Mexican cartels adopt crypto, authorities struggle to keep pace
The director of a Mexican financial intelligence unit said that local law enforcement has only a quarter of the staff needed to deal with the crypto laundering of cartels
Mexican authorities have reported increased use of crypto assets to launder funds by organised crime in Latin America.
In a report published on 8 December by Reuters, the director of the financial intelligence Bitcoin Code scam unit of the Mexican Ministry of Finance, Santiago Nieto, described how cartels use crypto assets to launder money obtained through illegal activities.
Nieto says that South American cartels typically deposit dirty profits into various bank accounts in amounts below $7,500, the limit for banks to report a transaction. The funds are then split into small amounts of Bitcoin (BTC), which can then be transferred across national borders without friction.
As required by a 2018 law, registered crypto trading platforms must report transfers in excess of 56,000 Mexican pesos (approximately $2,800). Local authorities hope that this measure will assist in the fight against the use of digital assets for organised crime.
The arrest in April 2019 of human trafficker Ignacio Santoyo was attributed to this law
The authorities found that Santoyo and his sister had acquired more than $22,000 in BTC on the local Bitso exchange.
Hector Ortiz, the alleged leader of the Mexican hacker group Bandidos Revolution Team, was arrested in a similar manner after law enforcement officials identified „tens of thousands of dollars“ in BTC. This information allowed investigators to track his location using his mobile phone.
However, Rolando Rosas, director of the Cyber Investigations Unit of the Mexican Attorney General’s office, explained to Reuters that law enforcement does not have the resources to deal with money laundering via crypto assets. The unit has a staff of 120 officers, about a quarter of the required number, and is unable to keep up with the 1,033 alerts for above-threshold Bitcoin transactions made by registered trading platforms this year.
Approximately 98% of transactions were reported by Volabit, an exchange operating in the state of Jalisco, home of the Jalisco New Generation Cartel. Volabit’s general manager, Tomas Alvarez, told Reuters:
„It is a mistake to assume that if alerts are generated by a Jalisco company, they must necessarily correspond to Jalisco residents. Our users come from all over the country. In fact, most of the alerts do not involve users living in the State of Jalisco“.
In January, a report by the US Drug Enforcement Agency showed a drop in cash seizures from $741 million in 2011 to $234 million in 2019. This suggests that criminal organisations are using crypto assets for much of their money laundering activities.