Identifying High-Risk Currency Exchange Centers in Mexico

Written by Sayari

May 18, 2020

Currency exchange centers continue to be used by Mexican transnational criminal organizations to launder illicit proceeds and thus present significant risks to financial institutions and U.S. national security. 

In our latest report, we used public records to uncover a network of 30 high-risk currency exchange centers in Mexico. These companies are linked to public accountants who previously had corporate connections to convicted money launderers and drug traffickers operating on behalf of the Sinaloa Cartel. 

While this report demonstrates the value of using public records to identify networks of high-risk currency exchange centers, it also underscores the importance of examining individuals with seemingly unimportant corporate roles such as legal representatives, comisarios, and those holding powers of attorney. These individuals can serve as key investigative leads in identifying businesses at high risk for facilitating money laundering. 

 

Money Laundering Through Currency Exchange Centers

Mexico-based transnational criminal organizations have long used currency exchange businesses to launder the proceeds of illicit activities. While the details inherent in each scheme may differ, the overall modus operandi is relatively similar.

Drug trafficking organizations, for example, will first consolidate bulk cash in the U.S. as a result of illicit drug sales. Members of the organization will then coordinate—via the use of couriers—the smuggling of bulk cash across the border, which is received by Mexico-based currency exchange centers. The dollars are then deposited into accounts at U.S. banks. Finally, those funds are wire-transferred to accounts associated with members of criminal organizations in Mexico, which can then be withdrawn in pesos. 

In other cases, U.S. dollars will be exchanged for pesos at the exchange houses themselves. After the exchange is made, pesos are then often deposited directly into bank accounts at Mexican financial institutions held in the names of straw account owners who serve as placeholders for members of the criminal organization.

 

The César Hernández Money Laundering Network

In February 2020, a Mexican national by the name of César Hernández Martínez was sentenced to over 11 years in prison after pleading guilty to one count of conspiracy to launder monetary instruments.

In an agreement with U.S. prosecutors, Hernández admitted to “managing and supervising an ‘extensive’ international money laundering organization that smuggled $13 million in narcotics proceeds from the United States to Mexico.” He also admitted to owning and operating currency exchange houses in Tijuana that were used to receive the illicit proceeds and further the laundering scheme.

Hernández’s guilty plea and subsequent sentencing followed a partially redacted 2015 indictment in which Hernández, along with ten other publicly identified individuals, were charged with conspiracy to launder monetary instruments and/or conspiracy to import cocaine, among other charges.

 

Identifying High-Risk Currency Exchange Centers

To identify Mexico-based currency exchange centers that could be at high risk for money laundering, we conducted a public records investigation into César Hernández’s network. We identified two public accountants that had previous corporate connections to Hernández and another individual who pleaded guilty to importing cocaine in relation to the same case.

These two public accountants are affiliated with at least 30 additional currency exchange houses in Mexico. Given the accountants’ previous connections to known drug traffickers and money launderers, these currency exchange centers could be at high risk for money laundering.

 

View the full report

Download Mexico Currency Exchange Center report. 

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