US federal prosecutors say a real-estate investment firm accepted millions in drug money, revealing how high-end real-estate ventures are being used to launder dirty cash at scale.
“BMPE continues to be “perhaps the largest, most insidious money-laundering system in the Western Hemisphere.”
The case was settled on January 12, when Sefira Capital LLC — a Florida-based investment firm — agreed to forfeit around $30 million to resolve a charge that Sefira and 31 of its subsidiaries accepted millions in drug profits laundered through a scheme known to law enforcement officials as the Black Market Peso Exchange, according to a Department of Justice (DOJ) news release. It was one of three investment companies to forfeit around $50 million in similar cases.
According to the federal complaint against Sefira, the Drug Enforcement Administration (DEA) used undercover accounts and directed informants to transfer drug proceeds through money-laundering brokers. The transfers resulted in millions of dollars being moved to Sefira accounts, prosecutors said. Sefira accepted this money from DEA’s unnamed accounts without any attempt to inquire into the source of their ownership — a direct violation of financial risk regulations.
The seized assets were spread out over 31 bank accounts belonging to Sefira subsidiaries, in amounts of up to $8.7 million per account, according to the complaint.
As part of the settlement, Sefira committed to “conduct reasonable due diligence on future investors, and not accept investment funds” from anyone except actual investors.
In announcing the settlement, New York US Attorney Audrey Strauss explained in a statement that the “Black Market Peso Exchange facilitates the laundering of vast sums of drug trafficking proceeds.” The forfeiture signals not only the surrender of millions in laundered proceeds, “but also the agreement of corporate defendants to exercise due diligence to ensure they are not assisting in or facilitating money laundering,” she said.
InSight Crime Analysis:
The Black Market Peso Exchange is nothing new, but the recent settlement underscores that the system has evolved to include the investment of dirty dollars within the United States into legal, high-end, profit-earning real estate.
The Black Market Peso Exchange (BMPE) refers to a trade-based money laundering system to convert drug dollars into local Latin American currencies.
BMPE became a mainstay of money laundering in the 1980s, as organized crime adapted to increasingly strict financial regulations requiring traditional banks to know their customers and ensure that their income source was legitimate.
BMPE is different from other money-laundering mechanisms because its aim is not to get dirty money into the banking system undetected but to circumvent traditional financial institutions altogether. Money laundering brokers are at the center of the scheme, buying dirty dollars from trafficking groups at a discount, taking out a commission, and then selling the dollars on to Latin American traders.
To pay for their US-based dollars, these Latin American importers usually deposit pesos into an informal exchange house, where trafficking groups pick them up. In a 2017 Miami-based case, however, Colombian importers would pay the cartel directly, once they received their American retail goods, according to a USA Today investigation.
BMPE is pervasive in the fashion district of Los Angeles, for instance, where despite government crackdowns, thousands of businesses continue to accept bulk cash in exchange for exporting goods, ranging from clothes to flowers, to Mexico. The advantage of BMPE is that no money actually crosses the border.
In the early 2000s, the US government started to combat BMPE actively. American exporters were put on notice: from now on, it would be their responsibility to make sure that exports were not financed by “black peso” dollars. Yet, by 2015, little had changed — with a federal official telling PBS that the BMPE continued to be “perhaps the largest, most insidious money-laundering system in the Western Hemisphere.”
Now, instead of relying on exports to transfer the value of the dirty dollars to Latin America, money laundering brokers are cleaning them in the United States by investing in real estate. COVID-19 has likely quickened this shift. In the first half of 2020, non-essential businesses’ shuttering caused a huge backup in the Mexican BMPE. As a result, drug cartels lost millions to seizures in the Los Angeles fashion district alone.
Purchasing high-end real-estate from undiscerning brokers provided an elegant solution — goods were no longer needed to cross closed borders and the dirty dollars would instead be invested in one of the few US markets that experienced a record-breaking boom.
What’s more, according to the complaint against Sefira, the real estate holdings were packaged as equity interests in special purpose vehicles (SPVs) — structures rife for abuse.
U.S. Attorneys » Southern District of New York » News » Press Releases
Department of Justice. U.S. Attorney’s Office Southern District of New York
FOR IMMEDIATE RELEASE
Tuesday, January 12, 2021
Acting Manhattan U.S. Attorney Announces Settlement Of Civil Forfeiture Claims Against Over $50 Million Laundered Through Black Market Peso Exchange
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Timothy J. Shea, the Acting Administrator of the U.S. Drug Enforcement Administration (“DEA”), and Susan A. Gibson, the Special Agent in Charge of the New Jersey Division of the DEA, announced today that the United States has settled a civil forfeiture action against assets of Sefira Capital LLC (“Sefira”) and 31 subsidiary corporations, which own high-end commercial and residential real estate throughout the United States. The Government’s complaint, which was filed on January 8, 2021, alleged that the defendant corporations accepted millions of dollars of narcotics proceeds laundered through the shadow financial system commonly known as the Black Market Peso Exchange, for investment in various real estate ventures.
In the stipulation of settlement filed with U.S. District Judge Andrew L. Carter Jr. today, which is still subject to approval by the Court, the defendant corporations agree to forfeit $29 million to resolve the Government’s claims, representing approximately $22.5 million previously seized from Sefira and its subsidiaries, and an approximately $6.5 million payment in lieu of the forfeiture of certain real estate interests. As part of the settlement, Sefira agreed to conduct reasonable due diligence on future investors, and not to accept investment funds from any source other than the actual investor.
In a related civil forfeiture action, the Government filed today a proposed judgment of forfeiture with U.S. District Judge George B. Daniels, covering $23.2 million seized from Hampus Assets, Inc., and Kaunas Assets Corp. in connection with their acceptance of millions of dollars of narcotics proceeds laundered through the Black Market Peso Exchange. Hampus Assets and Kaunas Assets previously entered into a settlement consenting to the forfeiture of the funds, agreeing to conduct reasonable due diligence on future deposits into bank accounts under their control, and to refrain from conducting certain cross-border money transfers.
Acting Manhattan U.S. Attorney Audrey Strauss said: “The Black Market Peso Exchange facilitates the laundering of vast sums of drug trafficking proceeds generated in the U.S., enabling the conversion of U.S. dollars into the currencies of drug trafficking organizations’ countries. The forfeiture filings announced today signal not only the surrender of more than $50 million in laundered proceeds, but also the agreement of corporate defendants to exercise due diligence to ensure they are not assisting in or facilitating money laundering.”
DEA Acting Administrator Timothy J. Shea said: “The alleged laundering of millions of dollars of illicit proceeds shows the incredible profit generated by ruthless drug cartels who only care about money and power, not the suffering of Americans or devastated communities left behind. The DEA’s unique ability to infiltrate money laundering organizations is essential to illuminating the global networks used to repatriate drug proceeds around the globe. Money is the lifeblood of the cartels, and DEA, together with our law enforcement partners, is committed to identifying, targeting, and prosecuting these organizations to protect the American people.”
The Government lawsuits alleged as follows:
The Black Market Peso Exchange allows drug trafficking organizations to transfer narcotics proceeds from the United States to the country in which they operate while concealing the source and nature of the funds. Drug trafficking organizations will sell bulk United States currency earned from their drug operations in the U.S. to money laundering brokers at a discount, in exchange for payment in the home country or countries of the drug trafficking organization in their local currency. To finance the transactions, the brokers will purchase bulk currency in the local currency of the drug trafficking organizations, typically from individuals who wish to transfer money to the United States while avoiding the banking system. The brokers pay these individuals by depositing the U.S. dollar drug proceeds into U.S.-based shell accounts, and then transferring them to accounts controlled by the individuals, or for their benefit.
As part of an investigation of international money laundering, the DEA used confidential sources to facilitate transactions on the Black Market Peso Exchange to uncover persons engaged in illegal activity and develop evidence for criminal prosecutions. As part of the DEA undercover operation, confidential sources bought narcotics proceeds on the Black Market Peso Exchange, and then transferred those funds to U.S.-based accounts in the United States at the direction of money laundering brokers.
Sefira is a Florida-based boutique investment company that has raised over $100 million in capital from various investors (“Sefira Investors”) to invest in real estate projects primarily in the Southeastern United States. From 2016 to 2019, Sefira or its subsidiaries received millions of dollars in criminal proceeds from certain Sefira Investors as part of an effort by drug trafficking organizations and others to launder the criminal proceeds through the Black Market Peso Exchange.
Between January 2018 and January 29, 2019, the DEA transferred millions of dollars of narcotics proceeds to certain Sefira subsidiaries at the instruction of money-laundering brokers. These funds were wired from DEA undercover accounts that were not titled in the name of, or under the control of, any particular Sefira Investor. Sefira accepted these funds without inquiring as to the source of ownership of these accounts or funds.
In addition, millions of dollars of criminal proceeds were used to fund other Sefira Investors’ investments in Sefira. Sefira ignored similar red flags for those investments, including discrepancies between the purported investment amount and the actual amount Sefira received from Sefira Investors, as well as discrepancies between the purported Sefira Investors and the entities sending the investments to Sefira.
Between July 2018 and February 2019, Hampus Assets received millions of dollars from a shell company used to transfer narcotics proceeds on the Black Market Peso Exchange. These deposits came in large amounts in rapid succession and did not follow an observable business pattern. In October 2018, Hampus Assets transferred a portion of these proceeds to Kaunas Assets Corp.
Ms. Strauss praised the outstanding investigative work of Special Agents from the DEA New Jersey, Enforcement Group 2.
This case is being handled by the Office’s Narcotics and Money Laundering and Transnational Criminal Enterprises Units. Assistant United States Attorneys Aline R. Flodr, Stephanie Lake, and Sheb Swett are in charge of the case.