Jun.03, 2010, Source: Los Angeles Times

Reporting from Mexico City —More than half of the "breathtaking" sums of money earned by Mexican drug cartels in the U.S. and smuggled into this country dissolves into Mexico's cash-based economy, eluding detection and funding vast criminal operations, according to a new U.S.-Mexican government study released Wednesday.

The study, described by a senior U.S. official as the first of its kind, attempts to explore the ways illicit drug-trafficking profits make their way from the United States to Mexico or Colombia and how to stem the tide.

It estimates the money shipped south at $19 billion to $29 billion.

The failure or inability of the Mexican government to pierce intricate money-laundering operations is often cited as one of the major flaws in an offensive against cartels that was launched by President Felipe Calderon when he took office in December 2006. The fight has claimed more than 22,700 lives.

John Morton, a U.S. Immigration and Customs Enforcement assistant secretary, discussed some of the new report's findings at a small news conference in Mexico City. A tape recording of the conference was later released by the U.S. Embassy in Mexico. The full report was not released because it contained what U.S. officials said was secret information.

Morton acknowledged that the U.S. and Mexican governments have not done enough to slow the money flow.

"Simply arresting people won't be a full solution," Morton said. "We have to completely undermine the organizations as businesses, and to do this we have to identify, seize and forfeit their profits."

The cash is brought into Mexico both in amounts small enough for an individual to carry and in amounts large enough to fill shipping containers. Revenue from local dealing operations across the U.S. is first consolidated in cities that serve as "collection points," including Los Angeles, then moved to the border and broken up again for the cross-border leg of the transport.

In Mexico, where 75% of the formal and informal economy works through cash transactions, cartel bosses can launder their profits with all-cash purchases of large tracts of land, luxury hotels, cars, car dealerships and an endless array of high-end items.

For this reason, tackling the problem must include restrictions on the way cash is used in large transactions, including notarized certifications of the money and its origin that would be filed with the Mexican Treasury department, said U.S. Ambassador to Mexico Carlos Pascual, who joined Morton at the conference.

The Mexican government has taken occasional stabs at requiring better accounting of large all-cash purchases, but most of those efforts have foundered.