California Apparel News

After raids in the LA garment district revealed more than $90 million in cash has been allegedly laundered by apparel importers for Mexican drug cartels, federal officials are calling for a special order to reduce the dollar amount in cash transactions that can be done without having to report them to the government.

According to sources, federal officials are asking that the U.S. Department of the Treasury, through its Financial Crimes Enforcement Network, known as FinCEN, issue a geographic targeting order for a certain section of the Los Angeles Fashion District. The exact borders for the order were not revealed.

Basically the order imposes additional reporting and recordkeeping requirements on companies located in the area. Currently under federal law, companies are required to report in a special form, known as IRS form 8300, all cash transactions that total more than $10,000. Under a geographic targeting order, that amount would be reduced to a yet-to-be-determined cash amount to keep Mexican cartels from laundering their money through the garment district.

It is not known whether the Treasury department will grant the order. Steve Hudak, a FinCEN spokesman, said he could neither confirm nor deny that a geographic targeting order was requested or being considered by the Treasury department. “I have no comment on the issue right now,” he said.

However, he did say it is a powerful tool. “We don’t use it lightly,” he noted. “But it is very effective.”

To impose the order, FinCEN often sends letters via FedEx or contacts all companies located in the zone. The government agency can also issue a general notification. Most geographic targeting orders last no more than 180 days, Hudak said.

On Aug. 1, the Treasury department issued a geographic targeting order for armored-car services and other currency carriers along the San Diego–Mexico border at the Otay Mesa and San Ysidro ports of entry. FinCEN issued updated guidance concerning detailed and proper filings for currency totaling more than $10,000 in cash that is moving across the border.

In 1996, after confiscating $29 million in cash being illegally transmitted to Colombia, a geographic targeting order was issued on 3,500 money remitters in the New York metropolitan area. The order required the remitters to report all remittances of cash to Colombia that totaled more than $750.

Just like the Colombian drug cartels, the Mexican drug cartels have gotten more astute about how they launder their money. This became necessary after the Mexican government in 2010 clamped down on the cash dollar amount that could be deposited into a Mexican bank account. Currently, it is no more than $7,000 per month.

On Sept. 10, approximately 1,000 federal, state and local officials swarmed some 70 garment companies and residences in the Los Angeles Fashion District and surrounding areas to arrest several people suspected of laundering money for the drug cartels. The money-laundering operation involved individuals who allegedly took cash generated from selling drugs in the United States and then used it to purchase clothing overseas. Those clothes were then exported to Mexico, where they were sold for Mexican pesos.

During one raid at a Los Angeles condominium, law enforcement officers discovered $35 million in cash stored in cardboard boxes. At a Bel-Air mansion, another $10 million in cash was found stuffed in duffel bags, and four safes were uncovered.

Days after the raid, federal officials posted seizure notices for an $8 million mansion in Pasadena, Calif., and two other homes valued at $2 million. So far, one seizure notice has been listed for an 8,000-square-foot mansion at 1500 Lombardy Drive in Pasadena, Calif. Property records show the owner listed as LMMF 15003750 LLC, whose headquarters are at 1100 S. San Pedro St. in the Los Angeles Fashion District. The head of the company is listed as I-Yun Yih, also known as Nancy Yih, who is president of the clothing company LA Idol Fashion.

In addition, federal authorities are seeking to seize a second Pasadena residence at 3750 Mayfair Drive, also owned by LMMF 15003750 LLC, and a multi-unit residence in Alhambra, Calif., at 1117 N. Almansor St., whose owner is listed as I-Yun Yih.

Meanwhile, investigators made arrangements to freeze $15.6 million deposited in a Taiwanese bank account allegedly tied to money-laundering funds for the Mexican drug cartels.

So far, law enforcement officials have uncovered at least $100 million in funds and assets related to their investigation, known as “Operation Fashion Police,” authorities said. Government officials noted that their investigation continues and more enforcement activity is anticipated.