Friday, 3 October 2014

Clean Clothes And Dirty Money: how fast fashion is helping to launder drug profits

Fast fashion is responsible for a lot of unpleasantness in the world: from sweatshop and slave labour conditions, to environmental damage, to in the worst case scenario (and yes, I am thinking about Rana Plaza here) death and the ruin of families on the breadline. But it seems, if reports coming from the LA's Fashion District are to be believed, that fast fashion is now helping drug cartels to launder money earned from the sale and distribution of narcotics.

The US Department Of Justice calls the District "an epicentre for narco-dollar money." Hardly mincing their words there, but it shows what a problem the area has become for law enforcement when it comes to controlling the flow of money from Mexican cartels like the Sinaloa family, that come through the factories and back out across the border.

So why is fast fashion so attractive to the bad guys? Well, the businesses in the District are known for high-turnover and low price goods. As the federales clamp down on high-value exchanges through local banks and the borders are controlled ever more tightly, the cartels can see how they can use cheap disposable clothing as a pipeline for their profits. They are using a method called "black-market peso exchange" to clean their dirty money.

It's a simple process. The cartels find Mexican brokers that will buy from American firms in US Dollars. They then import and sell those goods in the local markets for pesos. The end result: clean money, millions of dollars worth. Fast fashion brands are a good fit for the exchange: cheap clothes with a high turnover mean the cartels can move a lot of money in a short space of time.

And I do mean a lot of money. Recent seizures in a sweep of businesses across the District netted an estimated $100 million in funds, including cash that authorities say included ransom payments to the Sinaloas.

It should be noted that of course most of the 5,000 businesses operating in the Fashion District do so completely within the law. But it just goes to show that fast fashion's low-cost, high turnover model can have consequences above and beyond the obvious problems.

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