Experts Say Drug Cartels Launder Illicit Profits Through US Private Sector

Published: 11 March 2024

US Tresury BuildingThe Treasury report highlights how there has been an uptick in enablers who allow drug traffickers to launder their ill-gotten gains in plain sight. (Photo: Rchuon24, Wikimedia, License)

By Henry Pope

While synthetic opioids claim tens of thousands of American lives every year, illicit fentanyl and money laundering converge in a shadowy underworld that thrives thanks to enablers exploiting loopholes in U.S. anti-money laundering laws not seen elsewhere in the West.

The addictive synthetic opioid fentanyl reaching U.S. consumers is mainly produced in clandestine labs in Mexico run by organized crime groups, such as the notorious Sinaloa Cartel. To produce the drug, these labs use precursor chemicals obtained from traffickers in China.

Going the other way are hundreds of billions of dollars that consumers pay every year to satisfy their addiction or even die.

Overdose figures in the U.S. remain high; more than 70,000 deaths were attributed to synthetic opioids in 2021 alone, according to the National Institute of Health.

Meanwhile, transnational organized crime figures launder the blood money through professionals exploiting the United States’ legal oversights, according to a recent U.S. Treasury risk assessment.

They funnel the illicit revenue through fake companies and wash it through convoluted accounting practices and other services protected by attorney-client privilege, said Scott Greytak, Advocacy Director of Transparency International U.S.

“Without these folks,” Greytak told OCCRP, “these operations would not be able to maintain their financing.”

For example, Mexican cartels have begun to employ so-called ‘factureros,’ or billers, whose sole purpose is to create false invoices for purported legitimate services never rendered, providing a stream for their drug money to flow back south.

The funds are distributed across multiple factureros so that if one is compromised, the others remain insulated.

In one instance in October 2022, two U.S. citizens were convicted of processing hundreds of fraudulent transactions via cashier’s checks to launder tens of millions of dollars in illicit drug proceeds. According to investigators, the checks were remitted to various other compromised individual and business accounts, complicating efforts to determine the conspiracy’s reach.

Two months later, the U.S. Department of Homeland Security found a clothing wholesaler guilty of submitting fraudulent invoices through customs, whitewashing millions for the Sinaloa Cartel. The fine, however, totaled less than a third of the reported money actually laundered.

And in another indictment dated April 2023, federal authorities charged a group of twelve conspirators with creating a network of shell companies to launder millions in cash for the Sinaloa leadership. The money, generated through opioid and synthetic drug sales, zigzagged through no less than nine U.S. states in its journey back to Mexico.

According to Greytak, the U.S. suffers from huge gaps in its anti-money laundering laws “that the rest of the Western developed world has closed off.”

“If you are a corrupt foreign official, if you’re an oligarch, if you’re a kleptocrat, or if you’re a well-resourced drug cartel, you have the resources that you can work with, you can afford to pay some of the best enablers in the United States,” he told OCCRP.

One area he highlighted was the U.S. legal system, which protects, by law, everything said and done between a lawyer and their client, as long as the lawyer doesn’t definitively know that the client is involved in criminal activity.

Any reasonable doubt still gives the lawyer a green light to work with and profit from a criminal conspiracy, he said.

“Lawyers are the handmaidens of transnational kleptocracy,” Nate Sibley of the Hudson Institute think tank told OCCRP. “They can resist law enforcement inquiries by claiming attorney-client privilege,” whereas U.S. financial institutions cannot.

“Unless that lawyer knows, actually knows, that the legal services they provide would be facilitating the commission of a crime, the lawyer doesn’t have to walk away from that relationship,” Greytak further explained. This means that, in essence, the two parties can collaborate freely within the confines of a “don’t ask, don’t tell” relationship.

“There are a lot of enablers who make a lot of money, if not a living, by being able to work with shady characters or criminal characters because the law does not require them to ask and then learn about who it is they're doing business with,” he said.

And who better to educate criminals on how to launder their money through various sectors, including real estate and shell companies, or move it through the finance industry while sidestepping know-your-client due diligence checks to get their money out clean.

“Through working with these enablers, you get a roadmap, a blueprint, of what is required to be reported of the operation that you’re running,” Greytak said. “If you’re pretending to be a legitimate company, you benefit from that [legal] advice.”

As long as there’s plausible deniability for the attorney, the law is on their side.

“It’s not even a gray area; it’s a clear gap between facilitating and aiding money laundering with that knowledge and not having to ask questions that would surface…to bring you to that level of culpability,” he told OCCRP.

One counter put forth by Washington is the ENABLERS Act, a bipartisan bill introduced in 2021 to close the existing loopholes used by criminals to launder their ill-gotten gains in the United States.

Lawmakers drafted the bill following the release of the Pandora Papers, which exposed how dictators, criminals, and the corrupt launder their money through economic sectors not required to perform the same due diligence expected of the banking industry.

Not everyone supports the bill, however.

In October 2022, American Bar Association (ABA) president Deborah Enix-Ross urged U.S. Senators to oppose the ENABLERS Act.

She argued it would label lawyers as ‘financial institutions’ under the Bank Secrecy Act and subject them to the same standards in submitting suspicious activity reports when providing financial-related legal services to clients.

A letter the ABA sent to senators expressed concerns that the “amendment would undermine the attorney-client privilege, the lawyer’s ethical duty to protect client confidentiality, the right to effective assistance of counsel, and the state supreme courts’ authority to regulate and oversee the legal profession.”

The bill is still trying to navigate its way through Congress and onto the Resolute desk.