Understanding Black Market Peso Exchange
So what’s the black market? The illegal trade of goods and services outside the boundaries of regulated markets is referred to as the black market. It operates unregulated, bypassing official platforms and channels, allowing transactions to go unreported.
The Black Market Peso Exchange (BMPE) is a trade-based money laundering that exchanges drug dollars into local Latin American currencies. BMPE conceals the source of the money by using legitimate business practices, effectively defunding drugs in the process. This strategy is popular in countries such as Mexico, Colombia, and Venezuela. As financial laws became more stringent against organized crime in the 1980s, requiring traditional banks to know their customers and ensure that their source of funds is legitimate, BMPE became the primary cause of money laundering.
Some high-profile leading cases of Black Market Peso Exchange (BMPE) are as follows
Case of the Cali Cartel: In the 1990s, the Cali Cartel, a Colombian drug-trafficking organization, used BMPE to steal millions of dollars. They have wreaked havoc on the Colombian economy by using shell companies and money brokers. Fanny Kertzman, the former chief of Colombian Customs at that time, says the black peso exchange launders almost $5 billion of drug money a year for Colombian traffickers.
Operation Casablanca: In the 1990s, US law enforcement uncovered a money laundering ring involving Mexican banks, drug dealers, and BMPE dealers. The project revealed how legitimate business transactions were used to launder drug money between the United States and Mexico.
Mexican Jalisco New Generation Cartel: The CJNG, a ruthless Mexican drug cartel, heavily relies on money laundering schemes to fund its illicit activities, with BMPE being one of its preferred channels. The BMPE enables CJNG to convert drug proceeds, primarily from illegal drug sales in the United States, into funds that appear legitimate in Mexico.
Distinct Steps in Black Market Peso Exchange (BMPE):
Obtaining Criminal Proceeds
Historically, criminal organizations such as drug cartels have operated illegally, making illegal money to undermine the law. For example, suppose a company sells drugs in the United States for one million dollars and keeps the money it makes.
Involvement of Intermediary Services
Drug dealers contact a cartel representative and express their willingness to pay the debt. A cartel representative informs South American money dealers of $1 million in the United States. A broker purchases $1 million at a discount and then invests it in the US financial system. The broker can use structured deposits or other methods to help with this process. They have one month to send the country’s money to the South American cartel.
Identification of Complicit Companies
The broker finds an export company in the United States that wants to export goods to South America and an import company in South America that wants to import goods into the United States.
Pay the Export Fee
Once a suitable import and export business has been identified, the broker coordinates the shipment process and obtains funds to pay the export company in US dollars.
Shipping and Selling the Product
The product is shipped to South America, where it is received by the importing company. The importer begins selling to his customers, earning local currency in the process.
Finally, the supplier pays the seller in the seller’s native currency, such as pesos. The South American cartel receives these pesos. The plan culminated in the cartel profiting from its drug distribution operations, with no remittances to the US.
What is Black Market Website Surveillance?
Black market websites, also referred to as darknet marketplaces, run on an encrypted network that gives users anonymity and protects their identities. These sites can only be accessed using specialized browsers making it difficult for law enforcement to track users’ activities and transactions. All types of illegal products and services, including drugs, weapons, stolen data, counterfeit documents, hacking tools, and many others, are available for purchase on these hidden platforms. Transactions are frequently made using cryptocurrencies such as Bitcoin, which complicates the tracking process. In 2022, 39% of UK businesses reported a cyber attack.
According to a report by Web3 security firm Beosin, the total value of cryptocurrencies lost in scams, hacks, and rug pulls during the first half of 2023 was $656 million.
Operation SaboTor, an international effort involving law enforcement agencies from the United States, Germany, the Netherlands, and other countries, was one notable example of successful black market website surveillance. The operation, which began in 2019, targeted several darknet marketplaces, including Wall Street Market, Dream Market, and others.
The Black market website surveillance techniques include
- Deep Web Crawling: Advanced web crawlers are used by experts to navigate encrypted networks, collect data from black market websites, and monitor their activities.
- Data Analytics: Data is collected and analyzed using powerful algorithms to reveal patterns and connections, assisting authorities in identifying links between illegal activities and their perpetrators.
- Undercover Operations: To gather vital intelligence on criminal networks, law enforcement conducts undercover operations, posing as buyers or sellers on black market websites.
- Collaboration with Cybersecurity Companies: Government agencies collaborate with specialized cybersecurity companies to monitor the dark web, obtaining real-time information on emerging black market websites and potential threats.
What Are the AML Regulations for the BMPE?
In response to the Black Market Peso Exchange (BMPE), the US government took action in the 1970s, enforcing money laundering laws and instituting reporting procedures for suspicious transactions. Regardless of the laws, many banks have previously violated these requirements, prompting the government to impose restrictions and enforce compliance.
The Mexican Ministry of Finance has also proposed a tax reform to limit the amount of US currency accepted by Mexican banks. The new monetary policy aims to prevent dollar outflows from the Mexican financial system.
Money exchangers are also subject to regulations, with daily exchange limits of $10,000 per customer when no banking activity is involved.
Recognizing the threat that BMPE poses, anti-money laundering (AML) regulations have been put in place to combat its illegal activities. Financial institutions must follow the following guidelines:
- Due Diligence: Banks and financial institutions must conduct due diligence on high-risk clients, particularly those engaged in cross-border transactions.
- Suspicious Activity Reporting (SAR): Financial institutions are required to report any suspicious transactions or activities that could be indicative of money laundering or terrorist financing.
- Compliance program: A robust AML compliance program must be implemented to detect, prevent, and report money laundering activities.
To summarise, the Black Market of Pesos Exchange (BMPE) is a sophisticated money laundering scheme used by criminal organizations to divert funds from illegal sources. Authorities are making progress in combating this illicit financial system by focusing on AML laws, but collaborative efforts between government agencies and the cybersecurity industry are still critical in the fight against money laundering fight against black market operations.
Also Read: What is Trade Based Money Laundering (TBML)