In the hyper-charged debate over the merits of building
“the wall” along the U.S.-Mexico border and its funding impact on a possible
government shutdown, I would like to propose a solution.
The
focus has largely been on contraband and illegal immigrants going north.
We largely ignore the other side of the equation; i.e. illicit proceeds –
mostly in the form of bulk cash – flowing south. If we could recover just
a few percentage points of the tens of billions of profits from the sale of
drugs and other transnational crimes (TOC) that annually flow south across the
border, we could pay for the wall. Moreover, targeting the illicit
proceeds should be palatable to both Mexico City and Washington DC, and may
serve as a basis for enhanced U.S.-Mexican cooperation on illicit trafficking
and related TOC.
During
the recent presidential campaign we heard that Mexico is going to pay for the
wall. Taxes on certain goods imported from Mexico and/or fees on official
remittances have been floated as possible revenue sources. Others ideas
assuredly will surface. Here, a few considerations are important; one –
forcing the government of Mexico to pay would be perceived by Mexicans and many
Americans as humiliating, and two – nobody wants to punish U.S. consumers or
hard working migrants.
But
using criminally derived funds to pay for the wall would drive home the lesson
that criminal activity is the reason the wall is being built. There is
also a degree of poetic justice in having the proceeds of crime used to thwart
future criminal behavior. This initiative also ultimately fulfills
President Trump’s campaign promise; most of the funding originates from Mexican
transnational criminal organizations.
Sometimes
lost in the discussion about transnational crime is the fact that criminal
organizations are motivated by greed. Cartels do not traffic in drugs for
the sake of trafficking in drugs. In fact, virtually every type of
transnational criminal activity – from the sale of counterfeit goods to arms
trafficking – is perpetrated with ultimate objective of making money. And
trafficking drugs is highly profitable. While estimates of U.S. narcotics
sales vary widely, a 2010 White House study pegged the number at $109 billion annually.
It
is important to note that analysts believe much of the money generated from
these crimes is actually laundered in the U.S. In fact, illegal drug
sales in the U.S. may generate as much as 20 million pounds of currency every
year! As a result, drug traffickers and money launderers have a logistics
problem. Because of financial transparency reporting requirements,
money launderers cannot simply walk into a bank in the U.S. with a suitcase
full of cash and deposit it with no questions asked.
So narcotics trafficking organizations
have increasingly moved to smuggling bulk cash into jurisdictions such as
Mexico. “Placing” their ill-gotten gains into financial networks in
Mexico is much easier. Studies recently conducted by the U.S. government
suggested that as much as $18
billion to $39 billion is
smuggled annually across our southern border in the form of bulk cash.
How
do they smuggle the cash? The techniques are only limited by the
criminals’ imaginations. Some of the most common methods include
simply driving it across the border and using a nearly endless list of ways to
conceal cash parcels. Bulk cash is sometimes concealed in vehicles’ spare
tires, gasoline tanks, seat cushions, floor boards, and panels. Other uses
include tanker trucks or similar vehicles that have false bottoms or altered
gasoline or water tanks. Bulk currency is concealed in shipping
containers, often secreted in cargo. Cash is also hidden in a variety of
consumer goods such as boxes of cereal and other food stuffs, teddy bears,
dolls, boxes of cigarettes, detergent, baked into bread, stuffed into air
compressors, tools, furniture, sports equipment, produce, etc. And
finally, bulk cash is smuggled by couriers simply taping money on their bodies,
using special smuggling vests, or simply transported in suitcases and duffle
bags.
So
how have we done? A variety of law enforcement agencies play a role
in detecting and intercepting bulk cash smuggling, particularly Immigration and
Customs Enforcement (ICE) and Customs and Border Protection (CBP). From
2005 to 2016, CBP officers reportedly seized a total of $211
million at the southern
border. According to a 2011 GAO study, we are seizing less than 1 percent of the multi-billion in
drug-trafficking proceeds smuggled across the border. Another study
suggests that $99.75
of every $100 the cartels
ship south is getting through. Putting these numbers in perspective adds
clarity – think of it this way: We seize only a George Washington quarter out
of a $100 Benjamin paper bill!
Of
course, additional cash is being seized by other federal, state, and local law
enforcement agencies sometimes in the interior of the country. In
addition, Mexican law enforcement has also seized bulk cash on its side of the
border. But even combining all seizures, it is still probably fair to say
we are only recovering approximately one percent of the illicit cash.
These
statistics are even more sobering because bulk cash smuggling is the most
straight-forward of anti-money laundering efforts or investigations. We
are not talking about complex money trails layered via off shore havens,
tracking trade-based laundering schemes, or tracing virtual currencies in cyber
space. At its core, bulk cash is a physical commodity (money) that
generally moves from point A (U.S. side of the border) to point B (Mexican side
of the border). The cash shipments are hidden, often in complex ways –
but the fundamental methodology is not complicated.
The
consequences of bulk cash smuggling are devastating. The uncontrolled
hemorrhage of billions of dollars of untaxed drug proceeds that flow into the
coffers of transnational organized crime groups directly fuels massive crime,
corruption, and violence in Mexico. But the impact of these crimes is not
limited to Mexico. In fact, not only is drug-fueled instability in Mexico
spreading to parts of the U.S., particularly in Southwest border-states, but
the murder carnage in places like Chicago is largely the end result of
drug-related transnational criminality.
The
U.S. government is fully aware of the problem. In fact, bulk cash
smuggling was prominently featured in our last (2007)
National Money Laundering Strategy. The
“action items” in the report, centered on traditional law enforcement
countermeasures such as increased intelligence, coordination, border
inspections, etc., have proved wholly inadequate. In 2013, the U.S.
Senate Drug Caucus released an excellent report on improving U.S. anti-money
laundering practices. The report notes that bulk cash smuggling continues
to be a primary money laundering technique and that our counter-measures have
been ineffectual.
Law
enforcement officials have long observed that if we put a barrier (in all its
varied forms) in front of criminals they will try going around it. For
example, after the Mexican government restricted the deposit of U.S. dollars in
Mexican banks and currency exchange houses in 2010, law enforcement witnessed
the money launderers using “funnel accounts” and trade-based money laundering
to move money and value across the border. Some observers feel a recent
drop in cash seizures could also be the result of new ways of moving money
across the border such as prepaid cards. And, of course, criminals will
try to go around, under, and over the border wall. So countermeasures must
take the above into consideration.
Despite
criminals’ attempts at bypassing barriers, the numbers suggest tens of billions
of cash still cross our southern border every year. Let’s use $20 billion
as a round number. With the construction of a wall and a few other steps,
over a few years we should realistically increase our seizure rate to say 5% or
$1 billion a year. If that holds constant, in 15 years the recovered funds would pay for the
wall.
What
are the few other steps?
1.
In designing the wall, we should have stopping bulk cash on the northern side
of the border in mind as well as thwarting drugs and illegal immigrants coming
from the south. The construction and placement of the physical wall
should be done in such a way as will “funnel” currency smugglers to border
crossings that will be heavily controlled and monitored. In other words,
just like a successful tactical military maneuver, we will use terrain,
barriers, and deploy our resources (technology and personnel) to force
smugglers to use routes and border crossings we want them to use.
2.
Increase border enforcement personnel including Border Patrol and Customs and
Border Protection. The Trump Administration has already endorsed this
policy.
3.
Use data
and advanced analytics to better
target bulk cash smugglers just as we target narcotics smugglers and other
contraband traffickers.
4.
Treasury’s FinCEN should issue a long-delayed rule that equates prepaid
cards with monetary
instruments for purposes of cross-border currency declarations.
5.
Systematically crack down on trade-based
money laundering. Both the U.S. and Mexico have Trade Transparency
Units (TTUs). With a small increase in personnel and software, these TTUs could
be directed to increase their focus on U.S./Mexican trade fraud and “black
market peso” operations that are increasingly used by narcotics traffickers to
avoid our traditional anti-money laundering countermeasures.
All
of the above countermeasures are entirely doable. Not only do these
approaches to combatting criminality adhere to our already-articulated
inter-departmental bi-partisan national anti-money laundering strategy, but
they should be acceptable as they are self-funding and provide reasonable
political cover for all sides.
(Note:
An abbreviated version of this proposal was published February 27, 2017 in the Washington
Times)
John A. Cassara is a retired U.S. intelligence officer and Treasury
Special Agent. More information is available at www.JohnCassara.com