Merchandise seized during Colombia’s largest-ever anti-contraband operation was allegedly linked to the Sinaloa Cartel, an apparent illustration of the importance of trade-based money laundering for drug trafficking groups in the region.
The largest contraband sting in Colombian history started with a two year-long investigation by US Immigration and Customs Enforcement (ICE) in the port of Los Angeles, where US authorities suspect export companies of laundering Sinaloa Cartel drug money, reported El Tiempo on October 24.
A few days earlier, on October 20, Colombian President Juan Manuel Santos had announced “the largest asset seizure in the country’s history” following the “Hong Kong” operation in Bogotá. Authorities seized 20 buildings, 20 companies and 11 stores — an estimated total value of 260 billion pesos (nearly $87 million). Another 4.8 billion pesos (around $1.6 million) worth of contraband merchandise was also impounded.
The network used a contraband scheme dubbed “60/40,” El Espectador reported. Smugglers mix legal and illegal merchandise together, with illicit products making up 40 percent of the cargo.
But these contraband activities served a dual purpose, as certain sales of illicit merchandise resportedly allowed the Sinaloa Cartel to pay its Colombian cocaine suppliers, says El Tiempo. The Mexican group allegedly used drug profits from the United States to buy Chinese merchandise that was imported — and partly smuggled — into Colombia. The profit from the contraband sales served to pay Colombian criminal groups for the cocaine they supply to their Mexican counterpart.
The contraband networks working this scheme allegedly bring over Chinese nationals to use as front men. Colombian authorities dismantled 34 money laundering networks that used Chinese contraband in recent years, and at least 40 Chinese nationals were identified during Colombian customs stings since 2016, according to El Tiempo.
The scheme is also carried out with the involvement of US-based export firms that help falsify customs paperwork. The Assistant Director of Colombia’s Tax and Customs Police (Policía Fiscal y Aduanera – POLFA) confirmed on Caracol Radio that the scheme worked in a triangle between China, Los Angeles and Colombia.
InSight Crime Analysis
Colombia’s largest-ever contraband sting is a reminder of the importance of trade-based money laundering for criminal groups across the region. Commerce of goods is one of the top three money laundering methods worldwide along with the financial system and bulk cash transport, according to the Financial Action Task Force.
This is not the first time the Sinaloa Cartel is accused of using this method. In 2014, US authorities discovered the cartel imported clothes from China to Los Angeles, before sending the merchandise across the border to be sold in Mexico, the US Drug Enforcement Administration said in its 2015 National Drug Threat Assessment.
SEE ALSO: Coverage of Money Laundering
In Colombia, however, criminal groups have improved their margins by combining it with contraband smuggling. InSight Crime was told by the POLFA’s former director during a 2014 interview that contraband had evolved into a crucial money laundering instrument in the country for not only drug trafficking groups, but criminal networks from a range of illicit activities.