U.S., Mexico Press Effort to Freeze Kingpins’ Cash

By William Booth and Mary Beth Sheridan
The Washington Post

An aggressive U.S.-led effort to pursue money-laundering cases against Mexican cartels is inflicting only fleeting damage on the trafficking organizations, which have grown sensationally rich on drug profits from American consumers.

For the first time, U.S. Treasury agents have begun to share with their Mexican counterparts financial data on drug kingpins that are gleaned from wiretaps, informants and cyberspace probes. The United States has now designated more than 300 people and 180 companies as “significant narcotics traffickers,” which freezes their U.S. assets and bans Americans from doing business with them.

But while President Obama has boasted of “putting unprecedented pressure on cartels and their finances,” the U.S.-Mexican effort has produced little in the way of arrests or seizures. During the past 11 years, only $16 million tied to suspected Mexican traffickers has been blocked in the United States, or one dollar for every $20,000 estimated by the Congressional Research Service to flow southward from the United States to organized-crime groups in Mexico each year.

Mexican officials complain that the financial intelligence the United States shares with them is of little use, and that the information included in kingpin designations is unsupported by evidence that would allow Mexican courts to go after launderers.

Under U.S. law, a designation can be based on “reasonable belief’’ — a low legal standard that could include, for example, a declaration from an anti-narcotics agent based on a tip from an informant.

Until recently, the U.S. Office of Foreign Assets Control alerted Mexican authorities that it was about to put someone on the kingpin list only a day or two in advance — a diplomatic nicety but meaningless in terms of helping the Mexicans make cases.

U.S. Treasury officials concede that the dollars frozen are few but say the kingpin lists serve to “name and shame” businesses and associates who help launder cash for the cartels. Mexican authorities call this naive. “When they name someone to the list, the people associated with this business quickly go underground,” a senior Mexican official said.

The U.S. government has also had its frustrations. Mexican laws make it far harder to freeze assets than U.S. regulations do. And while Mexico has passed laws limiting deposits and withdrawals in U.S. dollars from Mexican banks, efforts to reform Mexico’s money-laundering laws have stalled in Congress.

Working together
In recent months, the two countries have made what U.S. officials describe as unprecedented efforts to work together.

In October, the U.S. Office of Foreign Assets Control added alleged senior trafficker Alejandro Flores Cacho to its roster of drug kingpins and prohibited Americans from dealing with a dozen of his alleged investments, including a sports club, a cattle ranch, an aviation school, a transport firm and an upscale cantina called the Numero Uno in Mexico City.

U.S. Treasury officials say Flores Cacho is the transportation chief for Joaquin “El Chapo” Guzman, founder of the Sinaloa drug cartel and one of the richest men in Mexico.

The two countries worked the case together for months, and the Mexicans were informed weeks in advance that Flores Cacho would be placed on the list, which allowed them to simultaneously freeze some of his assets.

“We viewed this as very significant because Flores Cacho remains one of the most active and senior narco-traffickers, and his access to not only air cargo companies but overland trucking companies meant he was very well positioned to move money, drugs and weapons,” said Adam Szubin, director of the Office of Foreign Assets Control.

“We did a tremendous amount of coordination and information-sharing, which went both ways,” Szubin added. “The whole game change is, we’re working this collaboratively with the Mexicans, which is why I feel this is a moment of tremendous promise.”

Yet Flores Cacho remains at large and Numero Uno is open for business. While the bar still welcomes an upscale crowd, it no longer accepts American Express — because of the kingpin listing.

On a recent afternoon, several patrons said they had heard this was once “El Chapo’s cantina.”
“But it’s a mistake, no? Because the place is filled with people,” said Alejandro Chamarro, a bank employee who was enjoying a cold beer and a plate of pork tacos.

The Mexican government froze $100,000 in a cantina bank account, but the Alonso family that says it owns the place swears it has never heard of Flores Cacho. It hired a lawyer to fight the kingpin listing and says the U.S. government never showed it any proof that the cantina belonged to El Chapo’s people.

The Mexican government froze $900,000 in other assets allegedly controlled by Flores Cacho. But The Washington Post found that at least half of his businesses listed by the Treasury Department had shut their doors by the time Flores Cacho made the kingpin list.

“The kingpin list can be a very useful mechanism to go after drug traffickers, if — and this is a big if — we work cases together,” said a senior Mexican Treasury official who spoke on the condition of anonymity because of security protocols.

Last year, Mexico’s attorney general opened 245 investigations into money laundering but resolved only 19 minor cases.

“We need to do much more on the Mexican side,” President Felipe Calderon said in a recent interview with The Post.

Empty desks
At a federal financial crimes unit here in Mexico City, rows of new desks are empty.

“To be able to prosecute money laundering, you need really smart people, knowing a lot about finance. At the same time they need to be very honest and very brave,” Calderon said. “So it’s not easy.”

Mexico has arrested more than 90,000 suspects on drug-related charges but only a handful of accountants, attorneys and business managers accused of laundering cartel profits.

“The black hole in Mexico is the prosecution system,” said Andrew Selee, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars. “There has been an inability to build solid legal cases on money laundering.”

Mexico’s attorney general, Arturo Chavez, whose office is responsible for prosecuting money-laundering cases, resigned last month, citing personal reasons. He was widely seen as an ineffective member of Calderon’s security cabinet, and U.S. officials who work with the prosecutor’s office say it is being reorganized again.

“There is tremendous pressure to start showing some results,” a Mexican banking official said.
Calderon’s term ends next year.