Mexico Cartels Stealing Gold to Launder Drug Money

[Athena]

Written by  Elyssa Pachico
Insight Crime
May 1, 2012

Mexican authorities say that, since 2008, criminal gangs have robbed so many trucks carrying gold shipments that some mining companies have been forced to switch to aerial transportation. This highlights the convenience of gold as a means to launder dirty cash.

Drug cartels primarily use the gold to launder their proceeds, usually reworking it into jewelery and selling it on the legal market, reports Excelsior.

Theft of gold bar shipments has been reported in some of the states most affected by drug violence, including Chihuahua, Sonora, and Durango. One miners' association in Sonora told the newspaper that their production costs have increased 15 percent due to security issues, and because they are forced to move their product mostly by plane.

The report does not provide a total for the number of such robberies registered in the past four years, but says the gold stolen during that period is worth some $3 million. The Attorney General's Office reportedly has seven open investigations into gold robberies, all of which involve drug trafficking groups. Some organizations even have the technology to melt down the stolen gold and recast it into bars with a higher level of purity, the report reveals.

InSight Crime Analysis

Gold has various advantages that are appealing to money launderers, including its easy convertibility, and the fact that it can be transferred with relative anonymity on the world market.

Both Colombia's Cali and Medellin Cartels favored gold as a way to launder the proceeds of drug trafficking. It is typically used a means to transfer money from drug sales in the US back to the cartel's country of origin. There are a couple of ways such laundering schemes could work. One is buying gold with dirty cash, and reworking the metal so that it is disguised as a common household or fashion item, then exporting this back to the drug cartel's home country, refining it, and selling it for cash. Another method involves exchanging cash for gold, and using the gold itself to represent the proceeds gained from drug trafficking.

A popular method used by the Medellin Cartel involved importing bars of gold mixed with lead, which were reported as fine gold. By overcharging for the low-purity gold and fudging the invoices, the cartel was able to disguise its profits.

It is likely that the Mexican cartels are also employing a wide variety of ways to use gold to launder proceeds from organized crime. The fact that the Mexican groups have elected to steal the gold outright, rather than purchasing it from legitimate jewelry sellers as the Colombian cartels used to, is one sign of the boldness of the Mexican criminal syndicates. It could also be that stealing gold shipments is viewed as easier and more convenient than going through the hassle of building a relationship with a supplier, which could explain why some Mexican groups have elected to use theft as their primary means of obtaining gold.

http://www.insightcrime.org/insight-latest-news/item/2564-mexico-cartels-stealing-gold-to-launder-drug-money

Link to Excelsior report (in Spanish)
http://www.excelsior.com.mx/index.php?m=nota&seccion=portada&cat=28&id_nota=830755

[Chimera]

Maybe I am just dense, but this does not make sense. If the cartels want to launder their money through gold how does stealing the gold help? Then they just have another asset, plus their dirty money! They need to buy gold with their dirty money then convert it back like the article describes.

[†.©ĤİVǾ.†]

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The author has deleted this message.

[ArmChairIntellect]

Birds of a Feather......

[elotero]

$ 3 millions in gold was stolen during that period.  So they are able to launder $3 million.  What about the other hundreds of millions of dollars.  Robbing gold trucks does not seem like a minor thing but when you compare that with how much money these cartels have and the things they do, it sounds like some no bodies are robbing these gold trucks trying to make a quick buck.

[DD]

Sometimes I think reporters, even for "Insight Crime", don't stop to think about what they write, or even read it.  

At today's gold prices, $3MIL in gold is about 1818 ounces of gold.  In 10oz. bars (the world standard), that is about 181 bars.  If the thefts were spread evenly over the 4 year period mentioned in the story, that would be about 45 bars a year stolen.  If the gold was in "Kilobars", (32.15 ounces), that would be about 56.55 kilos, or 124 pounds of gold.  That would be about 31 pounds of gold per year.

The article doesn't say how many trucks were robbed, only that there had been "so many" that the mining companies had switch to planes for transport.  They would have to be awfully small trucks if that 31 pounds a year were divided into several trucks.  I would think under the hood a VW would be adequate to transport 31 pounds.

The article draws the conclusion in the first paragraph that these thefts are an attempt by the cartels to launder their money.  I agree with Chimera that this makes no sense.  How does it help get rid of the profits from drug sales?  Making into gold jewelry and selling it on the legal market?  In the first place, converting raw gold into jewelry takes considerable skill and craftsmanship, something the cartel are not noted for.  Second, again how would selling jewelry made from stolen gold help them launder money from other illicit activities?

I only went into all this detail because some articles, even by reputable sources, are just downright silly.  Don't believe everything you read.  

[ArmChairIntellect]

I just read over the grammatical part, and stealing the gold would be dumb, that is if you were trying to launder money with it, there would be no purpose at that point.  But exchanging it is actually smart.  You can not determine the origin of gold once smelted, therefore it is an excellent way to the launder.  Gold takes up less space, dog aren't trained to detect it and its basically washed at the point of purchase.  Then it can be converted back to cash.  If it didn't work no one would do it.  It is also not the only thing they use. I believe Insight was making a comparison between SA and MX, and how they are evolving together.  

[Chimera]

©ĤİVǾ wrote

Chimera,

NOTHING in Mexico makes any sense...

LOL!!! I know, right?!?!?!

[DD]

@ACI.  I didn't understand what you were saying about exchanging the gold would be a smart way to launder the dirty money.  Exchanging it for what?  I guess I just don't understand the concept of what you are saying.

Now if they could get paid for their dope in gold, that would be a different matter.  

One reason I don't think the thefts are an attempt to wash their money is that it is just such a plddling amount.  The thefts average $750,000 a year.  For sake of discussion, lets say it's Guzman stealing the gold.  and though there is no way to know the real numbers, lets say out of the estimated 40 to 50 Billion in income to the cartels from drug sales, 20 Billion is Guzmans.  If my math is right, that is $1,666,666,666 month or 55 Million a day.  Why would he screw with $750,000 a year from gold thefts.  Maybe he is just a gold bug and just likes having it there to look at..  Maybe it is last ditch escape money that he could put in backpack if he had to run.  Who knows, but to me it is too small of an amount to try to somehow use it for laundering.

DD

[Chimera]

ArmChairIntellect wrote

I just read over the grammatical part, and stealing the gold would be dumb, that is if you were trying to launder money with it, there would be no purpose at that point.  But exchanging it is actually smart.  You can not determine the origin of gold once smelted, therefore it is an excellent way to the launder.  Gold takes up less space, dog aren't trained to detect it and its basically washed at the point of purchase.  Then it can be converted back to cash.  If it didn't work no one would do it.  It is also not the only thing they use. I believe Insight was making a comparison between SA and MX, and how they are evolving together.

I still don't understand! What do you mean by "exchanging" it?  I mean, exchanging for what, and with whom? Plus, there's the whole $3 million worth over, what, 7 years? Not a whole lot, really! Not when you're talking narco-cash, right? Can you help me understand better?

I get it about how gold is fungible, and once it's remelted it's untraceable. But the things that make no sense to me are:

1. The very small amounts stolen.
2. The need for cartels to exchange dirty cash for something convertible to clean cash. Stealing gold just gains an (valuable) asset which does not help with this at all.

So.

[Athena]

I posted the article to see if anyone had additional info on this subject.  To be perfectly honest I kept expecting the article to admit that some of the gold was stolen so that the cartel members could bedazzle their guns.  I wonder if more than $3M was stolen and for insurance purposes that is all the mining companies will admit to.  I also wonder if the gold was stolen not to launder money they already have but to pay off a debt on drugs that were used/lost/seized.

The attached link is to a NY Times article that describes how Colombian drug money was exchanged for gold, the gold was disguised as every day items and then sent to Colombia

http://www.nytimes.com/2003/06/06/nyregion/drug-money-laundered-into-gold-us-says.html?pagewanted=all&src=pm

[AnAnonymousUser]

a business is made, and someone writes down the what they spent on the materials, in this case the gold. Then they make items such as gold rings, buckles and pistol grips.  In their books, he or she would write down the labor expense.  Then they 'sell' the gold items to the circle, and the item is rotated out of the store, while drug money is used to cover the purchase.   Once the supply 'runs out' then more gold is 'ordered' and more items are made.  The items that were taken out as they 'sold' are reintroduced while a new expense or liability is added to the books.
Usually, the items will be priced @ or slightly below average market value, but factoring in that it's mostly the capo's drug money that was used to 'pay' for the items, it's an easy way to wash millions of $ while spending very little.

750k isn't a lot, but it'll cycle at least twice a month. Then the items are sold with a hefty 75% profit.  The proceeds can now go into a bank acc, in Peru as well D:

It works for chiles, plastic and metal as well.  If bringing it across the border, one should declare a lower value, then it's possible to sell the item in mexico for normal rates.  1m can easy be hidden this way by mid-range capos; then they buy a hummer or bmw w/ now legal money

[AJ]

Gold is just another way of making money for the cartels or it's just another thing to steal. What makes gold so valuable is that it has intrinsic value. It is a very precious metal and is even more valuable than money. If the price of the dollar goes down then the price of gold goes up, so right now gold is the perfect thing to steal. And it is too easy to sell. There is always a market for gold in any part of the world. It is also undetectable when melted. It is very likely that these criminals are taking the gold to refineries where the gold is being melted. It's a quick way of disposing the gold and they can also get top dollar for the weight of the gold. The jewelry can also be used as a form of laundering money by selling it at wholesale prices. If the cartels wanted to make their own jewelry from it, they would most likely make heavy jewelry out of it like big heavy men's necklaces and bracelets.

You also have to consider supply considerations. When there is an imbalance in supply versus demand, prices adjust to correct that imbalance. For example, if demand exceeds supply then prices will increase to the point where demand reduces or supply increases, thus correcting the imbalance. Because the load is forever changing, prices are continually adjusting.

[Chimera]

Thank you for that great description! But what still wonder is, would the cartels set up such a business and steal so little gold ($3mil over 7 years)?

Athena's reference to the NY Times story from 2003 is really, really interesting. It talks about the arrest of a lot of jewelry dealers who helped launder money. The narcos would buy gold then the jewelers would make the gold in to everyday things like, it said, "belt buckles, wrenches, screws and other hardware." Then they would sometimes paint the items, then send them to Columbia where it all was melted back down and sold again. Taa daaa! Laundered money, right?

But there's that missing first step: They.Bought.Gold.  They didn't steal it. I still can't get my head wrapped abound that "business model." heh heh

[Chimera]

Athena wrote

I posted the article to see if anyone had additional info on this subject.  To be perfectly honest I kept expecting the article to admit that some of the gold was stolen so that the cartel members could bedazzle their guns.  I wonder if more than $3M was stolen and for insurance purposes that is all the mining companies will admit to.  I also wonder if the gold was stolen not to launder money they already have but to pay off a debt on drugs that were used/lost/seized.

The attached link is to a NY Times article that describes how Colombian drug money was exchanged for gold, the gold was disguised as every day items and then sent to Colombia

http://www.nytimes.com/2003/06/06/nyregion/drug-money-laundered-into-gold-us-says.html?pagewanted=all&src=pm

LOL @ bedazzle their guns!!!  

                       

That is a very interesting idea you have Athena, that "the gold was stolen not to launder money they already have but to pay off a debt on drugs that were used/lost/seized." I never even thought of that, and it sure does make much more sense! Not really the "cartels," per se, either.

Great thinking to connect that over the years!

[DD]

@AnAnonymousUser.  Your first sentence "a business is made, and someone writes down the what they spent on the materials, in this case the gold "  illustrates my point of how is that laundering money.  They can't write down what they spent for the gold because they stole it, they didn't buy it.
DD