Money Laundering and the Black Market Peso Exchange: Big Target for Federal Agency Investigations

For many profit-making enterprises that operate outside the law, business revenues and profits mean lots of cash that needs to be moved from stacks on a table or in a safe (or set of safes) into places where it can be used to buy things without raising eyebrows or the suspicions of law enforcement.  This is what “money laundering” is all about, and it’s been going on for many years.

The Black Market Peso Exchange – Popular Way to Launder Money

There are as many ways to launder money as there are ways to make a sandwich, and some of the best are known by nicknames: for instance, the Black Market Peso Exchange.  Remember the movie “Blow” starring Johnny Depp, based upon the true story of cocaine trafficker Charles Jung?  The Black Market Peso exchange was one of Jung’s primary ways of laundering all the cash that came from business drug sales for the Medellin cartel.

Black Market Currencies – Selling Money on the Black Market

Currency can be a product on the black market for a number of reasons, for example in countries where laws are passed to prevent people from holding any currency other than that country’s own dollar or peso or franc, those who work to get foreign currencies in spite of the law will do so via the black market.  (Two recent examples: black markets for currencies in Egypt and Argentina.) So, having money trading on the black market as a product alone isn’t a new twist.

The money laundering twist of the Black Market Peso Exchange works like this:  in order to take large amounts of dollars in drug sales revenue and convert them into safe avenues for buying things, the dollars are sold to brokers who export American goods overseas.  These brokers deposit the dollars they’ve purchased into financial accounts and then these brokers sell the dollars to foreign businesses who need U.S. Dollars to buy American goods for export, and these businesses buy those dollars using pesos.  Now, the broker has exchanged pesos for dollars, and the drug revenue money has been “laundered.”

December 2012: Biggest Bank in Europe Pays Billions in Money Laundering / Black Market Peso Exchange Settlement with Justice Department

According to the U.S. Department of Treasury, the Black Market Peso Exchange has proved to be very successful and in earlier years, BMPE was considered “…perhaps the single largest avenue for the laundering of the wholesale proceeds of narcotics trafficking in the United States.”

Which makes BMPE a big target for federal investigations, like the big investigation into HSBC, the biggest bank in Europe.  In December 2012, the United States Attorney’s Office in Brooklyn, New York,, announced that HSBC had reached a settlement with the federal government over allegations that it had participated in a BMPE where the Sinaloa Cartel of Mexico and the Norte del Valle Cartel of Columbia laundered over $881,000,000 during a four year time period (2006 – 2010).

This was a big deal.  HSBC agreed to pay $1.9+ billion in a deferred prosecution agreement to settle probes of money laundering and to pay $665,000,000 in civil penalties.  HSBC also make the record books for agreeing to the biggest forfeiture by a bank in U.S. history ($1.25 billion).

February 2013: U.S. Attorney Announces Texas Black Market Peso Exchange Plea Deal

As further confirmation that federal investigators are working hard to find and arrest people for laundering money in peso exchanges, this week the United States Attorney of the Southern District of Texas, Kenneth Magidson, announced that that a plea deal had been reached with Enrique Morales, one of the four defendants indicted by a Houston Grand Jury with a BMPE money laundering operation that moved over $20,000,000 from Texas to Mexico.

Morales pled guilty to federal charges of (1) conspiracy to commit money laundering and (2) conspiracy to operate an unlicensed money transmitting business.  According to the federal prosecutors, Mr. Morales was considered to be the mastermind of this Black Market Peso Exchange operation.

How did Morales’ BMPE Work?

Their BMPE involved putting U.S. dollars, revenue from drug sales into bank accounts held in the name of shell companies.  The four co-defendants were named on corporate documents as owning and operating these shell companies.  The shell accounts were then used to move the money from the company accounts into other bank accounts both in the United States and in Mexico.  The accounts that received the deposits from these shell companies then moved money into the shell companies’ bank accounts in the form of pesos.  Those accounts were held by the clients of the co-defendant brokers.

Sentencing of Morales and his co-defendants (who have already entered into plea deals) is scheduled for May 2013. Morales can be sentenced to up to 20 years incarceration in a federal prison along with a $500,000 fine or twice the value of the property involved in the offense, whichever is greater, on the money laundering charge as well as up to five years in federal prison and a fine of $250,000 for conspiracy to operate an unlicensed money transmitting business.

What Will The Sentence Be?  It’s Too Soon to Tell.

Of course, whether or not these defendants will face the maximum sentence will not depend upon the United States Attorney but instead upon the federal judge presiding over the sentencing hearing.  Criminal defense attorneys recognize federal sentencing to be a major courtroom battle, especially in press-covered cases like this one.  However, what Mr. Morales receives in years behind bars and monetary fines cannot be assumed.

For example, the federal judge agreed with my arguments in a structured money laundering case back in 2006, and while the Pre-Sentence Report called for a 46-57 month sentence, my client only received 15 months in a sentence rendered by Dallas Federal Judge David Godbey.


Comments are welcomed here and I will respond to you -- but please, no requests for personal legal advice here and nothing that's promoting your business or product. Comments are moderated and these will not be published.


Leave a Reply

Your email address will not be published. Required fields are marked *

*

*



You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>