Describing him as a “longtime Mexican Drug Kingpin,” the Office of Foreign Assets Control (OFAC) of the U.S. Department of Treasury has designated Raul Flores Hernandez and the “Flores Drug Trafficking Organization,” or  “Flores DTO,” as a Specially Designated Narcotics Trafficker under the Foreign Narcotics Kingpin Designation Act (Kingpin Act).  OFAC also has used the Act to designate 21 other Mexican nationals and 42 entities, including a casino, a soccer club, a music production company, and various bars and restaurants, for allegedly supporting or being controlled by Flores and the Flores DTO. According to the government’s press release, Flores “has operated for decades because of his longstanding relationships with other drug cartels and his use of financial front persons to mask his investments of illegal drug proceeds[.]”

Although Mr. Flores may not be well known outside of Mexico, other individuals designated by OFAC certainly are. OFAC designated soccer superstar Rafael “Rafa” Márquez Alvarez, who plays defense for the Atlas Fútbol Club in Guadalajara, Mexico, and who served as captain of the Mexican team in four FIFA World Cups from 2002 to 2014.  Mr. Márquez is not necessarily beloved throughout the United States, where he is remembered for having head-butted a U.S. player during the 2002 World Cup quarterfinals.  OFAC also designated Norteño singer Julio Cesar Alvarez Montelongo, better known as Latin Grammy-nominated musician Julion Alvarez. According to OFAC, “[b]oth men have longstanding relationships with Flores Hernandez, and have acted as front persons for him and his DTO and held assets on their behalf.”  As for the rest of the Flores DTO, OFAC asserts that it is comprised of “a significant number of Flores Hernandez’s family members and trusted associates, upon whom he heavily relies to further his drug trafficking and money laundering activities and to maintain assets on his behalf.”

Broadly, the effect of OFAC’s designations will be to prohibit U.S. individuals and entities from engaging in financial transactions with the listed individuals and entities. Further, assets in the U.S. held by these individuals and entities are frozen. Mr. Flores was indicted on drug trafficking charges in March 2017 in both the District of Columbia and the Southern District of California.

On the same day that OFAC announced its designations, the Mexican government seized assets allegedly belonging to Flores and the Flores DTO, including the Grand Casino in the Guadalajara, Mexico area.  OFAC’s press release emphasized that U.S. and Mexican law enforcement personnel had been working closely in concert, and that the designations were “part of a larger collaborative effort with Mexican government agencies . . . to use financial sanctions, among other tools, to disrupt Mexican drug trafficking organizations.”

Although the government has described this action as “the largest single Kingpin Act action against a Mexican drug cartel network that OFAC has designated[,]” it is not the only high-profile Kingpin Act designation made this year. In February 2017, and as we previously have blogged, OFAC designated a high-ranking foreign official: the Executive Vice President of Venezuela, Tareck Zaidan El Aissami Maddah, otherwise known as El Aissami.

OFAC has set forth the below chart regarding the individuals allegedly involved in the Flores DTO, and also has made available another chart regarding the many entities involved.  Most of the designated entities are registered in the Mexican state of Jalisco.

The Kingpin Act, set forth at 21 U.S.C. §§ 1901 to 1908, grants OFAC the authority to freeze any U.S.-based assets of alleged foreign narcotics traffickers and their organizations, and to prosecute U.S. citizens who help transact the ill-gotten gains – or, more broadly, to prosecute anyone who conducts or causes a related transaction to occur within the United States. The Act prohibits any transaction or dealing by a U.S. person, or any transaction or dealing within the United States, in property or interests of anyone designated under the Act.  The Act similarly prohibits any such transactions designed to evade or avoid the Act’s prohibitions, as well as related attempts and conspiracies.  Violations of the Act can be criminal: a willful violation of the Act or “any license, rule or regulation issued pursuant to this chapter,” is a felony punishable by up to ten years in prison, as is the willful neglect or refusal “to comply with any order of the President issued under this chapter[.]” Civil violations of the Act can result in monetary penalties of up to $1 million.  You can read more about how the Kingpin Act works here.

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Dennis K. Burke

burked@ballardspahr.com | 602.798.5484 | view full bio

Dennis focuses his practice on white collar crime, internal investigations, commercial litigation, and government relations. He served as U.S. Attorney for the District of Arizona, and has more than 20 years of significant experience…

burked@ballardspahr.com | 602.798.5484 | view full bio

Dennis focuses his practice on white collar crime, internal investigations, commercial litigation, and government relations. He served as U.S. Attorney for the District of Arizona, and has more than 20 years of significant experience in federal and state government. As the U.S. Attorney for the District of Arizona, Dennis oversaw all federal prosecutions in the state and led a range of investigations, including high-profile cases involving white collar crimes, drug trafficking, immigration issues, and fraud.

Peter D. Hardy

hardyp@ballardspahr.com | 215.864.8838 | view full bio

Peter is a national thought leader on money laundering, tax fraud, and other financial crime. He is the author of Criminal Tax, Money Laundering, and Bank Secrecy Act Litigation, a well-reviewed and comprehensive legal treatise published…

hardyp@ballardspahr.com | 215.864.8838 | view full bio

Peter is a national thought leader on money laundering, tax fraud, and other financial crime. He is the author of Criminal Tax, Money Laundering, and Bank Secrecy Act Litigation, a well-reviewed and comprehensive legal treatise published by Bloomberg BNA.

He advises corporations and individuals from many industries against allegations of misconduct ranging from money laundering, tax fraud, mortgage fraud and lending law violations, securities fraud, health care fraud, public corruption, Foreign Corrupt Practices Act violations, and identity theft and data breaches.  He also advises on compliance with the Bank Secrecy Act and Anti-Money Laundering requirements.

Peter spent more than a decade as a federal prosecutor before entering private practice, serving as an Assistant U.S. Attorney in Philadelphia working on financial crime cases. He was a trial attorney for the Criminal Section of the Department of Justice’s Tax Division in Washington, D.C.

Priya Roy

royp@ballardspahr.com | 215.864.8336 | view full bio

Priya focuses her practice on white collar defense, internal investigations, and complex civil litigation. She counsels clients in AML and BSA matters, as well as matters involving allegations of tax fraud, violations of the False Claims…

royp@ballardspahr.com | 215.864.8336 | view full bio

Priya focuses her practice on white collar defense, internal investigations, and complex civil litigation. She counsels clients in AML and BSA matters, as well as matters involving allegations of tax fraud, violations of the False Claims Act and Anti-Kickback Statute, violations of the Food, Drug, and Cosmetics Act, securities violations, and other fraud and regulatory offenses and abusive acts and practices.