Financial Crime World

Title: Puerto Rico’s Role as a Money Laundering Hub: A Growing Concern in the Drug Trafficking World

Introduction

Puerto Rico and the US Virgin Islands (USVI), specifically the PR/USVI High Intensity Drug Trafficking Area (HIDTA), have gained notoriety as a significant money laundering center for drug trafficking organizations (DTOs) in the Caribbean.

Money Laundering in the Caribbean: A Growing Concern

  • According to a report from the San Juan High Intensity Financial Crime Area (HIFCA), leaders of major money laundering organizations are maintaining cells in Puerto Rico and the USVI.
  • Financial institutions, money remitters, and shell corporations are among the favored tools used in this illicit business.
  • DTOs are turning to bulk cash smuggling, as electronic wire transfers face increased scrutiny.

Methods of Money Laundering

Bulk Cash Smuggling

  • DTOs are transporting bulk cash to the HIDTA region for laundering.
  • Later, laundered cash is transported back to their home bases in the CONUS.

Asset Substitution in USVI

  • Asset substitution has emerged as the most popular method for laundering illicit proceeds in USVI.
  • Third parties purchase used automobiles or boats from the CONUS and ship them to St. Croix for resale.
  • Drug traffickers acquire these vehicles using cash, sell them to unsuspecting buyers within the St. Croix community.

Future of Drug Smuggling and Money Laundering

  • Drug smuggling through the PR/USVI HIDTA is expected to rise throughout the region.
  • Puerto Rico-based drug traffickers will continue to transport illicit drugs, primarily cocaine, to the CONUS using USPS Express Mail services.

Corruption and Law Enforcement

  • Corruption within the Puerto Rico Police Department has fueled concerns about law enforcement’s ability to protect citizens and deter crime.
  • The decreased cooperation between the public and law enforcement officers makes it difficult for police to enforce the law and combat the worsening drug situation.

Colombian Black Market Peso Exchange (BMPE) System

  • The BMPE system, established in the 1960s, facilitated the transfer of U.S. drug dollars to Colombian merchants in exchange for Colombian pesos, forming business agreements that have persisted.
  • Drug traffickers continue to rely on this system to launder their U.S. drug proceeds.

The USA PATRIOT Act

  • Enacted on October 26, 2001, the USA PATRIOT Act has had a significant impact on law enforcement efforts and criminal organizations, including those operating in the PR/USVI HIDTA.

Conclusion

The PR/USVI HIDTA is a significant money laundering center for drug trafficking organizations, employing various methods to launder ill-gotten proceeds from drug trafficking activities in the region. As law enforcement efforts increase, DTOs are turning to new tactics to hide their proceeds.