Key facts:
Cash smuggling is among the most widely used methods of money laundering.
Bitcoin is traceable, but payments in cash, gold and diamonds go unnoticed.
Although Mexico’s Jalisco Nueva Generación Cartel and Sinaloa Cartel are using small transfers in bitcoin (BTC) to avoid money laundering controls, traditional banks remain the preferred mechanisms for money laundering. This is stated in a report by the International Narcotics Control Board (INCB).
The body that carries out coordinated work with other organizations made up of UN member states stands out in its report the Importance of tracking the money and disrupting illicit financial flows run by the drug cartels. This, with the aim of “fighting all forms of organized crime.”
In this sense, it identifies the mechanisms that the cartels use to move, hide and launder money. Among these he mentions the banking system, money carriers, cash smuggling in bulk, alternative remittance delivery systems (such as hawala), mobile or internet payments, and cryptocurrencies.
“The traditional banks they remain the preferred mechanisms for money laundering. For example, in 2012, the HSBC bank admitted to having laundered 881 million dollars obtained from drug trafficking for the Mexican Sinaloa cartel between Mexico and the United States of America”.
INCB Report Regarding Leaked FinCEN Files.
The report is based on the journalistic investigation around the FinCEN (Financial Crimes Enforcement Network) files, which analyzed more than 2,000 suspicious activity reports on bank transfers in the United States. Based on this, he stated the refusal of banks and governments to actually stop money laundering activities through the banking system.
Cash in the hands of figureheads to launder money
Another mechanism used by Mexican cartels are fictitious companies to launder millions of dollars through an intricate plot that is based on national and international financial operations, according to the document.
Criminals use front men to create entities, ranging from real estate and jewelry companies to consulting services, as part of a money laundering network that also includes housewives, students and bank employees.
An investigation by the Mexican Financial Intelligence Unit even found that four fictitious companies, linked to the Sinaloa cartel, had received and transferred 3,500 million of Mexican pesos (USD 160 million) in less than two years.
The report of the International Narcotics Control Board adds that criminal groups also often use informal money transfer systems such as “hawala”, the black market for foreign exchange and basic products such as gold and diamonds for money laundering.
Bitcoin among the methods used to launder money
The INCB document indicates that the Jalisco New Generation Cartel and the Sinaloa Cartel are using the Bitcoin network to launder money.
It is believed that the Mexican cartels launder some USD 25,000 million a year, but until now the percentage that this represents is unknown, since until now could not be determined How much money do Mexican cartels move each year?
In any case, the INCB report also highlights the fact that the authorities have been able to estimate the amount of money that the Mexican cartels launder per year using bitcoin, since these transactions are traceable. However, the same does not happen with payments of dollars in cash, gold and diamonds since these usually go unnoticed by the authorities, as mentioned in the document.
The method used by cartels in Mexico and Colombia to launder money with bitcoin, according to the report, is dividing the profits from the sale of drugs into small payments with the aim of circumventing controls. This is due to the fact that the Mexican authorities require cryptocurrency exchanges to report the data of all operations that exceed 56,000 Mexican pesos (USD 2,800).
“The cartels use those accounts to purchase a series of small amounts of bitcoin online, obscuring the origin of the money and allowing them to pay associates in other parts of the world.”
Report of the International Narcotics Control Board.
For several years, the use of bitcoin has been linked to money laundering, but more recently studies have also emerged that determine that the pioneer cryptocurrency, is among the least used for illegal activitiesas reported by CriptoNoticias.
While cybercriminals have laundered more than $33 billion in crypto since 2017, with much of that digital money moving to centralized exchanges, Chainalysis acknowledges that, according to UN data, $800 million and 2,000 million dollars annually with fiat money, such as dollars or euros.