Drug cartels and International Banking


Question 1

International banks play a great role in supporting organized crimesthrough money laundering. Glenny (2009) confirms that organizedcrimes accounts for about one fifth of the global GDP. One of thecommon organized groups is a drug cartel, which deal with illegaldrug trade. These groups are dangerous and have caused severalmurders in an attempt to ensure their survival. Unlike terrorists,the main purpose of drug cartels is to make hard cold money and notto destabilize the government. However, these groups are as dangerousas terrorists because they are trained to kill when necessary.

Since it is impossible to survive in the market without gettingcaught, they are forced to engage in money laundering. This refers toa process of making unclean money clean to disguise the real source.Although there are many forms of money laundering, internationalbanks, which are obliviously the home of money, are largely involved. Whereas there are many types of criminals who require moneylaundering, drug cartels are in serious need. This is because theydeal with almost exclusive cash, which can cause logistics problems.Drug cartels make billions of dollars within a very short time fromtheir businesses. For instance, 20 kilograms of cocaine is worth$1billion when sold in the streets.

International banks support drug cartels through various stages. Thefirst stage is placement, where the launderer deposits large amountsof money in a bank. This is often dangerous as banks may reporttransactions involving large amounts of money. After this, banks makeseveral transactions to make it difficult to follow and change itsform. This stage is referred to as layering and involves several bankto bank transfers between different accounts in differing countries.It also involves making several withdrawals and deposits tocontinually help in varying the amounts in accounts, changing money’scurrency, and purchasing expensive items. This stage is usuallycomplex as it involves various steps that eventually make dirty moneyappear clean while covering its origin as much as possible. Finally,integration stage involves re-entering money into the mainstream insuch a way it appears as a legal transaction. This may be the finalbank transfer in which case the launderer makes it look like a profitfrom an investment or sale of expensive equipments bought at thesecond stage. It is difficult to catch a criminal at this stage ifthere is no documentation.

It has been noted that international banks are the major players inmoney laundering. Further, bank officials in money laundering arebacked up by the highest levels of banking institutions. Moneylaundering is made possible by the important banks in the world. Forinstance, Citibank, which is the biggest bank in US and serves over100 countries is said to be the biggest money launderer. It has over$100 billion client assets in private bank in over 30 countries.Private banking caters for extremely wealthy customers where thebanks charge them for managing their assets. The private bankingsector goes beyond normal services hence, attractive to moneylaunderers. Correspondent banks also offer a route for moneylaundering. Correspondent banking refers to the provision of bankingservices by one financial institution to another. It is highlyprofitable thus, a significant sector of banking. It enablesoverseas banks to carry out their businesses without their physicalpresence. Banks licensed to conduct their businesses in a foreigncountry without their physical presence attracts wealthy criminals inpursuit of money laundering. Most big banks have multiplecorrespondents throughout the world to enable international financialtransactions in places where they do not have physical presence. Mostbanks offering laundering services have correspondent relationshipsoffshore. Some of the biggest banks can process up to $1 trillionthrough wire transfers in a single day. Billionaire drug cartels optfor correspondent banking because they can access internationaltransfer systems, which help in facilitating fund transfers acrossinternational boundaries. One of the major sources insolvency inLatin America, Africa, Russia and many other countries is the pillageof economy resulting from transfer of billions of money out of thecountry through correspondent banking.

The increased schism of the world is rooted in organized criminalactivities and corrupt financial transactions. While it is true thatforeign debt payments undermine the economy of a country, moneytransfer enabled by corrupt bank officials is also a significantfactor. Oblivious of the fact that, banks are the major players inmoney laundering campaigns for anti laundering cannot be successfulwithout putting international banks in the picture. Informationtechnology is greatly helping by making it challenging to laundermoney in financial institutions.

Question 2

International banking and drug cartels has drawn much attention fromseveral countries. In turn, this has led to the formation of variousbodies whose main goal is to detect money laundering in internationalbanks. Recognizing the importance of international cooperation in thefight against money laundering has borne several bodies includingEgmont group of financial intelligence units. Financial intelligenceunits bring added value to the process of fighting financialcorruption through supervision, exchange of information, andoperational and strategic analysis.

The core function of financial intelligence units is to receive,analyze, and broadcast to necessary authorities. Fighting moneylaundering in the international scope is complicated and some casesof money corruption go unnoticed. It is, as such, important for theintelligence unit to train its members on how to detect suspiciousactivities with regard to possible financial corruption. FIU alsocooperates with the anticorruption agency cooperation to facilitateinvestigation of corruption in the financial units. The flow ofinformation in these systems is both upstream and downstream. Thismeans that FIU may feed the anticorruption agency and vice versa.Feeding the FIU with corruption information from anticorruptionagency helps in analyzing financial corruption with prior knowledge.This can also help greatly in easing information exchanges in thefuture.

With regard to international cooperation, FIUs can act as a bridge onbehalf of anticorruption agencies by obtaining relevant informationfrom financial institutions. In case corruption occursinternationally, FIU is able to exchange information with foreigncountries where anti corruption agencies are not able to reach. TheEgmont secure web enables various IFUs to share knowledge onfinancial corruption in a secure way. FIUs should be involved fromthe first step in investigation so as help anticorruption agencies totrace assets belonging to suspects. This means that domestic agenciesshould cooperate with IFU in the early stages of investigation.

FIU has many successful instances where it was able to trace cases ofmoney laundering. For instance, a man named Geoffrey was arrested inEurope after making several deposits in various branches within ashort distance. Since the financial institution monitored moneydeposited into each account, the deposits raised an alert, which ledto further investigation. According to the sources, the criminal rana business of importing second hand goods from Africa. The FIU wasconcerned about the several deposits made within the same account indifferent branches. The concern was raised by the fact that if themoney was genuine, Geoffrey would have deposited in a single branch.The bank reported this to IFU to allow further investigation. Theaccounts of the launderer were monitored and brought more suspicions.After a thorough investigation of his business, it was found out thathis businesses did not produce as much money as he transacted.Geoffrey and his assistant were later arrested for money laundering.Although there are not as many cases reported by IFU, the few thathave been reported can help to scare away money laundering and hence,render drug cartels inefficient.

Financial Action Task Force (FATF) is another intergovernmental bodyformulated to combat money laundering in bank. It was established in1989 after the 1988 UN drug convections. Its membership involves themajor financial centers of North America, Europe, and Asia. FAFT hascome up with recommendations that every member country is expected tofollow. Its main aim is to stop dirty money from entering banks andensure it can be traced in case it occurs. The supervisors of theleading banks combat money laundering in three ways: customer duediligence, core principles of effective banking, and prevention ofcriminal use of banking system. The major international banks havealso made an agreement to conduct and guide private internationalbanking, which has been a leader in money laundering.

Question 3

Drug cartels are found in almost all parts of the world, but Mexicoand the United States tops the list. In fact, due to the existence ofdrug cartels, Mexico is listed as the most violent countries in theworld. The drug war in Mexico is as a result of transnational drugtrade worth $400 billion a year accounting for 8% of internationaltrade. The American government claims that there is no other way toeliminate drug cartels other than fighting illegal drug trade in allmeans. The drug cartels in Mexico have caught headlines over and overdue to violence and murderous activities. The war may occur betweencartels and cartels or between cartels and the authority. Theexistence of banks to cover up for criminal activities worsens thesituation because the major drug dealers are aware that their dirtymoney will be cleaned using various ways. According to statistics,the United States offers one of the largest markets of illegal drugs.Approximately 8% of people above 12 years have experimented illicitdrugs. Americans consume approximately $65 billion in illegal drugsannually, a figure which is close to what the country spends oneducation. Statistics reveal that much of these drugs are acquired byMexican cartels, which make between $10 to $40 billion a year. Morethan 95% of the cocaine in the US passes through Mexico. CIA alsoreports that Mexico is the largest foreign supplier ofmethamphetamine and marijuana to the United States market. Thecountry also produces about 125 tons of heroins and cultivatesmarijuana in almost 18,000hectares. These drugs are later ondistributed to the United States through the border using Mexicandrug cartels extensions.

The realization that drug cartels were affecting the economy and thewell being of the nation prompted the United States to start a drugwar. When the war on drugs began, the coast guard moved to shut downthe drug trade in the borders of Caribbean and Florida, the mainentry of cocaine into the United States from Columbia. This forcedthe Columbian cartels to move their illegal drugs through Mexico intosouthern California and Texas. Eventually, the intermediaries thatthe Colombian cartels used established their own trade leavingColumbian cartels in the dark. Mexican cartels increased leading to atotal of seven drug trade organizations, which operate to date. Theincrease in drug cartels has made it difficult to maintain thesituation by the concerned authorities (Langton, 2011).

The Mexican drug war has killed thousands of people includingcivilians, federal employees, and henchmen since 2006. The impact onthe country has been weighty and violence has proved difficult tomaintain. Kidnappings and killings related to drug cartels havespilled over the areas involved. The main sources of violence areinter-cartel disputes, intra-cartel disputes, and the Calderon’sgovernment war on cartels. Since 2006, the president set out toeliminate the high value leaders using police and army units. On theother hand, the cartels reacted violently to counteract government’saggressiveness. The violence has aggravated recently leading toseveral deaths of public servants. The war on drug cartels is farfrom over because when the government tries to eliminate oneorganization, the other assumes the territory and trading routes.While one cartel is weakened, the other one gets stronger and morekillings ensue. This has made it extremely difficult to fight illicitdrug trade in Mexico. Oblivious of these killings, there is a concernthat drug cartels should be considered as terrorist groups (Kan,2012).

It is has also been noted that the war against drug cartels ischallenging because of extensive corruption in Mexican government andlaw enforcers. Thus, it is crucial for the Mexican and the UnitedStates government to fight corruption to emerge victorious ineliminating illicit drug trade. Further, international bankingsystems should also help in fighting this trade by ensuring that theystop laundering in the financial institutions. International bankscan help greatly in fighting drug cartels by identifying suspiciousactivities in the accounts and disregard money laundering.Cooperation between banks, the government and ensuring a corrupt freenation can help greatly in eliminating drug cartels.

Question 4

With references to liberal and realist perspective, drug cartels andinternational banking draws mixed reactions. Realism holds thatgovernments and those in power pursue their own interests whileliberalism holds that governments can cooperate and actaltruistically to promote democracy and peace. Liberals believe thatmanipulation of the international system to promote cooperation andpeace while realists believe that this is impossible. The conflictingviews of these ideologies can be reflected in the case of illicitdrug trade.

From the perspective of liberals, it is possible to stop drug cartelsand money laundering business if the countries involved cooperate infighting against illegal drugs trade. Anticorruption agencies andfinancial intelligence units believe that they can fight financialcorruption and illicit drug trade. Transnational drug cartels pose agreat challenge both domestically and globally. As such, it has beenrecognized that national and bilateral markets must cooperate to endillicit drug trade. The dynamics of illegal markets and thepervasiveness of money laundering all require multilateral responses.There are many aspects in which the government should consider withregard to drug cartels and money laundering in financialinstitutions. First is the formation of international norms toaccommodate conventions on drug cartels and money launderingpractices. Second, there should be information sharing to enhance lawenforcement through creation of Interpol. Finally, creation ofeducation programs aimed at eradicating drug trafficking at theregional and global levels would also be helpful.

The countries that receive drugs can also help in eliminating drugtrafficking in the borders. It is possible for the governments ofvarious nations to put strict measures in the borders to make drugtrafficking impossible. This can be achieved by first fightingcorruption by government officers who receive bribes to allow drugsto flow. Fighting drug trafficking starts domestically followed byinternational efforts. If all the countries affected by illicit drugtrade could come together and cooperate, drug trafficking would end.Likewise, international banks can help in reducing instances of moneylaundering by monitoring individual accounts and money transfers.

However, from the realist point of view, drug cartels and moneylaundering in financial institutions will continue to ensue. This issupported by the view that everyone is in search of power for selfinterests. The more governments try to fight drug cartels, the moreviolent they become to a point the governments are unable to containthe situation. Further, it should be noted that some of the mostpowerful people in drug cartels are influential politicians. It isnear impossible to fight drug trafficking if the same people whoshould fight it are the main players. Similarly, the officials whoshould control illegal drug trade and money laundering accept bribesand let drug cartels go scot free. The few that get into the hands ofthe police are not always the main dealers. The leaders of cartelsconduct their business safely leaving those in the lowest levels at ahigh risk. For security reasons, the ones caught are not willing toexpose their leaders no matter what. Whenever they are caught, thelords just recruit new dealers and continue with their business asusual. On the other hand, the rich lords have been able to conductmoney laundering activities safely with the help of banks. Thebanking officials who help in money laundering services receivebribes hence, they see no harm in helping in money laundering. Theyclaim that even if they do not do so, someone else will. In fact, itis perilous for them not to obey the orders of their seniors.Corruption in financial institutions and especially in the privatebanking system is far from over as long the ones in power are onlyafter their own interests.

Realism seems to govern the illicit drug trade. People and thegovernment officials have played a great role in encouraging illicitdrug because every person seeks his or her own interests. Corruptionis the root that enables drug cartels and misconduct in internationalbanking to pursue and prosper. No matter what the governments andinternational banking institutions claim, one thing is obliviousdrug cartels and money laundering in international banks will not endany time soon. Lack of cooperation, self interests, and corruptionhas aggravated drug cartels and money laundering in internationalbanking system in the most profound of ways.

Question 5

Illicit drug trade is a lucrative venture that continues to flourisheach awakening day. Since the 1970s, the war on drugs has never borefruits. It is true that it has helped to catch a few criminals andinstilling fear of venturing in the business however, drug cartelscontinue to enjoy their freedom. The lords of the drug cartels arebillionaires and ruthless people who only look after their owninterests. They are well connected with the top governmentindividuals. In fact, research indicate that some lords of drugcartels appear in the lists of the most powerful and influentialindividuals in the world. This has made it difficult to catch up withthe leaders of illegal drug dealers. Many governments includingMexican have tried to fight drug cartels to no avail.

The more governments try to dismantle drug cartels, the more violentthey become. For instance, since 2006, the war on drug has become soviolent leading to thousands of deaths including innocent civilians.The efforts on curbing drug cartels have become futile because of theruthlessness of the suspects. Likewise, when the governmentconcentrates its efforts on fighting one drug cartel, another carteltakes control. On the other hand, targeting small cartels allows themajor cartels to absorb the territories of the disbanded ones. Whenthe war on one territory ensues, the cartels establish newterritories. This has made it difficult to fight drug cartels in manyaspects.

It is also notable that international banking is the least target oflaw enforcement while it is oblivious that it plays a great role inencouraging the growth drug cartels. Although there are campaignsagainst money laundering, the financial institutions continue tolaunder money for their won benefits. First of all, banks benefitgreatly from the made by cartels, and secondly, the officials arepaid in kind to corrupt money. However, there is hope with as newtechnology helps in detecting suspicious money transfers andmovements. If the banks can monitor the activities of the accounts,then there is an increased likelihood of reducing money launderingcases.

From the above analysis, it is evident that there is a great futurefor drug cartels as long as corruption both by the governmentofficials and bank officers exist. The drug cartels are increasinglybecoming wiser than the governments in charge. No matter how hard theauthorities claim to fight drug cartels, more and more drugs aredistributed in various parts of the world. The probability that thedrug cartels will continue to flourish in the near future is veryevident if the concerned authorities continue fighting drugs in thesame pace. In fact, drug cartels and money laundering seems toincrease every year. Studies reveal that the number of peopleimmersing in drugs increases every year despite the anti drugscampaigns. If the relevant authorities fail to put strict measuresand fight corruption, drug cartels will become stronger while bankinginstitutions will continue to launder money. This will not onlyaffect the economy of the affected countries, but also the well beingof people in general. Tough measures must be put in place if drugcartels are to be eliminated.


Glenny, M. (2009). McMafia: A journey through the global criminalunderworld. New York, N.Y: Vintage Books.

Kan, P. R. (2012). Cartels at war: Mexico`s drug-fueled violenceand the threat to U.S. national security. Washington, D.C:Potomac Books.

Langton, J. (2011). Gangland: The rise of the Mexican drug cartelsfrom El Paso to Vancouver. Mississauga, Ont: J. Wiley &amp SonsCanada.