COVID-19 Cripples International Money Laundering

Cory Wilson is a Calgary defence lawyer with significant experience representing individuals charged with criminal offences. For a free consultation, contact us at 403-978-6052 or here.

With the worldwide economic shutdown, dirty money is piling up with nowhere to go. During April, police agents made three significant seizures of more than $1 million in alleged drug proceeds. According to top drug officials, the reason for such large a large surplus of cash is directly related to COVID-19 – trade-based money laundering systems that many drug organizations use to repatriate and move money has slowed due to the shuttered economy. With many small businesses closed, supply chains in disarray and the worldwide economy hanging in the balance, complex money-laundering schemes are hobbled and cash is piling-up.

The recent multi-million dollar seizures harken back to a time before drug traffickers learned of an exploited money-laundering.

The cataclysmic shuttering of non-essential business have had an incredible impact a prevalent money-laundering scheme called the black market peso exchange. In order to move money back to Mexico where the major cartels operate, money needs to be converted from dollars to pesos.

In order to do the conversion, drug trafficking groups throughout the country use wholesalers to remit profits to Mexico. A broker pays pesos from the drug trafficker’s dollars. The traffickers than deliver the cash to an exporter who ships goods such as clothing, sportswear or cosmetics to a retailer in Mexico. The retailer sells the goods for pesos and forwards the money to the broker.

First developed by Columbian cocaine traffickers, Mexican cartels were late to the party in employing this scheme as they preferred to simply transport the money across the border into Mexico. That technique changed when the Mexican government began to crack down on implemented financial regulations which restricted the direct cash flow to its banks.

With storefronts closed and agents seizing significant quantities of bundled cash, it appears drug traffickers may be forced to resort to either holding or smuggling the cash.

Chinese Money Laundering

Coronavirus has also substantially slowed capital flight to China which was the primary driver of international money laundering pre-pandemic.

With the Chinese government heavily restricting the amount of money that can leave the country, money launders developed a workaround. A Chinese national contacts a broker

generally located in the USA. The broker directs this person to pay a chemical factory that produces the precursor chemicals used to make methamphetamine and fentanyl. The factory then ships the precursors to Mexico where they are converted to narcotics and smuggled into the USA and sold for dollars. The broker than directs the drug traffickers to deliver the cash to a relative or friend of the Chinese national whose money began the sequence.

However, as a result of the pandemic, the flow of chemicals across the border into Mexico has slowed dramatically and thus, no flow of laundered money.

Until the pandemic is over, there can be no doubt that law enforcement will continue to make significant seizures of money.

Cory Wilson is a criminal defence lawyer based in Calgary. If you have been charged with a criminal offence or are a suspect in a criminal investigation, call today for a free, no obligation consultation.