Embassy of the United States

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Money Laundering

U.S. Officials Announce Charges against Money Launderers

Department of the Treasury
Department of Justice

Statement by Treasury Deputy Secretary Stuart Eizentadt
and Deputy Attorney General Eric Holder

September 28, 1999

Following is the text of the Eizenstat/Holder statement,
followed by the text of the U.S. Attorney's press release.
In the texts "billion" means 1,000 million.

Today's indictments as a result of "Operation Cash Back" in Miami demonstrate that law enforcement will not tolerate businesses giving drug traffickers and money launderers a free hand to sanitize their illicit profits.

These indictments represent the most aggressive enforcement to date of the law that requires all businesses to report large cash transactions. Today's activities exemplify the initiatives set forth in the first National Money Laundering Strategy announced last week by Treasury Secretary Lawrence Summers and Attorney General Janet Reno. The Strategy underscores our commitment to elevate money laundering on our enforcement agenda.

The Money Laundering Strategy recommends actions to: strengthen domestic law enforcement; enhance steps taken by financial institutions to prevent and detect money laundering; partner with state and local authorities; and bolster our efforts to have strong money laundering standards adopted, and adhered to, worldwide.

The allegation in these indictments underscore a key component of the Strategy targeting systems used to launder money, in this case, the Black Market Peso Exchange which Colombian drug syndicates have used for years to launder profits from cocaine sales. These indictments also illustrate the way money laundering systems can tempt some otherwise legitimate businesses to knowingly violate the law.

As co-chairs of the National Money Laundering Steering Committee, we congratulate the Internal Revenue Service Criminal Investigation Division, Broward County Sheriff's Office, Sunrise Police Department, Coral Springs Police Department and the U.S. Attorney's Office for their work on this nearly three-year investigation. This type of cooperation is essential to attack money laundering.

U.S. Department of Justice
United States Attorney
Southern District of Florida

Charles Rossotti
Internal Revenue Service Commissioner

September 28, 1999

Thomas E. Scott, United States Attorney for the Southern District of Florida; Bruce Thomas, District Director, Internal Revenue Service, Criminal Investigation Division; David Boyett, Chief, Sunrise Police Department; Roy Arigo, Chief, Coral Springs Police Department; Ken Jenne, Sheriff, Broward County Sheriff's Office; announced today that as a result of a joint inter-agency investigation named "Operation Cash Back," 24 grand jury indictments have been returned in Miami, Florida, charging 60 defendants with money laundering conspiracies, substantive money laundering charges and charges for failure to file IRS Form 8300. Of those charged, 16 defendants are Colombian nationals who are peso brokers or business owners, nine defendants are Colombian couriers residing in the U.S., and 35 defendants are employees of sixteen U.S. businesses, located primarily in the South Florida area.

Operation Cash Back began in late 1996. The investigation focused on a money laundering system referred to as the black market peso exchange, which requires the assistance and cooperation of Colombian money or peso brokers, Colombian businesses and U.S. businesses who sell or export merchandise to Colombian businesses. As explained by Charles 0. Rossotti, Commissioner of the Internal Revenue Service, "Money laundering is not a victimless crime. Narcotics money is part of the untaxed underground economy." The black market peso exchange is reported to be responsible for the laundering of up to 30% of the Colombian drug cartel's cash or some 6 billion dollars a year.

After drug traffickers import and distribute drugs in the U.S., one of their most significant problems is the movement of their illicit proceeds. There are three main ways drug traffickers use to get their proceeds back into their pockets:

(1) bulk shipments in luggage or freight;
(2) depositing the cash into bank accounts, and
(3) cash purchase of goods which are shipped to Colombia.

Operation Cash Back targeted the two latter, more sophisticated methods. The hurdle drug traffickers face by employing these last two methods are U.S. laws requiring that banks and businesses file forms notifying the IRS of large cash transactions. "Any business that receives $10,000 or more in a cash transaction must report it to the IRS by filing a Form 8300. This form helps the IRS identify otherwise anonymous taxable transactions and helps the IRS combat the laundering of illegal income from activities like drug trafficking" stated Commissioner Rossotti, Drug traffickers must be sure that the large cash transactions, with their drug proceeds, go unreported, so as not to leave a paper trail. Drug traffickers often deal closely with the Colombian peso brokers, who organize the pick up of drug proceeds as well as the delivery of those proceeds to representatives of the Colombian businesses. Immediately upon their representative's receipt of the narco dollars, the Colombian businesses must deposit pesos into the drug traffickers' Colombian bank accounts, at the direction of the peso brokers. The Colombian businesses then use these narco dollars to purchase goods from U.S. vendors, pay debts and/or make wire transfers. In order for the scheme to work, the U.S. vendors must not file the required IRS 8300 forms.

In Operation Cash Back, an undercover "storefront" was established to track the movement of drug proceeds. The storefront billed itself as being able to facilitate the movement of drug proceeds without a paper trail, in two ways:

1. depositing the cash into banks in small increments so as not to attract the attention of the authorities, for later withdrawal via money orders, cashier's checks and wire transfers; or
   
2. purchasing goods from U.S. vendors, who would agree not to report the large cash transactions, for shipment of those goods to Colombia.

The storefront received large amounts of drug proceeds from the peso brokers or from Colombian businesses who would direct the storefront as to the manner in which the cash was to be disposed of. Typically, these instructions would be to either wire transfer the proceeds or to use the proceeds to purchase durable goods. Upon receiving an order for durable goods, the storefront would purchase the goods from Miami-based businesses or, vendors, who were asked not to report the transaction and were advised that the cash was drug proceeds.

Most significantly, once the peso brokers delivered the drug proceeds to a representative of the Colombian businesses or to the undercover storefront on behalf of the Colombian businesses, the Colombian businesses had to deposit pesos into the drug traffickers' Colombian bank accountants, at the direction of the peso brokers, thus enabling the drug traffickers quick access to their profits anonymously. The Colombian businesses obtain access to large amounts of U.S. currency, without leaving a paper trial. The Miami-based vendors facilitated the money laundering scheme by agreeing not to file the required IRS forms. It is the coordination and cooperation of all of these participants that facilitate the goal of the drug traffickers: clean money. "When businesses deliberately break the law and turn a blind eye to their responsibility to file Form 8300, they become accomplices of the drug dealers and tax evaders" explained Commissioner Rossotti.

"The crime of money laundering undermines the stability of every part of our financial system and is often the means by which larger criminal drug operations are supported," said Attorney General Janet Reno, "Operation Cash Back is a significant step forward in combating these criminals and ensuring the integrity of our financial institutions."

To combat the perception in the drug trade that money laundering crimes are under-prosecuted, United States Attorney Scott stressed that this investigation has shown that there will be consequences for people who seek to profit off of the drug trade. United States Attorney Scott commends the efforts of the IRS, the Sunrise Police Department, Coral Springs Police Department and the Broward County Sheriff's Office. Assistant United States Attorney Michael Mullaney handled the Operation Cash Back investigation for the U.S. Attorney's Office.

The defendants face a maximum of 20 years imprisonment on money laundering charges and a maximum of five years imprisonment on the failure to file IRS Form 8300 charges.