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How Black Market Peso Exchange (BMPE) works?

The black market peso exchange is a complex way of trade based money laundering that involves exchange of currencies as well as drug smuggling and other illegal techniques. The name originated from a Colombian money laundering technique though the same technique can be used by criminals in any country. Let's understand.

First a Colombian drug cartel residing in the US smuggles illegal drugs into the USA, and then sells those for cash in dollars.

Next the drug cartel contacts a peso broker, most likely located in Columbia, to exchange the cash dollars with the Colombian currency, Peso. The peso broker usually gives a very lucrative exchange offer compared to traditional exchange agencies. After the exchange, the drug dealer now has Pesos and the peso broker has dollars.

Next, the peso broker needs to layer and integrate these illegal dollars into the legal financial system. For that, he searches for a Colombian importer who is importing from an US exporter. To pay the US exporter, dollars will be required. So, the peso broker offers to pay for the import on behalf of the importer. In this way the illegal dollars that he obtained is used for the payment for the trade and thus it gets layered and integrated. The goods that are imported in this way are usually under invoiced to reduce the amount of the import duty and the importer works in collusion with the peso broker.

In return, the peso broker gets hold of part or whole of the imported goods which he sells inside Colombia and in return gets pesos. In this way his stock of pesos gets replenished and this whole cycle can be repeated again.

In many cases, the drug cartel, the peso broker and the importer are part of the same group or organisation so that it can complete the cycle without depending on a third person.

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