Where Does All The Illegal Drug Money Go?

By May Wilkerson 03/18/16

A new book claims that the majority of illegal drug money is a lot closer to home than we think. 

Where Does All The Illegal Drug Money Go?
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Americans spend a lot of money on illicit drugs—about $109 billion in 2010, according to a White House study. So where do the profits go? Even though the majority of these drugs come from other countries, most of the cash remains in the U.S., Business Insider reports.

This is largely because major increases in the value of illicit drugs happen in the U.S., and because of government efforts to keep illegal drugs and their profits from crossing borders. "Most of the profits involved in the drugs business actually stay here in the United States or in Europe, where the consumption happens," said Tom Wainwright, author of Narconomics, told Business Insider. Cocaine, for example, is worth about $20,000 per kilo when it arrives in the U.S.—then the price is jacked up to about $150,000 in street value.

As a result, the people profiting from these drugs also reside mainly in the U.S. “The real millionaires, the real drugs millionaires, are right here in the United States,” said Wainwright. In the cocaine business, for example, more than half of these profits end up remaining in the states.

Why these extreme price hikes? Because of the risk involved. These profiteers are usually cartel operatives who have to liaise between a cartel’s base of operations and the group it partners with to distribute the drugs in the U.S. Their costs include stash houses, transportation to distributors, as well as their own salaries. Add to this the expenses involved in keeping this all on the down low. These costs, in addition to the huge risks of getting caught and facing long prison terms, allow them to charge a premium.

After the drugs have been distributed and the cash has been collected, the money must then be filtered back to the drug cartel’s headquarters. Cash flows of this volume attract attention, so the organizations rely on both cash smuggling and money laundering to move the money around, explained Mike Vigil, the former head of the Drug Enforcement Administration’s international operations. “What they do is they formulate business enterprises, you know like fictitious businesses ... here in the United States, also in Mexico, and they use those to launder money,” he said.

These fake businesses often involve precious metals, like gold and diamonds, or other goods purchased in large amounts with drug money that are then resold. According to Vigil, the “epicenter” for money laundering by Mexican drug cartels, especially the notorious Sinaloa Cartel, is the Los Angeles Fashion District.

Large multinational banks have also been implicated in money laundering for cartels. Both Wachovia and HSBC have faced federal investigations for their involvement in the drug trade. 

In the past, famous drug lords like Pablo Escobar and Joaquín “El Chapo” Guzmán were able to amass billions of dollars selling drugs to American consumers. But as enforcement has gotten stronger, less and less of these profits make it back to the source.

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May Wilkerson is a writer, comic and Managing Editor @someecards. Co-host of the podcast Crazy; In Bed w/alyssalimp. She is also the top Google result for "insufferable lunatic." Follow this insufferable lunatic on Twitter.