Fashion District Store Using ‘Black Market Peso Exchange’ Scheme Allegedly Took Ransom Money: Investigations Assignment, NKU, US

Assignment Details:

Large-Scale Law Enforcement Effort Targets Downtown Los Angeles Businesses Linked To Money Laundering For Drug Cartels

Fashion District Store Using ‘Black Market Peso Exchange’ Scheme Allegedly Took Ransom Money for Hostage Being Held and Tortured by Sinaloa Drug Cartel

LOS ANGELES – Approximately 1,000 law enforcement officials this morning fanned out across the Fashion District in downtown Los Angeles to execute dozens of search warrants and arrest warrants linked to businesses suspected of using “Black Market Peso Exchange” schemes to launder narcotics proceeds for international drug cartels.

Authorities today arrested nine defendants and seized what is estimated to be at least $65 million in cash and from bank accounts around the world in relation to asset forfeiture actions filed as part of the ongoing investigations.

One case unsealed today alleges that the Sinaloa Drug Cartel used a Fashion District business to accept and launder ransom payments to secure the release of a United States citizen who was kidnapped by that narcotics organization, held hostage, and tortured at a ranch in Mexico.

Two other indictments also unsealed today involve alleged money laundering by other Fashion District stores using the Black Market Peso Exchange (BMPE) scheme.

In a BMPE scheme, a peso broker works with an individual engaged in illegal activity, such as a drug trafficker, who has currency in the United States that he needs to bring to a foreign country, such as Mexico, and convert into pesos. The peso broker finds business owners in the foreign country who buy goods from vendors in the United States and who need dollars to pay for those goods.

The peso broker arranges for the illegally obtained dollars to be delivered to the United States-based vendors, such as the stores in the Fashion District, and these illegally obtained dollars are used to pay for the goods purchased by the foreign customers. Once the goods are shipped to the foreign country and sold by the foreign-based business owner in exchange for pesos, the pesos are turned over to the peso broker, who then pays the drug trafficker in the local currency of the foreign country, thus completing the laundering of the illegally obtained dollars.

This BMPE scheme – which is also known as Trade-Based Money Laundering – is often used by Mexico-based drug trafficking organizations to collect money from their drug sales in the United States without having to take the risk of smuggling bulk amounts of U.S. currency across the Mexican border and without having to convert and wire the U.S. currency through established financial institutions, which not only carries transaction fees but also a threat their illegal activity will be detected.

Case Study Questions:

  1. Define or describe Trade-Based Money Laundering (TBML) and Black Market Peso Exchange (BMPE).
  2. Discuss the investigative techniques and the BSA forms law enforcement used or might have used in its investigations leading up to the events of September 10, 2014, described in the press release. Explain which of the BSA reports you think would have been relevant to the investigation and why.

Respond to the initial posts of two of your classmates explaining how your views about the investigative techniques differ from his or hers and explain how techniques or forms he or she did not discuss may have helped the investigation. Also, critique the BSA forms that he or she identified or may have not seen as a potential source of financial information.

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Reference no: EM132069492


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