Gold-plated handguns. Million dollar pieces of art. Exotic wildlife. These and other ostentatious symbols of wealth were reportedly found at some of the properties formerly owned by Joaquin "El Chapo" Guzman – Mexico’s top drug kingpin. But it was the bulk cash, mostly in carefully stacked $100 notes, that caught my attention. Reports from Mexico speculate the money recovered could eventually exceed one billion dollars. While that number is hard to digest, there can be no doubt that before his February 21 arrest, the former godfather of the Sinoloa Cartel controlled an organized criminal enterprise conservatively estimated to have pulled $3 billion in annual revenue.
According to experts at the Financial Action Task Force, bulk cash smuggling is one of the three principal international money laundering methodologies. Bulk cash refers to the large amounts of currency notes that criminals can accumulate through illicit activity – particularly narcotics trafficking. Smuggling, in the context of bulk cash, refers to money launderers’ subsequent attempts to physically transport the cash from one country to another – for example from the United States to Mexico—where it is easier to launder.
While estimates of U.S. narcotics sales vary widely from $50 billion to $100 billion annually, $100 billion in drug sales may generate as much as 20 million pounds of currency! As a result, those who launder narcotics proceeds have a logistics problem. A money launderer attempting to make a bank deposit of $1 million in $100 bills would have a stack of cash standing 5 feet high and weighing more than 20 pounds! Smaller denominations would make the transaction even more absurd. It takes fifty thousand $20 bills, weighing more than 100 pounds, to make $1 million.
The logistics issues coupled with mandated financial transparency reporting requirements imposed on financial institutions by the U.S. government, have increasingly driven narcotics trafficking organizations to try to smuggle bulk cash into jurisdictions such as Mexico, where placing their ill-gotten gains into financial networks is much easier.
Although a variety of law enforcement agencies play a role in detecting and intercepting bulk cash smuggling, the Homeland Security Department's Immigration and Customs Enforcement and DHS’ Customs and Border Protection are most active. In fiscal year 2013, ICE special agents arrested over 520 individuals who were attempting to smuggle currency and seized more than $59 million in bulk currency or monetary instruments. From March 2009 to February 2011, CBP seized $67 million worth of bulk cash. While in 2010, bulk cash seizures in Mexico totaled about $40 million.
Despite valiant efforts by our law enforcement professionals to stem the tide, buttressed by new initiatives such as regional task forces and HSI’s National Bulk Cash Smuggling Center, the bottom line is not good. Although the metrics are not precise, according to the government’s own numbers we are probably intercepting less than 1 percent of the billions smuggled across our southern border every year.
That statistic is even more sobering because bulk cash smuggling is the most straight forward of money laundering investigations. We are not talking about complex money trails layered via off-shore havens, tracking trade-based laundering schemes, or tracing virtual currencies in cyberspace. At its core, bulk cash is a physical commodity (money) that generally moves from point A (U.S. side of the border) to point B (Mexican side of the border). It’s not complicated.
There will never be enough customs inspectors and criminal investigators in the fight against international money laundering. But better use of data and technology can be a modern day force multiplier. There have been tremendous advances in the amount and variety of data collected. Financial intelligence, travel and trade records, motor vehicle data, criminal intelligence reports are just a few examples of big data sets available to law enforcement agencies. Predictive analytics, financial fraud frameworks and social network analytics are new capabilities that can help law enforcers more efficiently target their efforts.
There are exciting developments in an emerging breed of software that can explore and analyze data to help uncover unknown patterns, links, opportunities and insights that can drive pro-active, cause-based decisions. Often referred to as “predictive analytics,” it is now available to help law enforcement sort through large volumes of data to predict the likelihood of targeted activity. A limited pilot program has proved very successful in intercepting narcotics flowing north from Mexico into the United States. I believe this same technology could revolutionize law enforcement decision-making at the border by increasing our odds of identifying, intercepting, and seizing bulk cash.
The bottom line in this era of diminishing resources is that predictive analytics could boost efficiency and the odds of success. With bulk cash smuggling, if we simply improve our “success” rate a percentage point or two, we could recover many hundreds of millions of dollars. Let’s give it a try.