Dictionary of Financial Scam Terms: Black Market Peso Exchange

Black Market Peso Exchange

A system by which drug money profits are laundered through the use of international trade and blocked currency accounts (see BLOCKED FUNDS). Here is how it works:

Columbian drug dealers export drugs to North American and Western Europe. The drug sales are deposited in the currency of country where the drugs are sold. Now the drug dealer has to figure out a way to convert those Dollars, Francs, Deutsche Marks, etc. into Columbian pesos back home, but there is a small catch - a peso broker (broker who specializes in converting currencies in blocked currency accounts for a commission) is contracted by the cartel to exchange the pesos he controls in Columbia for the funds the cartel holds in the foreign countries.

Once this is accomplished, the drug dealers are out of the picture. Now it is up to the currency broker to launder the funds he now hold in foreign countries. He now must place these funds into the country's banking system and move it around. For this process, he has contacts in the foreign countries to assist him.

To accomplish the final phase, the broker advertises to Colombian importers that he has foreign funds available for the purchase of foreign products. Colombian importers place their orders. The broker's contacts purchase from manufacturers on behalf of the Colombian importers, and the broker pays for the products with the drug money. The broker is in turn paid in pesos by the Colombian importers, refilling the broker's supply of peso currency funds.

The purchased goods are shipped to the Caribbean or a destination in South America from which they are smuggled into Colombia, the Colombian importer takes possession, and avoids the expensive Columbian import and exchange tariffs.

The drug money has thus been moved into the banking system, the broker has his new peso accounts, making money from all sides in the process, the drug dealers have their pesos, the Columbian importer has his foreign products to sell at a cheaper price, and everyone has made out like a bandit. Unfortunately, honest manufacturers and suppliers have been unwittingly dragged into money-laundering.

To learn more about the Black Market Peso Exchange, please visit Money Laundering: Black Market Peso Exchange, brought to you by Enforcement Division of the U.S. Customs Service.