700 South Florida Electronics Companies Under Scrutiny for Drug Laundering – Kaufman Rossin u s anti money laundering laws

Looking to starve a complex money-laundering scheme favored by latin american drug cartels, federal agents have put 700 south florida electronics exporters under increased financial scrutiny.

Using an enforcement tool known as a geographic targeting order, the government is asking a wide group of import-export firms near miami international airport to collect extensive information from clients involved in cash transactions worth over $3,000. The standard reporting threshold for suspicious transactions is $10,000.

The objective is to target trade-based laundering schemes favored by drug cartels, including mexico’s sinaloa and los zetas crime organizations. Businesses covered by the GTO have received a copy of the order and must comply starting april 28.

The order is “aimed at disrupting the illicit financial infrastructure upon which … drug trafficking organizations rely,” according to a statement tuesday from the treasury department’s financial crimes enforcement network.U s anti money laundering laws the move is a joint effort with the U.S. Immigration and customs enforcement and the anti-money laundering unit of the miami-dade state attorney’s office.

The action is not necessarily an indicator that hundreds of south florida businesses are actively engaged in money laundering money, said john tobon, assistant special agent in charge of miami’s department of homeland security investigations office. Instead, it’s meant to smoke out straw men and shell corporations used by cartels.

“these individuals know how to keep themselves in the shadow,” he said. “this will start to bring them into the light.”

Tobon explained violent criminal organizations in the past 15 years increasingly have partnered with electronics dealers in south america to launder drug proceeds. Flush with U.S. Dollars, the cartels need to find a willing partner in importers from countries that restrict the flow of greenbacks, such as colombia and venezuela.U s anti money laundering laws those importers buy dollars from cartels on the black market peso exchange—something tobon referred to as “criminal organizations making profit on their profit”—then use third parties to purchase electronics in miami using the laundered drug money.

While south florida electronics exporters might end up being unwitting participants, the laundering scheme follows a pattern that could be disrupted by additional scrutiny.

“we’ve been warning local businesses for over a decade about third-party payers, and what we’re seeing is that the activity hasn’t stopped,” tobon said. “the financial industry has been doing a good job [of compliance], but we should be including the exporters.”

While geographic targeting orders have been available to federal agencies since 1988 and were strengthened by the USA patriot act, law enforcement agencies have used them only four times.U s anti money laundering laws in spite of the large number of affected companies, the move in south florida attempts to be surgical and was carefully studied for months before adoption.

Still, the orders could hurt operations at local export-import businesses and create a new headache for banks that service those compliance, a risk compliance expert told the daily business review. Both the export-import companies and their bankers are exposed to civil and criminal liability if they are enabled money laundering, something that could lead banks to drop companies as clients, according to ivan garces of accounting firm kaufman rossin.

“over the past couple of years, banks have been hit with such heavy penalties and cost of compliance that they say, ‘you know what? We’re going to get out. We’re exiting these relationships,’ ” he said.

Garces, a principal in kaufman rossin’s risk advisory services group, said that while the government didn’t name the companies facing orders, “they’re not difficult to identify.”

u s anti money laundering laws

“banks are going through those databases to identify who those businesses are, going back to study transactions,” he said. “this adds to the regulatory burden.”

Garces said he wasn’t surprised by the south florida orders following the use of gtos in los angeles last october that targeted 2,000 fashion exporters.

That action was substantially more dramatic than in south florida and included raids on businesses and homes suspected of stockpiling laundered drug money. Federal agents seized $90 million in cash in those raids from file boxes, duffel bags, backpacks and car trunks.

“I wouldn’t be surprised if we saw more,” garces said.