Friday, June 04, 2010

Describing cash smuggling by cartels easier than stopping it

See this "Binational Criminal Proceeds Study" (pdf) from US Immigration and Customs Enforcement for a detailed discussion of currency smuggling from the US to Mexico. Time magazine described the topline results thusly:
Based on interviews with law enforcement officials on both sides of the border, along with confidential information, the study also describes routes the money often takes: Smaller dealers throughout the U.S. send cash to consolidators in five cities: Los Angeles, Chicago, New York, Charlotte and Atlanta. The money is then trucked overland to four secondary hubs — Phoenix, El Paso, Dallas and Houston — to be broken into smaller amounts and prepared for smuggling across the border.

The most common border crossings for cash smugglers are in San Diego, Nogales, Arizona, and the Texas cities of McAllen, Laredo and Brownsville, according to the report.
One often hears talk of "money laundering" by drug cartels, but that term is a misnomer for most of this activity. For the most part cartels smuggle bulk cash into Mexico, a nation which runs largely on a cash economy. About 75% of Mexico's economy operates on cash compared to 20% in the United States. Between 50% and 75% of smuggled cash never sees the inside of a bank, according to the report, even after it enters Mexico. Among the key findings:
The Criminal Enterprises that together operate the series of process steps required to smuggle criminal proceeds out of the United States, in to Mexico, and on to third countries are adept at compartmentalizing knowledge and responsibility to limit the impact of law enforcement (LE)’s interdiction and to impede LE’s investigative work. The end-to-end supply chain is designed with redundant nodes and simplified roles to limit the potential negative impact that any one individual or group of individuals can have on the success of the overall operation.
In English, that means when law enforcement busts a mule carrying drug cash, it's virtually impossible to trace responsibility up the ladder to the final recipients of the money. So little fish get caught, big fish swim free.

Notably, the report describes the problem in detail but offers no suggestion for strategies that might successfully stop it. However, the US Ambassador told Time that "it's going to be important for Mexico have restrictions on how cash can be used, or to require that large purchases are accompanied with notary certificates reported to the Treasury." Whether that's possible within the constraints of an underdeveloped economy, I don't know. But it's clear from this report that interdiction on the US side hasn't, and likely won't, make a dent in the problem.


Richard said...

What's "undeveloped" about NOT having huge consumer debt, a mortgage crisis or banks that are "too big to fail"?

If there is money returning to Mexico from our -- ahem -- "produce sales abroad", it sure isn't showing up in the countryside. I suspect the massive amounts being slung around by the think-tanks are based on the retail value of narcotics sales, not the wholesale prices.

And, I'd look at Wall Street and the U.S. banks for the loot. A few thousand, or hundred thousand, or even a million in cash isn't all that much money compared to what is supposedly earned in that particular sector of the economy.

Gritsforbreakfast said...

My "underdeveloped" reference was that they don't nearly as large a middle class and much of the economy (not just drugs by a longshot) operates off the books. In that environment I don't think it's possible to push everyone off cash and onto plastic.

As for not seeing the money in the countryside, the biggest cache I know of was found in the Mexico City suburbs (see pic).

Don Dickson said...

We could end all of this virtually overnight, of course. All we'd have to do is to declare victory in the war on drugs, and give away free drugs to anyone in America who wants them....except marijuana, you'd have to pay for that. Cha-ching.

Anonymous said...

Don't give 'em away, Donald. Let the market deliver them legally and tax the shit out of it. The cartels would go away the next day.

Don Dickson said...

No, I think we SHOULD give away free meth, free heroine, free powder and crack cocaine. Use all you want. The demand would soon drop precipitously, I suspect. But yeah, reefer, market price plus tax. $18 billion short, you say? Not for long.

Gritsforbreakfast said...

Donald, are you anticipating a large number of Darwin Award winners?

Anonymous said...

Now that Calderon has Obama in his back pocket everything should be okay. Disarm the American public and open the borders up. That would significantly increase their income.

Don Dickson said...

Grits, whether or not anyone would win a Darwin Award, I do believe we'd quickly thin our ranks of drug addicts if we gave 'em all the drugs they want. If they're going to use drugs, better they should get them from the United States Government than from a Mexican or Colombian cartel, no?

We should even cover their health care. It'll be expensive in the short run, but it'll save us a boat load over the long term.

It only took us what, three years?, to figure out that Prohibition was a bad mistake. Why has it taken us so long to catch on that the war on drugs was a bad idea?