Whenever or wherever people discuss cartel money laundering, one man always comes to everyone’s mind, who for decades made the financial institutions and regulatory bodies.
Yeah! We are talking about the EI Chapo, who for years moved his illegally obtained money from one place to another without being detected using different money laundering techniques.
And still, after decades, the followers are EI chapo following his footsteps and laundering using the same but advanced techniques.
Cartels are famously known as those groups of people who obtain money through drug sales and using different techniques they commit money laundering crimes.
Fighting against cartel money laundering and making compliance efforts against the drug cartel cartels are essential measures for financial organizations. Failure to do it can cause millions of dollars in fines to the organization.
HSBC had to pay nearly 2 billion dollars in fines because of not implementing the strict AML regulations against the Sinaloa Cartel and other drug traffickers, who were successfully making transactions to another jurisdiction without being detected.
Are there any specific techniques that can help businesses flag suspicious transactions as part of cartel money laundering?
Yeah, many could highlight the signs of cartel money laundering. This blog discusses the different techniques drug producers, suppliers, and traffickers use to avoid regulatory screening. Let’s find out some of the best techniques.
Top Money Laundering Techniques Drug Traffickers Use to Avoid Detection
- Cash Smuggling across the border
One of the favorite laundering techniques the group of drug traffickers use is they smuggle huge amounts of cash from one country to another.
It would be like the Hollywood thriller and crime series to know that they hide the cash in spaces, trucks, vegetables, and other hideable things.
The surprising techniques they used to move money do not stop here, even the top movie and film writers penned their real-life techniques into their writings.
- Smurfing and Structuring Techniques
When they have to launder through the banking channel, they try different techniques. As drug traffickers have to move their drugs to different countries and jurisdictions, the involvement of the financial system becomes compulsory.
The regulatory bodies have set thresholds to detect suspicious transactions, what drug criminals do they break down the large amount into smaller ones, below the thresholds, open multiple bank accounts, and make multiple small transactions to different jurisdictions to avoid the detection process.
- Establishment of Shell and Offshore Companies for Laundering Purposes.
Do you know there are hundreds of companies in the virtual jurisdiction who have been making millions of dollars in profits without producing and providing anything?
These are the shell companies that are often created to move the illegally obtained money from their own countries to other jurisdictions.
Shell companies that are most probably created are car wash service providers, retail stores, and cash-intensive businesses.
It makes it quite difficult for the bodies to detect these cash transactions as illegal.
- Exploiting the global trade system
Global trade systems are vulnerable to money laundering and for drug and cartel launderers, this becomes an even more easy and more sophisticated way to move money from one place to another using the global trading system.
Over and under-invoicing is the most commonly used technique for the movement of dollars. This is what EI Chappso did by manipulating the trade system, he moved millions of dollars without actually moving anything.
This is not shorter than the magician who often performs a trick before the crown where he hides the coin in his hand and finds it in someone, sitting in the crowd, pockets.
- Purchasing Expensive Properties
Real Estate itself is considered the top source of investing laundered money. The recent Dubai property leaks are a testament to this statement. Where elites from different countries laundered billions of dollars into Dubai and invested in the real estate market.
So, this is exactly what drug traffickers do, as they have to spend their illegal money, so they invest in real estate, luxury apartments, and other expensive properties to avoid the detection process.
- Gaming and Gambling
Since the world has been moving towards a technologically advanced living style. The techniques of laundering money are also being developed by the laundered and drug cartels. In Gaming and gambling techniques, they purchase a token.
Bet on online platforms and as there is ambiguity in the gaming and gambling platform about the ownership structure, they pretend that they have won millions through the gambling.
How Can Businesses Stop Drug Cartels from Money Laundering?
Identifying the money laundering patterns is very crucial for financial institutions comprehensive crackdown against the culprits. Therefore, businesses need to implement the advanced Enhanced due diligence on the higher risk individuals including the PEPs and their close associates.