Money Laundering Fuels Drug Cartels Affecting Border Security

The One Thing Missing From The Border Conversation
stack of one hundred dollar...
stack of one hundred dollar...

Former Arizona Attorney General Terry Goddard said recent conversations over border security are missing a critical element: money laundering.

Goddard, who’s a Democrat, said money laundering is fueling the Mexican drug cartels’ operations, yet the issue is overshadowed by calls for more fences, boots on the ground and technology along the United States-Mexico border.

He criticized the federal government during a border security forum in Arizona last week, saying, “Our efforts as a country to enforce the laws against illegal money transfers across the border are pathetic.”

“That’s why the cartels are so successful,” he added. “What they are able to do essentially is buy any technology, hire any troops. They have the best-trained and best-paid operatives in the world, and they are the ones who make a mockery of our defense on the border.”

Goddard is the author of the report “How to Fix a Broken Border: Follow the Money” released in October 2012 by the Morrison Institute. As Arizona attorney general in 2010, he was involved in a cartel money laundering investigation that resulted in a seizure of $20 million that came from drug sales in the U.S.

Now he is calling on the federal government to make combating money laundering a top priority in efforts to secure the border.

The federal government’s efforts to combat money laundering

The U.S. Department of Homeland Security and the U.S. Department of Treasury already have several initiatives and intelligence teams in place to crack down on money laundering.

Homeland Security Secretary Janet Napolitano spoke in Arizona on Friday about her agency’s efforts to stop the flow of illegal drugs and money across the southern border. She noted that between 2009 and 2012, DHS has seized 39 percent more drugs, 71 percent more money and 189 percent more weapons along the Southwest border as compared to fiscal years 2005 to 2008.

The federal government has also made substantial seizures of illegal drug proceeds in recent years. During fiscal year 2011, U.S. Immigration and Customs Enforcement (ICE) agents seized more than $150 million that came from drug sales and made 428 arrests in bulk cash smuggling investigations. That’s up from $7.3 million and 48 arrests in fiscal year 2005.

But these seizures of cash from the drug cartels only add up to a small portion of the total amount of money flowing from the U.S. to Mexico that comes from the sales of illegal drugs.

The most recent data released in 2008 by the U.S. National Drug Intelligence Center, which was closed last June, reveals that between $19 to 39 billion in illegal drug proceeds flow from the U.S. to Mexico every year. In 2011, a Mexico government official estimated that number to be $64 billion. Last year, a Justice Department official said it could now be about $85 billion.

Goddard: What the feds can do to combat money laundering

Goddard said one step the federal government can take to combat money laundering is set restrictions on stored-value cards that drug traffickers are using to transfer money from the U.S. to Mexico.

These cards are like credit cards, except they don’t require a bank account because they have a monetary value encoded on them and can be used anonymously.

Goddard explained that while individuals crossing the border with $10,000 or more are required by the federal government to disclose that money, the stored-value cards are except form that policy. In fact, there is no currency disclosure requirement at the border for these cards. This allows drug traffickers to get away with using these cards to transfer large sums of money from the U.S. to Mexico.

“You could literally walk up to an Immigration and Customs Enforcement agent, wave it in his face and say, ‘I have a million dollars in this card and there’s not a thing you can do about it,’” Goddard said.

Several bills, including one by former Rep. Gabrielle Giffords (D-Ariz.) in 2010, have attempted to address this issue. Giffords introduced a legislation that would’ve established a disclosure requirement for stored-value cards that total more than $10,000. It would’ve also established criminal and civil penalties for those who violated the rule. Another similar bill was introduced last year but like with Giffords’ proposed bill, it went nowhere.

Goddard also recommended increasing the penalties for those those involved in money laundering, noting that no jail time has been issued to those, including bank executives, who’ve helped provide billions of dollars to the Mexican drug cartels.

He added that until the federal government does more to address money laundering, the Mexican drug cartels will further improve their operations using the illegal drug proceeds coming from the U.S.

“They know how to exploit every possible opportunity, and we have done relatively little to keep them from getting critical resources they get from drug sales,” he said.

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