Feds break up money-laundering ring; 26 arrested

Thursday, October 19, 2006

WASHINGTON -- Law enforcement agents broke up a Colombian money-laundering ring Wednesday, arresting 26 people in three countries and seizing more than $16.5 million in cash and drugs, drug enforcement officials said.

Arrests were made in Bogota and Cali, Colombia; New York, New Jersey, Florida and London, England, according to Drug Enforcement Administration officials. They requested anonymity because they were speaking in advance of the formal announcement later in New York.

More than $10 million in alleged drug profits and more than $6.5 million in cocaine, heroin and marijuana were seized in the operation conducted by DEA, the FBI, Immigration and Customs Enforcement, the Internal Revenue Service, New York city and state police and Suffolk County, N.Y., police.

The officials said the investigation targeted Colombian criminal organizations that laundered millions of dollars worth of illegal drug-smuggling profits through the sophisticated black market peso exchange, an illegal currency exchange system.

All transactions in this exchange are verbal, with no paper trail. It uses peso transactions in Colombia and dollar transactions in the United States with no visible connection between them. These attributes make this black market very hard for agents to detect and for that reason has become one of the primary methods that Colombian drug traffickers use to launder their illegal profits.

In the exchange, one or more "peso brokers" serve as middlemen between narcotics traffickers who control huge amounts of illegal drug profits in the United States and Colombian business people seeking to purchase cheap U.S. dollars outside the highly regulated Colombian banking system.

The process involves three steps:

First, the drug smugglers sell their U.S. drug profits to peso brokers in Colombia in exchange for Colombian pesos. Second, the peso brokers use criminals in the United States to collect the drug money and deposit the illicit funds in U.S. banks. Finally, the peso brokers sell the drug dollars at less than the official exchange rate to executives of Colombian businesses who want to purchase goods abroad for import to Colombia.

In one scheme, the officials said, a peso broker in Colombia arranged to launder illegal drug money located in New York. He arranged for other defendants to collect the cash and turn it over to another defendant who used it to buy used truck parts from a scrap yard he controlled in Lindenhurst, N.J. The parts were shipped to Venezuela and Colombia and resold for pesos, the officials said.

U.S. agents obtained seizure warrants for bank accounts throughout the United States that they said had been used to aid the laundering. Colombian agents conducted 24 searches in Bogota and Cali.

The defendants include people from every level of the operations -- peso brokers in Colombia, their criminal confederates in the United States and Colombian business people who knowingly acquired the cheap drug dollars to buy imports, the officials said.

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