How Mexican Drugs Use Money Transfers to Send US Drug Proceeds Home (2023)

CULICAAN, Mexico

A Mexican mother walked into a bank in her hometown of Culiacán in the Mexican state of Sinaloa, where a bank transfer of $8,000 from the United States was waiting. She withdrew the money in local currency, then walked around town and deposited almost all of it in accounts at two different banks.

Money sent home by migrant workers is saving millions of Mexicans. However, the woman never met the person who gave her the money or the owners of the accounts from which she took it. What she knew: The deal had been carefully orchestrated by the Sinaloa Cartel, one of the world's largest drug trafficking groups, to repatriate US drug profits back to Mexico under the guise of a routine bank transfer.

Her discount: $230 in Mexican pesos.

It was the start of easy money for the woman, who says she previously struggled to make ends meet cleaning houses. Recalling that April 2014 day for Reuters, she estimated that she had made around $17,000 over the years recruiting others to the program and making hundreds of thousands of dollars worth of remittances - but never too much or too often. authorities. She said she was drawn to the game by a neighbor, and she never met her bosses in person.

"Everything was done over the phone," she said, "and the phone numbers changed each time."

The woman showed Reuters messages on her phone that she believed were from traders coordinating the collection and delivery of the money orders to her. One in early 2022 said: “They are waiting for you outside. They know who you are. Give them money.

Culiacán's mother is among the army of civilians recruited by the Sinaloa Cartel and other drug syndicates across Mexico to help move illegal drug profits made in the United States south of the border. This criminal scheme essentially relies on an extensive legal network of remittance companies to help migrant workers send money to their families.

Almost all remittances to Mexico, almost all of which come from the United States, reached a record $58.5 billion last year, according to data from Mexico's central bank. This represents an increase of $25 billion, or 74%, compared to 2018, when President Andrés Manuel López Obrador came to power. The Mexican economy is slowly recovering from the coronavirus pandemic, which has boosted migration to the United States in recent years, as well as remittances sending workers home.

As legitimate remittances explode, cartels have become increasingly easy to disguise their ill-gotten gains with small amounts of money sent to average citizens across Mexico who have no apparent ties to organized crime, four U.S. and Mexican security officials said.

The cartels are flooded with cash from US sales of fentanyl, cocaine, heroin, methamphetamine and marijuana. Currently, up to 10% of all remittances to Mexico may be drug money channeled by criminal organizations such as the Sinaloa Cartel and the Jalisco Next Generation Cartel, according to a U.S. government official dealing with illicit finance, who requested anonymity because he is not . authorized to speak publicly about it. A March report by Mexican advisory team Signos Vitales estimated that at least $4.4 billion, or 7.5% of remittances sent to Mexico last year, may have come from illicit activities.

According to four industry executives and Mexican and US law enforcement officials, several features of the remittance industry make it an attractive vehicle for criminal funds to enter the financial system. Chief among these is the global reach of this network and the modest cash transactions that power this network. The identification requirements for such transfers are less stringent than those for opening an official bank account or transferring large sums of money.

Cases have already been documented where criminal groups use popular money transfer services to carry out illegal activities. Reuters has previously reported how gangs operating on both sides of the US-Mexico border kidnapped and held migrant workers for ransom.demand that relatives donate money to free them.

Now, the news agency is the first to detail how Mexican drug gangs have used legal remittance networks to repatriate drug proceeds to the US, and the factors that make it so difficult for authorities to track and thwart this activity.

Reuters interviewed about 20 Mexican residents who said that the Sinaloa Cartel pays them to broker remittances and after receiving the money they pass it on to the cartel's agents. Data from eight US federal court cases and interviews with more than a dozen industry personalities, analysts and law enforcement on both sides of the border provide a detailed picture of how this criminal enterprise operates.

Seven remittance companies and banks that responded to Reuters' questions said they were constantly working to thwart the activities of criminals. Western Union, the world's largest money transfer company based in Colorado, said in a statement that it "dedicates significant resources to helping detect and prevent misuse of our services."

Jorge Godínez, the US director of WorldRemit, a London-based remittance company, was skeptical that money transfer scammers would transfer large sums of money in small chunks. "They should do a lot of transactions," Godínez said. "I'm not ruling it out, but it's a bit more work."

However, drug syndicates seem to be doing just that, partly because of the corona virus.

Remittances by migrant workers are a lifesaver for millions in Mexico, where opportunities to raise this money are ubiquitous. However, authorities say Mexican drug cartels use this legal network to repatriate drug proceeds to the US.

The use of remittances to transfer drug money has increased as a result of the Covid-19 pandemic after long-established travel routes have been disrupted by closures and lockdowns, according to four security officials from the United States and Mexico. Between March 2020 and November 2021, the US-Mexico border was closed to all but "essential" travel. This has greatly hampered the traditional method of repatriating drug proceeds - smuggling cash hidden in cars, trucks and cargo trailers. Security sources say traffickers have turned to other means, resulting in a greater reliance on remittances. This approach has worked even after the public health emergency has been eased, they say, because the networks created by drugs are effective.

In a sign of growing US government concern, the Office of the Director of National Intelligence, the president's primary provider of intelligence, included this year in its report for the first timeannual risk assessment report"the use of legitimate money transfer channels" by international criminal organizations for money laundering. No money transfer companies were named in the report.

Narcos' use of such remittances is not a new phenomenon, but according to a person familiar with the report, the massive increase in remittances from the United States to Mexico in recent years "helps to obscure this practice." The Sinaloa and Jalisco New Generation Cartels are believed to be among drug syndicates that use cash transfers to repatriate drug proceeds, the person added.

'Too much'

There is a clear pattern of money laundering through remittances, according to a U.S. illicit finance official, people who participated in this program in Mexico, and federal court documents reviewed by Reuters based on U.S. money laundering criminal cases.

In the United States, a large proportion of money transfers are made through convenience stores, chain stores, and currency exchange offices. These companies register as agents with one or more money transfer companies, such as Western Union, and display the well-known logos of these companies in their stores to entice customers. Retailers receive training from money transfer companies on how to use their technology platforms, detect suspicious transactions, and comply with US anti-money laundering laws. Agents receive a commission on each processed transaction. Customers can bring cash into these stores and send it abroad. Neither senders nor recipients need a bank account.

According to individuals and documents, this fragmented network is crucial to the functioning of the program. While money transfer companies have internal systems designed to detect and mitigate illegal activity, checks rely heavily on checks conducted in person with customers at the store level. So the safeguards are as solid as the honesty and diligence of these police officers, some of whom are allegedly working with drug dealers, according to law enforcement sources and eight federal lawsuits reviewed by Reuters that involved alleged money laundering. drug money through money transfers.

Republican U.S. Senator John Cornyn of Texas in 2019introduced the draft lawthis would require the Minister of Finance to analyze the use of remittances by criminals for drug trafficking and other illicit activities and develop a strategy to stop this. This act became part ofa larger draft of the Anti-Money Laundering ActIntroduced last year by Iowa Senator Chuck Grassley, who did not vote in Congress.

"The overdose crisis in the United States makes targeting cartels in their pockets even more urgent," Grassley said in a statement to Reuters. He said he was working on reintroducing the regulations.

Cornyn's office did not respond to a request for comment.

The U.S. Treasury Department's Financial Crimes Enforcement Network (FinCen), which is tasked with combating money laundering, said in an emailed statement that it "consistently monitors and evaluates enforcement cases" against financial institutions, including remittance companies. The statement said FinCen did not comment on the investigations for political reasons and did not confirm whether an investigation was ongoing.

Currently,US law obligationsthat money transferors keep records of all transactions of $3,000 or more for five years, including the names and addresses of the people on both sides of each transfer. Suspicious activity should be reported to FinCen. To stay hidden, scammers tend to keep transactions below the $3,000 threshold, according to court documents and people who have claimed they are laundering money this way.

Money transfer outlets also have their own internal procedures, many of which routinely require senders to provide proof of identity and telephone number for transfers of any size. But that information can easily be fabricated, especially by corrupt insiders running these stores, making it harder for law enforcement to identify patterns, according to documents from eight federal cases and officials on both sides of the border.

The process of breaking up large sums of money into smaller transactions to avoid reporting requirements is commonly known as "smurfing" or "structuring". Mobilizing large numbers of people, or "smurfs," to send and receive these modest sums of money is what U.S. law enforcement officials call "many-to-many."

According to a U.S. official and a 2019 federal indictment against alleged criminals operating a money laundering ring in Ohio, U.S.-based associates sending money south can obtain bribes of up to 10% of the value of individual transfers, which rarely exceed $1,000, from the cartels.

According to data from the country's central bank, the average size of remittances sent to Mexico in 2022 was $390. This money is often sent to Mexican retailers, including convenience stores, supermarkets, pharmacies, and department stores.

Two dozen Mexican smurfs who claimed to work for the Sinaloa cartel told Reuters they preferred to contact retailers because retailers typically ask fewer questions than banks. They said they usually had to show their official voter ID; indicate the name of the sender and his relationship with this person; and providing a transaction tracking number, which senders only share with recipients - details of the cartel previously communicated to them via SMS or Whatsapp.

Recipients in Mexico typically keep 1% of the proceeds as compensation, people say, while new recruits take a bigger chunk on the first deal to entice them into the business. Security officials said Mexican Smurfs earn less than their American counterparts because they are less likely to be arrested. A Reuters search of Mexico's court records in 2012 found no cases of money laundering through remittances.

The Mexican Presidency and the Attorney General's office did not respond to requests for comment on the country's strategy to combat alleged money laundering through remittances. The Financial Intelligence Unit, which investigates financial crimes, also declined to comment.

In the US, since 2017, at least seven drug trafficking cases involving remittances used to transfer profits to Mexico have been successfully tried in federal courts in Colorado, Georgia, Ohio, Oklahoma, Texas, Virginia and Washington state. According to court documents filed by prosecutors, these cases involved laundering more than $100 million between 2013 and 2020. At least 81 of those charged in these cases pleaded guilty to crimes, including conspiracy to launder money and distribute drugs, and illegal possession of firearms.

"The defendants used their anti-money laundering training to smuggle the drug proceeds into Mexico."

According to a June 21, 2017 press release, then-U.S. Attorney John Horn, who led the case in Georgia, said that the Mexican cartels "may have found an effective way through unscrupulous broadcasters" to send drug proceeds back to Mexico , according to a press release of 21 June 2017, the Georgian crisis. fees. Horn declined to comment.

The government alleged in the case that between 2013 and 2017, 11 defendants used wire transfers to launder more than $40 million from nine small businesses in metropolitan Atlanta that offered money transfer services, including a gas station and a taco restaurant. Nine of the accused pleaded guilty and two are still at large. They were all store managers or employees and, according to prosecutors, knowingly took large amounts of cash from drug dealers, broke them up into small transactions to avoid reporting obligations, and transferred them under the names of fictitious customers in exchange for bribes.

Of the nine defendants sentenced to prison, one remains in prison and six have been released, according to figures from the Federal Bureau of Prisons, which do not contain information about the other two.

Reuters was unable to contact lawyers for six of the nine defendants because most of the documents in the case, including the names of the defense lawyers, had been sealed. Lawyers representing the three defendants - Oscar Gustavo Perez-Bernal, Itzayana Guadalupe Perez-Bernal and Susan Fiorella Ayala-Chavez - did not respond to requests for comment.

In the Ohio case, federal prosecutors alleged in 2019 that a family-owned chain of three Columbus mobile phone shops offering money transfer services transferred $44 million in illicit drug profits to Mexico between 2013 and 2019 in transactions that never exceeded $1,000. These stores - Express Cellular, Los Rosales and Los Rosales 2 - sold very few goods and were essentially money laundering fronts whose real customers were heroin, fentanyl and marijuana dealers who paid owners up to 10% of each transfer, prosecutors said. According to the indictment, the money was transferred to fake senders and ended up in Nayarit, Jalisco, Michoacan and Sinaloa - Mexican states that are strongholds of organized crime.

Among those who pleaded guilty were four family members who ran mobile phone shops: Jose Luis Rosales-Ocampo, Josue Gama-Perez, Thania Rosales-Guadarrama and Dulce Rosales-Guadarrama.

All four were sentenced to prison terms of between six and twelve years. The suspects' lawyers did not respond to requests for comment.

Last year, federal prosecutors in Missouri uncovered charges against alleged participants in an alleged $4.7 million plot to distribute heroin, fentanyl and methamphetamine into the US and send some of the proceeds to Mexico in the form of remittances. Among the 44 defendants were the owners of three small Kansas City stores where drug money was transferred, prosecutors said. The three owners - Ana Lilia Leal-Martinez, Ana Paola Banda, Maria de Lourdes Carbajal and all Mexican citizens - pleaded not guilty.

Banda's lawyer, Henri Watson, said "the case is complex and the government has not yet made all the discoveries necessary to properly defend the case." Lawyers for Leal-Martinez and Carbajal did not respond to requests for comment.

In eight federal cases, no charges were brought against any remittance company whose independent agents were implicated in this network. However, prosecutors dealing with these cases in court documents listed some of these companies as claiming that the defendants used their platforms to transfer drug money.

Listed companies include: DolEx, Texas, Girosol, Florida, Boss Revolution (owned by IDT Corporation, New Jersey), Intermex, Miami, Omnex, New Jersey, Ria (owned by Euronet, Kansas), Sigue California and Transfast from New York.

DolEx, Girosol, Intermex, Omnex, Euronet and Sigue did not respond to requests for comment. IDT declined to comment.

Sangita Bricker, senior vice president of global communications at payment giant Mastercard, which acquired Transfast in 2019, said the company uses the latest technology and best practices to monitor suspicious activity and report it to law enforcement.

At least four of these companies – Intermex, Ria, Sigue and Transfast – became aware of potential drug money laundering on their platforms and took action to prevent it, according to an affidavit filed in 2019 by an IRS investigator. which helped federal prosecutors in downing cell phone store owners in Ohio. As we read in the document, each of the four companies investigated suspicious transactions carried out by at least one mobile phone shop using their platforms, and then terminated agency contracts with these companies between 2015 and 2017.

For example, Sigue investigated 375 transactions by Express Cellular between March and August 2017 and found multiple indications of "drug trafficking-related messages," the statement read. Among the red flags listed in the document: Nearly two-thirds of transactions were sent to the "high-risk" Mexican state of Nayarit, a location known as the center of poppy cultivation. Many of the transactions ranged from $800 to $999, which Sigue described as indicating "drug proceeds." The statement said Sigue ended its relationship with Express Cellular in November 2017.

The document did not specify whether Sigue, Intermex, Ria and Transfast launched their own internal investigations into mobile phone stores or in response to federal law enforcement officials investigating suspicious activity at those stores.

Prosecutors and the IRS did not respond to requests for comment.

In the past, some major players have been accused of allowing criminals to use their networks. In 2017, Western Union, a company based in Colorado, agreed to thispay $586 million to settle the chargesThe U.S. Department of Justice and the Federal Trade Commission said they failed to stop criminals from using their services for money laundering and fraud. As part of this deal, the company agreed to strengthen consumer protection and improve oversight of its agents in exchange for avoiding criminal charges.

In an emailed statement, Western Union said the company had made "significant investments in people, processes and technology" to honor an agreement with the government that closed the criminal case in March 2020.

"Most of my family did"

The city of Sinaloan in Costa Rica, about 35 kilometers south of Culiacán, the state capital, is home to just 28,000 people. According to Mexican government records, this is an area from which there is little migration to the United States. However, Costa Rica boasts a thriving financial cluster, home to six branches of the country's largest banks, as well as convenience stores, pharmacies and other retail outlets where residents can pick up money orders.

During a visit to the city last year, Reuters saw at least five people on motorcycles, wearing sachets and accompanied by security guards, collect money from people leaving Banco Azteca, Banorte and BanCoppel branches located on a poorly paved main road. Six residents told Reuters that the couriers worked for the Sinaloa cartel and collected drug money sent in the form of money orders, without going into details.

Juan de Dios Gámez, the mayor of Culiacán, whose jurisdiction includes the city of Costa Rica, did not respond to a request for comment. A spokeswoman for Sinaloa governor's office RubénRocha referred Reuters to the federal attorney general's office, which did not respond to a request for comment.

Grupo Elektra, the owner of Banco Azteca, told Reuters in an emailed statement that it is going beyond standard legal requirements to protect against money laundering and fraud by using technology that allows the bank to do real-time background checks on people who use its services. . The company said it has its own financial intelligence unit that "constantly" shares information with Mexican authorities that it has not exchanged.

However, she admitted that it is difficult to eliminate people who were paid to carry out transactions on behalf of someone else. "No institution is fully protected from individuals who individually and illegally solicit performances for others," the statement said.

BanCoppel declined to comment. Banorte has stated that it has not found any cases of money laundering through its payment system, but has stated that it has the resources to stop any money laundering attempts. Banorte did not provide any further details.

Costa Rica is not the only community where residents say the Sinaloa Cartel employs local residents to launder money through remittances.

In Sinaloa, 49 people familiar with the action - many of whom participated in it themselves - told Reuters that residents often think about it. The mother, from El Tepuche, a small rural town about 18 miles from Culiacán, said she had been making remittances for the Sinaloa Cartel for four years. "I did it, most of my family did it," she said.

As U.S. officials become increasingly concerned about the use of remittances to transfer drug-related money, Lóz Obrador stressed the importance of the vast and increasing amounts of money being sent from the United States. Mexico received the second-highest number of remittances in the world last year, behind India and China, according to the World Bank. Remittances accounted for 4.3% of Mexico's GDP last year, almost double the 2015 figure, according to government data. Nearly two million Mexican households received remittances last year, according to the Central Bank of Mexico.

"This will go to the poorest people," López Obrador said at a February 2 news conference in Mexico, praising migrant workers for sending remittances.

His office did not respond to requests for comment on allegations by law enforcement officials that Mexican cartels were using remittances to launder drug money.

Mexico's team of advisors, Signos Vitales, studied the recent surge in remittances and concluded that increased migration alone cannot explain the rapid expansion. The report concluded that "money laundering closely linked to drug trafficking" appeared to explain at least part of the increase.

ToResearch from March 2023pointed to various data points that Signos Vitales analysts found highly unusual. Among them:

Between 2018 and 2022, eight U.S. states with relatively modest populations of Mexican ancestry saw excessive increases in remittances to Mexico. The biggest exception was Minnesota. Senders who used money transfer services in the country last year transferred $4.7 billion to Mexico, or 8% of the total in 2022, according to data from the central bank, placing Minnesota in third place behind California and Texas, and ahead of states like Arizona, Colorado, Florida, Illinois, New Mexico, and Nevada - all places with significantly higher Hispanic populations. About 200,000 people of Mexican descent live in Minnesota. They would all need to send an average of about $23,000 each to get close to $4.7 billion, giving "strong reason" to doubt whether the workers themselves would be able to send such large amounts of remittances to Mexico. send, said Signos Vitales.

In the first nine months of last year, 227 Mexican municipalities received so many remittances that every household in those cities could receive at least one remittance per month. "Statistically, such phenomena are unlikely," says Signos Vitales. In total, $10.5 billion went to these destinations, or nearly 25% of all remittances sent to Mexico in the first three quarters of 2022.

Oquitoa is a village of about 500 people located in a region of the state of Sonora dominated by the Caborca ​​cartel. As of 2017, Oquitoa did not record any money transfers. Last year he received $2.5 million.

Signos Vitales also discovered hundreds of municipalities that only started receiving remittances in recent years. Among them is Oquitoa, a village of about 500 people located in a region of the state of Sonora dominated by the Caborca ​​cartel. As of 2017, Oquitoa did not record any money transfers. According to data from the central bank, last year the country received 2.5 million dollars.

"There is a lot of information that ... raises at least suspicions of some form of illegal activity," said Enrique Cardenas, CEO of Signos Vitales.

The offices of Minnesota Governor Tim Walz and Attorney General Keith Ellison did not respond to requests for comment.

Mobile phone shops, restaurants, markets, cashing checks and a Western clothing store. U.S. court records show that, since 2017, defendants convicted of money laundering in seven federal cases have used the services of several small businesses to transfer drug proceeds to Mexico on behalf of drug traffickers. (The slideshow)

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In Culiacán, a former landlady who began collecting money orders for the Sinaloa Cartel in 2014 said she was initially nervous about getting involved in drugs but did so "out of necessity".

She recently returned to Mexico from the United States with her daughter and was struggling to make ends meet on a monthly income of $150 when a neighbor offered her a way to make easy money.

Her first rebate of $230 was used to pay that month's rent. Soon she was receiving regular money transfers, but no more than three times a month, which was the limit imposed by the cartel. Sometimes her guardians texted her to "take a few months off," she added.

The woman stated that she receives about 1% on every transfer made. However, much of her total earnings - around $8,000 - came from getting other people involved in the ring. She said she was paid $40 per capita for people she recruited herself, $20 for each person her employees brought in, and then a final payment of $10 per person from the next level of the pyramid.

She says the job didn't make her rich, but it did make life a little more comfortable. “We used that money to improve the house,” he says.

One of her direct recruits was a truck driver in his 50s from Sinaloan, who told Reuters that he ultimately implicated his daughter in the operation. He said she and other younger recruits used Albo, a Mexican financial technology or mobile payment company, to receive money for the cartel.

The daughter's actions shed light on how new banking technology is providing traffickers with new ways to launder money, confirmed by security experts and 13 Smurfs who said they were transferring money to the Sinaloa Cartel. Some fintechs offer app-based services that transfer money across borders in seconds and provide users with a debit or credit card to make purchases with that money.

Either it has partnered with London-based remittance company WorldRemit to allow people in the US to send remittances to users in Or Mexico. The truck driver said he stuck with the traditional method of making money transfers at banks and retail stores because he was not very familiar with smartphone apps.

He said his daughter was receiving transfers via a virtual wallet in the Albo app. She would then transfer the money electronically to a bank account number that the cartel had given her via WhatsApp. He showed Reuters an Or debit card with his daughter's name on it and believed to be linked to a virtual wallet.

Or did not respond to requests for comment. WorldRemit said it uses market-leading security features to combat suspected financial crimes on its platform, without providing further details.

The truck driver said his daughter had been collecting remittances for the Sinaloa Cartel for three years. Then in June 2019, two unknown men shot her dead.

Her father suspects that the money that landed in her Albo account turned out to be too much of a temptation for her. He said that a few months before her death, she moved to a new place, updated her wardrobe, replaced her smartphone and bought a new TV.

"They shot my daughter right here in front of my house," he said. Reuters reviewed a copy of her death certificate. She is said to have died from gunshot wounds.

The man said he was still making money transfers to the Sinaloa Cartel. He is afraid that if he stops, they will hurt him.