CATF Reports Oct. 15, 2015, 5:18pm


The porous border of the Southwestern U.S. is a perennial magnet for criticism: sophisticated criminals of many types, now believed to include terrorists, routinely exploit its vulnerabilities. Soon after 9/11, U.S. intelligence agencies realized that Islamic extremists had established beachheads in the Southern hemisphere and had joined with traffickers to benefit from the boom in narcotics exports to the U.S. Then as now, the most active region infiltrating contraband and extracting profits is the cross border area stretching from California to Texas. Congressional investigators have been critical of weak federal border management that appears correlated with low overall impact in reducing the flow of money - whether cash or electronic payments - across the Southwestern border. 

U.S. enforcement machinery for combating drug trafficking and money laundering holds enormous potential for combating terrorist fundraising that rests on exploiting U.S. border control and funds transfer vulnerabilities. U.S. officials combating traffickers and launderers along Arizona’s border with Mexico have long wondered how many individuals smuggled illegally into the country could be terrorists, and how much currency was being smuggled in basic schemes missed by border agents. Estimates of smuggling and laundering based on currency seizures - notoriously raw and unreliable - were gradually replaced by advanced intelligence analytic platforms, many utilizing the latest in artificial intelligence. Thus, projections came to be accepted as providing a more comprehensive and objective picture. In theory at least, pinpointing the flow of illicit funds for specific criminal purposes could help law enforcement produce better estimates of the overall magnitude of those activities, including numbers of schemers involved in organizing and executing the illegal activities.

In response to the growing perception of a Southwestern border crisis, a coalition of state level officials in California, Arizona, New Mexico, and Texas acknowledged that money transmitters were fast becoming the major vehicle for facilitating the money laundering problem. They were doing so by electronically transferring funds from hundreds of U.S. money remitting outlets in border locations to Sinaloa and other cartel-controlled Mexican regions. In 2010, the state officials created the Southwestern Border Anti-Money Laundering Alliance (Alliance), and in order to fund an enhanced capability they turned to a windfall $94 million settlement resulting from the case of Arizona vs. Western Union Financial Services. Filed by the Arizona attorney general, the litigation involved the failure of Western Union to comply with Treasury regulations intended to capture data on suspicious financial transactions so analysts, like those working for the Alliance, could mine the data for leads. The Alliance analytic and enforcement program was financed with a $50 million infusion from the settlement, with the funds divided among the core states whose agencies apply for analysis and enforcement grants.

Each Alliance member state formulates its own anti-laundering strategy. For instance, the priorities set by the New Mexico statewide program include: 1) bulk cash transportation connected with drug trafficking; 2) human trafficking cases related to trans-national criminal organizations, including both illegal border entry and prostitution related cases; 3) firearms trafficking; 4) organized retail crime operations.

Thus far, the connection between border money transmitters and terrorist finance remains speculative but is widely accepted within law enforcement as a growing problem of unknown magnitude. For example, there are reports that money remittances involving the Texas “Charlie Hebdo” terrorists, whose assassination plans were aborted by alert security guards, were later found in a law enforcement database. To get a handle on the burgeoning problem of cross border transfers, one federal banking organization identified scores of attributes of suspicious transactions - including ones linked to terrorist finance. One basic recommendation is to embed every one of those attributes in a robust new training initiative that jointly benefits bank personnel, law enforcement - and the money transmitters themselves.

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