Drugs and Money: Laundering Latin America's Cocaine Dollars

By Robert E. Grosse | Go to book overview

Chapter 14

Mexico’s Black Market in Foreign Exchange and Its Relation to Narcotics Money Laundering

OVERVIEW

The Mexican foreign exchange market plays an important role in laundering the narcotics revenues of traffickers from that country and, to some extent, of traffickers from Colombia who ship through Mexico. This market is different from many other emerging foreign exchange market structures, because a legal, parallel market has existed for more than two decades. The black market, meaning unreported foreign exchange dealings, is relatively smaller (compared to the size of the economy) than in other Latin American countries, since businesspeople have broad access to dollars in the legal, parallel market.

Narcotics traffickers especially use the black market for cash transactions and the legal, parallel market and official bank market for moving narcotics proceeds into and out of Mexico, as well as into pesos and out of dollars. The laundering process includes cash transactions within Mexico, but more importantly, cross-border transactions in which narcodollars earned in the United States are laundered through Mexico in the form of wire transfers, checks and money orders, and other financial instruments.

In addition to the foreign exchange market, the financial market in Mexico is used directly for laundering narcotics money from the United States. That is, dollars are brought into Mexico from the United States by drug trafficking organizations, and this cash is deposited into Mexican banks for further laundering through wire transfers abroad and other means. Non-cash instruments such as money orders and checks are likewise used to bring dollar-denominted funds into Mexico for insertion into the banking system and transfer to destinations chosen by the traffickers.

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