Mexican drug cartels and Chinese money launderers

In December 2019, the Drug Enforcement Administration of the U.S. Department of Justice released its 2019 National Drug Threat Assessment. A full chapter of this document is devoted to the subject of Mexican drug cartels, or “Transnational Criminal Organizations”, as they're called by the DEA. This post derives from that chapter.

Mexican cartels control lucrative smuggling corridors, primarily across the U.S. southwest border, and maintain the greatest drug trafficking influence in the United States. They continued in 2019 to expand their influence by forging business alliances with other transnational criminal organizations (TCOs), and by working in conjunction with transnational gangs, U.S.-based street gangs, prison gangs, and Asian money laundering operations.

The most important Mexican cartels in the U.S. drug trade

Although new offshoots continuously emerge, the DEA assesses the following six Mexican drug trafficking organizations as having the greatest strength in United States drug markets: The Sinaloa Cartel, the Jalisco New Generation Cartel (CJNG), the Beltran-Leyva Organization, the Juarez Cartel, the Gulf Cartel, and Los Zetas. These organizations maintain distribution cells in designated cities across the United States that report to TCO leaders in Mexico, either directly or through intermediaries.

Operational structure and characteristics of cartel affiliates in the U.S.

Mexican drug trafficking organization activity in the United States is mainly overseen by Mexican nationals or by U.S. citizens of Mexican origin. U.S.-based cartel members of Mexican origin enter the United States both legally and illegally, and often conceal themselves in densely populated Mexican-American communities. Mexican cartel members operating in the United States can often be traced back through familial ties to leading bosses in Mexico. Members may reside in the United States prior to employment by a Mexican TCO. In some cases, U.S.-based cartel members are rewarded with high-ranking positions upon returning to Mexico, for years of successful activity in the United States.

The Sinaloa Cartel has maintained the widest national influence in the U.S.; its most dominant positions are along the West Coast, in the Midwest, and in the Northeast. The Jalisco New Generation Cartel is the Mexican TCO with the second-most widespread national influence. Beltran-Leyva Organization activities are more dispersed throughout the United States; its heaviest concentrations are in regions with large heroin markets.

U.S.-based Mexican drug trafficking organizations are composed of compartmentalized cells, each of which is assigned specific functions, such as drug transportation or distribution, consolidation of sales proceeds, or money laundering. Mexican cartel operations in the United States are typically structured as a supply chain. Individual operators are unaware of aspects beyond their specific function. In most cases, individual drug-shipment transporters within the United States are independent, third-party “contractors” who may work for multiple Mexican cartels. The number of transportation groups is increasing in some areas, and they often transport relatively small shipments.

Relationships with local criminal groups and street gangs

U.S.-based Mexican cartel members are generally responsible for coordinating the transportation and distribution of bulk wholesale quantities of illicit drugs to U.S. markets, while smaller local groups and street gangs not directly affiliated with the Mexican transnational criminal organizations typically handle retail-level distribution. At times, Mexican TCOs collaborate directly with local criminal groups and street gangs to distribute and transport drugs across the United States at the retail level.

Spillover violence

While drug-related murders in Mexico reach epidemic proportions, there is little spillover violence in the United States. Mexican cartel members based in the U.S. generally refrain from violent turf-battles with their rivals, in order to avoid detection or scrutiny by law enforcement agencies. Mexican TCO-related violence does occur in parts of the U.S., particularly along the southwestern border. However, it's less frequent compared to what regularly occurs in Mexico and mostly involves ‘trafficker-on-trafficker’ incidents.

Cartel money laundering in the U.S.

Mexican cartels generate billions of dollars annually through the sale of illegal drugs in the United States. They implement a variety of strategies to counter efforts to identify and confiscate their drug revenues in the U.S. and Mexico. In the United States, Mexican drug trafficking organizations employ bulk cash smuggling, or they deposit drug proceeds into the U.S. banking system and order electronic fund transfers to Mexico. Alternative money-laundering schemes include the Black Market Peso Exchange system, in which cartel dollars are “swapped” by money brokers for pesos already in Mexico, and the use of Money Service Businesses (check cashers, sellers/issuers of payment instruments and money transmitters) to transfer drug proceeds to Mexico.

Inside Mexico, the Mexican transnational criminal organizations inject illicit proceeds into the financial system through foreign exchange companies, or by purchasing assets with cash, or by the use of front and shell companies which receive electronic transfers, in order to conceal the true beneficial owners of the fund transfers. The Drug Enforcement Agency has also seen evidence of cryptocurrency utilization by Mexican TCOs, as a means by which to transfer their wealth from one country to another.

Mexican drug cartels and Chinese money launders

There exists considerable desire among Chinese nationals to transfer their wealth outside of China and into the United States, fueling a demand for U.S. dollars. To limit the outflow of renminbi, the Chinese Government placed a cap on sales of the Chinese currency for foreign exchange. The DEA has detected an alarming trend wherein Asian money laundering organizations “process” cartel drug proceeds as a means of satisfying this overseas demand for dollars.

Asian money laundering organizations acquire U.S. dollars from the Mexican TCOs by selling them pesos, in Mexico, or by selling assets “stuck” in China via Chinese underground banking schemes. The Asian MLOs then turn around resell those U.S. dollars to Chinese nationals located in the United States, normally in exchange for payments of renminbi still in China. This Chinese demand for foreign exchange has provided an outlet for Mexican TCO drug proceeds that, the DEA reports, is changing the landscape of money laundering within the United States.

Disclaimer: Information on this website is not legal advice.