United States Department of the Treasury - PDF document

1 1 United States Department of the Treasu
1 United States Department of the Treasury ColombianBlack MarketPeso Exchange Date:November1997Advisory:Issue 9 This advisory is provided to alert banks and other depository institutionsto a large-scale, complex money laundering system being used extensively byColombian drug cartels to launder the proceeds of narcotics sales. Thisinstitutions and businesses can take steps to help law enforcement counter it.Drug sales in the United States are estimated by the Office of NationalDrug Control Policy to generate $57.3 billion annually, and most of thesetransactions are in cash. Through concerted efforts by the Congress and thethis cash a significant problem for the drug cartels. AmericaÕs banks haveeffective systems to report large cash transactions and report suspicious orunusual activity to appropriate authorities. As a result of these

2 successes, theplacement of large amount
successes, theplacement of large amounts of cash into U.S. financial institutions has createdvulnerabilities for the drug organizations and cartels. Efforts to avoid report-the cash out of the country.Colombian drug cartels. The system involves the use of a Colombian Blackdetection by the Bank Secrecy Act reporting requirements. In simple terms,U.S. bank accounts. The exchangers then sell monetary instruments drawn 2 cartels is the single most efficient and extensive money laundering ÒsystemÓin the Western Hemisphere. It is designed to maneuver around the currencyreporting requirements of the U.S. Bank Secrecy Act (BSA) which impedesanonymous large-scale currency transactions occurring in the U.S. financialsystem. The ÒsystemÓ functions in the following manner:1)The Colombian drug cartels export drugs to the United States;2)Dru

3 gs are sold for dollars in the U.S.;3)A
gs are sold for dollars in the U.S.;3)A cartel in Colombia enters into a ÒcontractÓ with the Colombian4)The cartel sells its U.S. dollars to the ExchangerÕs U.S. agent;5)Once the U.S. dollars are delivered, the peso exchanger in Colombiapesos into the cartelÕs account in Colombia; (At this point, the cartel6)The Colombian Black Market Peso Exchanger now assumes the risk 7)The Colombian Black Market Peso Exchanger now has a pool of8)Finally, these goods are transported to Colombia.Structured Transactions Ñ This method consists of a large poolcurrency reporting threshold of the BSA . These structuredeither case, these accounts are ultimately controlled by the peso exchanger. Outbound Currency Smuggling Ñ U.S. currency, which is notdollarsÕ narcotics nexus more difficult. The cartel has converted the drugare sold to the peso exchan

4 ger. ColombiaUnited StatesCOCAINECOCAINE
ger. ColombiaUnited StatesCOCAINECOCAINETRADEGOODSFREETRADEZONESCONSUMERMERCHANTCARTELSLEGIT MARKETFREEZONESCARTCOLOMBIANFINANCIALSYSTEMGOODS VALUE S. MARKETSS.A.S.CURRENCY FINANCIALSYTMCOTRANGOSollsarDollars VALUE S.ECONOMY ollarsDollarsDollars ECONOMY FINANCIALSYSTEM tional law enforcement investigative efforts, nontraditionalthe U.S. Postal Service, the Drug Enforcement Administration, theFinCEN. The ICG is located at FinCEN and uses its data andin the U.S., Colombia, Panama and Mexico. This network providessystemon the road and share that information with affected banks,merchants and officials within the Colombian, Panamanian andTo start the process, the ICG and FinCEN met with officials from theregional law enforcement task force (IMPACT) in Miami duringcommunity. Together with the Task Force, the ICG then informed thebanking comm

5 unity in South Floridaabout the CartelÕ
unity in South Floridaabout the CartelÕs use oftheir banks to launder drug money. Representatives of these banksavoid detection. The account holders were often foreign nationalsusing passports as identification. The bankers were urged to reviewdeny the money launderers access totheir financial institutions. Thebanks have been extremely cooperative and supportive of this effort.merchants in Colombia and Panama. FinCEN network, ICG members then approached government officials PanamaÕs Colon Free Zone. The ICGÕs message has been essentiallythe same as the one it took to the U.S. banksÑÒWe are all faced with acommon problem and here is what we know about it. We will benefitby working together to find solutions.Ó The response from all of theexchange initiatives are underway. While these are encouragingdevelopments, there is stil

6 l much work to be done to counter this m
l much work to be done to counter this moneyBroadening the education effort. provided by law enforcement to determine the most effective ways toamongthemselves to share ideas and identify the best approach todeposits to multiple accounts at different branches of the same bank FinCEN Advisory is a product of the Financial Crimes Enforcement Network,(703) 905-3773. For more information about FinCENÕs programs, visit the Questions or comments regarding the contents of the FinCEN Advisoryshould be addressed to the Office of Communications, FinCEN.Director For more information This advisory is meant to be only a first step in an on-going effort toness communities will engage in a partnership effort with FinCEN and thealso continuing their dialogue with banking and government officials in theFinCENGreg Passic703/905-3875IRSAl James703/905-35