Skip to main content

Illicit funds from Mexico find safe haven in U.S.

By Heather A. Lowe, Special to CNN
updated 9:44 PM EDT, Tue June 12, 2012
Wachovia Bank settled after it was accused of laundering $378 billion in Mexican drug cartel funds between 2004 and 2007.
Wachovia Bank settled after it was accused of laundering $378 billion in Mexican drug cartel funds between 2004 and 2007.
STORY HIGHLIGHTS
  • $872 billion in illicit finances left Mexico from 1970 through 2010; most went to U.S. banks
  • Heather Lowe: This funds the underground economy, including drugs and human trafficking
  • Lowe: Mexico needs easy, automatic, access to U.S. bank deposit information to fight crime
  • U.S. should agree to a method to easily exchange information with Mexico, she writes

Editor's note: Heather A. Lowe is legal counsel and director of government affairs at Global Financial Integrity, a research and advocacy organization in Washington.

(CNN) -- The United States has a strong national interest in economic, political and civil stability in Mexico. Its war against transnational drug cartels has dramatically highlighted Mexico's problems, but the truth is that the nation has had deep, unsolved, structural problems in its economy and an opaque international financial system for decades.

Global Financial Integrity's report on Mexico found that $872 billion in illicit finances left the country from 1970 through 2010. Although some laundered drug money may be included in that figure, it overwhelmingly represents tax evasion by both domestic and multinational corporations doing business in Mexico, as well as corruption, kickbacks and bribery from wealthy Mexican public officials and business leaders.

Evidence in the report suggests that much of this illicit money ends up in the United States. Illicit flows, through a phenomenon known as trade mispricing, dramatically increased after the North American Free Trade Agreement was established, and have remained high. Bank deposit data from the Bank of International Settlements show that the United States is the No. 1 destination for Mexican funds. The study reveals that increases in the flow of illicit funds significantly drive Mexico's underground economy, which includes drug smuggling and human trafficking. As a result, Mexico's underground economy has ballooned to more than 30% of its GDP.

7 held in allege scheme to launder cartel money

But the United States has the power to help Mexico at little cost to itself. Mexico's tax authorities need easy, automatic, access to bank deposit information on Mexican citizens with accounts in the United States, so that they may track tax evasion and other financial crimes across the border.

Heather Lowe
Heather Lowe

Under an existing treaty, the U.S. government is required to make information about specific Mexican account holders available to Mexico upon request. But the United States does not collect enough information from U.S. banks to meet most requests and must go to the banks and collect it. In practice, that system is too slow and burdensome to generate the volume of information needed to enable the Mexican government to analyze the flow of funds across the border. An automatic system of exchange would allow Mexican authorities to clamp down on illicit funds leaving their country.

The U.S. and Canada employ such a system. The U.S. Treasury already collects the requisite information on Canadian citizens' accounts in the United States and sends it to Canada automatically, and vice versa. The Canadians have the same form of automatic tax information exchange with Mexico. This means that the only exchange relationship missing between NAFTA countries is between the United States and Mexico.

The technology is already in place to execute automatic exchange, and all that is needed on the U.S. side is that the government collect a Form 1099 for all Mexican citizens with accounts in the United States. It should be very easy for Treasury to quickly and cheaply expand automatic exchange of tax information to our southern neighbor.

Mexico has asked for this information. In 2009, then-Mexican Finance Secrecy Agustin Carstens formally requested that the United States automatically exchange tax information with Mexico, in order to "help detect and prevent tax evasion, money laundering, terrorist financing, drug trafficking and organized crime." As far as we know, the Treasury has not replied.

Money is the lifeblood of any criminal organization. Tracking money has proven to be an effective way for law enforcement to catch criminals over countless generations. Al Capone himself was only caught by Eliot Ness through charges of tax evasion. Mexico needs those same tools in its arsenal to combat organized crime. Without U.S. cooperation, this becomes much more difficult.

If the United States truly wants Mexico to successfully combat the corruption, violence and pervasive influence of organized crime inside its borders, it should help Mexico address the root structural causes of its turmoil. There is no good reason to withhold this information from our neighbors. By virtue of our geographic proximity, Mexico's problems become the United States' problems. There is no excuse to ignore a highly effective, low-cost option available to us in this fight.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Heather Lowe.

ADVERTISEMENT
Part of complete coverage on
updated 1:50 PM EDT, Sun September 21, 2014
John Sutter boarded a leaky oyster boat in Connecticut with a captain who can't swim as he set off to get world leaders to act on climate change
updated 7:22 PM EDT, Fri September 19, 2014
Is ballet dying? CNN spoke with Isabella Boylston, a principal dancer at the American Ballet Theatre, about the future of the art form.
updated 5:47 PM EDT, Fri September 19, 2014
Sally Kohn says it's time we take climate change as seriously as we do warfare in the Middle East
updated 9:02 AM EDT, Fri September 19, 2014
Dean Obeidallah says an Oklahoma state representative's hateful remarks were rightfully condemned by religious leaders..
updated 3:22 PM EDT, Fri September 19, 2014
No matter how much planning has gone into U.S. military plans to counter the Islamic State in Iraq and Syria, the Arab public isn't convinced that anything will change, says Geneive Abdo
updated 11:44 AM EDT, Fri September 19, 2014
President Obama's strategy for destroying ISIS seems to depend on a volley of air strikes. That won't be enough, says Haider Mullick.
updated 9:03 AM EDT, Fri September 19, 2014
Paul Begala says Hillary Clinton has plenty of good reasons not to jump into the 2016 race now
updated 11:01 AM EDT, Fri September 19, 2014
Scotland decided to trust its 16-year-olds to vote in the biggest question in its history. Americans, in contrast, don't even trust theirs to help pick the county sheriff. Who's right?
updated 9:57 PM EDT, Thu September 18, 2014
Ruben Navarrette says spanking is an acceptable form of disciplining a child, as long as you follow the rules.
updated 11:47 AM EDT, Fri September 19, 2014
Frida Ghitis says the foiled Australian plot shows ISIS is working diligently to taunt the U.S. and its allies.
updated 3:58 PM EDT, Fri September 19, 2014
Young U.S. voters by and large just do not see the midterm elections offering legitimate choices because, in their eyes, Congress has proven to be largely ineffectual, and worse uncaring, argues John Della Volpe
updated 9:58 PM EDT, Thu September 18, 2014
Steven Holmes says spanking, a practice that is ingrained in our culture, accomplishes nothing positive and causes harm.
updated 2:31 PM EDT, Thu September 18, 2014
Sally Kohn says America tried "Cowboy Adventurism" as a foreign policy strategy; it failed. So why try it again?
updated 10:27 AM EDT, Thu September 18, 2014
Van Jones says the video of John Crawford III, who was shot by a police officer in Walmart, should be released.
updated 10:48 AM EDT, Thu September 18, 2014
NASA will need to embrace new entrants and promote a lot more competition in future, argues Newt Gingrich.
updated 7:15 PM EDT, Tue September 16, 2014
If U.S. wants to see real change in Iraq and Syria, it will have to empower moderate forces, says Fouad Siniora.
updated 8:34 PM EDT, Wed September 17, 2014
Mark O'Mara says there are basic rules to follow when interacting with law enforcement: respect their authority.
updated 9:05 AM EDT, Tue September 16, 2014
LZ Granderson says Congress has rebuked the NFL on domestic violence issue, but why not a federal judge?
updated 7:49 AM EDT, Tue September 16, 2014
Mel Robbins says the only person you can legally hit in the United States is a child. That's wrong.
updated 1:23 PM EDT, Mon September 15, 2014
Eric Liu says seeing many friends fight so hard for same-sex marriage rights made him appreciate marriage.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT