Drug cartels retreating to riskier, bulkier cash U.S. agents target electronic 'laundry'

July 06, 1993|By William C. Rempel | William C. Rempel,Los Angeles Times

NEW YORK -- Export papers were all that distinguished the two rust-colored shipping containers from dozens of others waiting on a Brooklyn dock to be loaded aboard the Colombian freighter Loquimay.

They listed the cargo as dried split peas.

But veteran U.S. Customs Service inspectors Dean Jordan and Luigi Ruzza recalled seeing earlier shipments from the same Queens exporter to the same address in Medellin, Colombia, with one curious difference: The previous containers carried automobile parts. Why would a Colombian auto parts importer be getting tons of peas?

The suspicious Customs officers drilled holes in the padlocked 20-foot containers. Peering inside, they could see stacks of 100-pound bags of the vegetable.

Then the inspectors noticed their drill bits. They were caked with a green, powdery substance, and it wasn't split peas. It was residue from U.S. currency -- $7.2 million in every denomination -- that agents found stacked like bricks in a hidden chamber of the container.

The discovery last summer, and the resulting investigation by Customs and Internal Revenue Service agents, shut down a fledgling money-laundering operation based in New York that had funneled more than $80 million to the Medellin drug cartel and was spreading into Florida, Texas and California.

It also told federal investigators that a five-year crackdown on networks to launder drug money seemed to be working. Authorities were forcing the cartels to sacrifice more sophisticated electronic techniques for a return to riskier bulk transfers of currency to retrieve shares of the illegal drug trade -- an estimated $334 million, most of it cash, generated every day in the United States.

"Maybe we're driving them back to the Stone Age," said Michael P. Fahy, head of financial investigations for the Customs Service in New York. "If the cartels have to move their profits in bulk cash, they're more vulnerable. It's not the way they like to do business."

The slow, inefficient and risky bulk transfer of cash was common two decades ago, before the proliferation of electronic banking made it possible to slip billions of dollars into accounts around the world with the stroke of a computer key.

But federal officials say stricter disclosure rules and tougher money-laundering statutes -- with penalties up to three times as severe as those for bank fraud -- have turned banking officials into watchdogs for law enforcement and made the banking system less accessible to drug barons.

"The criminal element is already afraid of the audit trail, and lately they can't trust the banking system to look the other way like they used to," Mr. Fahy said.

In part, his optimism springs from the early successes of such efforts as Operation El Dorado. The groundbreaking Treasury Department task force targeting the profits of international drug lords was launched in New York last year.

According to official statistics, El Dorado agents in their first six months seized more than $52 million in cash, arrested 128 suspected money launderers and dismantled financial networks responsible for processing hundreds of millions of dollars.

"I'm looking for the day when we take them down a billion dollars at a time," said Robert E. Van Etten, a former IRS agent who heads the Customs Service field office in New York.

Operation El Dorado was Mr. Van Etten's brainchild. The New York-based organization -- coordinated jointly by local Customs and IRS agents -- pooled the investigative, regulatory and intelligence-gathering resources of all branches of the Treasury Department. Mr. Van Etten said he expected it to become a national model.

Operation El Dorado's tactical scheme, targeting the money rather than the narcotics, is part of a significant shift throughout law enforcement in its long, frustrating war on drugs.

For years, Customs agents focused on intercepting narcotics shipments at the nation's borders. The FBI and the federal Drug Enforcement Administration targeted domestic and foreign distribution networks. Such efforts produced sensational headlines: highly publicized seizures of tons of contraband, arrests, convictions, stiff penalties and a national prison system jammed with drug-related convicts.

But all of this did not cripple the drug business.

"We got a lot of couriers, dealers, distributors -- a lot of little guys," Mr. Van Etten said. "But some of the biggest people in the narcotics trade never touch the stuff. To get them, you've got to go after the money. They do touch the money."

Official estimates of drug money laundering in the United States range from $10 billion to more than $100 billion a year.

Drugs enter the U.S. market on consignment. The cash proceeds of street sales then have to be returned to the drug lords, less the standard fees paid to those who facilitate its transfer.

That transfer process -- from collection and accounting to the delivery and ultimate deposit into a legitimate account -- is "the laundry."

Authorities say they have documented millions of dollars in transcontinental drug money transfers by hired armored cars or unsuspecting commercial carriers, such as Federal Express.

Of course, shipping illicit currency abroad is more hazardous because packages are subject to routine inspection by Customs agents on both sides of the border. That is one reason the cartels prefer shortcuts directly into the U.S. banking system.

Investigators say couriers who deliver the bags of cash to the laundry keep between 0.25 percent and 1 percent of their haul, while the primary launderers, who transfer cash into the banking system, generally keep from 4 percent to 6 percent of the total.

In private, even the most optimistic investigators concede that so far they are inflicting only incidental damage on drug profits. But if Operation El Dorado lives up to expectations, it could one day add substantially to cartel overhead.

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