DRUG MONEY FLOWS SOUTH

Border Agents Step Up Seizures

WASHINGTON -- The guy looked pretty bulky.

As he waited to walk from San Ysidro into Tijuana, border officials asked
him a question southbound crossers are hearing more often these days:

Anything to declare?

Nope, he replied.

So why did he look like the Michelin Man?

Dubious customs agents found $107,000 in cash inside the lining of the
man's clothes. Authorities believe the bills were proceeds of drug
trafficking and that the 49-year-old Mexican was trying to smuggle the
money into Mexico for drug lords based there.

The incident underscores an increasing concern for law enforcement
officials: Money-laundering crackdowns have boosted the volume of cash
being smuggled across the border.

For veterans of the war against drugs, it's an old story: You push down
here, it pops up there.

"When you close down one avenue, like the financial institutions, then --
boom! Immediately you start seeing more shipping of money. We are
anticipating that (drug traffickers) would be doing that," said Dean Boyd,
a Customs Service spokesman. "If we can get them shipping cash all the time
that's where they are most vulnerable."

Along the U.S.-Mexico border, the number of cash seizures has doubled in
the past year. About $15.4 million has been confiscated -- 14 percent more
than the previous year.

That amount still is a tiny fraction of the $57 billion in annual proceeds
generated by drug trafficking in the United States, according to the Office
of National Drug Control Policy at the White House.

Officials estimate that 80 percent of the proceeds -- about $47 billion --
is laundered or smuggled out of the country by the cartels.

"The swiftness of that flow has become mind boggling," said Rep. Nydia M.
Velazquez, D-N.Y., who has sponsored legislation to combat money laundering.

Initially, traffickers try to turn the money into safe and legal assets by
wiring it out of the country or depositing it into bank accounts. When that
doesn't work, they resort to smuggling, or what authorities call "bulk
shipments" of cash.

People leaving the country are required by law to report to the Customs
Service any sum of money they are carrying in excess of $10,000.

One of the more celebrated cases of a suspect being nabbed while trying to
sneak money out of the country came in 1995 when U.S. authorities arrested
Mexico's former deputy attorney general, Mario Ruiz Massieu, for failing to
declare some $40,000 in cash he was carrying as he prepared to board a
plane in Newark for Madrid. Last month, Ruiz Massieu was found dead in his
New Jersey apartment, an apparent suicide victim from a drug overdose,
officials said.

Drop In The Bucket

Officials concede that they are making barely a dent in the flow of money
out of the country. Despite the increase in the number and size of
seizures, the amount still is minuscule compared to the overall flow.

"We believe we are catching only a fraction of the cash being shipped out
of the United States," Assistant Customs Commissioner Bonni Tischler told
congressional subcommittees investigating money- laundering operations.

The traffickers "have the ability to adapt to changing market conditions
and disruptions by law enforcement," she testified.

"They also have both the financial means and manpower necessary to change
their methods of operation with each successful investigation employed
against them."

Cartels must improvise to retrieve their proceeds.

That was illustrated recently when top Justice Department and Drug
Enforcement Administration officials proudly announced the arrests of
dozens of top people of a major Mexican drug cartel -- the Amado Carillo
Fuentes group. Officials told how they seized $20 million in cash, more
than 12,000 kilograms of cocaine and 4,800 pounds of marijuana in Operation
Impunity. A San Diego operative was described as a key cocaine runner for
the cartel.

But authorities believe more than $100 million already had been returned to
Mexican drug lords by underlings who smuggled it back in cars.

The same week the arrests were made, Treasury Secretary Lawrence Summers
and Attorney General Janet Reno announced a national strategy to combat
money laundering. Among the tactics, government officials said, is a
proposal to strengthen penalties on unreported cash smuggling.

Over the last few years, there have been numerous customs crackdowns on the
"outbound" money flow -- especially targeting money-laundering operations.

One of the most prominent, Operation Casablanca, was a three-year sting
focusing primarily on money laundering. When it was completed in May 1998,
it ensnared more than three Mexican banks and officials from more than a
dozen other top Mexican financial institutions. The sting resulted in the
arrests of 162 people and the seizure of more than $100 million in funds
and property.

"Casablanca has increased the bulk shipments due to money launderers'
concerns for sting operations," said California Deputy Attorney General
James Dutton in San Diego. "Drug dealers have more incentive for bulk
shipments."

The San Diego Take

At San Ysidro, the world's busiest border crossing, and nearby Otay Mesa,
customs agents had seized $2.7 million in undeclared cash this year as of
Sept. 1. In contrast, an estimated $1.9 million was seized the entire
fiscal year between Oct. 1, 1997, and Sept. 30, 1998, officials said.

Customs reports made available since the Casablanca investigation ended 17
months ago reflect the cat-and-mouse nature of the law-enforcement chase of
the tainted-money movers.

According to the records, numerous illicit bank accounts closed in Mexico
and Central America that had been used to launder money. In response,
traffickers are attempting to "smuggle proceeds via bulk shipments, bank
drafts and money orders out of foreign countries," internal customs reports
state.

Huge stockpiles of cash are reported in the Northeast as the drug
traffickers wait for the right time to ship money. Their concealment
methods are limited only by their imaginations, said customs' Tischler.

As part of Casablanca in April 1998, a total of $4.8 million was seized
from a Mexican organization operating in New York. The money was found sewn
into the lining of jackets, packed in Tide laundry detergent boxes,
concealed in checked baggage and wrapped in aluminum foil and newspaper.

Two months later, customs officials in Newark, N.J., seized $11 million,
wrapped in duct tape and hidden in a truck transmission loaded in a sea
container. The container was bound for Venezuela. Not surprisingly, no one
claimed ownership of the cash.

At the border crossings, customs does a person-by-person,
vehicle-by-vehicle check of those heading north, reflecting the intensive
effort to track drugs and weapons. Southbound, it's a different story.

It's random.

A few years ago, customs officials rarely inspected vehicles leaving the
country, but authorities stepped up the checks as the surge of cash began
to move south.

Usually four or five customs inspectors at a time are attempting to stop
traffic while trying to avoid getting run over. "We try to throw off the
smugglers," said Vince Bond, the customs spokesman in San Diego. "We try to
throw them off balance, give them a sense of unpredictability."

The $107,000 seizure at San Ysidro was unusual; most of the time customs
agents see no more than $15,000 to $20,000 being transported by smugglers,
Bond said.

"They don't want to lose it all in one clip, after selling all that
cocaine. What we usually see is in smaller shipments," he said.