The Drug Money Maze
Article Summary and Author Biography
The money laundering of drug cartels has become a complex high-tech business. Law enforcement officials have stepped up scrutiny of the global banking system in an effort to short-circuit these illicit financial networks. As the risks have increased, the premium that money launderers exact from cartels has more than quadrupled. The task now is for the United States to convince foreign nations and bankers that crime, even in suitcases full of small denominations, does not pay.
David A. Andelman is Washington correspondent for CNBC and a contributing editor of Worth magazine. He served for 20 years as a domestic and foreign correspondent for The New York Times and CBS.
CLOSING DOWN THE DIGITAL LAUNDRY
Tax-free money, even $100 billion worth, can be a problem when it is generated by drug deals, bundled in bills of small denominations, laced with minuscule traces of cocaine and lying around one’s house in suitcases. Each year, the world’s leading drug cartels generate upwards of that amount in $5, $10 and $20 transactions around the world, the vast majority of which take place in the streets and ghettos of America’s major cities. U.S. law enforcement officials and drug experts calculate the annual revenues from cocaine trafficking to be $29 billion a year in the United States alone. This drug money is the lifeblood of cartels, necessary for the operation and growth of their vast black market. It is used to pay their private armies and assure the complacency, if not outright complicity, of the nations that shelter them. With illicit profits politicians, judges, police and journalists are regularly bought or silenced by hired assassins.
But cash presents a fundamental problem. It is heavy and unwieldy. In $100 denominations, cash is three times the weight of the drugs that generate it; 450 paper bills weigh one pound. In the more common street-level denominations of $10 and $20 bills, it is at least 15 to 30 times the weight of its equivalent value in cocaine. To move cash around the world in the quantities and with the speed demanded by the operations of the major cartels is therefore difficult, if not impossible.
In recent years, senior law enforcement officers in the United States and nations with leading financial centers have begun to realize that the financial networks of drug cartels are highly vulnerable, especially at the point just before illegal money enters the international banking system, and that these networks can be attacked in a systematic and effective manner. The United States and other nations have not given up on the more traditional means of attacking drug traffic at the street level, nor have major international law enforcement bodies given up on controlling wholesale production and export. But the savvy money launderers who covertly guide cash from street corners to the pockets of drug kingpins are an ever-increasing target in the international war on drugs...
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