A new slate of sanctions against businesses and individuals involved in a timeshare scam in Puerto Vallarta, Mexico, demonstrates how drug trafficking organizations like the CJNG use unsuspecting tourists as one more source of illicit income.
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned seven individuals and 19 Mexican companies believed to be involved in timeshare fraud led by the Jalisco Cartel New Generation (Cartel Jalisco Nueva Generación – CJNG) in Puerto Vallarta, a major tourist destination in on Mexico’s Pacific coast. OFAC sanctioned eight other Mexican companies that were linked to the same network in March.
The fraudsters’ scams allegedly included unsolicited offers to purchase timeshare properties. Once the owners agreed to sell, the fraudsters requested advance payments that they said would cover fees and taxes and would expedite the sale. Once the owners paid, the scammers disappeared, leaving the victims with no buyer and no money, according to a Treasury Department press release.
SEE ALSO: Booming Mexico Resort Town of Puerto Vallarta is Hostage to CJNG
In another scheme, real estate companies sold units in timeshare developments that were never built, either because the companies simply vanished or because the projects were purposefully planned in protected natural areas and subsequently canceled, an expert on criminal activities in Puerto Vallarta who did not want to be identified for security reasons, told InSight Crime. The money was never refunded.
This type of timeshare fraud often targets people looking for retirement or vacation properties abroad and helps the CJNG generate revenue beyond its traditional drug trafficking activities.
“They take advantage of the fact that these are usually older people who tend to be trusting and do not follow basic security measures such as asking for references or checking public information about the property,” said the source.
The CJNG also utilized frontmen, people who received payments for using their official ID, or nominees to register the companies carrying out scams, according to documents obtained by VICE. In some cases, these nominees may have been deceased or unaware that their identity was used for criminal activities.
InSight Crime Analysis
The CJNG’s involvement in the timeshare scheme is only the tip of the iceberg concerning their involvement in businesses across the tourism sector in Puerto Vallarta, which has been a goldmine for the group for years.
Hotels, bars, restaurants, and now timeshares are particularly attractive since they provide access to a range of other criminal activities, including money laundering, human trafficking, and drug trafficking, explained the source consulted by InSight Crime.
While the most recent sanctions target a scam operation, drug trafficking organizations are frequently involved in real construction projects to launder money. As a high-traffic tourist area, constructing housing developments or residential complexes in Puerto Vallarta offers criminal groups a sound way to launder investments, said the source.
Criminal groups use frontmen or front companies to make large purchase orders for building materials or finance the construction of properties with dirty money. The cost of a beachfront apartment is high, meaning it is an easy way to legitimize large sums of ill-gotten cash.
SEE ALSO: Los Cuinis May Have Laundered Money Through Argentina, Uruguay
The restaurant sector is also crucial to the CJNG’s activities, as restaurants are used as a place of exchange for drug shipments and sales. However, restaurants can also become epicenters of violence and attract the attention of local authorities. For instance, in 2016, two sons of Joaquín Guzmán Loera’s, alias ‘El Chapo,’ were kidnapped — and subsequently released — in an upscale restaurant in Puerto Vallarta, allegedly on orders from Nemesio Oseguera Cervantes, alias ‘El Mencho,” leader of the CJNG. Additionally, the former governor Aristóteles Sandoval was assassinated at a restaurant in Puerto Vallarta in 2020. The CJNG was linked to his murder.
Despite the various criminal economies within the tourism sector in Puerto Vallarta, the effectiveness of both international sanctions and seizures of properties by local authorities is questionable. Sanctions would likely have a limited effect on this criminal operation because they would only freeze assets that are inside the US, whereas this fraud is taking place in Mexico, although it will make the accused companies’ access to the US banking system much more difficult. Seizures made at the local level, “represent minimal damage” to the organization, said the source. “For every ten businesses they target, they have 100 operating, so it’s not very significant.”
The Cuinis, a once-powerful money-laundering wing of the CJNG, used the real estate sector in Puerto Vallarta and other Jalisco beach resorts to launder their drug money for years. The sanctioning of 15 businesses and six individuals linked to the gang by the US Treasury Department in 2015 has done little to curb the CJNG’s use of the tourism sector for money laundering and profiteering.
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