California Toy Wholesaler Implicated in Drug Money Laundering
It’s well known that Mexican drug cartels are feeding of the US economy, with both hands in the trough. But they have an ongoing problem. US law requires reporting cash purchases over $10,000 and illegal drug sales generate millions. The problem for the cartels is how to turn all the dirty cash into something they can spend.
In the recent past, schemes have been uncovered that used a barter system to exchange US bought guns for drugs or drug money (operation Fast and Furious involved this method) and recently a horse farm was busted that served as a front for money laudering. Now, the DEA is reporting on an Los Angeles area toy wholesaler who is accused of doing the same thing.
The web of transactions is a bit complex, but starts with what are called, “discount dollars.” This is US currency the drug cartel has in the US that is dirty. They’ll sell it at a less than face value to get clean money, especially if that money is in pesos. Cartels can’t simply exchange large sums of cash – that triggers an investigation.
The scheme worked like this: Mexican toy retailers could buy discount dollars from the local cartel. They would receive credit at the LA toy wholesaler. They would then place an order (but less than the ceiling of $10,000) with the wholesaler, using the money they had purchased at a discount. The toy wholesaler would use the US funds as payment and that money would now be worth full value and would be “clean.”
Because they had invoices showing the purchase, and because there really were customers that customs or the IRS could verify, all would seem fine. The Mexican toy retailers got their product to sell and so it went.
Two problems led to the bust. The first was a large amount of cash sales, just under the limit that didn’t require reporting. The second was bulk cash. Before it was cleaned up the bulk cash had to be stored somewhere – a bank wouldn’t do. So the US toy company held it. Records how about $3 million was stored (with another $3 million already cleaned and in a US bank). That’s enough cash to make a pile of twenties about as big as an office desk – more for smaller denominations.
More details can be found on the DEA website.