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Arizona is Money Laundering Hub for Mexican Cartels

A border official has claimed that more than half of the drug cash seized by border officials on the United States' southwestern border in 2011 came from Arizona, suggesting the state is a key hub in the evolving practice of transnational money laundering.

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Testifying before the House Subcommittee on Border and Maritime Security on May 21, Immigration and Customs Enforcement (ICE) Special Agent Matthew Allen said that along the southwest border with Mexico, "approximately 23 percent of the narcotics and approximately 53 percent of the currency and monetary instruments" linked to the drug trade and seized by ICE officials came from Arizona last fiscal year.

During the Congressional field hearing on information sharing in Arizona's drug fight, Allen said that Sonora, the Mexican state bordering Arizona to the south, is dominated by the Sinaloa Cartel. Immigrations and Customs Enforcement believes the state is a "consolidation point for drug proceeds owed to the Sinaloa Cartel for drugs smuggled into Arizona and distributed to other illicit markets within the United States," according to a transcript (see .pdf) of Allen's statement.

Allen said a Mexican banking regulation established two years ago placed strict limits on deposits of US currency in Mexican financial institutions, forcing cartels to change their laundering patterns. One change, he said, was that cartels may now favor making deposits in US banks before wiring the money to Mexico, transferring small amounts at a time to avoid detection.

InSight Crime Analysis

The fact that more than half of the currency and less than a quarter of the drugs seized by ICE were in Arizona shows that money from other drug proceeds is likely diverted there, where it can be smuggled back into Mexico. This suggests that Sonora is a key financial hub for the Sinaloans.

Arizona's large share of cash seized may result from the shift in money laundering tactics to smaller-scale "funnel account" transfers which make border states important because the practice requires a physical cash exchange between a designated account holder and the trafficking organization they are working for.

This decentralization of laundering seems similar to another alleged Sinaloa practice in the region, in which crews of smugglers brought drugs accross the border in backpacks. Both trends could be a response to heightened enforcement, with the organization adapting by decreasing the scale of both its individual cash and drug transfers.

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