By Hannah Davis
FAIR
Mexicans living in the United States sent home over $63 billion last year, almost double what was remitted in 2018. In fact, so much money was transferred from the United States to Mexico as remittances that it accounted for 4.3% of Mexico’s Gross Domestic Product, or GDP.
Now, lawmakers are sounding the alarm about how these dollars support cartels and their lucrative trafficking operations. Given the current border crisis and staggering increases of illegal aliens in the United States, there’s no doubt that such money transfers will continue to spike in the coming years. That is why there’s a push – both at the state and national level – to impose a fee on these funds, also known as remittances.
In the Ohio legislature, Representatives Scott Wiggam (R-77) and Angela King (R-84) of Ohio have introduced House Bill 451, the Withholding Illegal Revenue Entering Drug Markets (WIRED) Act. As written, the WIRED Act imposes a 7% fee on remittances out of the United States, and the funds garnished will be distributed as grants to local law enforcement agencies. Only those who pay the fee and file their taxes yearly would qualify for a refund through a tax credit. The bill is similar to federal legislation pushed by Ohio’s Senator, JD Vance, which FAIR supports.
While remittances may help relatives in their home countries, cartels have co-opted wire transfer companies like Western Union and use them to fund their trafficking operations. According to the Financial Crimes Enforcement Network (FinCen) of the U.S. Department of the Treasury, cartels disguise their transfers by divvying large sums of money into smaller amounts. Afterward, they find an individual willing to wire the funds to an unknown person back in Mexico. Those wiring and receiving the remittance provide false names and earn a cut of the cartel’s lump sum. FinCen refers to this process as “smurfing,” and to those involved as “smurfs.”
A report made by the Mexican think tank, Signos Vitales, estimates that $4.4 billion (7.5%) of remittances sent to Mexico in 2023 were linked to cartels. In 2019, eight individuals from an Ohio money laundering ring were sentenced for laundering $44 million in cartel proceeds to Mexico. Another Ohio resident sent over 300 wire transfers to the Sinaloa Cartel. The schemes were textbook: go to a store (such as a bodega or a prepaid cellular shop), send small amounts, and leave with your cut.
Due to President Biden’s border crisis, over 9 million illegal aliens, and another nearly 2 million known gotaways have crossed into the country, many of which send money back to their home countries. Reports indicate that, during the first nine months of 2023, over 200 Mexican municipalities were inundated with remittances. “Statistically speaking, such phenomena are unlikely. Collectively, those places received 10.5 billion, or nearly 25% of all remittances sent to Mexico in the first three quarters of 2022,” said Signos Vitales.
Similarly, Oquitoa, a small village in Sonora, registered zero remittances in 2017. However, by 2023, the town of 500 people had received over $2.5 million. Clearly, the cartels have targeted money-wiring in small towns, and have profited profusely from lax vetting and the low-tech components of the industry.
Remittances have been under scrutiny for over a decade, but Congress has failed to take action to control the transfer of money. That is why states like Ohio have become involved, taking the lead from Oklahoma, which passed a strong remittances law back in 2009.
Rep. King believes HB 451 will curb the cartel’s impact, stating, “Wire transfers have long been the tool of choice for illicit activity and money launderers. The remittance fee is a financial weapon we can use to target illicit activity funneling money from the United States to the cartels while simultaneously supporting local law enforcement.” Ideally, those using remittances for nefarious purposes will stop their dealings. At a minimum, some of the money wired will be used to fund operations that catch the criminals.
Fortunately, as more states follow Oklahoma’s lead by introducing remittance bills to their legislatures, the federal government has allocated more resources to research. The Office of the Director of National Intelligence’s Annual Threat Assessment for 2023 highlighted growing concern over the “exploitation of legitimate remittances channels” by transnational criminal organizations that “threaten the integrity of the U.S. and international financial systems [by] laundering billions of dollars of illicit proceeds.”
HB 451 was referred to the Ways and Means Committee. Proponents of HB 451, including FAIR, will testify on May 7th. To receive updates and view documents related to HB 451, including amendments and testimonies, refer to the Ohio House of Representatives website.
