Webinar in Review

Bulk Cash Smuggling Along the Border: A High Stakes Game of Hide and Seek

Bulk cash smuggling along the United States-Mexico border has dogged financial institutions and law enforcement professionals alike dating back to the opening salvo of the war on drugs. Today, the problem has exploded as cartels with expansive resources have found innovative methods to transfer wealth not just between those two countries but also around the world.

These were just a few takeaways from our Oct. 4 Webinar, Bulk Cash Smuggling Along the Border: A High Stakes Game of Hide and Seek, featuring former IRS-Criminal Investigation Special Agent in Charge Christopher M. Sigerson, who spent a career supervising and training agents on anti-money laundering and financial crime techniques.

According to Sigerson, the nearly 2,000-mile border represents “some of the most expensive real estate in the world” when the cost of monitoring and policing it are considered along with the human cost of life and the billions in opportunities it holds for narco-traffickers.

The United Nations estimates that nearly $2.1 trillion of the global gross domestic product is illicit revenue, and $1.6 trillion is laundered. However, as Sigerson explained, only about 0.2 percent is interdicted.

“Bulk,” in the traditional sense of cash smuggling, truly means “bulk.” “We’re not just talking about a duffle bag or two. We are talking about tons of cash,” Sigerson said. Thousands of pounds can be alleviated and managed by “refining,” or the purchasing of higher denomination bills, the best source of which are financial institutions.

From shrink-wrapped packages to the use of “mules” to elaborate tunnels built below the border, smugglers have perfected the art of transferring cash – and law enforcement seems to be perpetually trailing the play. Some 140 tunnels have been found along the California and Arizona borders with Mexico, but there is no telling how many exist.

Beyond the on-the-ground fieldwork of bulk cash smugglers, there is a vast AML component involving financial institutions in the bulk cash world.

“That is simply because when you follow the money in any kind of financial crime it is easier to follow the money trail than it is to identify the ultimate destination of that wealth,” said Sigerson, who pointed out that far more cash is forfeited from financial institutions than from drug traffickers themselves.

Sigerson sees some benefits in shifting the fight from the border to virtual balance sheets. He is encouraged by recent retooling at the top level of FinCEN, particularly the unit’s newly appointed Director Jennifer Shasky Calvery, an aggressive criminal prosecutor, and her Deputy Director Peter Alvarado, a former IRS-CI agent.

“FinCEN is no longer being run by industry insiders or by regulators. It’s being run by law enforcement and prosecutors,” Sigerson said. “So I think the tone and the direction we’re going to get from FinCEN is going to be very different.”

The mainstay Casas de Cambio are alternative and sometimes first choices for cartels to move cash – only now, cartels are moving further south to avoid detection. In one elaborate scheme, members of Los Zetas cartel posing as journalists traveled all the way to Nicaragua with $7 million in an attempt to run the cash through a CDC.

Increasingly, bulk cash is being smuggled in ever more elegant ways. For instance, rogue money services criminals can gain access to remote deposit print machines from money services businesses, then rig the machines so they can go to a country where U.S. currency is a commodity and trade freely until access is disconnected by the financial institution. The end result: international U.S. dollar checks drawn fraudulently distribute quick bursts of funds before they are shut down.

While much of the action in bulk cash smuggling occurs along the border, more and more the front lines of the fight are being brought to financial institutions nowhere near the border.

Advised Sigerson: “You have to ask yourself, as an AML officer, ‘Does this crime’s trail lead through my financial institution?’”