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Mexico limits dollar transactions

The new measures are designed to reduce drug traffickers' money laundering by 'closing the path to illicit resources' funneled into Mexican banks.

June 15, 2010|By Tracy Wilkinson, Los Angeles Times

Reporting from Culiacan, Mexico — In a step aimed at thwarting money laundering by drug cartels, the government of Mexico announced strict limits Tuesday on the deposit and exchange of U.S. dollars in banks, noting that the nation's economy is being flooded with illicit drug profits.

The money helps traffickers buy military-grade weapons used to kill tens of thousands of people and recruit small armies all over the country who battle rival gangs and government forces.

Failure to intercept the money has long been singled out as a major flaw in President Felipe Calderon's military-led offensive against the cartels.

In response, the government announced that it will limit individual bank account holders to deposits of $4,000 monthly in U.S. currency, while others without accounts will be allowed to exchange up to $1,500. Companies working along the border or in designated tourist areas can conduct bank transactions of up to $7,000 monthly.

Drug traffickers have long taken advantage of lax rules and the preponderance of cash transactions in Mexico to launder multibillion-dollar annual profits in Mexican banks and currency exchange houses. It is routine to see all-cash purchases of high-end items such as real estate, airplanes, horse farms and expensive art.

The new measures were announced in Mexico City by Finance Minister Ernesto Cordero, who said they are designed to reduce laundering by "closing the path to illicit resources" funneled into Mexican banks. He said that about $10 billion in surplus — and probably illicit — money has been detected annually in the Mexican banking system.

"For the last few years we've seen the Mexican banking system receiving a very large amount of U.S. dollars in cash, far beyond what could be explained by the activities and dynamics of the economy in Mexico," he said.

A recent joint report by the U.S. and Mexican governments estimated that traffickers send between $19 billion and $29 billion a year from the U.S. to Mexico, slightly under half of which goes through banks. The rest stays in the cash economy; about 75% of all transactions in Mexico are in cash, and the measures announced Tuesday do not address this flow of money.

In Culiacan, capital of Sinaloa state, the historic cradle of Mexican drug trafficking, the seeming beneficiaries of money laundering appear everywhere. The casinos, the elaborate mansions with Italian marble staircases and faux ancient Greek statues, the Hummer dealerships — they all speak to a wealth far beyond what could be generated by the local industries of tomato and shrimp farming.

Guillermo Ibarra, an economist on leave from the Autonomous University of Sinaloa, has estimated that 20% or more of the economy in Sinaloa is based on trafficking profits.

The measures announced Tuesday do not apply to electronic transfers and are not likely to have an impact on average Mexicans, Cordero said, because the monthly limit on dollar transactions is far above the earnings of 98% of Mexican households.

Additionally, the Assn. of Mexican Banks said in a separate news conference that the new rules were not expected to affect the millions of dollars in remittances sent to Mexicans in Mexico from relatives working in the U.S. Almost all of those are transferred electronically and paid out in pesos, the organization said.

wilkinson@latimes.com

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