5 things drug cartels love about Hong Kong
The Big Buddha, the nightlife and other reasons drug kings love to stash cash in The Pearl of the Orient
Latin American drug cartels have apparently infiltrated Hong Kong with cocaine and methamphetamine, and as a result, new reports of money laundering are starting to leak out of the Asian peninsula. According to media covering this emerging story, three Columbian individuals based in Guangzhou, China have been accused of laundering more than five billion dollars for drug cartels based in Mexico and Colombia. They operate in Hong Kong, using bank accounts based there and in mainland China.
Investigations by the South China Morning Post (SCMP) show that the infamous Mexican Sinaloa cartel, run by the equally infamous El Chapo, has established a criminal and legitimate corporate presence in Hong Kong. In addition to trafficking cocaine and meth to the city, the SCMP says the “group also ran front companies and bank accounts which it used to launder drug funds, according to official Mexican documents and interviews with law enforcement sources.”
A violent Sinaloa spin-off, the Jalisco New Generation cartel, is quickly making inroads in Hong Kong too, according to the SCMP’s investigations. Established in 2010 as the military wing of Sinaloa, the Jalisco New Generation cartel broke away from it, most likely as a result of El Chapo’s penchant for publicity. The new gang grew quickly across Mexico, making its own headlines along the way.
With its proximity to China and its lax banking laws, Hong Kong has long served as well-known haven for money laundering and shady financial deals. In addition, Hong Kong owns a vast network of intermediaries for establishing shell corporations as tax havens. In fact, the recent release of the Panama Papers listed Hong Kong as one of the three most active intermediaries in the world, ahead of only Switzerland and the United Kingdom. Hong Kong is obviously an attractive market for money launderers, but why specifically would gangs from Mexico and Columbia target Hong Kong?
In addition to famous tourist sites such as The Big Buddha and its world-class shopping and nightlife, here are five things ruthless cartel leaders might love about Hong Kong:
1. Drugs in Hong Kong are expensive: According to the SCMN, the cartels are able to make up to 35 times more profit by trafficking cocaine to Asian cities such as Hong Kong. What organization, legal or illegal, would turn its back on high margins? Unfortunately, higher margins often come with higher risk: “The severe penalties, such as life imprisonment or even the death penalty, for traffickers caught in Asia are reflected in the exorbitant price of the drugs there,” a Mexican source revealed.
2. Real estate: The ease of establishing shell companies in Hong Kong naturally leads to the purchase of real estate as a method of hiding illicit funds. Hot markets for laundering illicit funds through real estate purchases include Hong Kong, the United States, Australia and Canada.
3. Intermediaries: As the Panama Papers revealed, Hong Kong is a great place to establish shell corporations based in the British Virgin Islands. The cartels know that shell companies in these ‘intermediary’ countries are perfectly designed to hide funds from tax collectors. In fact, El Chapo has already been exposed in the Panama Papers.
4. Mexican/Columbian shutdown: In 2012, the British bank HSBC Holdings paid the US government $1.9 billion in penalties to resolve claims that it allowed drug cartels in Mexico and Colombia to launder proceeds through its banks in Latin America. This removed much of the money laundering opportunities for cartels in Latin America as all banks in the region suddenly faced new levels of scrutiny.
5. The food: There are very few similarities in the food served in Mexico versus the food served in Hong Kong, except one important ingredient — heat! While there are differences in the origins of heat sources between Hong Kong and Mexico, this one common characteristic ties the two regions together. Never doubt the power of food to connect cultures!
