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FinCEN Advisory
This advisory provides banks and other depository institutions with additional information concerning the Black Market Peso Exchange system.
Overview - FinCEN Advisory Issue 9 |
FinCEN Advisory Issue 9 (November 1997) discussed in detail a largescale,
complex money laundering system that is used extensively by Colombian
drug cartels to launder the proceeds of United States narcotics sales. The
system is called the Black Market Peso Exchange (BMPE) because its purpose
is to facilitate “swaps” of dollars owned by the cartels in the United States for
pesos already in Colombia, by selling the dollars to Colombian businessmen
who are seeking to buy United States goods for export.
As explained in greater detail in Advisory Issue 9, the Black Market Peso
Exchange system operates through brokers who purchase narcotics proceeds in the
United States from the cartels and transfer pesos to the cartels from within Colombia.
This underground financial and trade financing system is a major—perhaps
the single largest avenue for the laundering of the wholesale proceeds of
narcotics trafficking in the United States. It also reflects the desire of Colombian
importers (who may otherwise be legitimate businessmen) to avoid
paying extensive Colombian import and exchange tariffs by smuggling goods
into Colombia. Finally, this system exploits United States exports in the
recycling of narcotics dollars. The U.S. Customs Service believes that the “United States exports that are purchased with narcotics dollars through the BMPE system often include household appliances, consumer electronics, liquor, cigarettes, used auto parts, precious metals, and footwear.”
Continued Treasury Concern |
The BMPE system is thus a subject of major concern to federal law
enforcement agencies. Treasury’s Office of Enforcement has created a multiagency
task force to study the system and develop strategies for countering
its operation.
Because the peso brokers operate at the intersection of the United States
financial and trading systems, attention is being directed both to the international
trade community and to the financial community. Thus, the U.S.
Customs Service is issuing a “Trade Advisory” concerning “Black Market
Peso Brokering” to United States exporters. FinCEN is updating its earlier
Advisory to help depository institutions respond appropriately to potential
misuse of their services by money launderers.
Possible Peso Exchange Activity - Unusual Money Transmission Transactions |
The operation of the peso exchange system depends upon the ability of
the money brokers who serve as intermediaries to the cartels, to place funds
in the United States financial system without attracting law enforcement
interest. FinCEN Advisory Issue 9 outlined several possible indicators of the
structuring of cash deposits destined for the peso exchange system into
banks. Use of banks for this purpose continues.
Money launderers also place funds by using non-bank money transmitters.
The majority of non-bank money transmitters in the United States are legitimate
and law-abiding businesses. However, in recent years, there has been an
upsurge in the misuse of some money transmitters by money launderers with,
in some cases, the cooperation of a small part of that industry.
Treasury officials believe that a large percentage of the funds “placed” by
launderers through non-bank money transmitters may actually be destined for
peso exchange transactions. In such situations, the launderers, in effect,
engage in two layers of misrepresentation. First, structured funds delivered
to individual transmitter points of sale are further broken down on the
transmitter’s books to appear to represent a number of smaller ostensibly “normal” money transmission transactions, for example, a series of transfers
of funds from the United States to individuals in Colombia. Second, the
dollar/peso broker actually orders the transmitter not to send the funds to
Colombia at all, but instead, to send them either to a middleman in another
country or, perhaps in some cases, directly to a United States exporter of
goods, as payment for those goods.
Banks and other depository institutions, as well as money transmission
firms that operate through a wide network of agents, should be aware of the
possibility that certain unusual transactions may be connected with BMPE
operations. For example, a particular money transmitter usually sends funds
through a bank to individuals in one or a limited group of nations; in particular
cases, however, the same money transmitter asks the bank to send funds
to industrial or consumer sales companies or distributors in other nations
(that is, nations to which it does not routinely send funds) in large amounts
as payment for goods. These latter requested transfers could be BMPE
transfers and may thus require further examination. The fact that the funds
are sent to companies in the United States for this purpose, and are used to
pay for resaleable goods, such as appliances, consumer electronics, auto
parts, liquor, cigarettes, and footwear, are also relevant.
The BMPE system is a particularly sophisticated example of money
launderers’ ability to adopt the protective covering of legitimate transaction
patterns. Thus, FinCEN and the Department of the Treasury welcome a
continued dialogue with financial institutions concerning BMPE.
The Treasury Department will consider any report relating to a transaction
described in this Advisory to constitute a reportable suspicious transaction
relevant to a possible violation of law or regulation, for purposes of the
prohibitions against disclosure and the protection from liability for the reporting
of suspicious transactions contained in 31 U.S.C. 5318(g)(2) and (g)(3).
James F. Sloan
Director
FinCEN Advisory is a product of the Financial Crimes Enforcement Network, Department of the Treasury, Post Office Box 39, Vienna, Virginia 22183. For more information about FinCEN’s programs, visit the FinCEN web site at http://www.fincen.gov. General questions or comments regarding FinCEN publications should be addressed to the Office of Communications, FinCEN, (703) 905-3773. Information may also be faxed to (703) 905-3885.