug-related crimes

Drug-related crimes such as kidnapping, homicide and money laundering are picking up in the county, says Haws.

One local family consisting of a father, an uncle and a cousin, were all recently kidnapped and taken to Mexico, according to Region II sources. The family members were never seen again, and are believed to have been killed.

"Crimes like these are usually perpetrated by the cartels against undocumented Mexican nationals, so it makes it hard to positively identify a lot of the victims," said Haws. The FBI has been involved in some of the Mexican-on-Mexican investigations, but without a U.S. citizen nexus, their hands are somewhat tied. "We're also seeing a lot of extortion cases," he said. "The cartel members might get a small local business to illegally transfer too much money on one occasion, then will extort them to continue the transfers, using the company's fear of getting into legal trouble." Other strong-arm methods of local cartels is to kick gang members out of their homes and move their own families in. "The gang family may be having some debt issues, and the cartel member will just say, get out, we're moving in,'" he said. Fear of cartel violence prevents others from fighting back or reporting these activities, making it difficult for Region II to secure witnesses and informants. Haws said money laundering is also "huge" in Bloomfield, and that the cartels are using small businesses like clothing shops to launder their drug money. Investigating and apprehending cartel-related individuals is an extremely dangerous business for Region II and other law enforcement officials. "We have to always be extremely careful, as each and every one of these guys has multiple guns, and they don't care about anything or anybody. Even though many of them have families here, they don't care as much about their wives or their kids as their money. They'll do anything for the money and to stay alive," said Haws.

Federal presence

"What we don't have in this county and what is desperately needed is a stronger federal presence," said Haws. While there is an effective FBI office in Farmington, much of the agents' responsibilities are devoted to investigating crimes on the Indian Reservation and they lack the manpower to fully tackle the cartel issues in the county. What is most needed, said Haws, is a federal magistrate. "We've been trying to get a federal magistrate here for years, and have shown through cases and sheer numbers that we have a serious drug problem here. A federal magistrate is warranted, but we're still fighting this battle." Despite the presence of a federal magistrate's office located in Durango, it can only be utilized only for Colorado cases unless an interstate nexus can be demonstrated. Some temporary help has come in the form of five Homeland Security investigators who have arrived to work with Region II for the next month, and they are reviewing many of Region's open drug cases.

A serious warning

Haws made an ominous prediction that Bloomfield will continue to see an increase in Mexican cartel presence and drug-related violence. "These people are already here in Bloomfield and in nearby towns, and although most of the violence has involved non-U.S. citizens, I believe it's just a matter of time before what's happening in the U.S. towns bordering Mexico will start to happen here, and our citizens will start to be affected more and more. The problem is here. It's real. And it's what we're dealing with every day," he said.

What can be done

At the conclusion of Haws' presentation, Bloomfield City Manager David Fuqua asked what the council can do to help, and asked if a resolution which could be taken to other officials, senators and pertinent groups would assist with efforts to secure a federal magistrate for the area.

"That would definitely help," said Haws. "Without a federal hammer' to help us with our efforts, we don't have the manpower or resources to keep going after the cartel once some are taken down. They just keep springing up and replacing each other." Mayor Scott Eckstein agreed that it would be productive to draft a resolution expressing the importance of a local federal magistrate, and Haws stated that he would provide the Council with additional statistical information needed to bolster the resolution's statement about the need for a federal magistrate. Haws has also been coordinating with Farmington officials and with the San Juan County Sheriff's Office to lobby for a federal magistrate, but stated that it would be a tremendous help if everyone could come together to try to work toward this goal. "Everyone has been doing what they can, but this is a huge problem. We just need to be aware of what we may be facing in the future." he said. Mayor Eckstein found Haws' presentation to be eye-opening. "I frankly found it a little alarming, as the activities Neil was describing are not things we see on a day-to-day basis," he said."If it's true, and I believe it is, the situation is worse than I thought it was. I think a resolution which we could get other elected officials to sign would be very effective, and if there's something else we can do to help, we'll do it." Police Chief Mike Kovacs agreed. "These cartel members are hiding in plain sight, and if we don't figure out a way to stiffen our laws within New Mexico, these cartel activities will start to affect all of us. Law enforcement is understaffed, and we're going to have to find a way to get ahead of the issue. I'm glad the city is taking a stance on this, and I look forward to working with the city to combat the problem," he said.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at www.launderingmoney.com and on twitter at : http://twitter.com/#!/LaunderingMoney