GAO: Opportunities Exist to Stem US-Mexico Money Laundering

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A report from the Government Accountability Office (GAO) discusses money laundering issues between the U.S. and Mexico, and how Mexican drug trafficking organizations (DTOs) employ diverse methods to smuggle illicit cash via the southwest border.

According to the report, released March 9, 2011, the estimated proceeds from drug trafficking generated in the U.S. ranges between $18 billion to $39 billion, proceeds which are then smuggled back primarily to Mexican cartels.

An extract from the executive summary:

“This testimony discusses federal efforts to stem currency smuggling across our nation’s borders. Mexican drug-trafficking organizations, terrorist organizations, and other groups with malevolent intent finance their operations by moving funds into or out of the United States. For example, a common technique used for taking proceeds from drug sales in the United States to Mexico is a method known as bulk cash smuggling.

The National Drug Intelligence Center (NDIC) has stated that proceeds from drug trafficking generated in this country are smuggled across the southwest border and it estimates that the proceeds total from $18 billion to $39 billion a year. NDIC also estimates that Canadian drug-trafficking organizations smuggle significant amounts of cash across the northern border from proceeds of drugs sold in the United States.

In addition to bulk cash smuggling, 21st century methods and technologies of laundering money have emerged. In 2009, NDIC stated that new financial products and technologies present unique opportunities for money launderers as well as unprecedented challenges to the intelligence, law enforcement, and regulatory communities. NDIC and others cited the use of prepaid cards or gift cards that are loaded with currency or value–also called stored value–as presenting a compact and easily transportable method to move money into and out of the United States.

(…) This testimony is based on our October 2010 report on cross-border currency smuggling and updated information on bulk cash seizures and the status of one our recommendations. Like the report, it will cover the following three issues: (1) the actions CBP has taken to stem the flow of bulk cash leaving the country through land ports of entry and the challenges that remain, (2) the regulatory gaps that exist for cross-border reporting and other anti-money laundering requirements involving the use of stored value, and (3) the extent to which FinCEN has taken action to address these regulatory gaps.”

Download the full report (.pdf.)

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