California Criminal Defense Lawyer Blog
The worldwide Covid-19 pandemic has changed everything and that includes criminal activity. Reports are that crime has decreased significantly in Southern California since the stay at home orders went into effect. Not only has the virus considerably diminished the opportunities for crimes such as robbery, burglary, and other crimes where one would expect to see an impact, but it has also had a notable impact on the drug trade and the attendant crime of money laundering. Many of the traditional means used by drug dealers who “wash” the proceeds of their trade have been shut down as a byproduct of the virus. These disruptions in the money laundering trade have had a supply chain effect, leaving illegal drugs in shorter supply and making them much more expensive in Southern California and elsewhere across the nation.
The white collar crime of Money laundering of drug proceeds is illegal under California law (California Health and Safety Code section 11370.9) and under Federal law (18 United States Code 1956). How does the money laundering of drug proceeds typically work? There are almost as many money laundering schemes as there are dirty dollars but usually the strategy involves moving money through a legitimate business or through a series of transactions that almost work like a foreign currency exchange that coverts one foreign currency to U.S. dollars via complicated intermediary steps.
Money laundering, which is usually accomplished by running dirty money through a legitimate businesses, say a restaurant or an apparel wholesaler—the latter being a favored way of laundering money in Southern California— has become all but impossible with these businesses forced to close during the pandemic. In years past, when currency transaction controls were not as strict, drug proceeds were often simply shipped as cash back to, say Mexico, and distributed as deposits to bank accounts. Drug dealers, particularly the Mexican cartels favored this method until the Mexican government instituted financial regulations that made this risky. The cartels then picked up the money laundering methods developed by Colombian traffickers by utilizing legitimate businesses to make their dollar proceeds untraceable to the drug traffickers. Now that this money laundering pipeline has been shut off, the dirty money is piling up and the drug traffickers have turned to the old method of packing up drug proceed cash in boxes and sending it across the border. Resorting to the old methods of money laundering have brought back the good old days for law enforcement when drug proceed cash was much easier to intercept and seize. Law enforcement have hauled in huge drug money seizures since the Covid 19 business shutdowns were ordered.
The other common way that money is laundered involves converting Chinese Yuan to U.S. Dollars through a series of steps whereby a Chinese national is looking for a way to bypass the Chinese government’s restrictions on moving Yuan to other countries. Under this scheme the Chinese national pays a factory that makes precursor chemicals in China. These chemicals are then shipped to Mexico, where the final methamphetamine of fentanyl product is made. The final product is then smuggled to the U.S. and sold for U.S. dollars. The Chinese national (or an associate in the U.S.) is then paid back in U.S. dollars for the precursor chemicals he or she “bought.” That way, the Chinese government never knows about the “redemption” of yuan to dollars made by the Chinese citizen.
That most of the precursor chemicals are made in factories located in Wuhan, China is not only of peculiar interest but also meant that these factories were closed when the virus hit Wuhan. Many of those factories remained shuttered or are minimally operating. With this connection closed, the spigot is turned off or barely running for the manufacturers of methamphetamine and fentanyl in Mexico.
Like so many other Covid 19 consequences for which we presently do not know the outcome, this may permanently alter the illegal drug trade and the way the cartels operate.
Orange County criminal defense attorney William Weinberg has many years’ experience defending individuals charged with drug crimes and/or money laundering. If you have been charged with any crime, he offers a free consultation regarding your case. You may contact him at 949-474-8008 or by email at bill@williamweinberg.com