Matthew Cox

Los Angeles has been at the heart of the money laundering operations here in the United States.

Long before underground banking, Chinese banking networks began laundering Mexican drug proceeds in 2017.

The strategy most utilized by the Mexicans is a scheme known as the Black Market Peso Exchange.

The Black Market Peso Exchange is a form of trade-based money laundering.

In this scheme, a cartel operative in Los Angeles arranges to sell U.S.

dollars at a discount in exchange for clean Mexican peso using a broker, while at the same time the broker facilitates a Mexican importer's access to U.S.

dollars in L.A.

to purchase goods from U.S.

vendors.

Once the goods are shipped and sold by the Mexican business in exchange for pesos, the pesos are turned over to the broker who then pays the cartel's organization in Mexico in clean Mexican currency.

This particular scheme, known as trade-based money laundering, is the process of disguising the drug proceeds by moving value through trade transactions to legitimize their illicit origin.

While originally developed by the Colombians, the Mexicans were the ones to perfect it.

Trade-based money laundering is often used by the cartels to collect money from their drug sales in the U.S.

without having to take the risk of smuggling bulk amounts of cash across borders and without having to convert and wire the money through established financial institutions, which not only carry transaction fees, but also a threat to their illegal activity being detected.

The first full year of the Sinaloa cartel's operations in Los Angeles was 1990.

By then, the Mexicans and the Colombians had adopted the payment-in-kind business model.

With this model, the Mexicans were no longer being paid in cash for smuggling the Colombian product over the border.

Instead, the Mexicans were now demanding payment and product.

See, this is where, in an earlier podcast, we discussed how the American government dismantled the Colombian networks on the West Coast.

Right.