Drug smugglers leave a trail of hard-to-carry cash
Four million dollars, in small bills, is a bit like a St. Bernard: nice, but hard to hide. So, when federal agents burst into a Miami drug ring office last month, they found a pile of money the size of a small refrigerator. The $4 million haul represented two days' cash flow for a smuggling operation, posing as a currency exchange firm, that authorities said had been operating in south Florida for 15 months.
The bust represents a new emphasis on an old law-enforcement tool -- catch crooks by tracking their profits. Few drug dealers accept MasterCard of Visa, so wholesalers quickly accumulate boxes, bags, and old suitcases full of 10-and 20-dollar bills.
"It's a very severe logistical problem for criminals to move that much cash," says William Meglen, director of Custom's currency investigation division. "I mean, we're talking bulk."m
Frustrated criminals sometimes try to transfer the money in unusual ways. Maria Rojas at Bogota, Colombia, was arrested at the Miami airport last year, carrying $1.5 million in eight shrink-wrapped Monopoly boxes.
In Florida, stories of customers swaggering in from the street, dumping out a shopping bag of money, and driving off in a new Mercedes Turbo are common.
One suspected cocaine dealer, Antonio Cabrera Sarmiento, paid cash for various parcels of real estate, a blue Rolls-Royce and a 60-foot Hatteras yacht.
Miami has become well-known as the Wall Street of this underground cash. Federal authorities point to what they call the "grotesque" amount of currency flowing into the Miami Federal Reserve Bank -- where deposits jumped from around
The federal chase of the hot money is led by Operation Greenback, a joint Customs/Treasury investigation begun last year, succeeding the less-than-successful Operation Banco.
Greenback's main weapon is a much-maligned thing -- paperwork. The Bank Secrecy Act of 1970 created IRS Form 4789, which requires banks to report cash transactions over $10,000, except for certain regular customers. It also spawned Treasury Form 9022-1, which requires that foreign bank accounts must be listed once a year, and mandated that anyone leaving the country with more than
"IRS Form 4789" doesn't sound like something to strike terror in a devious heart. But these paperwork requirements attempt to box in criminals with large amounts of cash.
"The whole motive behind the legislation was the belief that organized crime was using legitimate financial institutions to deal with illicit funds. It's intended to provide audit trails," says William Meglen.
Criminals don't want to leave a record of their cash anywhere. So it becomes difficult to put money in the bank, wire it overseas, or physically carry it out of the country.
They can keep it around the house, but that isn't very secure. Anyway, the mattress gets lumpy after being stuffed with a few hundred thousand. So they buy things, like Sarmiento with his yacht and Rolls.
"But people remember big cash purchases," says James Laughton, a branch chief of currency investigations at Customs.
If they break down and try to launder the money through a bank, the required forms can alert authorities to suspicious movements of large blocks of money, or give them evidence to move against a suspect.
Jaime Araujo, alias Pedro De La Cruz Alvarez, was caught that way. Over 19 months he deposited $15.4 million in a San Ysidro, Calif., bank, whose deposits before the windfall were only $3.9 million. Sometimes Araujo deposited so much money bank officials had to help him unload his car. But a Treasury official in Washington saw the Form 4789s, and became suspicious. His suspicions led to a convicion of Araujo on the biggest tax evasion case in history -- and the breakup of a 40-member drug marketing ring.
Authorities claim most depository institutions look askance at customers who shove stacks of currency, often moldy and damp from burial, across the counter for deposit.
But Customs investigator Meglen admits that "banks like cash."
And there is at least one case of bank employees taking a cut for covering the paperwork trail. Late last year, an employee of Florida's Landmark First National Bank was accused of sending money through fictitious channels, dutifully filing the bank's copy of Form 4789, but sending the carbon destined for the IRS through a shredder. In Return, the employee allegedly received 0.75 percent of the cash.
In any case, the paperwork audit is a needed weapon against a fast-growing problem. Operation Greenback is currently investigating suspected narcotics operations with a combined cash flow of around $1.5 billion a year, according to Customs estimates. But experts put underground cash activity in Dade County, Fla., alone at anywhere from $7 to $11 billion.