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Cash flow restrictions between Mexico and US loosen, war on drugs gets more complicated

Cash flow restrictions between Mexico and US loosen, war on drugs gets more complicated

Posted by Liliana Castaño on October 14, 2014

 U.S. front companies for cartels aren't new, but U.S. officials say they took a more prominent role after Mexico capped dollar deposits in cash at $7,000 a month for businesses in 2010, later raised to $14,000. As a result, they say, cartels sought companies to deposit money in American banks and wire it back in pesos under the guise of international trade.

San Diego, the largest American city on Mexico's border, had become a magnet for cash coming to the country from Mexico, according to an Associated Press analysis of customs declarations since 2009.

But now the rules of the game have changed.

As of last month, the Mexican government no longer limits the monthly cash deposits of U.S. dollars that border businesses can make if the companies allow authorities to monitor their financial transactions and meet other requirements.

In making the announcement, President Enrique Peña Nieto said the limit has only hurt honest businesses.

The new measure has sparked concern among some U.S. officials that cartels may go back to walking into Mexican banks to deposit sacks of drug-tainted dollars.

"If one day you have a restriction and the next day that restriction no longer exists, one would think logically that it now becomes easier," said Joseph Burke, head of U.S. Immigration and Customs Enforcement's National Bulk Cash Smuggling Center.

Now companies on Mexico's border with the United States won't be limited on cash deposits if they can show they have been established for at least three years, allow authorities to monitor financial transactions and prove they need to make deposits larger than $14,000 a month to operate.

In 2010, Mexico set some of the toughest restrictions in its history on dollar cash transactions, seeking to fight money laundering that was fueling a bloody drug war.

Pena Nieto's move came two days after U.S. agents raided businesses in downtown Los Angeles' fashion district that were suspected of funneling drug money to Mexico and seized $70 million in cash.

Drivers have always stuffed trunks with cash from drug sales in the U.S. and went to Mexico undetected. That's never changed but, with Mexican banks out of the picture in 2010, cartels needed other ways to convert profits to pesos to fund their operations and luxurious lifestyles.

Couriers brought dollars back to the U.S. and often declared them to customs officials, as required for any amount of $10,000 or above, U.S. officials say. The Treasury Department imposed additional reporting requirements on armored car services at San Diego border crossings in August, calling it a response to Mexico's regulations.

U.S. border inspectors have little power to stop cash, and money laundering charges are difficult to prosecute, which leads some to believe the scheme will continue even without Mexico's restrictions. Investigators say bringing money back and forth across the border makes it more difficult for either country to track.

There was $3.73 billion declared at U.S. ports of entry from Mexico last year, up from $3.15 billion in 2009, the year before Mexican regulations took effect, according to the AP's analysis of customs declarations. Declared money from Mexico totaled $3.96 billion during the first eight months of this year.

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