Mexico targets money laundering with plan to limit cash transactions

Stashing cash in spare tires, engine transmissions and truckloads of baby diapers, couriers for Mexican drug cartels are moving tens of billions of dollars south across the border each year. U.S. border and customs agents at crossings such as this one in Laredo, Tex., inspect vehicles for drug money in an effort to catch the bulk cash before it makes it into Mexico.
Washington Post Staff Writer
Thursday, August 26, 2010; 7:13 PM

MEXICO CITY - President Felipe Calderon proposed sweeping new measures Thursday to crack down on the cash smuggling and money laundering that allow Mexican cartels to use billions in U.S. drug profits to enrich their criminal organizations.

Legislation introduced by the Calderon administration would make it illegal to buy real estate in cash.

The new laws would also limit the purchase of vehicles, boats, airplanes and luxury goods to 100,000 pesos in cash, or about $7,700. Violators could be sentenced to five to 15 years in prison.

Criminals here are increasingly using cash transactions to launder their vast profits, according to a senior Mexican official who investigates financial crimes but spoke on the condition of anonymity because of security protocols.

The Mexican official and his counterparts in U.S. law enforcement say that billions of dollars in cash are used to buy airplanes, ranches and businesses to circumvent new Mexican laws that require banks to report large cash movements.

"This illicit money is vital for the criminal. That is what they seek, this money. It is also vital to finance their activities," said Calderon, who called the new money-laundering laws "unprecedented."

Mexican drug cartels and their Colombian suppliers generate, launder and remove from the United States $18 billion to $39 billion each year, according to the National Drug Intelligence Center. Most of this money crosses the Southwest border in plastic-wrapped bundles of $20 or $100 U.S. bank notes, stashed in tires and engine compartments of cars and trucks.

"In the criminal world, cash is king, and in Mexico you have to go after the cash if you want to disrupt their operations," said Jerry Robinette, a special agent in charge of the U.S. Immigrations and Customs Enforcement agency in San Antonio.

A recent report by Douglas Farah, a consultant for the Woodrow Wilson International Center for Scholars, concluded that "very little is effectively being done to either impede the movement of drug money into the formal economy or significantly reduce the flow of bulk cash across the U.S.-Mexico border."

U.S. and Mexican agents seize no more than 1 percent of this southbound cash, according to an analysis by The Washington Post, based on figures provided by both governments.

If passed by the legislature, Calderon's new money-laundering laws would upend common practice in Mexico, where many legitimate buyers and sellers prefer cash transactions to skirt tax bills.

As part of the $1.4 billion Merida aid initiative to Mexico, U.S. agents have trained their Mexican counterparts to detect and disrupt money-laundering operations.

The Mexican government in June announced strict restrictions on cash deposits and withdrawals made in U.S. dollars. Mexicans with bank accounts can deposit as much as $4,000 in cash per month, but Mexicans without accounts can exchange only $300 a day up to $1,500 a month Businesses can move larger amounts of U.S. dollars but the new restrictions have faced tough opposition.

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