Small Success Shows Bigger Failure to Stop US-Mexico Cash Smuggling

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U.S. authorities celebrated the confiscation of more than a million dollars in cash along the Mexican border, unwittingly illustrating the overall failure to stop billions of dollars in drug money that flow south into Mexico each year.

Custom officials made the first seizure Friday, when a Mitsubishi SUV was discovered with $600,000 in the spare tire while waiting to cross the border from Laredo, Texas. A day later, authorities in Eagle Pass, Texas, found almost $550,000 beneath the seat of a Mazda trying to drive into Mexico, Excelsior reports.

“This is the largest seizure of outbound currency in the history of Eagle Pass Port of Entry,” said customs director Cynthia O. Rodriguez.

Rodriguez’s comment unintentionally illustrates the general failure of U.S. and Mexican efforts to stop the southward flow of drug profits. According to the Washington Post, American officials grabbed just $85 million in illicit cash at the border in 2009. This is overshadowed by the $18-$39 billion in drug profits that the U.S. government estimates to cross the border each year. The figure appears to conflate cash shipments with other forms of money transfer, but even the lower end of the range would mean that U.S. authorities’ cash seizures are a fraction of a percent of the total.

The authorities are hailing the seizure of $1.15 million in illicit cash over two days as a success. But even if the pace was maintained for an entire year, and the government managed to confiscate $209 million, this would still be only a small fraction of the total estimated flow.

This lack of effectiveness reflects the difficulty of spotting cash shipments. Hundreds of thousands of cars cross the U.S. border with Mexico every day, and a thorough inspection of them all is not feasible. A million dollars in one hundred dollar bills occupies a space not much larger than a shoebox, so authorities are in search of the proverbial needle in the haystack.

Once cash makes it over the border into Mexico, drug trafficking organizations have to launder it. Here the authorities also fail; Mexican prosecutors secured just 37 convictions on money-laundering charges from 2008 through mid-2010, according to the Associated Press. This is despite the fact that in many cities it is common knowledge which businesses are connected to organized crime.

An asset-seizure law passed in 2009 was supposed to be an enormous step forward in the fight against money laundering. However, not a single case has been brought using the law in its two years of existence.

The problem with the law, according to the AP, is that it requires prosecutors to divulge the entire scope of their evidence against a suspect when seeking the seizure of an asset. This can throw future criminal prosecutions into jeopardy, a risk many are unwilling to take.

Mexico has also enacted stronger restrictions on dollar deposits in banks, which makes it more difficult to process drug money smuggled over the border. However, with the nation’s economy heavily based on cash, it is difficult to enact regulations strict enough to significantly limit the flow of dirty money.

A robust money-laundering effort would also depend on the participation of the banks where capos keep their money. However, banks have a strong financial incentive to avoid asking tough questions of people who do business with them. Consequently, they often don’t. U.S. bank Wachovia’s lax monitoring of $378.4 billion in cash transfers over several years illustrates this problem, as detailed in an investigation by British newspaper The Observer. As a result, the bank failed to identify the cash used to purchase of 22 tons of cocaine.

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