Money Laundering Detection Methods Fall Short in Puerto Rico

The US territory of Puerto Rico has emerged as a significant hub for money laundering operations, with drug traffickers from Central and South America using the island to conceal their illegal profits. A recent report by the San Juan High Intensity Financial Crime Area (HIFCA) reveals that the leaders of these money laundering organizations maintain cells on the island, utilizing various methods to launder their illicit proceeds.

Methods Used to Launder Money

Several tactics are employed by drug traffickers to launder their illegal profits:

• Colombian Black Market Peso Exchange (BMPE): Exchanging US dollars for Colombian pesos at inflated rates allows drug traffickers to funnel their illegal profits back into Colombia and beyond.
• Asset Substitution: Third-party facilitators purchase used cars and boats from the mainland United States, then ship them to St. Croix, where they are resold to unwitting buyers.

The Role of Bulk Cash Smuggling

The US Drug Enforcement Administration (DEA) has reported a surge in bulk cash smuggling to Puerto Rico and the US Virgin Islands. Drug traffickers use money remitters, shell corporations, and other methods to conceal their illegal activities. Additionally, the DEA notes that traffickers are increasingly avoiding electronic wire transfers due to increased scrutiny under the USA PATRIOT Act.

Challenges in Detecting Money Laundering

The outlook for money laundering detection in Puerto Rico is grim:

• Increased Commercial Goods Shipments: The island’s seaports are expected to see a significant increase in commercial goods shipments over the next few years, providing drug traffickers with ample opportunities to hide contraband within legitimate cargo.
• Lax Port Security and Limited Inspection Capacity: This makes it difficult for law enforcement officials to detect illegal activity.

Corruption and Public Trust

Corruption within the Puerto Rico Police Department has eroded public trust and cooperation, making it harder for authorities to combat crime and enforce the law. As a result, the crime rate in Puerto Rico is likely to rise, and the drug situation will worsen in the coming year.

Conclusion

The struggle to detect and prevent money laundering in Puerto Rico highlights the need for increased cooperation between:

• Law enforcement agencies
• Financial institutions
• The public

Until this cooperation improves, the island will remain a major hub for illegal activities, undermining economic stability and security.