Gangs were moving an estimated $40bn (£27bn) in cash back into Mexico across the border each year, it added.
Mexico has long been the main conduit for illicit drugs smuggled into the US but this report suggests that the efforts to halt the flow on both sides of the border have had only a limited impact, the BBC's Richard Lister reports from Washington.
In 2007 the US pledged $1.4bn (£0.9bn) over three years to fight the drugs cartels but the following year heroin production in Mexico rose from 17 to 38 metric tonnes.
This, the report says, led to lower heroin prices and more overdose deaths in the US.
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