23 June 1999
Source: http://www.usia.gov/cgi-bin/washfile/display.pl?p=/products/washfile/latest&f=99062201.llt&t=/products/washfile/newsitem.shtml

USIS Washington File

22 June 1999


(Describes trade-based system of laundering drug proceeds)  (2100)

WASHINGTON -- "The demand for U.S. dollars can translate to huge
profits for illegitimate money transmitters and brokers involved in
the movement of narcotics proceeds throughout the world," says Bonni
Tischler, assistant commissioner of the U.S. Customs Service.

In June 21 testimony before the Senate Caucus on International
Narcotics Control, Tischler outlined aggressive steps that the Customs
Service is taking to enforce existing laws designed to combat money
laundering while also "focusing on individual criminals and their
organizations." Enforcement strageties include "attacking systems or
industries that are exploited by traffickers," often involving U.S.
businesses that find themselves unwittingly used by drug cartels as
transit stops in the money-laundering chain, she said.
Of particular concern, she added, is the Black Market Peso Exchange
(BMPE) utilized by Colombian drug syndicates, which operates through a
series of peso brokers and importers who disguise their currency
smuggling as legitimate business transactions. Customs officials have
targeted these operations, often succeeding "in changing the behavior
of an entire industry, rendering a previously reliable system
unreliable," and have "raised the cost of doing business to the drug
trafficker, and disrupted the all-important money laundering cycle in
the long term," Tischler asserted.

Following is the text of her testimony, as prepared for delivery:

(begin text)

Testimony of Bonni G. Tischler
Assistant Commissioner
U.S. Customs Service

Before the Senate Caucus on International Narcotics Control
June 21, 1999

Thank you, Mr. Chairman and members of the Caucus, for the opportunity
to address you on this very important topic, the Black Market Peso
Exchange, or the BMPE. This trade-based system of laundering drug
proceeds has been utilized by Colombia's drug syndicates for a number
of years. Its existence, however, has not been widely publicized or
understood outside of the highly specialized world of federal drug
money laundering investigators and drug money launderers.


Money is a commodity. As with any other commodity, money can be
bought, sold or traded. The U.S. dollar is the preferred currency
worldwide. The demand for U.S. dollars can translate to huge profits
for illegitimate money transmitters and brokers involved in the
movement of narcotics proceeds throughout the world.

The BMPE process starts with a peso broker. For a fee, these brokers
arrange the financial transactions necessary to launder the drug
cartels' money. Broker activities include receiving and coordinating
orders for money, locating sources of U.S. dollars, arranging pickups
and directing placement of funds. Within the broker's network are
others who perform various services for a percentage of the broker's
earnings. Those working for the brokers pick up cash, buy money orders
and checks, open checking accounts, transport and smugglemoney, among
other things.

The primary market in Colombia for large blocks of U.S. dollars is
Colombian importers. In order to purchase goods for import, the
Colombian importer must first acquire U.S. dollars, which are the
recognized instrument of trade in the Western Hemisphere. Access to
U.S. dollars is regulated by Colombian law and administered by their
central bank. Before the Colombian central bank would convert pesos to
dollars they require certification that government import permits be
obtained, thereby insuring that the requisite Colombian duties and
taxes are collected.

The Colombian Foreign Exchange and Trade regime tends to be expensive
and naturally results in exposure to government scrutiny. An
alternative is the underground system of BMPE brokers, which offers
the businessman a choice and the drug trafficker an opportunity.

U.S. Customs Approach

The Customs Service has for some time approached drug money laundering
by attacking systems or industries that are exploited by traffickers,
in addition to focusing on individual criminals and their
organizations. Examples of this strategy can be found first in the
Choza Rica/American Express Bank investigation in Laredo that
addressed Casas de Cambio along the Mexican border and Operation
Wiredrill in New York which attacked money remitters. In doing so,
Customs strategic planners have endeavored, and arguably succeeded, in
each instance in changing the behavior of an entire industry,
rendering a previously reliable system unreliable, raised the cost of
doing business to the drug trafficker, and disrupted the all-important
money laundering cycle in the long term. Experience has shown us that
denying traffickers access to broad-based systems, bringing about
voluntary compliance in the impacted industries, is by far the most
effective and efficient way to attack drug money laundering.

Outreach to U.S. Business

A key component to the BMPE money laundering process involves
international trade. This is Customs core business and we are uniquely
suited to address this issue. Today I am announcing a Customs
initiative designed to identify and educate those businesses involved
in international trade which are at risk of being victimized by drug
money launderers. An integral part of this program is a brochure,
which I have both on display and available to the Caucus, developed
jointly by the Customs Office of Investigations and the Office of
Strategic Trade. The brochure will be utilized by Customs Special
Agents and Trade Specialists in the business community to do the

-- Describe the BMPE Process;
-- Highlight "red flags" or indicators of BMPE activity;
-- Provide U.S. businesses with a point of contact if they suspect
they have been victimized by BMPE-related activity.

Customs Special Agents, Intelligence Analysts, and Trade Specialists
have been analyzing outbound trade data, financial and payment data,
including CTRs, CMIRs and SARS, through the use of advanced targeting
software such as the Numerically Integrated Profiling System -- or, as
we refer to it, "NIPS." This will allow us to target this education
and compliance program on those businesses that are likely to benefit
from and utilize this important information. Moreover, Customs intends
to get the word out via other forums such as trade publications,
industry associations and via our World Wide Web site. I am indeed
pleased to have the occasion of this hearing to roll out this
initiative and the brochure.

The Customs Service intends to be aggressively pursue this educational
compliance initiative; however, we are prepared and have indeed
employed other tools available to us to detect and disrupt drug money
laundering utilizing the BMPE.

Undercover Operations

Among those tools are Customs undercover operations that are directed
at the peso-brokering system and which have, over 8 years, resulted in
the seizure of more than $800,000,000 in cash and monetary
instruments. These operations have also produced more than 2,100
arrests and the seizure of 100,000 pounds of cocaine. The two largest
single seizures of cash in the history of federal law enforcement were
made as a result of Customs undercover operations Casacam in Miami
($22,000,000) and Omega in Los Angeles ($19,000,000) targeting the

Recently concluded undercover investigations such as Operation
Casablanca and other investigations illustrate some recent success in
BMPE investigations.

Operation Casablanca

Operation Casablanca resulted in the arrest of 168 individuals, the
indictment of 3 Mexican banks, two of which plead guilty to criminal
money laundering charges, and the seizure of over $100 million in cash
and monetary instruments. During Operation Casablanca, U.S. Customs
undercover agents dealt directly with peso brokers to arrange for
money pickups. The drug money was placed into accounts opened by
corrupt Mexican bankers. From there, it moved through the banks'
correspondent accounts in the U.S. before being sold through the BMPE
and deposited in foreign and domestic accounts.

Operation Double Impact

Operation Double Impact, which was conducted by our San Juan Office,
focused on an international heroin and cocaine smuggling operation.
Profits from these drug sales were laundered through the BMPE at
businesses in Floridan and San Juan. Thirty targets were arrested and
over $10 million in 70 identified accounts was frozen.

Operation Primero

Our Atlanta office conducted Operation Primero, in which Customs
undercover agents targeted the Cali Cartel's use of the BMPE in the
U.S., Canada, Europe and Australia to launder drug proceeds. In one
portion of the case, two Colombia peso brokers were indicted on 35
counts of money laundering and ultimately convicted.

In an analysis of Customs BMPE investigations, Customs has
demonstrated that they are 35 times more effective -- i.e., seizure
values versus expenditures -- than all [other] U.S. government
counter-narcotics programs.

Intelligence, Coordination, and Training

Customs intends to enhance and improve our undercover investigations
by collecting and analyzing the intelligence they produce daily
through a single entity designated the Money Laundering Coordination
Center (MLCC). In addition to coordinating leads, information, and
undercover activity in existing investigations, the MLCC will:

-- Identify and compile a list of active Colombian money brokers along
with the traffickers they service;
-- Identify and compile a list of banks, accounts and businesses
utilized by brokers and traffickers,
-- Identify and track trends and patterns such as the amount and
number of contracts let for money pickups in U.S. cities, seizures of
money and drugs as a result of BMPE operations, and the cost of doing
business in cities and regions in the U.S. as well as Europe and Asia;
-- Deconflict situations wherein different investigative entities are
unknowingly targeting the same suspects, bank accounts or

The Customs Service plans to ask other agencies conducting money
laundering investigations to participate in the MLCC.

Asset Forfeiture Investigations

The Customs Service also has the most extensive asset forfeiture
program in federal law enforcement. We have 20 specially trained and
equipped groups of Special Agents, Analysts, Auditors and contract
personnel deployed in every Special Agent in Charge office in the
United States. The Office of Investigations is in the process of
augmenting five of those groups, in Los Angeles, Chicago, Miami, New
York, and Houston, where BMPE activity is concentrated. Information
and intelligence on bank accounts which contain drug proceeds placed
by a BMPE broker will be referred to the Asset Forfeiture Groups for
seizure and forfeiture. As a side note, were legislation such as HR
1658 enacted (the Civil Asset Reform Bill offered by Chairman Hyde),
this aspect of our enforcement efforts would be virtually shut down.

Customs Colombia Working Group

In November 1998, a working group was convened at Customs to develop a
strategy to assist Colombia on a number of issues, including the BMPE.
The working group has developed a strategy for proposed training
programs and assistance projects to further expand cooperation between
the U.S. and Colombia.

Specific steps have been designed to improve the Colombian Customs
infrastructure, thereby strengthening their ability to deal with
issues such as contraband smuggling, which is integral to the BMPE
money laundering process.

Included in the strategy are:

-- A Customs Mutual Assistance Agreement with Colombia has been
developed and is in the process of being vetted through the
Departments of State and Justice. This new agreement will provide the
framework for U.S. Customs Service and Colombian Customs to share
information on issues such as BMPE and trade issues related to
contraband smuggling. As an example, Colombian import data could be
shared with U.S. Customs under the auspices of this agreement and
compared to our export data. Anomalies could then be the basis of a
bilateral investigation by U.S. and Colombian Customs.

-- A training, technical assistance and short-term advisor package has
been developed and funded by the Department of State/INL. Many of the
programs directly impact Colombia's ability to address the contraband
smuggling and BMPE process. As an example, State/INL has agreed to
fund three short-term advisors to Colombia to work with the U.S.
Customs Attache and Colombian counterparts to help combat the BMPE and
to support the Colombian Joint Contraband Technical Task Force

-- With approved DOJ asset-forfeiture funding, Customs will assist the
newly created National Tax and Customs Police with targeting and
contraband interdictions efforts, trade compliance, and investigate
techniques training.

-- Finally, Customs has conducted Basic Intelligence and Post Seizure
Analysis (PSA) training of selected Colombian counterparts and
provided them with PSA software and database in Spanish. In addition,
we are currently working to provide the DIAN with laptop computers to
assist in their analysis of seizure data on contraband merchandise and
subsequent sharing with the U.S. Customs.

In addition, the Customs Service recently placed an Attache in Bogota,
Colombia. The Attache will become an important focal point for Customs
CBMPE investigations, facilitating the exchange of information with
the Embassy Country Team as well as his Colombian law enforcement

The BMPE is -- in no terms -- the ultimate nexus of legitimate and
criminal trade activity. As you have heard this morning, Customs is
doing everything it can to put an end to it.

Thank you.

(end text)