In Mexico, an Unstanched Flow of Drug Money

By Maurizio Guerrero
Post-Wilson Fellow
Wednesday, October 29, 2008; 12:00 AM

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.

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