In its fight against organized crime, the Mexican government is going after what is perhaps most valuable to criminal enterprises: their money and their bank accounts. On June 17, the government confirmed a new money laundering law that will help prevent cartels from washing their proceeds so easily. The law will take effect sometime around March 2014.
Money laundering is broadly defined as the process by which illegally obtained earnings are made to appear legitimate. One method of money laundering is the black market peso exchange. Mexican and Colombian criminal groups have long used this method because it is very difficult to detect and prosecute. In these exchanges, Mexican criminals will smuggle drugs or other goods into the United States and sell them on the street for U.S. dollars. They then sell those dollars to a peso broker with connections in Colombia. The peso broker deposits the cash into the U.S. banking system in the form of structured deposits, making sure that these deposits do not exceed $10,000 — the amount at which banks are required to file suspicious transaction reports to the U.S. government. To avoid detection, the peso broker finds a Colombian importer that needs U.S. dollars and can purchase goods from U.S. exporters. The peso broker then uses funds from his U.S. bank account to pay the U.S. exporter on behalf of the Colombian importer. The U.S. exporter ships the goods to Colombia, where the Colombian importer sells the goods for pesos. These pesos are used to repay the peso broker. According to the U.S. Treasury Department, black market peso exchange moves an estimated $5 billion in drug proceeds from the United States to Colombia every year.
Mexico's new money laundering law is designed to counteract these and other methods. The new law may indeed disrupt illegal financial operations in Mexico, but ultimately its effectiveness will depend partly on the vigilance of Mexican businesses and financial firms, and criminals certainly will try to exploit those that do not enforce the rules strictly.
