The International Narcotics Control Board Report for 2021 from the United Nations (UN) highlights that Mexican drug cartels are using cryptocurrencies to launder the money they acquire from unlawful activities.

Using information provided by authorities in both Mexico and the United States, it estimates that, in our country alone, organized crime launders some 25 billion dollars a year in this way.

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Using cryptocurrencies for money laundering

Cyberspace and cryptocurrencies are emerging as new battlefields for organized crime groups vying for control of criminal markets for drugs, weapons, sex, and people trafficking.

Since 2018, the Law to Regulate Financial Technology Institutions, better known as the Fintech Law, has required all crypto asset trading platforms to report operations in excess of 56,000 pesos (or 2,830 dollars). However, they’ve still found ways to launder the money.

The United States Drug Enforcement Administration has shared that both Mexican and Colombian organized crime groups are increasing their use of virtual currencies because of the anonymity afforded by the technology and its transaction speeds.

‘Smurfing’ or fragmentation of money

They use a technique known as smurfing (or fragmentation) so as to evade the law and continue laundering money, which is the process of bringing resources obtained through crime or unlawful activities into the legitimate financial system.

In this case, so as not to attract the attention of tax authorities, bank transactions must not exceed 7,500 dollars.

Criminals divide illicit money into small amounts which are deposited in various bank accounts. From these, they make small investments in cryptocurrencies so as to disguise the money’s origin and pay associates in other parts of the world.

Laundering and financing

Organized crime is now under greater scrutiny, which is why it makes use of other money laundering mechanisms in addition to cryptocurrencies, such as alternative systems for sending payments (the hawala system, for instance) and payments through mobile devices or online.

They do this in addition to using traditional schemes such as the banking system, cash mules, bulk cash smuggling, money service providers, stocks, nonprofits, real estate, shell companies, and trading.

Illicit financial movements have negative impacts on development, political, economic, and social stability, and international security.

The UN is focusing on the issue through target 16.4 of the Sustainable Development Goals, which aims to significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets, and combat all forms of organized crime.

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