Famous Money Laundering and Drug Trafficking Rings Targeted by DEA

Famous Money Laundering and Drug Trafficking Rings Targeted by the DEA

The illegal drug trade is a massive global industry generating hundreds of billions of dollars in revenue every year. Critical to the success of major drug trafficking organizations is the ability to launder the enormous profits generated by the sale of illegal drugs. Money laundering allows drug traffickers to disguise the criminal origins of money made from drug sales so that it appears to come from legitimate sources. Without an effective way to launder funds, drug rings would drown in cash and have difficulty financing further criminal enterprises.

For decades, the United States Drug Enforcement Administration (DEA) has targeted complex money laundering networks that allow drug cartels to funnel illicit profits into the legitimate financial system. By following the money trail, the DEA has been able to dismantle powerful drug smuggling operations by cutting off their access to laundered funds.

Here are some of the most famous money laundering and drug trafficking networks pursued by the DEA over the years:

The Cali Cartel

Based in Cali, Colombia, the Cali Cartel was one of the most formidable drug trafficking and money laundering organizations in history. At its peak in the 1990s, the cartel controlled over 80% of the global cocaine market and was generating an estimated $7 billion per year in revenue.

A major DEA investigation called Operation Cornerstone identified a complex money laundering network involving over 100 accounts held at dozens of U.S. banks. The Cali cartel was laundering hundreds of millions in drug proceeds through these accounts annually. In 1995, Operation Cornerstone resulted in the indictment of 40 members of the Cali Cartel on money laundering charges and the seizure of over $50 million in assets.

This dealt a major blow to the cartel by cutting off access to its laundered funds in the U.S. The success of Operation Cornerstone against the Cali cartel’s financial infrastructure played a key role in the decline of the organization.

The Gulf Cartel

Based in northeastern Mexico, the Gulf Cartel has long been one of Mexico’s largest drug trafficking organizations. For decades, the cartel has smuggled multi-ton quantities of cocaine, marijuana, methamphetamine and heroin into Texas across the U.S.-Mexico border.

In 2014, the DEA led a multi-agency investigation called Operation Too Legit that targeted a major Gulf Cartel money laundering operation. Investigators identified a web of businesses, including a used car dealership and a day spa, that were laundering millions in drug proceeds on behalf of the cartel.

These front companies provided cover for the financial transactions, creating an appearance of legitimacy for the illicit funds. Operation Too Legit resulted in over $4 million in asset seizures, effectively cutting off a significant source of laundered revenue for the Gulf Cartel.

The Sinaloa Cartel

Based in the Mexican state of Sinaloa, the Sinaloa Cartel is one of the most powerful drug trafficking groups in the world. In the 2000s, the cartel gained notoriety under the leadership of Joaquín “El Chapo” Guzmán, who became Mexico’s most-wanted drug lord.

In 2014, the DEA and other agencies launched Operation Narco Polo to target a massive Sinaloa Cartel money laundering and drug trafficking network. The complex operation involved couriers smuggling drug proceeds in bulk from the U.S. to Mexico, with the funds ultimately laundered through Chinese banks.

Investigators conservatively estimated that the scheme laundered over $3.5 billion for the Sinaloa Cartel over just a few years. Operation Narco Polo resulted in significant arrests and financial seizures, delivering a major blow to the cartel’s money laundering apparatus.

The Norte del Valle Cartel

Based in Colombia, the Norte del Valle Cartel was estimated to supply 70% of the cocaine entering the United States during the 1990s and early 2000s. The cartel’s former leader, Orlando Henao Montoya, was once identified by the DEA as one of the most-wanted drug traffickers in the world.

In 2004, the DEA led Operation Money Clip, a landmark investigation into the Norte del Valle cartel’s financial operations. Operation Money Clip focused on the cartel’s bulk cash smuggling activities, targeting couriers and front companies used to launder money.

Over $100 million in cartel cash was ultimately seized, severely limiting the organization’s ability to move and launder funds. This dealt a major financial blow to the Norte del Valle cartel from which it never fully recovered.

The Arellano-Felix Organization

Based in Tijuana, the Arellano-Felix Organization, also known as the Tijuana Cartel, was one of Mexico’s first major drug trafficking cartels. In the 1990s and early 2000s, the cartel dominated the lucrative drug smuggling routes through Baja California into California.

In 2003, the DEA led a four-year investigation called Operation Imperial Emperor targeting a complex money laundering and drug distribution network run by the Arellano-Felix Organization. Investigators uncovered a web of front companies, stash houses, and bank accounts used to launder millions in drug proceeds.

The operation resulted in over 100 arrests and the seizure of nearly $50 million in cash and assets. This effectively cut off the cartel’s access to its laundered money, dealing a devastating financial blow.

Trends in Money Laundering

While each drug trafficking organization utilizes unique money laundering techniques, some common trends have emerged over the years:

• • Use of front companies and businesses – Drug rings use cash-intensive front companies like restaurants, bars, car washes, etc. to commingle illicit cash with legitimate funds.
  • Trade-based money laundering – Misinvoicing goods imported or exported to disguise transfers of value across borders.
  • Bulk cash smuggling – Physically smuggling large quantities of cash across borders to deposit into banks in jurisdictions with weak anti-money laundering controls.

Bulk cash smuggling involves physically transporting large amounts of illicit cash across borders to deposit into banks in other countries. Smugglers exploit jurisdictions with weak anti-money laundering regulations and greater banking secrecy. The cash is often concealed in hidden compartments in vehicles, luggage, or on one’s person.

Colombian drug cartels notoriously smuggled billions in cash per year from U.S. drug sales into Mexico. From Mexico, the funds were deposited into Mexican banks and wired to accounts in Colombia and other countries. In the 1990s, Mexican authorities routinely seized tens of millions in smuggled cash heading south across the border.

Today, bulk cash smuggling from the U.S. into Mexico remains a major money laundering technique of Mexican drug cartels. However, greater banking restrictions have led traffickers to also exploit other destinations like Panama, Peru and Venezuela to deposit bulk cash.

The Department of Homeland Security has prioritized targeting bulk cash smuggling through multi-agency initiatives like “Operation Firewall.” Since 2005, Operation Firewall has resulted in over 6,000 seizures totaling more than $1 billion in illicit bulk cash.

• • Use of money mules – Recruiting individuals to smuggle cash across borders or transfer funds between accounts.

Money mules are low-level couriers recruited by traffickers to smuggle cash or transfer illicit funds between accounts. Mules are used to distance kingpins from the money laundering activity and obscure the paper trail.

In a common scheme, mules open accounts in their own name into which drug proceeds are deposited by traffickers. The mules then withdraw the funds in cash or wire transfer it to other accounts as directed for a commission.

Unwitting mules are often recruited under false pretenses for what they believe to be legitimate work. Willing mules knowingly participate for payment while avoiding directly handling drugs.

The DEA has aggressively pursued money mule networks. In 2019, a DEA operation targeted over 600 money mules tied to Mexican cartels resulting in numerous arrests and multi-million dollar seizures.