A surge in legitimate remittances from migrant workers has inadvertently made it easier for drug cartels to hide their profits by sending small transfers from the United States to individuals across Mexico who have no apparent links to organized crime, Reuters reported Friday (Aug. 18).
The drug trafficking groups have been recruiting civilians to act as conduits for remittances, according to the report. These individuals receive the money and then hand it over to cartel operatives. The scheme takes advantage of the extensive legal network of firms that facilitate transfers from migrant laborers to their families.
The process of laundering drug money through remittances involves breaking down large sums into smaller transactions to evade reporting requirements, commonly known as “smurfing” or “structuring,” the report said. Cartels mobilize many people, referred to as “smurfs,” to send and receive these modest sums.
The pandemic further accelerated the use of remittances for moving drug money, per the report. With the closure of the U.S.-Mexico border to nonessential travel, the traditional method of repatriating drug profits through bulk smuggling of cash hidden in vehicles was disrupted. As a result, drug traffickers turned to remittances as an alternative method.
PYMNTS research has found that COVID-era workarounds like remote onboarding and account creation have left many doors and windows open for cybercrooks to slip through. The risk makes it essential that money transfer providers meet know your customer (KYC), anti-money laundering (AML) and other regulatory requirements, according to the “Smart Payment Tracker,” a PYMNTS and Nium collaboration.
While remittance shops and money transfer companies have internal systems in place to identify and prevent illegal activity, these controls heavily rely on face-to-face checks with customers at the shop level, according to the Reuters report. As a result, they are only as robust as the honesty and diligence of the agents.
In addition, criminals often keep their transactions below the reporting threshold to avoid detection, the report said.
The exploitation of legitimate remittance channels by transnational crime organizations has become a growing concern for U.S. officials, per the report. The Office of the Director of National Intelligence included this issue in its annual threat assessment report. In addition, legislation to combat the use of remittances for money laundering has been introduced in the past and is expected to be introduced again.
