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Money Laundering Click here to read more of DEA's Money Laundering Operations >> The Office of National Drug Control Policy estimates that Americans spend approximately $65 billion per year on illegal drugs. With only approximately $1 billion seized per year, domestically, by all Federal agencies combined, no one can claim to have discovered the “holy grail" of drug financial investigations. DEA’s revenue denied program comprises a global accounting of DEA’s efforts to bankrupt DTOs, especially those with international DTOs that target our communities with their poison. DEA is an agency with global reach, with 86 offices in 62 countries. DEA’s financial enforcement strategy is “mission driven” in that we are focused on the flow of money back to the international sources of supply, since this is the very money that is destined to finance the next cycle of illegal drugs that will target our consumer market here in the United States. This is also the money that allows the international DTO’s to continue to operate. It is important to us at DEA to carry the fight to the doorstep of those DTOs that spread their poison in the United States and drain billions of dollars each year from our economy.
There is little doubt that the sole reason people sell drugs is for the money. Money serves as both the motivating force and the lifeblood of DTOs. Therefore, attacking the financial infrastructure of DTOs has to play a key role in any viable drug enforcement strategy. DEA’s objective with financial investigations is to identify and halt the use of drug proceeds that finance the continued operations of DTOs. Financial Investigations Strategy Since the major DTOs involved in methamphetamine production are also involved in the smuggling of marijuana, heroin, and cocaine, it is virtually impossible to differentiate the source of the drug money by the type of drug. In the case of methamphetamine, payments to sources of supply are almost exclusively in the form of currency. Thus, financial investigations relating to the movement of funds to Mexico are not classified or segregated by any particular type of drug. However, illicit drug proceeds can be categorized based on how they are used by the DTOs. Drug proceeds are used to pay sources of supply, to support the infrastructure of the organization, and to acquire personal assets. The“ cash on hand” left over can be considered as either part of the organization’s working capital or personal wealth. To significantly reduce the supply of illegal drugs, DEA must focus our efforts on the drug proceeds used to pay the sources of drug supply. Denying the sources of supply revenue from the distribution of drugs will hamper their capability to acquire or produce additional drugs and support their organizations. The higher in the drug distribution chain we can deny the revenue flow, the greater effect this denial will have on the entire distribution network.
Payments to sources of drug supply flow almost exclusively in the form of currency. This currency is handled and transported covertly, just like the drugs that generated it. Thus, the investigation of this component of drug proceeds is a “contraband” investigation, as opposed to an “asset tracing” investigation, which are more traditional money laundering investigations that other agencies are better equipped and more experienced in dealing with than the DEA. DEA, on the other hand, is the best equipped and trained agency to carry out “contraband” investigations. DEA, on the other hand, is well-equipped and trained to carry out “contraband” investigations. Accordingly, DEA “financial investigations” focus on identifying and interdicting those drug proceeds flowing back to the source of drug supply. In this type of money flow investigation, the financial transactions are also overt acts in the drug conspiracy and, oftentimes, provide the best evidence in linking local drug organizations to their sources of drug supply. Since drug money flows toward the “command and control” of the DTO, as opposed to away from “command and control” like drugs, a money flow investigation enables an investigator to work his/her way up the distribution chain, which is the primary objective of all drug investigations. To ensure maximum effectiveness, DEA money flow investigations are designed to be compatible with, not competitive with, the long-term asset-tracing type investigations that have traditionally been the norm. In fact, whenever DEA is involved in a long-term, asset-tracing type investigation, there is always an agency such as the Internal Revenue Service (IRS) involved as well. A 2005 DEA study determined that during 2003 and 2004 there were excess U.S. dollars present in Mexico that could not be accounted for from legitimate sources totaling at least $9.2 billion and $10.2 billion, respectively. It is estimated that the four major drugs that are smuggled into the United States from Mexico ( i.e. methamphetamine, heroin, cocaine, and marijuana,) generate as much as $22 billion per year for the sources of supply. DEA has identified the following as the major money laundering threats relating to movement of drug proceeds to Mexico:
To address these threats, DEA has formulated a strategy that encompasses intelligence-based enforcement, as well as domestic and international collaborative efforts to target the movement of bulk currency and ultimately attack the command and control targets in the United States and Mexico. By working closely with our Federal, state, and local law enforcement counterparts in the United States and our counterparts in Mexico, we exploit the intelligence from bulk currency interdictions to identify, target, and ultimately, prosecute the command and control targets on either side of the border.
DEA also works closely with the Treasury Department, Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) to identify opportunities to apply regulatory sanctions and freezing orders against these Mexican DTOs. Through enforcement operations, analytical analysis of the Bank Secrecy Act, and other financial records, we identify the movement of drug funds. We also target rogue remitter agencies and agents who are complicit in the movement of drug money to Mexico, through criminal enforcement and asset forfeiture. To carry out our strategy, DEA, through the Office of Financial Operations, has instituted a number of national initiatives, that target bulk currency smuggling and the remission of drug money through U.S. wire remitters. In October 2004, DEA instituted the Bulk Currency Initiative. The Bulk Currency Initiative is an information sharing vehicle by which our state and local counterparts can share the information they obtain from making a currency seizure, whether it be along the nation’s highways or in operation at an airport. Information obtained by DEA in this manner many times can be tied to other investigations throughout the world. The currency seizure itself then becomes an overt act in the drug conspiracy investigation and often helps to identify other co-conspirators within a DTO that were previously unknown. This initiative resulted in an increase in DEA’s currency seizures for FY 2005 of over $80 million, from $259 million to $339.6 million, an increase of 31 percent. This initiative continues, and DEA hopes to see similar results for this fiscal year. To coordinate multi-jurisdictional bulk currency investigations, DEA’s Special Operations Division (SOD) instituted the Money Trail Initiative. In the first year and a half, the Money Trail Initiative was responsible for the dismantlement of six national organizations involved in the transportation of bulk currency drug proceeds from various points in the United States to Mexico. As of July 2006, this initiative has resulted in the arrest of 418 defendants and the seizure of $65.4 million in United States currency, $14.5 million in assets, 59.6 metric tons of marijuana, 9.7 metric tons of cocaine, 126.7 kilograms of methamphetamine, 9 kilograms of heroin, 249 vehicles, and 77 weapons. One of these SOD investigations, Operation Choque, resulted in the identification and arrest of Mexican CPOTs Oscar, Miguel, and Luis Arriola-Marquez, and the dismantlement of their organization, which, based on ledgers seized by Mexican authorities, was responsible for the smuggling of at least 14,000 kilos of cocaine into the United States and the smuggling of $240 million out of the United States. Based on information supplied by DEA, Mexican authorities have seized over $18 million of the Arriola-Marquez Organization’s assets. Domestic efforts
DEA has 24 Financial Investigation Teams (FITs). These teams are located in each of its 21 domestic field divisions, as well as in our Bogotá and Bangkok Country Offices. Each domestic field division has one FIT located in the same city as its division office, with the exception of the Miami Field Division, whose FIT is located in Ft. Lauderdale, Florida, and the Chicago Field Division, which has two FITs based in Chicago. The FITs are tasked with carrying out DEA’s national financial initiatives, providing guidance to other DEA personnel in financial investigations, conducting the more sophisticated financial investigations, and serving as DEA’s local point of contact with the financial community. Administrator Tandy has mandated that all DEA investigations include a financial investigation. The FITs are not expected to conduct all DEA financial investigations. However, they do provide guidance, when needed, to other DEA investigators on their financial investigations. DEA has assigned 159 Special Agents, 8 Intelligence Research Analysts, and 3 DIs to the FIT Teams, which averages 7 Special Agents per FIT. With the exception of the Washington D.C. and San Francisco Field Divisions, each FIT is multi-agency, with participation requested and encouraged from Federal, state and local agencies. Current participation by outside agencies is as follows:
The Special Agents, Postal Inspectors and Police Officers from these outside agencies conduct drug-related financial investigations jointly with their DEA counterparts. This team effort brings the specialized expertise and jurisdictions of their parent agencies to the table, where all participants have the same access to the DEA databases as their DEA counterparts. In addition to the FITs, DEA has a number of Special Agent personnel assigned to liaison positions within the Intelligence Community, Department of Defense and the Executive Office of the President (ONDCP) who enhance our ability to conduct financial investigations. These Special Agents have sign-on authority to the databases maintained by these agencies that they need to perform their liaison duties. In addition, DEA has a limited number of Special Agents assigned to other law enforcement agencies. These agents have direct sign-on authority to the databases of the agencies to which they are assigned. One example of this is the ICE-led El Dorado Task Force in New York, where DEA has a full enforcement group assigned. International Challenges Within the United States, regulators and law enforcement have a fairly accurate overview of financial transactions. Particularly after the additional tools provided by the USA PATRIOT Act came into force, law enforcement generally has access to the information it needs to identify and thwart significant money laundering efforts within the United States. However, this same transparency is not present in many other countries, including Mexico. Accordingly, DEA believes that most drug proceeds are now smuggled out of the United States to Mexico in bulk, rather than inserted into the financial system within the United States. Because of the lack of transparency of their financial system, the Mexican financial services industry continues to be a facilitator for drug money movement. Although it is a sophisticated financial sector, obtaining financial information from the Mexican financial services industry remains difficult. However, based on intelligence information from various DEA, ICE, and other United States law enforcement operations, we do know that once bulk currency is delivered to its intended recipients in Mexico, it can take a number of paths. Most commonly, bulk currency is deposited into the Mexican banking system through casas de cambio, centros cambiarios and banks, and then repatriated to the U.S. banking system through correspondent banking and bank note sales to United States institutions. While some of the bulk cash can be used to purchase precursors and equipment for methamphetamine manufacture, it also can be infused into the financial system through Mexican front companies or used to purchase real estate, businesses and other luxury assets in Mexico. In some instances, the bulk cash is converted to larger denominated United States dollars at casas de cambio or centros cambiarios for further smuggling to Colombia or for further smuggling to Panama for delivery to the Panama Free Trade Zone to purchase commodities on behalf of Colombian businesses. The combination of widespread corruption within Mexico, coupled with insufficient regulatory and criminal enforcement, makes disguising and moving drug proceeds in Mexico a relatively safe and simple task. As part of our strategy to employ regulatory measures against money laundering systems that facilitate drug money laundering, DEA works closely with the FinCEN and other law enforcement agencies. DEA provided information to support the issuance of FinCEN’s April 2006 Advisory to all United States financial institutions on the smuggling of bulk cash and the role of Mexican casas de cambio in the repatriation of those drug dollars into the United States banking system. DEA enjoys a very close working relationship with the OFAC. Much of the information used by OFAC to support its designations under the Kingpin and Specially Designated Narcotics Trafficker authorities is provided by DEA. |
