Drug Cartels are Using Legitimate Remittances by Ordinary People for Money Laundering; Here's How

The world of Narcos isn't all about violent shootouts and daring escapes, but the web of money laundering operations behind cartels is what keeps the drug trade going. In Culiacán, Mexico, a woman collected an $8,000 remittance from the United States and deposited it into local banks, but she had no direct contact with the sender. This seemingly ordinary transaction was orchestrated by the Sinaloa Cartel to launder drug sale profits as remittances. She earned $230 in pesos and became part of a network of civilians assisting cartels in moving illicit funds. This practice takes advantage of the surging legitimate remittances to Mexico, primarily from the US, which hit a record $58.5 billion last year. The ease of blending ill-gotten gains with these legal transactions has raised concerns among security officials in both the U.S. and Mexico.

Laundering drug money through legitimate channels

Mexican drug cartels are increasingly using remittance networks to launder proceeds from drug sales in the United States. An anonymous U.S. government official specializing in illicit finance estimates that up to 10% of remittances to Mexico may involve drug money, totaling about $4.4 billion. The remittance sector's global reach and the relatively small cash transactions make it an appealing option for criminals, with fewer identification requirements than formal bank accounts. Previous cases have shown criminal groups using money-transfer services for illegal activities, such as kidnapping and ransom demands that involve remittances.

Money transfer firms and banks are actively working to combat such activities, but drug syndicates are increasingly turning to remittances due, in part, to the COVID-19 pandemic.

Shift after COVID-19

COVID-19 disrupted travel routes and pushed drug traffickers to increasingly use remittances for laundering money, since the closure of the U.S.-Mexico border to non-essential travel from March 2020 to November 2021 made traditional cash smuggling harder. The U.S. government included "exploitation of legitimate remittance channels" by transnational crime organizations in its annual threat assessment report for the first time. Though specific money-transfer companies were not named, the substantial rise in U.S.-Mexico remittances has obscured this practice. The Sinaloa Cartel and Jalisco New Generation Cartel are suspected of using remittances to repatriate drug proceeds.

Reading money laundering patterns 

A clear pattern for money laundering through remittances has emerged, according to a U.S. official, individuals involved in the scheme in Mexico, and federal court documents.

In the United States, remittances primarily flow through businesses like corner stores, retail chains, and currency exchanges, acting as agents for money-transfer companies. These agents receive training and earn commissions per transaction, while customers can send cash without a bank account. This system heavily relies on in-person checks at the shop level, and its effectiveness depends on the integrity of local agents, some of whom may have connections to drug traffickers.

The Financial Crimes Enforcement Network (FinCen) consistently monitors financial institutions, including remittance companies, but doesn't comment on ongoing investigations. Current U.S. law mandates records of transactions over $3,000 for five years and reporting suspicious activity to FinCen. Criminals often keep transactions below $3,000 to evade detection. Remittance shops have procedures requiring identification for all transfers, but insiders can falsify information, complicating law enforcement efforts, as seen in eight federal cases and confirmed by officials on both sides of the border.

A father's story

A truck driver preferred cashing remittances traditionally because he wasn't familiar with smartphone apps. His daughter received the funds via Albo and transferred them to a bank account given by the cartel over WhatsApp. She had an Albo debit card connected to her virtual wallet. WorldRemit claimed to have robust security measures but didn't provide details. Tragically, the daughter was shot and killed in June 2019, possibly because of the funds in her Albo account, as she had shown conspicuous changes in her lifestyle. Despite the tragedy, the man still handles remittances for the Sinaloa Cartel out of fear for his safety.