Drug Traffickers Launder Millions Through Remittances. Here’s How to Stop Them.

Drug cartels are exploiting a new tool for laundering money—remittances.  

Lax government oversight allows cartels to launder tens of millions through remittances annually (and that’s a conservative estimate based on criminal convictions to date). But it doesn’t have to be this way. Congress and U.S. embassies can take steps now to curb the practice and make it harder for fentanyl traffickers and others to refinance.

In 2023, Latin America received a record-setting $155 billion in remittances, primarily from senders living in the United States. Most senders are hard-working families, and most remittances to Latin America—which have doubled over the past decade—are a force for good, boosting consumption in Central America and the Caribbean. 

But as remittance flows have grown, transnational organized crime groups (TOCs) have also learned how to exploit them—namely as a tool for covertly cleaning and moving the proceeds of their drug sales on U.S. streets back to Latin America. 

TOCs coerce or bribe U.S. citizens and residents without criminal records into mixing drug proceeds with clean cash destined for recipients in the region. Those recipients then transfer the money to TOCs’ local contacts. The 2024 National Money Laundering Risk Assessment, issued by the U.S. Treasury Department, flags the indictments of over a dozen individuals federal prosecutors accuse of laundering more than $20 million through a Utah-based money-remitting business. And that’s not the only case of indictments for remittance-based laundering mentioned in the report.

While money laundering via banks has gotten harder in recent years, laundering through remittances remains too easy. Remittances are currently subject to a patchwork of state and federal legislation that the U.S. Department of Treasury’s 2024 National Money Laundering Risk Assessment and the 2023 Annual Threat Assessment of the U.S. Intelligence Community say make them vulnerable to money laundering.

All that makes money laundering via remittances hard to control—but it’s not impossible. Here are four steps the U.S. government can and should take now.

Pass the Remittances and Money Laundering Risk Assessment Act 

This bill, introduced in 2019 by Senator John Cornyn (R-TX), would address one of the biggest current hurdles: the lack of information about remittance-based laundering. It tasks the U.S. Department of Treasury with reporting to Congress on TOC use of remittances and developing a government strategy to curb the practice. Days after its introduction, the bill was incorporated into a larger anti-money laundering bill, the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act. Senators Cornyn, Klobuchar (D-MN), and Grassley (R-IA) reintroduced that act in 2022, and again in January 2024, but it hasn’t yet made it past the Senate Committee on the Judiciary.

Lawmakers, including on that committee, should do what it takes to pass the bill in the next congress. They should also pass the Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act, which would make non-bank businesses and professions, including third-party payment services, subject to the same anti-money laundering regulations and procedures as banks. Bipartisan support for the 2021 Corporate Transparency Act proves it can be done.

Prosecute Remittance-based Laundering 

Second, state and federal prosecutors should raise the costs for launderers by pursuing targeted investigations. State prosecutors have landed money laundering convictions in at least seven cases involving remittance-based laundering since 2017.

Criminal investigations can also motivate money services businesses to do more to prevent laundering. In 2017, Colorado-based Western Union—the world’s largest MSB—reached a nearly $600 million settlement with the U.S. Department of Justice and Federal Trade Commission, admitting it turned a blind eye to money laundering and pledging to improve its compliance procedures.

Increase Funding for the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) 

This year, the Treasury Department’s new beneficial ownership rule went into effect, making it harder for money launderers and kleptocrats to park their illicit gains in anonymous U.S.-based shell companies. Now all companies conducting business in the United States are required to disclose their owners to a federal government registry.

But FinCEN, allotted less than $200 million per year and with a staff of just 300, has nowhere near enough resources to review the more than 32 million beneficial ownership filings it is expected to receive over the next year. Resource constraints will likely hinder its capacity to share information with law enforcement, security and intelligence officials, and financial institutions. Congress should increase FinCen’s funding in the FY26 appropriations act. 

Build a Coalition with Latin American Partners 

The United States should not and cannot address the problem alone. Latin American partners can help, too. The United States could use its 2020 memorandum of understanding with Panama—which helped that country establish a U.S.-trained anti-money laundering and anti-corruption task force—as a framework for future cooperation (similar MOUs already exist with Colombia and the Dominican Republic). Once enough partners sign on, the United States could use these agreements as the foundation for a broader regional effort to combat laundering at all levels, including via MSBs. U.S. embassies can leverage their convening power help to push the issue to the top of the agenda. In June 2024, the U.S. embassy in Belize brought together private and public sector actors to share best practices on countering laundering. More should follow.

Remittances should benefit hard-working families in the United States and Latin America—not drug cartels. It’s time the U.S. government and its regional partners got serious about tackling the problem.

Mariana Fernandez Rubach is the Latin America Policy intern at the Council on Foreign Relations. Mariana is a graduate student at the George Washington Elliott School of International Studies where she concentrates on security policy studies, organized crime, and money laundering.

A previous version cited a Signos Vitales report that experts have disputed.