Source: AP & Washington Post
A grim reminder of what drives Mexican DTOs, political corruption, weapons purchases and organized criminal enterprise …
An old article from Maurizio Guerrero Martínez, writer for Mexico’s Poder y Negocios.
Even though an estimated $24 billion in criminal funds courses through Mexico each year, no Mexican financial institution has been publicly sanctioned for money laundering. The country has long been a center for drug trafficking, and a world record was set for a criminal cash seizure when $205 million was found last year in Mexico City tied to a Chinese-Mexican businessman who has been jailed in the United States on methamphetamine-related charges.
Experts fear that Mexico’s lack of aggressiveness against money laundering could contribute to global instability by allowing financing to flow to terrorists or subversive groups around the world — as has happened with the FARC guerrillas in Colombia.
U.S. officials estimate that 10 percent of the Mexican financial system operates with laundered drug money, according to Jonathan Winer, a Washington-based expert on international money laundering.
“It’s hard to understand how that much money could be moving around without any evidence of it,” Winer said.
Winer said that the United States has had money laundering laws on the books for years but that they were not seriously enforced until federal bank regulators started levying large fines.
Pablo Gómez del Campo, an official with Mexico’s chief federal bank regulator, Comisión Nacional Bancaria y de Valores (CNBV), insisted that his government does impose sanctions in money laundering cases. But his agency’s Web site does not list any fines against institutions, even though the law requires it to do so.
On July 17, the Mexican agency in charge of prosecuting money laundering, Procuraduría General de la República (PGR), announced a legal action against an exchange house — Casa de Cambio Catorce. It marked the first money laundering prosecution to stem from an investigation of country’s financial system by the Financial Intelligence Unit (UIF), the Mexican agency charged with investigating financial crimes.
Two other Mexican exchange houses, Puebla and Majapara, are currently on trial for charges that emerged from investigations by U.S. authorities.
Concerns about money laundering have taken on new urgency in an age of global terrorism. After the attacks on the World Trade Center and the Pentagon on Sept. 11, 2001, the U.S. government toughened the penalties for institutions with poor money laundering controls, affecting not only terrorists’ assets, but those of drug traffickers, too. Investigators focused, however, on money flowing to terrorists through Islamic charities based in the United States and elsewhere. That approach played down the U.S. interest in drug trafficking and its financing in Latin America, according to Douglas Farah, author of “Blood From Stones: The Secret Financial Network of Terror” and an expert in the financial operations of criminal networks.
But authorities are seeing evidence that terrorist money and drug money can flow through the same channels.
“A pipeline has been created from South America to the United States, where drugs, people, weapons and cash are trafficked, and that could be used for any aim, even by subversive groups. The ideologies no longer matter — only the money,” Farah said. “The free flow of information and money has changed everything. Mexican, Colombian and Middle East terrorist groups are increasingly connected. The limits that existed before are blurring.”
The U.S. State Department has denied that terrorist cells exist in Mexico. Nevertheless, in 2005 a British citizen, Amer Haykel, an alleged al-Qaeda member, was arrested in Baja California. According to a U.S. intelligence assessment provided by Winer, there is evidence of Islamist terrorist cells in Mexico, including a Hezbollah presence in the southern state of Chiapas.
Over the years, money laundering enforcement has proved the most effective tool for cracking down on the drug trade. Without cash, the criminal networks fall into a downward spiral.
“If you take away their money, they can’t pay their sources of supply, they lose credibility, and they can’t pay bribes and employees,” said Allan Doody, a former U.S. federal agent who now works as the principal analyst for the Homeland Security Institute, a research center that receives funding from the U.S. government.
Winer said the Mexican strategy should be to better regulate the centros cambiarios — exchange centers that act as global cash transmitters — and also to better monitor transactions between Mexican institutions and offshore banks, which he described as “opaque, and difficult to evaluate and document.”
Even with laws on the books, enforcement is difficult.
“It is not easy to align the legal infrastructure to prosecute money laundering,” explains Don Semesky, head of financial investigations for the Drug Enforcement Administration (DEA) in Washington. “There’s a lot of obstacles within the bureaucracy. To put the things in place takes a lot of time.”
The obstacles can be seen in the way the Mexican federal prosecutor, the PGR, investigates a financial crime. To respect the banking secrecy laws, the PGR must ask for the information through the CNBV, the Mexican bank regulator. CNBV can refuse the request, and in that case the dispute will end up before a judge. During the trial, the person whose account is in dispute is warned, so he has time to move his money before the investigation can be completed.
Seizures of cash have increased in Mexico in recent years. But except for Casa de Cambio Catorce, financial institutions have largely escaped seizures and penalties.
One reason may be lack of resources.
In 2008, the budget for UIF, the government’s financial investigative arm, was less than $6 million, or 0.16 percent of the budget of the Finance Ministry, which supervises UIF. The ministry spends four times that much on communications and public relations. The office that prosecutes money launderers has a budget of $3 million, just 0.3 percent of the federal prosecutor’s budget. The office’s director has changed three times since 2005.
The Merida Initiative — the U.S. government’s main program to help Mexico combat the drug trade — spends 1.25 percent of its $400 million budget on money laundering. That $5 million goes to updating computers.