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Money Laundering Takedown

Massive operation in Los Angeles targets Sinaloa drug cartel.


Money Laundering Takedown
Operation Targets Sinaloa Drug Cartel

09/12/14

In a major takedown in Los Angeles on Wednesday, September 10, nearly 1,000 federal, state, and local law enforcement officers seized approximately $100 million in cash, arrested nine subjects, and searched dozen of businesses in the city’s downtown fashion district alleged to have laundered money for Mexican drug cartels.

The ongoing investigation—three indictments were unsealed Wednesday—is specifically aimed at the Sinaloa Cartel and its activities, including narcotics trafficking, hostage taking, and money laundering in Los Angeles and elsewhere in the U.S. and Mexico.

In one case, the cartel used a fashion district business to funnel ransom payments related to a kidnapped U.S. citizen who was held hostage and tortured by cartel members in Mexico.

“The victim, who worked as a distributor for the Sinaloa Cartel, was kidnapped after 100 kilograms of cocaine he was supposed to distribute were seized by U.S. law enforcement,” said Bill Lewis, assistant director in charge of our Los Angeles Field Office. The victim—who was ultimately released and safely returned to the U.S.—was kidnapped because of his drug debt.

The cartel sent demands to the victim’s family in the U.S. and instructed them to deliver the ransom money—separate payments of $100,000 and $40,000—to a Los Angeles business known as QT Maternity. “Our investigation determined that the ransom payment was distributed to 17 other businesses located in the fashion district,” Lewis said. “These stores were used as third-party money launderers in a scheme commonly referred to as the Black Market Peso Exchange.”

The peso exchange scheme essentially turns dollars into Mexican currency through the sale of legitimate goods. The Mexican businesses that participated used illicit drug money to purchase goods, which were then sold in Mexico for pesos. The proceeds were returned to the cartel in Mexican currency. This laundering process avoided the risk of smuggling large amounts of cash across the border.

“We have targeted money laundering activities in the fashion district based on a wealth of information that numerous businesses there are engaged in Black Market Peso Exchange schemes,” said Robert Dugdale, an assistant U.S. attorney in the Central District of California. “Los Angeles has become the epicenter of narco-dollar money laundering, with couriers regularly bringing duffel bags and suitcases full of cash to many businesses. Because Los Angeles is at the forefront of this money laundering activity,” he explained, “law enforcement in Los Angeles is now at the forefront of combating this issue.”

Wednesday’s operation was the result of a task force investigation made up of multiple federal and local law enforcement agencies, including the FBI, the Los Angeles Police Department, the Drug Enforcement Administration, the Internal Revenue Service, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. ICE-HSI efforts alone resulted in seizures of more than $65 million.

“Today’s arrests and searches should send a message to international drug cartels that the FBI and our partners won’t tolerate the exploitation of American businesses for the purposes of illicit financial transactions that fund hostage taking and the distribution of narcotics,” Lewis said Wednesday after the takedown. “In addition, today’s actions should send a warning to American businesses that turn a blind eye to the crime they facilitate while avoiding reporting requirements, transaction fees, and law enforcement scrutiny.”

Resource:
- Press release