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State Called Haven for Drug Money

Congress: Testimony outlines laundering activity that may transfer $30 billion a year. Mexican official says his country will work with U.S. to stem the flow.

September 06, 1996|STANLEY MEISLER | TIMES STAFF WRITER

WASHINGTON — Trucks and cars stuffed with dollars are crossing the southwest border into Mexico every day in money laundering schemes that have helped make Southern California the main collection center for drug money in the United States, Congress was told by a series of witnesses Thursday.

The witnesses, who included Clinton administration officials, California Deputy Atty. Gen. James D. Dutton and private investigators, could not put a definite figure on the amount of dollars laundered in Mexico. But Rep. Spencer Bachus (R-Ala.), chairman of the House Banking and Financial Services subcommittee on oversight and investigations, said he had seen "estimates of the amount of cash laundered through Mexico [that] range from $6 billion to $30 billion" a year.

Knowing the sensitivities of the Mexican government on the subject, U.S. officials were cautious in their testimony to the subcommittee. But they left little doubt that Mexico, the main crossroads for drugs entering the United States, also has become a major haven for money laundering.

Deputy Assistant Secretary of State Jonathan Winer told the subcommittee that Mexican President Ernesto Zedillo recognizes the extent of his country's drug problem and "is taking demonstrable action to fight drug trafficking and related crimes, including money laundering." He said that a high-level Mexican team would come to Washington in 10 days for a resumption of talks about money laundering.

Bachus said the actions of the Mexicans are more important than their rhetoric. After the upcoming meetings, he said, "their good faith will be demonstrated or it won't."

Officials agreed that they could cut deeply into drug profits if they prevent the illegal cash from crossing the border into Mexico. But they also agreed that the flow cannot be stopped with present resources.

George J. Weise, commissioner of the U.S. Customs Service, said 232 million people, 84 million cars and 2.8 million trucks cross the 2,000-mile border at 38 ports of entry every year. There are 2,000 customs inspectors to check them. Although these inspectors scour incoming traffic from customs stations at the border, they only attempt spot checks of traffic leaving the United States. He said far less than 1% of the vehicles leaving are checked.

In fact, Weise said, almost all the ports lack customs posts for inspecting outgoing traffic. To do so, the inspectors have to set up surprise roadblocks on U.S. streets approaching the border. But, he added, these usually cause traffic tie-ups that attract the attention of local radio stations, whose broadcasts take away the element of surprise.

Dutton testified that Mexican organized crime families collect drug money from all over the United States and hide the cash in various stash houses in the Los Angeles and Orange County areas.

Drivers of trucks and cars, often the same that carried drugs into the United States, take the cash from the stash houses to Mexico. Once inside Mexico, the drivers, each carrying no more than half a million dollars or so, deliver the money to brokerage houses.

"As many as five 'load' cars have been observed delivering currency to a brokerage house in a single day," Dutton said. "A major brokerage house can move $5 million to $10 million at a time for a Mexican [crime] family."

The brokerage houses deposit the cash with Mexican banks, Dutton said. The banks then transfer the money by wire or by Mexican bank drafts to banks elsewhere in the world, often in the United States. Because the original source of the deposit has been hidden, the money is considered laundered and can be used by either the Colombian producers of the drugs or the Mexican distributors.

Dutton added that the Mexican crime families launder money within the United States, and when they do, it usually ends up in Southern California. As a result, he said, "California is the acknowledged drug and money laundering capital of the country."

In 1995, the Los Angeles Federal Reserve branch took in $13.5 billion more in cash than it had issued, the largest cash surplus of any Federal Reserve region. Although U.S. officials have not completed their assessment of the reasons for the surplus, Stanley E. Morris, director of the Treasury Department's financial crimes enforcement network, testified: "I can tell you right now some of it is money laundering."

In May, the Mexican government enacted a law that made money laundering a crime, and there is even more sweeping anti-crime legislation awaiting enactment by the Mexican Congress.

But Winer told the subcommittee: "The true test of the Zedillo administration's willingness to combat money laundering is whether it will take concrete steps to implement the new laws, to adopt needed regulatory reform to supervise the financial system, to prosecute and convict money launderers in Mexico, and to seize and forfeit the assets involved."

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