LA police force breaks USD100m laundry ring

The Los Angeles police force’s latest raid on a money laundering network hidden in the fashion business offers a few insights into the world of ML.

Firstly, the old style laundry is still happening, although the garment emporia fronting the operation were all about selling clothes and not cleaning them. Mexican cartels used the clothing stores to store, hide and launder the cash, investigators believe. The businesses in this operation were involved in an old-style laundering typology – the Black Market Peso Exchange (BMPE), which is a form of trade based money laundering.

  • A peso broker works with a drug trafficker, for example, who has dollars in the US that he needs to bring to Mexico and convert into pesos.
  • The broker finds business owners in Mexico who buy goods from vendors in the US and who need dollars to pay for those goods.
  • The broker arranges for the dirty dollars to be delivered to the US vendors, the garment stores and they use these illegally obtained dollars to pay for the goods purchased by the foreign customers.
  • Once the goods are shipped to Mexico and sold by the business owner in exchange for pesos, the pesos are turned over to the broker, who then pays trafficker in the pesos.

The money is laundered, everybody gets paid, everyone is a winner. Until they get caught.

It looks like the drug trafficking capital of the world may have shifted base from Miami to Los Angeles, as police made raids this week on a series of fashion industry businesses and found USD100m in cash.

According to this video from NBC News, officers found cardboard boxes stuffed with cash, somet with USD1m written on the side. Each box weighed 40lb (18kg). So, now we know how heavy USD1m is.

Lastly, and humourously, it looks like the brains behind this operation was making a tongue in cheek reference to another famous drug related business. In the TV show Weeds, the cartel opened a maternity clothes shop on the California side of the border, dug a tunnel underneath it across to the Mexican side through which it transported drugs north and money south. In the LA ‘Fashion Police‘ operation, one of the shops used to front the laundry was a maternity store.

Does crime imitate art, or are launderers not as smart as they used to be? Watch the video here.

Read the US Department of Justice‘ press release on the raid and the suspected use of a Black Market Peso Exchange here.

 

 

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