U.S. banks still very involved in money laundering

June 29, 2010

In the olden days, drug smugglers would launder their money the old-fashioned way: by starting up a bank. Today, it seems, they have no need to do so: they just use Wachovia and Bank of America instead. Michael Smith has the story, which includes the tale of money launderer Pedro Alatorre:

In May 2008, the Justice Department sought extradition of the suspects, saying they used shell firms to launder $720 million through U.S. banks…

During the period in which Wachovia admitted to moving money out of Mexico for Puebla, couriers carrying clear plastic bags stuffed with cash went to the branch Alatorre ran at the Mexico City airport, according to surveillance reports by Mexican police…

Puebla executives used the stolen identities of 74 people to launder money through Wachovia accounts, Mexican prosecutors say in court-filed reports.

“Wachovia handled all the transfers, and they never reported any as suspicious,” says Jose Luis Marmolejo, a former head of the Mexican attorney general’s financial crimes unit who is now in private practice…

“I am sure Wachovia knew what was going on,” says Marmolejo, who oversaw the criminal investigation into Wachovia’s customers. “It went on too long and they made too much money not to have known.”

At Wachovia’s anti-money-laundering unit in London, Woods and his colleague Jim DeFazio, in Charlotte, say they suspected that drug dealers were using the bank to move funds.

Woods, a former Scotland Yard investigator, spotted illegible signatures and other suspicious markings on traveler’s checks from Mexican exchange companies, he said in a September 2008 letter to the U.K. Financial Services Authority. He sent copies of the letter to the DEA and Treasury Department in the U.S.

Woods, 45, says his bosses instructed him to keep quiet and tried to have him fired, according to his letter to the FSA. In one meeting, a bank official insisted Woods shouldn’t have filed suspicious activity reports to the government, as both U.S. and U.K. laws require.

“I was shocked by the content and outcome of the meeting and genuinely traumatized,” Woods wrote.

And that’s just one of many stories: I particularly also like the bit about how drug smuggler Oscar Oropeza’s wife and daughter would literally launder their banknotes before depositing stacks of cash at a Bank of America branch on Boca Chica Boulevard in Brownsville, Texas, where everybody knew who they were.

“I asked the tellers what they were talking about, and they said the money had this sweet smell like Bounce, those sheets you throw into the dryer,” Salazar says. “They told me that when they opened the vault, the smell of Bounce just poured out.”

How do the Mexican drug smugglers persuade U.S. banks to turn a blind eye to this kind of thing? Smith implies that it all comes down to the inherent profitability of the business, but I’m not fully convinced by that: I don’t think that bank managers’ bonuses are going to be so much bigger for allowing the money to pass through their bank that they would risk their own careers and their employer’s franchise to do so. My guess is that there are direct kickbacks somewhere along the line, and that bank employees are being paid directly, or threatened, or both, by the drug smugglers. I’d certainly love to find out what Martin Woods’ bosses told the authorities when they were asked why they told him not to report the suspicious activity; let’s hope Smith continues to report this story. It’s not over yet — not by a long shot.



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