Illicit Finance - Los Angeles HIDTA Drug Market Analysis

Mexican DTOs are the principal money launderers in the Los Angeles HIDTA region; they typically smuggle bulk quantities of illicit drug proceeds overland, in private or commercial vehicles, or by aircraft into Mexico to be laundered. Additionally, large amounts of drug proceeds are transported by Mexican DTOs to the HIDTA region from other areas of the country for eventual transportation into Mexico. Mexican DTOs exploit the HIDTA region because it is a national-level drug distribution center, is in proximity to the U.S.-Mexico border, and the number of Mexican transporters operating in the region aids in transporting bulk drug proceeds into Mexico and South America. Drug Enforcement Administration (DEA) seizure statistics indicate that agents typically seize between $20 and $40 million in the Los Angeles region each year. After Mexican DTOs smuggle illicit proceeds into Mexico, they often deposit the funds in Mexican financial institutions, including casas de cambio (exchange houses) and banks, for eventual physical transportation back to the United States or electronically through wire transfers. Other criminal groups, street gangs, OMGs, prison gangs, and independent dealers also transport drug proceeds in bulk from the region, but to a lesser extent than Mexican DTOs.

Various DTOs, primarily Mexican, exploit traditional financial institutions and money services businesses (MSBs) in the Los Angeles HIDTA region in order to transfer vast sums of illicit funds to international locations, including Mexico and South America. Los Angeles is one of the primary locations for Currency Transaction Report (CTR) and Suspicious Activity Report (SAR) filings in the United States.⁹ Although these filings may indicate suspicious activities, the specific origin of illicit funds, such as drug trafficking or illegal alien smuggling, cannot be determined.

DTOs, primarily Mexican and Asian, also launder drug proceeds through money transmittal businesses located in their own communities in the HIDTA region. They use small, local businesses or commercial businesses such as Western Union; they also maintain businesses, such as small retail stores, that provide money transmittal services. A large number of these businesses support the sizable Hispanic population in the area by legitimately wiring money to family members in Mexico; therefore, illicit money transfers are easily concealed in the high volume of legal transfers. Additionally, traffickers, particularly Asian criminal groups, launder money through informal value transfer systems (IVTSs), including hawala, hundi, and fei ch'ien.

Bulk Cash and Money Order Seizure at Los Angeles International Airport

In June 2006 members of the Los Angeles International Airport Task Force seized $8,500 in cash and $87,000 in blank money orders from two individuals who had arrived on a commercial flight that originated in Fort Lauderdale, Florida. Officers seized 37 blank money orders for $1,000 and 100 blank money orders for $500.

Source: Drug Enforcement Administration Los Angeles Field Division.

Traffickers in the Los Angeles HIDTA region also regularly launder illicit proceeds through a variety of other methods. They commonly commingle illicit proceeds with funds from legitimate businesses such as automobile dealerships, retail stores, real estate companies, and restaurants; purchase high-value assets; and use gaming casinos to launder proceeds. Traffickers also are using the Internet more often to launder money via electronic pay and/or transfer accounts. The anonymity afforded by Internet transactions allows traffickers to launder drug proceeds with minimal risk of law enforcement detection.

End Note

9. Financial institutions in the United States are required to complete Suspicious Activity Reports (SARs) for various suspicious transactions, including those totaling $5,000 or more that involve potential money laundering violations or violations of the Bank Secrecy Act (BSA). Financial institutions and money services businesses (MSBs) in the United States are required to file Currency Transaction Reports (CTRs) for all cash and coin transactions exceeding $10,000.