International Herald Tribune August 11 1997
contact: iht@iht.com

Size of Traffickers' Profits Gives U.S. a Huge Target
By Douglas Farah Washington Post Service

WASHINGTONMexican and Colombian drug traffickers,
confronted with regulations that make it increasingly difficult to transfer
their hundreds of millions of dollars in illicit gains back home, are facing
a quandary: what to do with the mountauns of cash their business
generates, mostly in small bills.

According to Justice Department calculations, the weight of
the cash generated by the street sale of heroin is about 10 times the
weight of the drug itself, so a ton of heroin generates 10 tons of cash.
For cocaine, the weight is about six times the weight of the drug sold.
The traffickers' need to move huge volumes of cash "could provide law
enforcement with perhaps its best opportunity to target these illicit
proceeds," according to Mary Lee Warren, a deputy assistant attorney
general.

"If a trafficking organization sells $1 billion worth of illicit
drugs on the streets of New York, it must contend with more than
256,000 pounds of illicit currency," or about 116,000 kilograrns, Ms.
Warren told Congress last month. "If we assume a conservative figure
of $50 billion for alll illicit drugs sold in the United States, the amount
of illicit currency produced by those sales weighs almost 13 million
pounds."

That cash must either be introduced into the legal
financial system in the United States or shipped to less regulated
markets. Because the money is extremely difficult to trace once it
enters the financial system or leaves the country, Ms. Warren said, "our
basic antimoneylaundering objective is currently to identify and
prevent the initial placement of the drug proceeds into our financial
systems." During the late 1970s and early 1980s, drug traffickers,
dealing with far smaller volumes of cash, shipped back home on the
same airplanes and boats that delivered the drugs.

As business boomed and the traffickers became more
sophisticated, they became proficient at using the banking system and
money exchange houses to ship money to home countries with a
minimum of risk. The criminal organizations also developed
sophisticated strategies for laundering their money, or making it appear
that the money was the result of legitimate businesses, by creating
hundreds of phony companies that allowed them to justify a huge cash
flow.

But law enforcement agencies increasingly have targeted the
flow of money, adding new reporting requirements to banks and
cracking down on unregulated exchange houses that electronically
transfer money from the United States. The measures have made
moving millions of dollars more timeconsuming, expensive and risky.
So traffickers are again favoring bulk shipments of cash to their home
countries.

Representative Bill McCollum, the Florida Republican who is
chairman of the House Judiciary subcommittee on crime, said at the
July 24 bearings that "the Mexican rnoneylaundering problem has
grown so bad that drug traffickers are now driving truckloads of cash to
Mexico without being challenged along the 2,000mile southwest
border."

"It's now estimated that $6 billion to $30 billion in drug
profits are laundered through Mexico annually," he said. "It's also
estimated that more than $2.5 billion in drug money is funneled into ^
Colombia each yearan amount equal to Colombia's annual income
from coffee sales and representing about 20 percent of Colombia's
total exports."

To deal with the overwhelming cash volume, the Mexican and
Colombian trafficking organizations are constantly developing new ways
to ship the cash in bulk, usually in the form of $20 bills.

"They are shipping bills back in airplanes, in cargo, in furniture,
in TVs, in washing machines, anywhere it fits," a senior Drug
Enforcement Administration of ficial in New York said.

So as not to alert customs officials, the packaging specialists make
sure the articles filled with money weigh the same as the commodity
normally would. For example, the DEA official said, a Colombian
specialist arrested last month shipped more than $2.5 million back to
Colombia by hollowing out speakers, toasters and refrigerators,
filling them to their normal weight with $20 bills, and reassembling
the merchandise so perfectly it was nearly undetectable.

Recent laws have given law enforcement officials more tools to
fight money laundering.

Raymond Kelly, the Treasury Department's undersecretary for
enforcement, said that major moneylaundering operations in New
York have been shut down over the last year because his department
now has the authority to impose stiffer reporting requirements on
specific geographic regions.

Mr. Kelly said the Treasury Department had discovered that
12 money exchange houses in New York "had funneled approximately
$800 million to Colombia last year."

"To account for the money legitimately, each Colombian
household in the area would have had to wire $30,000 to Colombia
each yearan amount which exceeds the $27,000 average annual
income for this community," he said.

The department required the exchange houses to report
transactions over $750, leading to six indictments and the closing of
several businesses.

But Mr. Kelly compared money laundering to a balloon, saying
that "just as putting pressure on one end of the balloon will force air to
the other, so too will effective enforcement measures force money
launderers to seek new paths of lesser resistance. As a consequence, we
cannot rest on our recent successes.