The Treasury Department’s Financial Crimes Enforcement Network imposed new financial reporting rules on 2,000 businesses Thursday in the fashion district of Los Angeles after a massive raid last month uncovered a suspected widespread money laundering operation working for Mexican drug gangs.
FinCEN’s geographic targeting order (pdf) requires the businesses to report any transaction involving more than $3,000.
Jennifer Shasky Calvery, FinCen’s director, said it’s one of the agency’s biggest orders ever issued.
“We’re hoping this is going to disrupt the ability of some of the most prominent drug trafficking organizations out there to launder and use their money to continue their illegal activities,” she said. “Our goal here is to make it so they can’t move their funds.”
She said about 2,000 businesses in the LA fashion district are being served with notice of the order.
Last month, a thousand federal agents launched raids across the fashion district and seized an estimated $90 million in cash and $30 million in bank accounts allegedly linked to a money laundering operation for Mexican drug cartels.
Nine people were arrested in raids at 70 downtown locations.
This order requires nearly every business in the fashion district to report any instance in which they receive at least $3,000 in cash, and failure to comply with the order could lead to a criminal indictment,” said Acting United States Attorney Stephanie Yonekura.
“My office sought the unprecedented order from FinCEN with the goal of shutting down the flow of dirty money to foreign drug cartels — a huge problem that has contaminated the fashion district,” Yonekura said.
Federal authorities allege that LA businesses received drug money in cash in exchange for clothing sold in Mexico. That allowed cartels to keep their profits in pesos without any traceable currency crossing the border or getting wired into a bank.
Businesses are normally required to report any cash transactions bigger than $10,000 to federal authorities but tighter rules were sought for the fashion district after the raid.
FinCen director Shasky said targeting orders aren’t used often.
One was issued earlier this year for cash couriers and armored cars at two Mexican border crossing points in California.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.