Deficiencies in the U.S. anti-money laundering framework to combat drug trafficking organizations

Abstract

As globalization has expanded the capabilities of financial institutions to operate with increased capacity and efficiency, so too has it decreased the effectiveness of regulatory agencies to monitor the increased amount of activity within the U.S. financial system. This gap has exposed the U.S. financial sector to the threat of criminals concealing their illicit profits by conducting legitimate transactions through financial institutions. Knowing these deficiencies exist, criminal enterprises have developed specialized money laundering methods to disguise the true origin of their assets. While fraud encompasses a larger portion of the estimated total amount of money being laundered within the U.S financial system, Drug Trafficking Organizations (DTOs) pose the greater threat. Specifically, Mexican DTOs are responsible for the majority of drugs that flow into the U.S. as well as the recurring violence along the southwest border. Also, the large amount of funds DTOs attempt to launder undermines the U.S. economy while potentially weakening financial institutions. Thus, it has been the interest of the government to establish a sound anti-money laundering framework to mitigate the vulnerabilities of the U.S. financial system. However, many financial institutions as well as agencies within the government are lacking in their abilities to identify, prevent, and investigate these threats. This paper will attempt to identify the specific methods of DTOs and how they exploit federal and public policy. Based on the methods identified, changes to correct the remaining vulnerabilities of the anti-money laundering framework will be recommended.