Authorities in the United States have alerted banks to the use of “funnel accounts” in trade-based money laundering, the latest scheme in an extensive arsenal of operations employed by Mexico’s drug cartels to legitimize their illicit funds.
On May 28, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an advisory (pdf) warning banks that criminal organizations are using these accounts to skirt restrictions on US dollar deposits in Mexico. The method allows narcos to exchange US currency for Mexican pesos that appear to come from legitimate business activities.
According to FinCEN, this scheme typically begins with criminal organizations hiring someone to open a US bank account that can receive deposits in branches in multiple states.
Once the account has been set up, various individuals working for the criminal organization deposit cash into this account — often in places far from where the account was opened — in amounts below $10,000, to dodge identification and transaction report requirements. An intermediary then uses wire transfers or checks to purchase goods with these funds, which are shipped to foreign countries and sold. The profits are transferred back to the Mexican criminal organizations.
InSight Crime Analysis
An estimated $19 to $29 billion is sent back to Mexico’s cartels every year from US drug sales. However, getting this money into the country without attracting the attention of financial institutions or government authorities is a complex logistical task for the cartels, and one that has become increasingly difficult.
In 2010, the Mexican government issued restrictions (pdf) on the amount of US dollars that could be deposited into Mexican banks and on the use of US cash at exchange houses and brokerages. These regulations were designed to limit money laundering options for cartels, which previously often used “casas de cambio” to deposit large sums of hard currency.
SEE ALSO: Coverage of Money Laundering
These regulations, along with other measures passed in recent years, have forced cartels to develop more creative methods of laundering US drug proceeds. The use of “funnel accounts” in trade-based money laundering is only the latest in a long list of schemes.
Over the past few years, criminal organizations have been caught using a myriad of activities to disguise the source of their funds. Mexican cartels have used prepaid cards, opened horse breeding businesses, and robbed gold trucks, to name just a few.