International drug traffickers are using increasingly sophisticated methods to cover up the flow of money. Drug cartels launder around 25 billion US dollars a year in Mexico alone. They are increasingly doing this via cryptocurrency. This is the conclusion of the United Nations in a report presented in Vienna and Mexico City on March 10th, which analyzes the effects of the global drug trade on the economy, security and society.
In order to avoid money laundering alerts, criminal organizations carry out many transactions in small amounts, which are always below the reportable thresholds. "Both Mexican and Colombian organized crime groups are increasingly using virtual currencies because these transactions are quick and anonymous," warns the annual report of the International Narcotic Control Board (INCB), which oversees the implementation of international drug treaties .
Cryptoassets as a 'new frontier'
Cryptocurrencies have emerged as a "new frontier" for criminals involved in the illicit trade in drugs, weapons, sex and people, according to the ICNB. "Criminals often split the illicit money into small amounts that they deposit into multiple bank accounts, a technique known as smurfing. They then use these accounts to make a series of online purchases using small amounts of bitcoin that allow them to disguise the origin of the money and pay employees in other parts of the world," the document said. The Mexican cartels Jalisco Nueva Generación and the Sinaloa cartel are mentioned among others.
Recently, the US Department of Justice and the FBI have announced intensified global fight against cyber crime. A ban on anonymous crypto payments was discussed in the EU Parliament.
Mix of many methods
Organized crime groups are using increasingly sophisticated schemes to launder money from drug trafficking or the kidnapping of migrants. According to an investigation by Mexican investigative journalist Zorayda Gallegos, published in the Mexican daily El Universal and quoted by the United Nations, "criminals use front men to conduct businesses, including real estate, jewelry stores and money laundering services, as part of a money laundering network that also includes housewives , students and bank employees are involved".
In addition, free trade zones and gambling companies continue to launder illegal funds, the ICNB report added. "Schemes such as hawala and black market bartering, as well as the use of commodities such as gold and diamonds, fall outside many of the financial disclosure requirements and therefore pose enormous challenges for law enforcement."
Banking system another important pillar for money laundering
Traditional banks continue to be the preferred mechanism for money laundering despite the increasing use of Bitcoin, according to the UN report. The document cites HSBC as an example of how the banking system behaved towards these criminals. The bank admitted in 2012 to laundering billions of dollars from the Sinaloa cartel. At the time, the bank avoided criminal proceedings for a payment of 1.9 billion US dollars.
For the International Narcotics Control Board, it is clear that "the largest financial institutions are involved in the movement and laundering of illicit financial flows". He concludes that previous anti-money laundering strategies have failed. Not mentioned in the report are non-fungible tokens (NFT). As the analytics firm Chainanalysis has found, NFTs are also used in conjunction with cryptocurrencies for money laundering.
