U.S. banks laundering Mexican cartels' drug money

A report in the August 2010 issue of Bloomberg Markets magazine sheds light on the role that U.S. banks have played in helping to finance the violent drug trade that has plagued the U.S. - Mexico border for years, resulting in over 22,000 dead on both sides of the border since 2006. Among the dead are police, soldiers, journalists and ordinary citizens.

Last December, a statement by Antonio Maria Costa, head of the UN Office on Drugs and Crime, was largely dismissed by U.S. corporate media. He said he has seen evidence that the proceeds of organized crime were "the only liquid investment capital" available to some banks on the brink of collapse last year. He said that a majority of the $352 billion of illegal drug profits was absorbed into the economic system as a result.

A document obtained by Bloomberg seems to confirm Costa's statement. It is an agreement between Wachovia, now owned by Wells Fargo & Co., and U.S. Department of Justice prosecutors in which Wachovia officials admit the bank had not done enough to watch for money-laundering schemes among some $378 billion it transferred between its branches and Mexican currency-exchange houses from 2004 to 2007. Wachovia has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers - including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

Among some of the details reported by Michael Smith for Bloomberg:

• On April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. After the crew tried to shoo Mexican troops away, the troops became suspicious and searched the jet. They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. Law enforcement officials also discovered something else. The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank of America Corp.
  
• Two front companies, Grupo ETPB SA and Grupo Rahero SC, made 12 cash deposits totaling $1 million at an HSBC Mexican branch, Mexican investigators found. The funds financed a Beechcraft King Air 200 plane that police seized on Dec. 29, 2007, in Cuernavaca, 50 miles south of Mexico City. For years, federal authorities watched as the wife and daughter of Oscar Oropeza, a drug smuggler working for the Matamoros-based Gulf Cartel, deposited stacks of cash at a Bank of America branch on Boca Chica Boulevard in Brownsville, Texas, less than 3 miles from the border. “Everybody in there knew who they were - the tellers, everyone,” said an investigator. “The bank never came to us, though.”
  
• In Tijuana, 15 miles south of San Diego, Gustavo Rojas has lived for a quarter of a century in a shack in the shadow of the 10-foot-high (3-meter-high) steel border fence that separates the U.S. and Mexico there. He points to holes burrowed under the barrier. “They go across with drugs and come back with cash,” Rojas, 75, says. “This fence doesn’t stop anyone." Drug money moves back and forth across the border in an endless cycle. In the U.S., couriers take the cash from drug sales to Mexico - as much as $29 billion a year, according to U.S. Immigration and Customs Enforcement. That would be about 319 tons of $100 bills.

According to Bloomberg, US banks, including Wachovia, Wells Fargo & Co., HSBC and Bank of America are playing a crucial role in the running of the Mexican drug trade, allowing their facilities to be used to launder money.

Bloomberg also reports that a former Wachovia executive in charge of anti-money laundering operations "quit the bank in disgust" after managers ignored his reports that drug money was being laundered through its facilities. He said, “if you don’t see the correlation between the money laundering by banks and the 22,000 people killed, you’re missing the point."

“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” said federal prosecutor Jeffrey Sloman according to Bloomberg. Wachovia agreed to pay $160 million to settle the court case in exchange for charges being dropped, a move Sloman described as "historic." Historic, perhaps, but that is chump change for a bank that posted $7.79 billion in profits in 2006 - while engaging in these blatant violations of federal law.

If any American is caught with even a small amount of drugs in their possession in these border states, they are looking at a stiff prison sentence. Yet the people who finance the drug trade get off with a slap on the wrist while making huge profits from it. Perhaps instead of incarcerating Americans, tracking the "illegals" and talking about building worthless fences on the border, federal investigators should follow the money. It may lead to the real criminals.