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LA Fashion District Ordered to Report More Cash Transactions to Curb Money Laundering

In the latest move to combat alleged money laundering activities in Los Angeles’ garment industry, the Financial Crimes Enforcement Network (FinCEN) announced Thursday the issuance of a Geographic Targeting Order (GTO) that requires additional reporting and record keeping obligations on certain businesses within the city’s fashion district.

Under the order, businesses will be required to report any instance in which they receive at least $3,000 in cash, and failure to comply could lead to criminal indictment. The order, which covers textile and garment stores, shoe stores, lingerie stores, and any business with “import” or “export” in its name, will go into effect Oct. 9 and will remain for 180 days.

The GTO was sought by the U.S. Attorney’s Office for the Central District of California to improve ongoing efforts to identify and pursue cases against individuals and businesses involved in illegal movement of U.S. currency to Mexico and Colombia on behalf of drug trafficking organizations (DTOs). Money laundering activities have become ubiquitous in the L.A. fashion district, with most of being conducted through Black Market Peso Exchange schemes, or trade-based money laundering which entails drug money in the U.S. being converted to goods that are shipped outside of the country and sold for local currency benefiting the DTOs.

On Sept. 10, more than 1,000 federal, state and local law enforcement officials in L.A. executed dozens of search warrants and arrest warrants to businesses tied with these schemes. Homeland Security Investigations (HSI) seized more than $90 million in currency found in various residences and businesses stashed in file boxes, duffel bags, backpacks and car trunks.

Richard Weber, chief of IRS Criminal Investigation, said, “Individuals who laundered money through the fashion industry will now be hard pressed to continue their criminal activities.” He added, “The issuance of this Geographic Targeting Order will assist law enforcement agencies in ferreting out money launderers from this trade industry and will help to preserve a strong local economy.”