By Laura Gottesdiener, Stefanie Eschenbacher and Sarah Kinosian
MEXICO CITY, Feb 28 (Reuters) - The Mexican government's killing of one of the world's biggest kingpins, known as "El Mencho," is being heralded as a major blow to drug trafficking.
But it did little to dismantle his cartel's critical U.S. operations, which will continue fueling its dominance unless Washington steps up the fight inside its own territory, U.S. and Mexican security sources said.
Mexican special forces killed the elusive drug
lord Nemesio Oseguera in a U.S.-backed raid on Feb. 22. It was the biggest takedown of a cartel kingpin in at least a decade.
El Mencho's Jalisco New Generation Cartel responded by torching buildings and blockading roads across Mexico in a terrifying display of its territorial reach that grabbed headlines worldwide.
On the U.S. side of the border, the cartel also has extensive networks that receive far less attention yet are the lifeblood of its power and profits, current and former U.S. and Mexican officials said. These enable it to source military-grade weapons, smuggle billions of dollars' worth of fuel, and launder billions more in cartel cash.
"The United States has become increasingly important to cartels, especially the Jalisco New Generation Cartel, for it to thrive," said Alamdar Hamdani, the former U.S. attorney for the Southern District of Texas.
White House spokeswoman Anna Kelly said that the Trump administration "has worked closely with the Mexican government to stop the scourge of drugs and criminals entering our country" and that this cooperation led to the "elimination of infamous narcoterrorist 'El Mencho.'"
"The president will continue to do everything in his power to keep America safe from these vicious criminals and the drugs they use to poison our country," she added.
MEXICANS CALLING FOR U.S. TO TAKE MORE ACTION AT HOME
Washington heaped pressure on Mexico to step up the cartel fight ahead of the raid against the once untouchable drug lord.
Such actions are risky for the Mexican government because they can spark a wave of violence in a country where the drug war has already cost tens of thousands of lives.
The decision by Mexican President Claudia Sheinbaum to escalate her crackdown has prompted renewed calls for the U.S. to do more on its side of the border.
"The United States can't turn a blind eye to Mexico's demands any longer," said Mexican Congressman Alfonso Ramirez Cuellar, a close ally of Sheinbaum.
He said the U.S. needed to improve efforts to go after money laundering, fuel smuggling and, above all, weapons smuggled from the U.S. into Mexico.
"We can't stop drug traffickers if the United States continues allowing them to strengthen their military capabilities," he said.
The U.S. has built and prosecuted hundreds of cases related to cartel-related activity inside the U.S. in recent years.
But the Trump administration last year diverted thousands of agents, including many specializing in drugs, firearms, and money laundering, away from such cases and to the mass deportation effort.
Reuters also reported in September that the number of people charged with drug conspiracies and money laundering fell significantly last year.
"The Trump administration has predominantly focused on highly militarized actions against drugs abroad and has not paid similar attention to actions at home," said Vanda Felbab-Brown, a security expert.
A spokesperson from the U.S. Department of Justice said the administration was "acutely focused on securing the border, prosecuting violent traffickers, deporting any and all members of cartel networks and ensuring they are held accountable for their horrific crimes against the American people."
The department also pointed to a string of recent cases, including against high-ranking members of the Jalisco cartel.
The office of Mexico's president did not respond to requests for comment.
Roberto Velasco, the Undersecretary for North America at Mexico's Foreign Ministry, said the Mexican government has repeatedly emphasized in bilateral meetings and working groups that stopping arms trafficking is a top Mexican priority.
"While there has been some significant progress, we believe much more can be done to control this flow and to target the networks in the United States that facilitate it, empowering transnational criminal organizations," he said.
Reuters spoke to a dozen current and former U.S. and Mexican officials after El Mencho's killing and reviewed U.S. court documents from 10 recent cases related to the cartel to gain better insight into its U.S. operations.
What emerged was a picture of U.S.-based activities that are critical to the cartel's firepower and profits and unlikely to be impacted by the death of its leader. Reuters reporting also revealed how U.S. companies and professionals – from fuel traders to cell phone retailers to stockbrokers – are complicit in cartel activity.
"There's a lot of economic integration - both legal and illegal," said Alexia Bautista, a former Mexican diplomat.
CARTELS FIGHT THE MEXICAN MILITARY WITH U.S. WEAPONS
When Mexican Special Forces descended on a cabin in a picturesque mountain town where El Mencho was waiting for a visit from his girlfriend, the cartel leader's men fought back – armed predominantly with U.S. weapons, Mexican Army chief Ricardo Trevilla said at a press conference.
Some 80% of the 23,000 weapons the Mexican government has seized since Sheinbaum took office in late 2024 came from the U.S., he added.
The Jalisco cartel, in particular, has become adept at sourcing heavy, military-grade artillery from U.S. gun shops across the country, according to U.S. and Mexican authorities.
Through one of its gun-running networks, the cartel obtained guns from more than a dozen U.S. states, including .50 caliber rifles capable of downing helicopters and FN SCAR assault rifles designed for U.S. Special Forces, according to a Reuters investigation.
While such firepower can be purchased legally in the U.S., the arms become illegal once they enter Mexico, which has tight gun regulations.
"We complain about the Mexicans' lack of effort to go after the drugs down there, but then why does the U.S. dismiss their argument that we could do better on the guns going southbound?" said Derek Maltz, former acting administrator for the U.S. Drug Enforcement Administration.
"The U.S. has to step up in a lot of areas," he said, citing not only arms trafficking prosecutions but also public health and mental illness programs to curb American drug demand.
FUEL SMUGGLING POWERS THE JALISCO CARTEL
Americans' insatiable demand for narcotics has long fueled the cartels' profits. But while drugs are the cash cow, in less than a decade the groups have quietly built a multi-billion dollar cross-border petroleum empire.
The Jalisco cartel dominates this business, which would have been impossible to expand without a network of knowingly or unknowingly complicit U.S. companies that includes refiners, fuel traders, transport companies and storage facilities, as Reuters reported in October.
"This is no longer stealing fuel from (state energy company) Pemex," said Guadalupe Correa, a professor at George Mason University who has studied how cartels diversify their income streams. "It's a huge, transnational business."
The cartel orchestrates two versions of the scheme, according to U.S. and Mexican authorities.
In Mexico, cartel members steal crude oil from Pemex that is then smuggled across the border where it gets sold to U.S. companies. In the other direction, cartel members purchase mostly diesel and gasoline from U.S. companies via shell companies. The fuel arrives in Mexico disguised as something else, in what boils down to a very lucrative tax fraud.
Sheinbaum confirmed last year that U.S. business people had been involved in the fuel smuggling cases under investigation. "One cannot explain otherwise how fuel comes from the U.S. to Mexico, and enters illegally," she said.
HUNDREDS OF MILLIONS IN CARTEL-RELATED ASSETS IN U.S.
In late 2024, El Mencho's son-in-law Cristian Gutierrez Ochoa was arrested in a $1.2 million house in Riverside, California.
According to the court records, Gutierrez, who pled guilty to an international money laundering conspiracy in June 2025, said he bought the five-bedroom property using drug proceeds funneled through a Mexico-based shell company set up to look like a tequila producer.
Real estate is one of myriad ways Jalisco cartel cleans its cash in the U.S.
In many of the schemes, the involvement of U.S. businesses is key, said Carlos Olivo, a former DEA agent who specialized in tracing the cartel's U.S. financial networks. He said the cartel's money flows through restaurants, textiles, the music industry, the agricultural sector and even the U.S. stock market.
"In total, we're talking about hundreds of millions in assets in cartel-related money in the United States," he said.
In response to questions about this story, a DEA spokesperson said the cartels employed a wide range of money laundering schemes and "also use trade-based money laundering schemes, cryptocurrency, bulk cash, and Chinese underground banking systems to fund their operations."
Alejandro Celorio, a former Mexican diplomat, said he hoped that Sheinbaum's decision to go after the most powerful cartel leader in the country would inspire the U.S. to redouble its efforts – inside its own borders.
"As the world's leading commercial and military power, the U.S. could certainly investigate more deeply how money and drugs move within U.S. territory," Celorio said.
(Reporting by Laura Gottesdiener in Monterrey, Stefanie Eschenbacher in Mexico City and Sarah Kinosian in Miami; additional reporting by Emily Green in Mexico City; editing by Claudia Parsons)
