Sen. Sheldon Whitehouse (D-Rhode Island) believes the United States needs stricter laws to stop Mexican drug cartels and organized crime from using digital resources, such as financial technology applications, for money laundering schemes.
"Whether dirty money flows through the traditional financial sector or the decentralized financial industry, it poses immense risks to America’s national security and the integrity of our financial system," Whitehouse, Chairman of the Senate Caucus on International Narcotics Control, said in a recent press release. "We must implement more robust anti-money laundering safeguards, better enforce existing ones, and close any loopholes to hold kleptocrats, cartels, and criminals to account.”
According to Investopedia, financial technology (fintech) is the development of new services and technology to better deliver financial goods, such as Venmo or using an iPhone to transfer funds, as well as cryptocurrencies such as Bitcoin. Although fintech has grown significantly in the last five years, they often face regulatory issues and cartels have begun to use Bitcoin and other e-commerce platforms to conduct drug transactions and money laundering.
According to a report by The Associated Press, the International Narcotics Control Board said cartels like the Jalisco New Generation Cartel and the Sinaloa Cartel have bought small amounts of bitcoin to avoid detection. Mexican cartels launder an estimated $25 billion a year in Mexico.
“Mexican and Colombian organized criminal groups are increasing their use of virtual currency because of the anonymity and speed of transactions,” the AP reported.
According to a Thomson Reuters Legal white paper, drug cartels often employ technical specialists to help them monitor law enforcement communication. To cartels, which are unrestricted by borders, money laundering is crucial to their operations. They infiltrate the U.S. banking system by employing thousands of contractors to deposit small amounts of money nationwide. Trade-based money laundering is another technique, in which contractors purchase something and move it back to Mexico where they can sell it for pesos, laundering the money.
In February, Whitehouse, along with Sens. Chuck Grassley (R-Iowa), John Cornyn (R-Texas), Amy Klobuchar (D-Minnesota), and Dianne Feinstein (D-California) introduced the Combatting Money Laundering, Terrorist Finance, and Counterfeiting Act of 2022.
The legislation “updates counterfeiting laws to prohibit state-of-the-art counterfeiting methods, increases the penalties for bulk cash smuggling, and ensures that money laundering laws apply to hawalas and other informal value transfer systems used by drug traffickers and terrorists," according to a February press release.
"Criminal enterprises are constantly finding new ways to move their dirty money wherever they think it’ll be safe," Whitehouse said. "That’s why drug traffickers, kleptocrats, and other bad actors pull elaborate tricks to stow their loot behind American rule of law ... We need to arm law enforcement with tools to tackle new methods of money laundering and counterfeiting.”
