How to Wash Money Clean

How to bring them home.

Imagine that you're a successful drug trafficker. Your cocaine cargo arrived safely in some rich nation, where it sold for thousands of times what it cost to buy the coca leaves and chemicals back in Colombia.

But now you have two challenges: You need to bring that money back into Colombia, and you need to disguise it as legal money.

You might take the first stept by having people swallow pills stuffed with hundred dollar bills or tape wads of bills to their bodies. But that's dangerous and means trusting the couriers.

Or, you might try to transfer the money back into Colombia thru the banking system. But the banks are supposed to have ways of flagging large transfers and investigating their origin.

Or, you could use the dirty money to buy stuff like washing machines, running shoes, or bicycles, import them into Colombia and then sell them to recover your profits. Even if you sell the products at a loss, it's still worth it, since the drug profits were so huge.

In the third case, you've not only brought your dirty money into Colombia, but also disguised it as clean money. That's called money laundering.

Think of the FARC guerrillas, and you think of bombings, drug trafficking, child soldiers and other crimes - but probably not supermarkets.

Yet, according to Colombian authorities, a supermarket chain played a fundamental in the guerrillas'

A Supercundi supermarket, allegedly linked
to the FARC guerrillas.

operations by laundering their ill-gotten gains. The Supercundi market chain had grown quickly after being founded in 2006, and, according to authorities, sold some products 90% cheaper than in a normal store. This week, the government shut down the markets, alleging they belonged to a friend of the FARC, who laundered the FARC's illegal income from drugs and illegal mining and then invested the new, clean money in land, luxury cars and new businesses.

The supermarkets also served a second function for the guerrillas - supplying their fighters with food.

Money laundering comes in many forms.

Years ago, a friend's girfriend told us about her job in a language institute which, strangely, taught almost no classes, and those it did have had almost no students. Whenever someone called asking to enroll, the instruction was to tell them that the class was full.

That sounded like a money laundering operation. Someone with an illicit income had set up the 'school' to be able to justify that income, confident that authorities wouldn't look too closely.

Another time, a tourist told me he'd tried to book in a Bogotá hostel, only to be told that it was
completely full. That sounded strange, as it wasn't busy season. Since the hostel had a nice website, I decided to visit it to drop off publicity. The place had no sign, and the woman who answered the door seemed to have no knowledge of a hostel there. Someone had come by once and talked about perhaps opening a hostel there, she said.

That sounded like a small-time money laundering operation.

During the narcos era, many drug traffickers bought sports teams to obtain social status and launder money, since authorities couldn't easily monitor their incomes. The athletes' international travels provided nice opportunities to smuggle drugs.

The Cali drug cartel, ironically, purchased the Rebaja drugstore chain to launder their money. And the San Andresitos stores, known for selling imported clothing and electronics, are also notorious for laundering money.

Money laundering, which affects - and often even benefits - all of us, is yet another economic distortion caused by prohibitionism. Legalize drugs, and this phenomenon, like many others, would simpy disappear.

A La Rebaja pharmacy on Plaza San Victorino, in Bogotá. The chain used to be owned by the Cali Cartel.

By Mike Ceaser, of Bogotá Bike Tours