Andrew M. Tammaro, Criminal Research Officer, U.S. Immigration and Customs Enforcement, Office of Investigations, Bulk Cash Smuggling Center, Williston, Vermont
September 9 through 18, 2009, joint operation between Colombian and Mexican law enforcement—based on information developed by U.S. Immigration and Customs Enforcement (ICE)—ultimately yielded more than $40 million in illicit drug proceeds hidden within sea containers.1 This recent success in the fight against Mexican and Colombian drug trafficking organizations underscores the relevance of effective intelligence collection supporting criminal investigation.
As evidenced by this most recent seizure activity, which occurred at the seaports of Manzanillo, Mexico, and Buenaventura, Colombia, the successful development and management of human intelligence for law enforcement is arguably the most productive, but also the highest cost source of information. It is—as with national security intelligence—the best way to determine an adversary’s plans and intentions.
However, the unintended consequences of the highly compartmented nature of confidential sources of information can work to the detriment of the analytical process that must turn information into knowledge. Getting high-value information into the hands of law enforcement officers as quickly as possible leverages information across a wider community of interest to identify and disrupt illegal activity. Achieving greater coordination among national law enforcement elements serves as a force multiplier by offering greater potential for individual jurisdictions to find relevance in seemingly unconnected events. This increased capacity can effectively disrupt and ultimately dismantle the means of sustainability for criminal organizations or the illicit systems they employ. By achieving a unified cross-jurisdictional paradigm of information exchange, law enforcement can enhance its understanding of criminal enterprise as a web of relationships among individual elements.
Criminal networks have developed into complex social systems. Such organizations have proven to be very adaptive in responding to the pressures leveraged against them by law enforcement. Evolving money laundering methodologies adopted by transnational drug trafficking organizations provide one example of this capability to survive despite evertightening statutory constraints.
Jurisdictions need to look beyond an approach that centers on individuals and cells as separate entities and recognize the interdependence among groups, structures, and processes that enables an organization or multi-organizational criminal systems to function.
ICE Bulk Cash Smuggling Center
The U.S. Immigration and Customs Enforcement (ICE) Bulk Cash Smuggling Center (BCSC) is located in Williston, Vermont. Its national mission is to provide tactical support to state, local, and tribal law enforcement agencies for the enforcement of illicit bulk cash smuggling and U.S. money laundering statuses.
The center publishes a weekly newsletter, the C-Note, which summarizes significant seizure activity from across all U.S. law enforcement jurisdictions. In addition, the center operates an intelligence unit that provides community members with strategic and tactical products and provides training and other outreach benefits upon request.
To receive the center's publications or for information, contact the BCSC at 802-872-6220 or e-mail firstname.lastname@example.org.
One example under way to network with state, local, and tribal jurisdictions is ICE’s Bulk Cash Smuggling Center (BCSC). This center seeks to increase the overall cooperation of the U.S. law enforcement community to detect and apprehend individuals and organizations transporting currency and monetary instruments in support of terrorism and other criminal activities. The national BCSC reinforces law enforcement efforts by disseminating real-time tactical intelligence, providing outreach, education, and training in this specialized aspect of financial crimes investigation. It is a single point of contact for federal, state, local, and tribal law enforcement to query national bulk cash smuggling investigations.
Bulk Cash Smuggling: The Need for Increased Cooperation
Bulk cash smuggling deterrent efforts focus on combating the methodology currently popular among Mexican drug cartels to safeguard illicit revenue streams, perpetuating the criminal violence that is threatening to turn Mexico into a failed state. A report published for the International Assessment and Strategy Center (IASC) brings the key issue of the bulk cash smuggling problem to the forefront:
Bulk cash smuggling across the U.S. Mexico border cannot be viewed in isolation. Rather, the process of illegally moving large quantities of dollars across the border must be viewed as part of the movements in a larger pipeline that flows across the northern tier of South America, through Central America and Mexico and into the United States.2
The report goes on to observe that this larger pipeline is fed by smaller regional tributaries that ultimately move cocaine, human traffic, and marijuana north into the United States and large amounts of cash generated from illicit U.S. drug sales, stolen cars, and weapons south into Mexico and beyond. This architecture relies on many of the same facilitators to enable the flow of goods and services in both directions.
Douglas Farah, the author of the IASC report, surmises, “Like much else in the drug trade, the current situation with bulk cash shipments is the product of adaptation and evolution by the drug cartels to law enforcement efforts. This means that any analysis of the movement is constantly subject to change. Using the pipeline analogy, products can be rerouted around whatever law enforcement obstacle is raised to create a blockage or bottleneck.3 This adaptability is critical to cartel survival, as the money derived from the sale of drugs and other illicit activities—and the ability to transport and place that cash into legitimate monetary systems—are vital to sustainability. Consequently, the impact of large cash seizures (such as the recent Colombian and Mexican seaport seizures) is high because it deprives the organizations of profits as well as operating funds. The ability for U.S. law enforcement to continue to erode the means of sustainability for drug cartels cannot rest on the efforts of any one organization, but can become truly effective only when community resources are leveraged in a coordinated fashion. The magnitude of the challenge is daunting when one considers the sheer size of revenues generated from the trafficking of illicit drugs by Mexican drug cartels within the United States.
The Scale of the Bulk Cash Smuggling Problem
Mexican Attorney General Eduardo Medina Mora, appearing before the Mexican Congress in 2007, stated that Mexican banks receive about $1 billion from their U.S. counterparts annually, but return up to $16 billion, of which about $10 billion “does not have an explanation and could be attributed to the flow of drug trafficking money.”4 Furthermore, according to Samuel Gonzales of the Mexican Autonomous Institute of Technology (Instituto Tecnolologico Autonomo de Mexico—ITAM), drug proceeds laundered in Mexico may account for as much as four percent of the country’s GDP, or roughly $35 billion.5
The presence of illicit financial flows also can be inferred from examining the net errors and omissions line-item in a country’s external accounts—a component of the current account balance. The net errors and omissions figure balances credits and debits in a country’s external accounts and reflects unrecorded capital flows and statistical errors in measurement. A persistently large and negative net errors and omissions figure is interpreted as an indication of illicit financial outflows.6 According to the International Monetary Fund, Mexico has run a negative net errors and omissions statistic for seven out of the last nine years (1999-2008).7
True estimates of bulk cash flows, however, are difficult to quantify primarily because true estimates of wholesale U.S. illicit drug sale earnings vary greatly. The Congressional Research Service, in a report to Congress, estimates earnings from illicit U.S. drug sales to be $13.6 billion to $48.4 billion annually.8 According to the National Drug Intelligence Center (NDIC), $18 billion to $39 billion in wholesale drug proceeds annually can be attributed to Mexican and Colombian drug trafficking organizations (DTOs), with an additional $33.7 billion to $56.2 billion associated with Canadian-based primarily Asian DTOs.9 Supporting these estimates are the findings of an analysis of the volume of repatriated U.S. banknotes by the NDIC that indicated that at least $17.2 billion was transported to Mexico through illicit nonbank channels over a two-year period. In the case of Canadian-based DTOs, the majority of the estimated revenue from illicit drug sales likely is smuggled across the U.S.-Canada border.10
The increase in bulk cash smuggling volumes can be attributed to several factors:
- The success of the United States in enforcing the currency transaction reporting requirements at domestic institutions
- Increased due-diligence by domestic institutions to “know your customer”
- A shift in the primacy of Mexican DTOs over Colombian drug cartels
- Adaptation and evolution of DTOs in reaction to law enforcement efforts
Following the Money
In 1970, Congress enacted the Bank Secrecy Act (BSA). This action was the result of substantial law enforcement evidence that bank procedures, which prevented the disclosure of confidential account information, were encumbering the investigation of organized crime. The BSA compelled financial institutions to file reports on suspicious financial transactions. Since the BSA was originally designed to regulate only the activities of banks and some other financial institutions that offered banking services, it became apparent that the statute was not sufficient to prevent all types of money laundering.11 In 1986, Congress criminalized the act of money laundering, adding the additional deterrents of fines and prison terms. Law enforcement—armed with the enhanced money laundering regimes—met with sufficient success in deterring the exploitation of the financial system such that criminal organizations were forced to resort to other methods of moving illicit proceeds while minimizing the paper trail. Bulk cash smuggling operations emerged as viable options because of a gap in these newly established laws and the reporting requirements at the border.12
Although a requirement to disclose the transportation of monetary instruments of $10,000 or more into or out of the United States existed in the form of the Customs Monetary Instrument Report (CMIR), the responsibility for filing the report remained with the entity with the greatest interest in avoiding the creation of a paper trail that the CMIR was designed to generate. Consequently, as Stefan D. Casella argues “that compliance among the target groups of criminals, tax evaders, and money launderers were obviously low.”13 Accordingly, Congress created a new “bulk cash smuggling” offense, 31 U.S.C. 5332, that is designed to permit forfeiture of 100 percent of the smuggled currency, whether or not the government can establish a nexus between the smuggled money and another criminal offense. In effect, the very act of smuggling cash became a criminal offense, without relying on the earlier statutory requirements to prove money laundering, that is, specified unlawful activity. Enacted as part of the post-9/11 effort to deter terrorist financing in Title III of the USA Patriot Act, the law recognized the central role that bulk cash smuggling played in the globalization of crime.
Emergence of the Mexican Cartels
Mexico has long been established as a staging and transshipment point for narcotics, illegal aliens, and other contraband destined for the U.S. market from Mexico, South America, and elsewhere, largely because of its geographic location. Throughout the 1980s and into the early 1990s, Colombia was the main exporter of cocaine and directly controlled distribution through dealings with criminal networks on a worldwide basis. In response to intensified U.S. law enforcement and interdiction efforts in South Florida and the Caribbean—traditional smuggling corridors throughout the 1980s—Colombian cartels formed partnerships with Mexico-based traffickers to establish alternate routes for cocaine into the United States through Mexico.14 The infrastructure to support this enterprise already existed. Mexico was already a major source for heroin and marijuana smuggled into the United States.
Although originally compensated in cash for the transportation services provided to the Colombian cartels, toward the end of the 1980s, compensation began to favor percentages of cocaine that composed the shipments. This arrangement provided a means for the Mexican organizations to actively distribute cocaine, resulting in the formation of formidable trafficking organizations in their own right.15 This emergence coincided with the decline of the Colombian structures, given the demise of the Medellin, Cali, and Northern Valley Cartels and the increased pressure by the Colombian government on the Revolutionary Armed Forces of Colombia (FARC).16 Without a dominant Colombian organization, the Mexican cartels have prospered.
Adapting to Change
The increased prosperity and dominance of the Mexican drug cartels over the past decade has presented these organizations with the need to process growing revenue streams during a period of time when enhanced U.S. anti-money laundering regimes were increasing the risk of discovery for traditional methodologies of money laundering through the formal financial sector. Informal and black market financial sectors present alternatives, such as trade-based money laundering, but changing dynamics brought on by the “dollarization” of many South and Central American economies (El Salvador, Panama, and Ecuador all officially use the U.S. dollar as their currency) make conversion into local currencies less of a requirement to sustainability than was true during the height of the Colombian cartel dominance of the market. Consequently, Mexican cartels are likely to rely less on foreign exchange services provided by their own money service businesses. According to Farah, the following key reasons support this assertion:
- Drug trafficking organizations in Mexico prefer to hold onto their cash in U.S. dollars, as U.S. dollars are considered more stable than the Mexican peso.
- Most bribes and operating expenses paid by Mexican drug trafficking organizations, which are large and continual, are paid in U.S. currency.
- Cocaine sources of supply in South America prefer to be paid in U.S. dollars from Mexican buyers.
- Many businesses in Mexico accept U.S. dollars, thus providing an easy means for drug trafficking organizations to place their illicit proceeds into the formal economy.17
Considering the extraordinary sums of cash inflows estimated to exceed legitimate sources such as worker remittances and cross-border commerce ($11 billion to $22 billion annually) and underscored by Farah’s assessment of the desirability of U.S. currency as a means of financing cartel operations, the evidence is compelling that bulk cash is being successfully smuggled across the border into Mexico by various means.
Evidence of U.S. Bulk Cash Movements
To suggest that the movement of such vast amounts of cash may occur in an ad hoc manner—the product of loosely networked criminals active across multiple jurisdictions—is to ignore the organizing principle evident in the scrutiny of bulk cash seizures across the United States.
|Figure 1 Bulk Cash Convergence by Geographic Location|
Period: October 2008-July 2009)
Callouts in red identify the top five destinations by percentage of total dollars.
Those in gold identify the top five origin locations. Subordinate convergence
hubs are highlighted in green.
Source: ICE Bulk Cash Smuggling Center
Analysis by the ICE BCSC of seizure data compiled from multiple sources18 provides evidence of domestic bulk cash movements to convergence points within the United States (depicted in figure 1). The data represent enforcement activity by federal, state, and local law enforcement resulting in seizures of bulk cash of $10,000 or more. Points of aggregation clearly identify an organized pattern of activity over time. What are not visually apparent in the figure are the relative strengths of the connections and the direction of the flow that reinforce the presence of a systematic organizing principle. Of the 632 seizures identifying both origin and destination information as part of the seizure record, 82.66 percent of the total dollars seized were destined for five terminal locations, and 49.07 percent of total dollars seized were linked to five origin locations.
Challenging the Law Enforcement Intelligence Process
Intelligence is a process of developing meaning from available information. For law enforcement, a relevant intelligence process must first and foremost support the production of investigations. To achieve this, two critical ingredients are required: developing facts, and reliable and valid inferences.19
As demonstrated in the recent successful investigations in Mexico and Colombia, the collection of high-value intelligence is achievable through a well-managed capability for developing confidential sources. However, that is only part of the process for developing high-value intelligence. Referencing existing information held by various components of U.S. law enforcement also can yield inferences that can successfully inform interdiction and enforcement strategies.
To challenge the adaptability of transnational crime, the law enforcement community needs to share its raw material: information. Building a capability that emphasizes coordinated intelligence collection and analysis brings the community closer to this goal. Just as the flow of illicit bulk cash cannot be viewed in isolation from the larger context of the globalization of crime, law enforcement cannot meet the challenge of disrupting illicit networks if its discrete elements operate in isolation from each other.
One way for the law enforcement community to achieve greater interoperability is the fusion centers. This existing platform provides an immediate network of access points for federal, state, and local law enforcement jurisdictions to exchange tactical intelligence and act as a natural conduit for advancing education, outreach, and training among community members. In this way, organizations such as the ICE BCSC and others achieve greater effectiveness in focusing efforts to address law enforcement issues of national importance on a global scale.■
1U.S. Immigration and Customs Enforcement (ICE), “ICE and International Partners Seize More than $41 Million in Colombia and Mexico: Largest Container Bulk Cash Seizure Made in Colombia and the United States,” press release, September 28, 2009, http://220.127.116.11/pi/nr/0909/090928washingtondc.htm (accessed February 4, 2010).
2Douglas Farah, “Money Laundering and Bulk Cash Smuggling: Challenges for the U.S. Mexico Border,” International Assessment and Strategy Center, June 19, 2009, http://www.strategycenter.net/printVersion/print_pub.asp?pubID=203 (accessed September 19, 2009).
4Ibid., n. 1, citing “Marching as to War,” Econom5ist.com, January 31, 2008.
5Ibid., n. 1.
6Raymond W. Baker, Testimony before the Committee on Financial Services, U.S. House of Representatives, 111th Cong., 1st sess., May 19, 2009.
7International Monetary Fund, “Country Tables,” IMF Statistical Database, http://www.imfstatistics.org/imf/ (accessed September 21, 2009).
8Colleen W. Cook,CRS Report for Congress: Mexico’s Drug Cartels, CRS Report RL3425 (Congressional Research Service, October 16, 2007), 4, www.fas.org/sgp/crs/row/RL34215.pdf. (accessed September 21, 2009).
9National Drug Threat Assessment 2009, (Washington D.C.: National Drug Intelligence Center, December 2008), http://www.usdoj.gov/ndic/pubs31/31379/finance.htm#strategic (accessed September 22, 2009).
11Dominique Carroll, “Ambiguity in Contemporary Money Laundering Statutes,” The Illinois Business Law Journal (April 15, 2008), http://iblsjournal.typepad.com/illinois_business_law_soc/2008/04/i-introductio-2.html (accessed February 9, 2010).
13Stefan D. Cassella, “Bulk Cash Smuggling and the Globalization of Crime: Overcoming Constitutional Challenges to Forfeiture Under 31 U.S.C. 5332.” Berkley Journal of International Law,22 (2004) 105–106.
14Cook, CRS Report for Congress, 4–5.
15“Mexico, U.S., Italy: The Cocaine Connection,” Stratfor, September 18, 2008, http://www.stratfor.com/analysis/20080918_mexico_u_s_italy_cocaine_connection (accessed September 29, 2009).
16Farah, “Money Laundering and Bulk Cash Smuggling.”
18These sources are the EPIC National Seizure Database (NSS) and the Treasury Enforcement Communication System (TECS).
19Robert M. Clarke, Estimation & Prediction,(Baltimore: American Literary Press, 1996).
|ICE Bulk Cash Smuggling Center|
The U.S. Immigration and Customs Enforcement (ICE) Bulk Cash Smuggling Center (BCSC) is located in Williston, Vermont. Its national mission is to provide tactical support to state, local, and tribal law enforcement agencies for the enforcement of illicit bulk cash smuggling and U.S. money laundering statutes. The center publishes a weekly newsletter, the C-Note, which summarizes significant seizure activity from across all U.S. law enforcement jurisdictions. In addition, the center operates an intelligence unit that provides community members with strategic and tactical products and provides training and other outreach benefits upon request. To receive the center’s publications or for information, contact the BCSC at 802-872-6220 or e-mail email@example.com.
Please cite as:
Andrew M. Tammaro, "U.S. Immigration and Customs Enforcement: Combating Bulk Cash Smuggling," The Police Chief 77 (March 2010): 28–33,
http://policechiefmagazine.org/magazine/index.cfm?fuseaction=display&article_id=2036&issue_id=32010 (insert access date).