THE LAUNDRY BUSINESS HAS NEVER BEEN ANY BETTER

5 Ways the MS13 Launders Money

by Felipe Puerta

InSight Crime
September 7, 2018

A number of recent operations have revealed that the MS13 has developed a financial structure that’s helped them increase their income. But how does the gang weave its dirty money into the legal market?

Extortion has traditionally been the main source of income for gangs like the MS13. More recently, these groups have ventured into other criminal markets, including unsuccessful attempts at becoming increasingly involved in international drug trafficking, which has helped beef up the gang’s financial muscle.

This new method of making money has forced every “clica” — or cell — to find a way to efficiently manage its growing resources. In the past, the money was used to maintain the gang’s criminal activities, pay members and purchase weapons and vehicles, as well as implement different money laundering schemes. Up until now, these methods have proven quite rudimentary, as InSight Crime detailed in a recent investigation.

These new money laundering schemes don’t just represent a new source of income for the MS13 — which in some cases, such as with motels, can exceed proceeds from extortion and microtrafficking — but they have also helped strengthen the presence of organized crime in the legal economy and increased the gang’s economic, political and social control in the communities in which they operate.

Below, InSight Crime highlights five of the main ways in which the MS13 launders money throughout the region:

1. Auto Theft and Resale

Since the early 1990s, stealing and reselling used cars has been one of the primary ways in which the MS13 launders money.

Although this method has traditionally been limited to the gang in El Salvador, in most cases the cars come from the United States, Mexico and Honduras. The cars are then sold and legalized in the used and restored car market in the Central American nation before they are later sold in used car lots.

The theft and sale of cars was an important aspect of “Operación Jaque” (Operation Check), which authorities in El Salvador carried out against the MS13 starting in 2016. During the operation, authorities arrested Dennie Antonio González Mirando, who, according to the country’s former head of customs (who was also linked to the case), had imported more than 2,000 used cars into the country and committed a series of administrative- and contraband-related crimes. González Mirando has since been released.

2. Shell Companies and Property

Investing in property continues to be one of the preferred money laundering methods for criminal groups throughout the region. This is largely due to the fact that there are few regulations on financial transactions in this business, and it also allows criminal groups to move large quantities of money in one single transaction.

In one operation against the MS13’s finances this year in El Salvador, prosecutors said that the gang now had a network of shell companies to launder money.

The shell companies — ranging from hotels, bars, restaurants, parking lots and brothels — which at times are used as legitimate businesses, are in some cases created from scratch. They even return the “investment” and the profits “as if they were partners” with the gang, according to El Salvador National Police Director Howard Cotto.

In addition, some of these properties, such as motels, are also allegedly used as meeting points for the gang to hide out or commit murders.

3. Small Businesses

Another thing Operation Check revealed was that many small businesses that had for years been extorted by the gangs were also being used to launder the gang’s money. This shifted the previously parasitic relationship between extortionists and those being extorted to a more symbiotic one.

The gang acquires the products that are later sold at a higher price in local clothing, food and liquor stores typically located in central plazas. The gang can demand up to 70 percent of the profits made.

4. Loan Sharking

Another money laundering technique used by the MS13 in some areas of Honduras is loan sharking — lending money to individuals at very high interest rates, also known as “gota a gota” (drop by drop) — allegedly in coordination with Colombian organized crime groups.

Illegal loan sharks can typically charge a daily interest rate of up to 30 percent to local business owners in various Honduran cities like the capital Tegucigalpa, San Pedro Sula and La Ceiba.

Some of these groups have also ventured into laundering money through the sale of illegal lottery tickets and other betting games. At times their earnings can surpass those of official lotteries. Paying late or failing to pay all together can result in threats, assaults and even death.

5. Money Transfers

Yet another way in which the MS13 launders money is through the official financial system, either by making small deposits into bank accounts, asking victims to make electronic transfers or through other financial intermediaries like Western Union.

A 2013 investigation published by El Faro showed how the gang used a remittance service — offered by the cell phone service provider Tigo and known as Tigo Money — to collect extortion payments locally and from abroad.

The only conditions to use the service, which allows for transfers of up to $750 per month, were that the sender and receiver had a Tigo sim card and an identification card.

The diversification of bank accounts and entities where the money is transferred, by using the bank accounts of those closest to the gang, for example, is a crucial part of this money laundering method in order not to raise the suspicions of financial intelligence institutions.