- The DEA is investing in software to trace crypto and identify cartel money launderers
- US agents have focused on Sinaloa and Jalisco New Generation
- Cartels smuggle in fentanyl from ingredients made in China
The US government is ramping up efforts to trace cryptocurrency payments, made by some of the biggest and most profitable Mexican drug cartels, who are buying fentanyl ingredients from Chinese chemical producers. The fentanyl trade is worth billions and the drug kills thousands of Americans each year, CNN reported.
Fentanyl is a powerful synthetic opioid similar to morphine, but 50 - 100 times stronger, according to the National Institute on Drug Abuse. Crypto analysis company Elliptic reported that transactions for fentanyl ingredients grew by a whopping 450% between April 2022 and April 2023.
What are US agencies doing?
The Drug Enforcement Agency (DEA) is investing in software to trace crypto and identify the cartels’ most apt money launderers. The Department of Homeland Security (DHS) is leading a team of forensic experts to examine digital evidence from stash houses near the border with Mexico. The IRS has deployed its tech-savviest agents to trace digital payments on the Dark Web.
Focus on Sinaloa and Jalisco, former is Fortune 50
US agents have focused on Sinaloa and Jalisco New Generation Cartel (CJNG), two Mexican cartels accounting for the majority of fentanyl sold on US streets. Sinaloa, a Fortune 50 company, has established very sophisticated crypto operations to fund its fentanyl business.
A changing trafficking landscape
Cryptocurrency has made it possible for cartels to smuggle fentanyl north of the border by moving huge amounts of money in milliseconds across the digital, decentralized money transfer system. None of the restrictions placed by banks exist.
What’s more, drug dealers are organizing fewer in-person meetings to hand over cash, which is making it harder for federal agents to perform stakeouts.
Still, digital funds can leave a trace. For example, the holder of a cartel-linked crypto account that DHS agents monitored for more than a year sent $200,000 to an accountant to launder. Agents pounced when the accountant used the money to buy real estate in the US.
Most of the fentanyl in the US comes from China
China outlawed the sale of fentanyl in 2019, but Chinese chemical manufacturers started making fentanyl ingredients instead, US officials inform. Mexican drug cartels smuggle in most of the fentanyl that enters the US from the ingredients made in China, which are packed in powder or pressed into pills.
A single company made enough drugs to kill 25M people
One single Chinese company reportedly shipped around 450 pounds of fentanyl to “clients,” who were actually DEA agents. The company expected payment in cryptocurrency. According to prosecutors, this was enough drugs to kill 25 million people.
Modes of transport
The fentanyl trade has made the Sinaloa Cartel hundreds of millions of dollars, data from the US Department of Justice indicates. Sinaloa is operated by the sons of drug lord Joaquín “El Chapo” Guzmán, who is currently in prison. Allegedly, they use trailers, planes, fishing boats, and even submarines to transport fentanyl and other drugs.
An international money laundering network
Cryptocurrency has made it possible for cartels to move money globally in new ways. The DEA reports that they have money launderers all over the world, from Thailand to Colombia. These employees, also known as “spinners,” get money from drugs in one cryptocurrency and exchange it for another to conceal the fund source. The cartels are protecting themselves by not getting the crypto directly.
Cryptocurrency prices are very volatile, which means the cartels are always in a hurry to convert their crypto to fiat. They often do this by moving it through a series of digital assets.
Mixing tools used to hide sources
The cartels also use privacy mixers like Tornado Cash to conceal the source of funds. North Korean hackers also use these tools to launder stolen crypto and help fund Pyongyang’s weapons program, CNN reported.
When can federal agents strike?
If a cryptocurrency exchange has its headquarters in the US, but serves a customer in Mexico, US agents can issue a subpoena and seize its assets.
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