Black Market Peso Exchange Money Laundering

Posted in Anti-Money Laundering (AML) on May 30, 2024

Table of Contents

The Black Market Peso Exchange is a trade-based money laundering technique commonly used by narcotics traffickers based in Colombia and Mexico. The central feature is the use of a money trader to ensure that the revenue from drug sales in the U.S. doesn’t actually cross any borders.

Instead, those dollars are used to purchase any number of legitimate commodities from unsuspecting businesses on behalf of legitimate South American businesspersons whose legitimate imports are used to obtain pesos for the drug cartels.

Let us make an example with a fictitious drug cartel, but it really can be any kind of criminal organization, or even legitimate organization which seeks to avoid, for example, tax payment.

Step 1: Drug Cartel Makes Cash For The Sale Of Drugs

The first and obvious step is that there needs to be some illegality obtained money that should be laundered. Let’s assume a drug cartel sells drugs for 1 million US-Dollar in the United States and keeps the cash in the United States.

Step 2: Money Broker Purchases Money For A Discount

Second, the financial manager of a cartel is contacted by his local cartel representative, and advised that the drug-selling trafficking organization is ready to turn over money owed to the cartel. The cartel financial manager notifies money brokers in South America of the 1 million US-Dollar available in the U.S. The money brokers in South America then purchase the 1 million US-Dollar at a discounted rate and are given thirty days after delivery to remit the equivalent in local currency to the cartel financial manager.

Step 3: Money Broker Contacts Money Exchangers

Thirdly, the money broker then will notify money exchangers in South America that they have 1 million US-Dollar available in the U.S. Four different money exchangers may then individually purchase 250 thousand US-Dollar each at a discounted rate of exchange.

Step 4: Money Exchangers Sell Money To Local Import Businesses

The money exchangers then notify their clients, who are likely to be South American businessmen and tourists, that they have dollars available in the U.S. When placing this order, the customer specifies the manner of delivery.

Step 5: Exporter Gets Money And Delivers Goods

The customer will pay the money exchanger in pesos when the delivery has been confirmed and the broker arranges that the goods are bought with the drug money which remains in the United States.

Step 6: The Drug Cartel Receives Money In Local Currency

The pesos received are then forwarded to the cartel family financial manager. In this method, the cartel family receives the proceeds of their cocaine distribution activities without the dollars ever leaving the United States.

Finally, the money has been laundered without physically relocating the cash in the U.S.