The movement of currency between countries is a critical aspect of international finance, and the flow of US dollars into Mexico is a significant area of attention, especially concerning financial crime. This article sheds light on an advisory issued by the U.S. Financial Crimes Enforcement Network (FinCEN) regarding the smuggling of bulk US currency into Mexico and its implications for financial institutions. Understanding the dynamics of Currency In Mexico, particularly the influx of US dollars, is crucial for both financial compliance and a broader understanding of cross-border financial activities.
The Rise of Bulk Currency Smuggling into Mexico
In recent years, law enforcement and financial authorities have observed an increasing trend in the smuggling of large amounts of US currency from the United States into Mexico. This development is partly attributed to the success of US financial institutions and law enforcement in tightening regulations and making it more difficult for narcotics traffickers to directly deposit illicit proceeds within the US financial system. As a result, those involved in illegal activities have resorted to physically moving cash across the border into Mexico.
Once this US currency enters Mexico, it becomes part of a complex financial landscape. Criminal organizations utilize various methods to obscure the origins of the funds. These layered transactions are designed to disguise the illegal source of the money before it is potentially reintroduced into the United States or moved to other international locations.
Key Activities Associated with Currency Smuggling
FinCEN, in collaboration with other agencies like the Department of the Treasury, Bureau of Immigration and Customs Enforcement, and the Drug Enforcement Administration, has identified several activities that are frequently linked to this currency smuggling trend. These activities serve as red flags for financial institutions and highlight the methods used to move and manipulate US currency in Mexico:
- Increased Sales of Large Denomination US Bank Notes: US banks have seen a rise in sales of large denomination US banknotes to Mexican financial institutions. This demand for large bills can be an indicator of efforts to handle and transport bulk cash.
- Exchange of Small for Large Denomination Notes: Within Mexico, there’s a practice of exchanging small denomination US banknotes, often smuggled in, for larger denominations held by Mexican financial institutions. This consolidation into larger bills simplifies the process of moving and laundering the currency.
- Bulk Shipments of Small Denomination Notes: Mexican casas de cambio (currency exchange houses) are sending large volumes of small denomination US banknotes back to their US accounts via armored transport or through direct sales to US banks. This reverse flow of small bills, which are typical of street-level drug sales, is a suspicious activity.
- Wire Transfers to Unrelated Jurisdictions: Casas de cambio are initiating multiple wire transfers from their US accounts to locations outside of Mexico that have no clear business connection to the casa de cambio. These destinations often include free trade zones and regions known for Black Market Peso Exchange schemes, a sophisticated method of money laundering.
- International Exchange of Large Denomination Notes: The exchange of small US banknotes for larger denominations extends beyond Mexico’s borders, with these large bills potentially being sent to international jurisdictions, including those associated with Black Market Peso Exchange activities.
- Suspicious Deposits by Casas de Cambio: Deposits made by casas de cambio into their US accounts sometimes include third-party items, such as sequentially numbered monetary instruments. This suggests an attempt to layer transactions and obscure the original source of the funds.
- Indirect Transfers via Mexican Institutions: Casas de cambio may deposit currency and third-party items into their accounts at Mexican financial institutions before wiring these funds to their accounts in the US. This adds another layer of complexity and makes tracing the funds more difficult.
Implications for Financial Institutions
U.S. financial institutions are urged to be vigilant and consider these activities when implementing their anti-money laundering programs. While these activities alone may not definitively indicate criminal behavior, they should be evaluated in conjunction with other information to determine if a suspicious activity report (SAR) needs to be filed, as required under the Bank Secrecy Act.
It is important to note that this advisory is intended to help financial institutions comply with their regulatory obligations and does not suggest that they should cease doing business with currency exchangers or other money services businesses. Instead, it emphasizes the need for enhanced due diligence and awareness of these emerging money laundering trends related to currency in Mexico.
Disclaimer: This article is based on an advisory issued by the Financial Crimes Enforcement Network (FinCEN) and is intended for informational purposes only. It does not provide legal or financial advice. Financial institutions should consult with legal counsel and compliance professionals to ensure adherence to all applicable regulations.
