OFAC Sanctions Drug Cartel Member for Arms Trafficking

The US Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned Obed Christian Sepulveda Portillo for trafficking high-caliber firearms from the US to one of Mexico’s top drug organizations. 

Obed Sepulveda was acting on behalf of the Cartel de Jalisco Nueva Generacion (CJNG). OFAC states the cartel is responsible for “a significant proportion of fentanyl and other deadly drugs trafficked into the United States.” 

Treasury under Secretary Brian E. Nelson said: “Treasury is actively targeting those who support and supply drug trafficking and criminal organizations, especially those engaged in the production and distribution of synthetic opioids that claim the lives of tens of thousands of Americans each year.”

Obed Sepulveda was sanctioned pursuant to Executive Order 14059. Signed by President Biden on December 15th, 2021, the order states that drug trafficking “constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.” It grants the Treasury Secretary the power to impose sanctions on those involved in the illicit drugs trade.

The importance of arms to CJNG 

Founded in 2011, CJNG has become one of Mexico’s two largest cartels. It is notorious for using lethal weaponry, including shooting down a military helicopter with a Russian-made rocket-propelled grenade launcher. The Brookings Institution published a piece in May 2022 arguing that CJNG’s “modus operandi is to be more ostentatiously violent than anyone else. Brazenness, brutality, and aggressive expansion are its signature approach at both the strategic and tactical levels, making both the takeover and the forced regular interactions with the group highly grating to both local communities and big businesses.”

CJNG’s reliance on arms to conduct its business makes the sanctioning of Obed Sepulveda even more notable. It’s also part of a recent pattern of federal action against the cartel. In October 2021, OFAC sanctioned four CJNG members for drug trafficking under the Foreign Narcotics Kingpin Designation Act. 

CJNG’s leader, Nemesio Oseguera Cervantes, is wanted by the US Drug Enforcement Agency, offering a $10m reward for his arrest. In March 2021, his daughter pleaded guilty to engaging in financial dealings with designated Mexican companies. In June 2021, she was sentenced to 30 months in prison. His son was arrested in 2015 and appeared in a Washington, D.C., court in February 2020 on drug trafficking charges. 

The intersection of drug trafficking and arms trading

Analysts have noted that the entry of Mexican gangs into Colombia had further complicated the “landscape of violence” in the country. Gangs are bringing high-powered weapons into the country not just for their use but also as payment for shipments of cocaine. 

On June 30, 2021, FinCEN issued its first US government-wide list of national priorities for anti-money laundering and counter-terrorism financing (AML/CFT). This included both transnational criminal activity and drug trafficking. Arms and drug trafficking are highlighted as predicate crimes that generate illicit proceeds but may also be components of a larger crime. 

Firms should already be reviewing their BSA/AML programs to ensure adherence with FinCEN’s priorities, with the announcement of sanctions on Obed Sepulveda offering a reminder of the interconnected nature of many financial crimes. Criminal behavior indicating arms trafficking may, with further investigation, relate to the import of illegal drugs, the financing of designed entities, or other such crimes. 

Financial institutions should be aware of the financing networks used by drug cartels, so they can more readily discover and report suspicious transactions. Adverse media tools can identify individuals connected to broader illicit activities that may not be evident in financial transactions. The fast-moving nature of OFAC arms and drug trafficking sanctions is a reminder of the need for a dedicated real-time tool to monitor negative news. A reliance on manual Google searches risks leaving suspicious information undiscovered.