Friday, April 15, 2011

On Washing Dirty Cash

Shannon O'Neil had a really worthwhile piece about trade-based money-laundering earlier this week:

At the Mexican port of Lázaro Cárdenas, containers arrive from China laden with toys and electronics. Some never make it into the hands of customers: they are dumped as worthless merchandise. Their value, instead, lies in a simple bill of sale that allows the buyers – drug trafficking organizations and organized crime syndicates – to launder billions of funds through seemingly legitimate trade.

Drug-related money laundering conjures up images of plastic-wrapped bundles of $20 or $100 bills stashed in car tires and dashboards, or hauled across the U.S.-Mexico border in semi-trailers. It includes tales of storied banks moving billions in sophisticated operations and entangles Western Union and other money transfer companies in the flow of profits south. Some worry that prepaid cards or even “virtual worlds” will be the new avenues for illegally moving billions and billions of dollars.

But trade-based money laundering is likely where the real money is. Less understood and perhaps more pernicious, this includes the stereotypical restaurant that never seems to serve any customers, except for a few toughs at the back table, but “rakes in” profits. But it is much more than that. It can involve jewelry stores, textile factories, travel agencies, or car dealerships. Any type of trade across borders is a potential opportunity for nefarious transactions, buried among the billions of legal ones.

For what it's worth, the most notorious money-launderers in Torreón, at least according to the word on the street, were also really successful businesses, especially nightclubs and car dealerships. There were a couple that were always empty yet stayed open for years, but more common were the ones that would have made money with or without the dirty cash flowing through. I can only imagine the huge volume of legitimate sales makes it harder to identify a place as a money-laundry.

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