cash

TIJUANA, Mexico — Every day, Mexican drug cartel accomplices in the U.S. shove proceeds from U.S. drug sales into their shoes, tape it to their torsos, stash it under dashboards — or just wire it electronically to Mexico. It all adds up to $25 billion a year they smuggle out of the U.S.

This compares with just $61 million seized in the past year — the $3 million blocked in banks through a highly touted U.S. Treasury Department program aimed at starving Mexican drug cartels, the Narcotics Kingpin Designation Act, and another $58 million seized by border inspectors.

The figures suggest that authorities are halting just 25 cents of every $100 in cartel profits — money that is fueling a brutal war that has killed 14,000 people in three years.

Bundles of $100 bills that add up to billions are sneaked from the U.S. into Mexico each year and then laundered into ostensibly legitimate funds at car dealerships, banks, pharmacies, restaurants and resorts.

That money pays Mexican farmers to grow more marijuana and Colombian smugglers to sneak in more cocaine. It bribes Mexican soldiers and U.S. Border Patrol agents, and pays assassins and mercenaries to take out rival smugglers or would-be prosecutors.

"This is the brilliance of the drug cartels. They pay ordinary people to get cash across the border for them, and then easily launder it into working capital to build and expand their violent and illicit operations," said Louise Shelley, who directs the Terrorism, Transnational Crime and Corruption Center at George Mason University just outside Washington, D.C.

8 major cartels in Mexico

There are eight major drug cartels operating in Mexico,and their methods of moving cash south are surprisingly similar, according to AP interviews with law enforcement agents and a review of court records on both sides of the border.

U.S. dealers are given drugs on credit and, under threat of kidnapping, attacks on their families or even death, they sell their inventory and pay the smugglers back within a week or two. The smugglers then pay someone in the U.S. to drive the cash to a "stash house" near the border, typically in Phoenix, San Diego, El Paso or Houston.

There, the cash is broken into increments of $50,000 to $300,000, lowering the risk of losing an entire load in one bust, and farmed out to trusted couriers.

They use the same methods people use smuggling drugs north: Money is hidden in the floorboards of buses and inside vehicle panels, tucked behind vehicle firewalls and inside spare tires, or stashed in custom-made compartments. Couriers wearing loose-fitting clothing tape stacks of $100 bills to their bodies.

If caught by Customs and Border Protection agents, the couriers often can forfeit the money and simply drive on; Mexican officials don't normally arrest people for failing to report money coming in. For the cartels, that risk is part of the cost of doing business.

"Cartels expect that we are going to take some of that money off," said Douglas Coleman, assistant special agent in charge of the Drug Enforcement Administration in Phoenix.

In 1969, officials stopped minting $500, $1,000, $5,000 and $10,000 bills, making smuggling harder. That leaves the $100 note as the highest denomination — a packet of 100 of those bills is less than a half-inch thick and contains $10,000. One billion dollars fits squarely atop a standard shipping pallet.

Money is also wired south

The other way to get money south is to wire it.

Since 1972, the United States has implemented a series of restrictions, including a requirement that financial institutions report deposits of $10,000 or more.

Still, authorities believe some drug smugglers use U.S. banks to move their money. In a typical scheme known as "smurfing," drug smugglers break large cash loads into less conspicuous increments, deposit them into numerous bank accounts in the U.S. and withdraw from those accounts at Mexican banks.

This approach, like other money-laundering methods, has drawbacks. Deposits can't be over $10,000, smugglers have to involve lots of people, or "smurfs," and the transactions create paper trails that can draw attention.

In another scheme, smugglers give legitimate bank account holders a small cut to use their accounts to deposit in the United States and withdraw in Mexico. Smugglers also are starting to ship cash through the postal service and shipping companies, allowing them to track it from start to finish.

It's 10% of Mexico economy

Once the money gets to Mexico, the cartels put it to work. About 10 percent of Mexico's economy — the world's 13th-largest — is based on cartel operations, analysts say.

Mexican lawmakers have refused to pass anti-laundering laws such as reporting requirements when people pay cash for mansions and luxury cars or regulations for salaries paid in cash.

"In Mexico there are still some very easy ways to launder money, and there is great reluctance among lawmakers to change that," said Ramon Garcia Gibson, an expert on financial controls. "It's everywhere: Businesses that aren't doing any business except to receive cartel cash and put it in the bank."