Tag Archives: Fashion District

Fashion District drug money laundering

L.A., and the Fashion District in particular, is the “epicenter” of narcodollar money laundering, mostly by Mexican drug cartels, said authorities at a press┬áconference today.

They came together from the FBI, DEA, IRS and US Attorney’s office to announce a bunch of arrests in the Fashion District early Wednesday and describe a scheme through which dollars are laundered into pesos.download

In one location, they came upon boxes of cash that they expected would total $35 million when they were done counting, which they weren’t by midday. They seized another $19 million in bank accounts and $10 million at a house in Bel-Air – $65 million in all.

Among all that’s interesting in this topic is the fact that virtually all of this takes place within the immigrant economic ecosystem in L.A., which has long fascinated me as it basically involves almost no native-born Americans. In this case, mostly Chinese sewing-company owners were doing business with Mexican drug traffickers.

Apparently these exchanges with Fashion District businesses on behalf of drug traffickers has become a popular way of laundering money ever since 2010 when Mexico put strict controls on the quantities of dollars that could be deposited in its banking system without being reported.

Used to be traffickers would just pack stack of dollars into a car and drive home. Now putting that money somewhere isn’t as easy. Hence this new Black Market Peso Exchange scheme.

Basically, it works thus: traffickers in the US with ill-gotten bucks find a peso broker – someone whose job it is to search out companies already selling goods into Mexico. A trafficker delivers large quantities of these dollars to Fashion District companies to pay for massive deliveries of clothes down to Mexican clothing importers who are in the scam.

“The cash never crosses the border, but the goods do,” said Robert Dugdale, chief of the U.S. Attorney’s criminal division in L.A. The Fashion District firm sends the clothes to a clothing importer in Mexico. The clothes are sold for pesos and the pesos are given to the cartel traffickers, after the broker takes a cut for himself.

A lot of this appears to depend on Fashion District clothing companies with owners who are willing to say nothing when some guy shows up with a duffel bag of cash, using only a nickname as ID.

Homeland Security had previously sent out notices to 160 companies in the district, telling them of U.S. legal reporting requirements for cash. The selection of which companies were notified “was not random,” said Claude Arnold, special agent in charge of Homeland Security Investigations here.

Apparently this scheme has sent floods of cash through the Fashion District. Be interesting to see after all this what happens to some of these companies.

One Fashion District company – Q.T. Fashions on 12th Street – allegedly laundered $140,000 in ransom money for the kidnapping of a cartel courier, a U.S. citizen, whose load of cocaine was confiscated by law enforcement. To get repaid, members of the Sinaloa Cartel kidnapped him, took him down to Mexico, tortured him and got the family to take the ransom money to QT Fashions, which allegedly got the cash down to Mexico. The hostage was eventually freed.

Photos: Stashes of cash; Source: US Attorney’s office

 

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Filed under Border, Business, Drugs, Global Economy, Los Angeles, Mexico, Southern California