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- Re: US Bank - Dirty Money
- Email-ID 1115826
- Date 2011-05-05 22:12:26
- From friedman@att.blackberry.net
- To kevin.stech@stratfor.com
- I have a cost. It is money spent on something and that has a profit.
- Sent via BlackBerry by AT&T
- ----------------------------------------------------------------------
- From: "Kevin Stech"
- Date: Thu, 5 May 2011 15:07:13 -0500 (CDT)
- To: ; 'Karen Hooper';
- 'Sean Noonan'; 'Secure
- List'
- Subject: RE: US Bank - Dirty Money
- What do you mean by "flow through effect"
- From: George Friedman [mailto:friedman@att.blackberry.net]
- Sent: Thursday, May 05, 2011 15:05
- To: Kevin Stech; Karen Hooper; Sean Noonan; Secure List
- Subject: Re: US Bank - Dirty Money
- Those numbers assume a profit margin of 25 percent which is absurdly low.
- Moreover it fails to take into account that the primary cost is labor
- which has a massive flow through effect.
- The likely profit margin on drugs is about 80 percent for the primary
- transporter. No one is going to risk his life on a 25 percent margin deal.
- Youre better investing in other things without risk.
- Dying for a 25 percent return doesnt happen. Smuggle drugs is dramarically
- more profitable.
- Sent via BlackBerry by AT&T
- --------------------------------------------------------------------------
- From: "Kevin Stech"
- Date: Thu, 5 May 2011 14:58:49 -0500 (CDT)
- To: 'Karen Hooper'; ;
- Subject: RE: US Bank - Dirty Money
- The $40 bn estimate is revenues, not profits. The common profit estimates
- you see are in the $10 bn range.
- From: Karen Hooper [mailto:hooper@stratfor.com]
- Sent: Thursday, May 05, 2011 12:30
- To: sean.noonan@stratfor.com; secure@stratfor.com
- Subject: Re: US Bank - Dirty Money
- WF bought wachovia, and yeah, the case was settled last year with no
- criminal charges pursued. Sounds like Fred's contact is doing a follow up
- investigation. I'm less interested in the laundering so much as the size
- of it and where it ends up. The exit of that much money from Mexico is no
- small thing. We're never going to get a full picture of how the drug trade
- affects the financial system in Mex, but it's worth tracking the pieces.
- Also, the $40 bn estimate of drug profits has always seemed low, and these
- data points reinforce that.
- Sent from my iPhone
- On May 5, 2011, at 13:11, "Sean Noonan" wrote:
- Btw, if this is new it is wells fargo not wachovia.
- WF already paid fines for some of these shenanigans
- --------------------------------------------------------------------------
- From: Karen Hooper
- Date: Thu, 5 May 2011 11:55:57 -0500 (CDT)
- To: 'Secure List'
- Subject: Re: US Bank - Dirty Money
- Two different things here: 1) The Wachovia bust detailed in the article
- I sent out said that Wachovia handled $378.4 bn in transfers from casas
- de cambio (CDC) in 2004-2007 that they're calling shady (though they
- haven't verified just HOW shady all of it is). 2) Fred's contact says
- his contact has seen $70 bn laundered as a part of an ongoing
- investigation, but we don't know yet know over what timeframe.
- Could be that the CDC transfers are majority legitimate, but why
- transfer cash TO the United States? Usually the flow of legitimate
- remittances goes the other way, and that's the amount the DEA case
- sanctioned Wachovia for failing to properly monitor under money
- laundering laws.
- I'll try to dig up more details from the Wachovia investigation.
- On 5/5/11 12:43 PM, scott stewart wrote:
- Wait, so it was way more than $70B?
- Maybe not all of that was cartel cash...
- From: Karen Hooper [mailto:hooper@stratfor.com]
- Sent: Thursday, May 05, 2011 12:24 PM
- To: 'Secure List'
- Subject: Re: US Bank - Dirty Money
- Right. What i'm saying is that Wachovia ALONE handled ~$125 billion per
- year in shady cash from Mexico from 2004-2007. And that doesn't even
- count the money that stayed in cash, went to the Bahamas or stayed in
- Mexico.
- That makes the $40 bn per year stat seem pretty miniscule, no?
- On 5/5/11 12:00 PM, scott stewart wrote:
- That is $40B a year. Not all of it was laundered by one institution.
- Some is still physically hauled as bulk cash.
- From: Karen Hooper [mailto:hooper@stratfor.com]
- Sent: Thursday, May 05, 2011 11:45 AM
- To: Secure List
- Subject: Re: US Bank - Dirty Money
- Any word on the rate of flow? $70 bn is much bigger than the $40 billion
- estimates that we've seen over the years.
- The volume of cash handled in the Wachovia case also suggests something
- on the order of $125 bn per year being laundered by a single method.
- That's a LOT of money, and a lot more than we've discussed.
- --------------------------------------------------------------------------
- From: burton@stratfor.com
- To: "Karen Hooper" , "Secure List"
- Sent: Thursday, May 5, 2011 11:25:50 AM
- Subject: Re: US Bank - Dirty Money
- The money laundered was new, framed as exposing next week or words to
- that effect.
- Sent via BlackBerry by AT&T
- --------------------------------------------------------------------------
- From: Karen Hooper
- Date: Thu, 5 May 2011 09:39:12 -0500 (CDT)
- To: Secure List
- Subject: Re: US Bank - Dirty Money
- Over what timeframe did your contact handle that $70 billion?
- On 5/5/11 10:31 AM, burton@stratfor.com wrote:
- The GOM has hired the ex-CIA group to find additional monies laundered
- by Wachovia. Same group are being used against British Tobacco.
- Sent via BlackBerry by AT&T
- --------------------------------------------------------------------------
- From: Karen Hooper
- Date: Thu, 5 May 2011 09:27:48 -0500 (CDT)
- To: Secure List
- Subject: Re: US Bank - Dirty Money
- Here's a good one:
- How a big US bank laundered billions from Mexico's murderous drug gangs
- Ed Vulliamy
- The Observer, Sunday 3 April 2011
- http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs
- A soldier guards marijuana that is being incinerated in Tijuana, Mexico.
- Photograph: Guillermo Arias/AP
- On 10 April 2006, a DC-9 jet landed in the port city of Ciudad del
- Carmen, on the Gulf of Mexico, as the sun was setting. Mexican soldiers,
- waiting to intercept it, found 128 cases packed with 5.7 tons of
- cocaine, valued at $100m. But something else - more important and
- far-reaching - was discovered in the paper trail behind the purchase of
- the plane by the Sinaloa narco-trafficking cartel.
- During a 22-month investigation by agents from the US Drug Enforcement
- Administration, the Internal Revenue Service and others, it emerged that
- the cocaine smugglers had bought the plane with money they had laundered
- through one of the biggest banks in the United States: Wachovia, now
- part of the giant Wells Fargo.
- The authorities uncovered billions of dollars in wire transfers,
- traveller's cheques and cash shipments through Mexican exchanges into
- Wachovia accounts. Wachovia was put under immediate investigation for
- failing to maintain an effective anti-money laundering programme. Of
- special significance was that the period concerned began in 2004, which
- coincided with the first escalation of violence along the US-Mexico
- border that ignited the current drugs war.
- Criminal proceedings were brought against Wachovia, though not against
- any individual, but the case never came to court. In March 2010,
- Wachovia settled the biggest action brought under the US bank secrecy
- act, through the US district court in Miami. Now that the year's
- "deferred prosecution" has expired, the bank is in effect in the clear.
- It paid federal authorities $110m in forfeiture, for allowing
- transactions later proved to be connected to drug smuggling, and
- incurred a $50m fine for failing to monitor cash used to ship 22 tons of
- cocaine.
- More shocking, and more important, the bank was sanctioned for failing
- to apply the proper anti-laundering strictures to the transfer of
- $378.4bn - a sum equivalent to one-third of Mexico's gross national
- product - into dollar accounts from so-called casas de cambio (CDCs) in
- Mexico, currency exchange houses with which the bank did business.
- "Wachovia's blatant disregard for our banking laws gave international
- cocaine cartels a virtual carte blanche to finance their operations,"
- said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less
- than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells
- Fargo stock traded at $30.86 - up 1% on the week of the court
- settlement.
- The conclusion to the case was only the tip of an iceberg, demonstrating
- the role of the "legal" banking sector in swilling hundreds of billions
- of dollars - the blood money from the murderous drug trade in Mexico and
- other places in the world - around their global operations, now bailed
- out by the taxpayer.
- At the height of the 2008 banking crisis, Antonio Maria Costa, then head
- of the United Nations office on drugs and crime, said he had evidence to
- suggest the proceeds from drugs and crime were "the only liquid
- investment capital" available to banks on the brink of collapse.
- "Inter-bank loans were funded by money that originated from the drugs
- trade," he said. "There were signs that some banks were rescued that
- way."
- Wachovia was acquired by Wells Fargo during the 2008 crash, just as
- Wells Fargo became a beneficiary of $25bn in taxpayers' money.
- Wachovia's prosecutors were clear, however, that there was no suggestion
- Wells Fargo had behaved improperly; it had co-operated fully with the
- investigation. Mexico is the US's third largest international trading
- partner and Wachovia was understandably interested in this volume of
- legitimate trade.
- Jose Luis Marmolejo, who prosecuted those running one of the casas de
- cambio at the Mexican end, said: "Wachovia handled all the transfers.
- They never reported any as suspicious."
- "As early as 2004, Wachovia understood the risk," the bank admitted in
- the statement of settlement with the federal government, but, "despite
- these warnings, Wachovia remained in the business". There is, of course,
- the legitimate use of CDCs as a way into the Hispanic market. In 2005
- the World Bank said that Mexico was receiving $8.1bn in remittances.
- During research into the Wachovia Mexican case, the Observer obtained
- documents previously provided to financial regulators. It emerged that
- the alarm that was ignored came from, among other places, London, as a
- result of the diligence of one of the most important whistleblowers of
- our time. A man who, in a series of interviews with the Observer, adds
- detail to the documents, laying bare the story of how Wachovia was at
- the centre of one of the world's biggest money-laundering operations.
- Martin Woods, a Liverpudlian in his mid-40s, joined the London office of
- Wachovia Bank in February 2005 as a senior anti-money laundering
- officer. He had previously served with the Metropolitan police drug
- squad. As a detective he joined the money-laundering investigation team
- of the National Crime Squad, where he worked on the British end of the
- Bank of New York money-laundering scandal in the late 1990s.
- Woods talks like a police officer - in the best sense of the word:
- punctilious, exact, with a roguish humour, but moral at the core. He was
- an ideal appointment for any bank eager to operate a diligent and
- effective risk management policy against the lucrative scourge of high
- finance: laundering, knowing or otherwise, the vast proceeds of
- criminality, tax-evasion, and dealing in arms and drugs.
- Woods had a police officer's eye and a police officer's instincts - not
- those of a banker. And this influenced not only his methods, but his
- mentality. "I think that a lot of things matter more than money - and
- that marks you out in a culture which appears to prevail in many of the
- banks in the world," he says.
- Woods was set apart by his modus operandi. His speciality, he explains,
- was his application of a "know your client", or KYC, policing strategy
- to identifying dirty money. "KYC is a fundamental approach to anti-money
- laundering, going after tax evasion or counter-terrorist financing. Who
- are your clients? Is the documentation right? Good, responsible banking
- involved always knowing your customer and it still does."
- When he looked at Wachovia, the first thing Woods noticed was a
- deficiency in KYC information. And among his first reports to his
- superiors at the bank's headquarters in Charlotte, North Carolina, were
- observations on a shortfall in KYC at Wachovia's operation in London,
- which he set about correcting, while at the same time implementing what
- was known as an enhanced transaction monitoring programme, gathering
- more information on clients whose money came through the bank's offices
- in the City, in sterling or euros. By August 2006, Woods had identified
- a number of suspicious transactions relating to casas de cambio
- customers in Mexico.
- Primarily, these involved deposits of traveller's cheques in euros. They
- had sequential numbers and deposited larger amounts of money than any
- innocent travelling person would need, with inadequate or no KYC
- information on them and what seemed to a trained eye to be dubious
- signatures. "It was basic work," he says. "They didn't answer the
- obvious questions: 'Is the transaction real, or does it look synthetic?
- Does the traveller's cheque meet the protocols? Is it all there, and if
- not, why not?'"
- Woods discussed the matter with Wachovia's global head of anti-money
- laundering for correspondent banking, who believed the cheques could
- signify tax evasion. He then undertook what banks call a "look back" at
- previous transactions and saw fit to submit a series of SARs, or
- suspicious activity reports, to the authorities in the UK and his
- superiors in Charlotte, urging the blocking of named parties and large
- series of sequentially numbered traveller's cheques from Mexico. He
- issued a number of SARs in 2006, of which 50 related to the casas de
- cambio in Mexico. To his amazement, the response from Wachovia's Miami
- office, the centre for Latin American business, was anything but
- supportive - he felt it was quite the reverse.
- As it turned out, however, Woods was on the right track. Wachovia's
- business in Mexico was coming under closer and closer scrutiny by US
- federal law enforcement. Wachovia was issued with a number of subpoenas
- for information on its Mexican operation. Woods has subsequently been
- informed that Wachovia had six or seven thousand subpoenas. He says this
- was "An absurd number. So at what point does someone at the highest
- level not get the feeling that something is very, very wrong?"
- In April and May 2007, Wachovia - as a result of increasing interest and
- pressure from the US attorney's office - began to close its relationship
- with some of the casas de cambio. But rather than launch an internal
- investigation into Woods's alerts over Mexico, Woods claims Wachovia
- hung its own money-laundering expert out to dry. The records show that
- during 2007 Woods "continued to submit more SARs related to the casas de
- cambio".
- In July 2007, all of Wachovia's remaining 10 Mexican casa de cambio
- clients operating through London suddenly stopped doing so. Later in
- 2007, after the investigation of Wachovia was reported in the US
- financial media, the bank decided to end its remaining relationships
- with the Mexican casas de cambio globally. By this time, Woods says, he
- found his personal situation within the bank untenable; while the bank
- acted on one level to protect itself from the federal investigation into
- its shortcomings, on another, it rounded on the man who had been among
- the first to spot them.
- On 16 June Woods was told by Wachovia's head of compliance that his
- latest SAR need not have been filed, that he had no legal requirement to
- investigate an overseas case and no right of access to documents held
- overseas from Britain, even if they were held by Wachovia.
- Woods's life went into freefall. He went to hospital with a prolapsed
- disc, reported sick and was told by the bank that he not done so in the
- appropriate manner, as directed by the employees' handbook. He was off
- work for three weeks, returning in August 2007 to find a letter from the
- bank's compliance managing director, which was unrelenting in its tone
- and words of warning.
- The letter addressed itself to what the manager called "specific
- examples of your failure to perform at an acceptable standard". Woods,
- on the edge of a breakdown, was put on sick leave by his GP; he was
- later given psychiatric treatment, enrolled on a stress management
- course and put on medication.
- Late in 2007, Woods attended a function at Scotland Yard where
- colleagues from the US were being entertained. There, he sought out a
- representative of the Drug Enforcement Administration and told him about
- the casas de cambio, the SARs and his employer's reaction. The Federal
- Reserve and officials of the office of comptroller of currency in
- Washington DC then "spent a lot of time examining the SARs" that had
- been sent by Woods to Charlotte from London.
- "They got back in touch with me a while afterwards and we began to put
- the pieces of the jigsaw together," says Woods. What they found was - as
- Costa says - the tip of the iceberg of what was happening to drug money
- in the banking industry, but at least it was visible and it had a name:
- Wachovia.
- In June 2005, the DEA, the criminal division of the Internal Revenue
- Service and the US attorney's office in southern Florida began
- investigating wire transfers from Mexico to the US. They were traced
- back to correspondent bank accounts held by casas de cambio at Wachovia.
- The CDC accounts were supervised and managed by a business unit of
- Wachovia in the bank's Miami offices.
- "Through CDCs," said the court document, "persons in Mexico can use hard
- currency and ... wire transfer the value of that currency to US bank
- accounts to purchase items in the United States or other countries. The
- nature of the CDC business allows money launderers the opportunity to
- move drug dollars that are in Mexico into CDCs and ultimately into the
- US banking system.
- "On numerous occasions," say the court papers, "monies were deposited
- into a CDC by a drug-trafficking organisation. Using false identities,
- the CDC then wired that money through its Wachovia correspondent bank
- accounts for the purchase of airplanes for drug-trafficking
- organisations." The court settlement of 2010 would detail that "nearly
- $13m went through correspondent bank accounts at Wachovia for the
- purchase of aircraft to be used in the illegal narcotics trade. From
- these aircraft, more than 20,000kg of cocaine were seized."
- All this occurred despite the fact that Wachovia's office was in Miami,
- designated by the US government as a "high-intensity money laundering
- and related financial crime area", and a "high-intensity drug
- trafficking area". Since the drug cartel war began in 2005, Mexico had
- been designated a high-risk source of money laundering.
- "As early as 2004," the court settlement would read, "Wachovia
- understood the risk that was associated with doing business with the
- Mexican CDCs. Wachovia was aware of the general industry warnings. As
- early as July 2005, Wachovia was aware that other large US banks were
- exiting the CDC business based on [anti-money laundering] concerns ...
- despite these warnings, Wachovia remained in business."
- On 16 March 2010, Douglas Edwards, senior vice-president of Wachovia
- Bank, put his signature to page 10 of a 25-page settlement, in which the
- bank admitted its role as outlined by the prosecutors. On page 11, he
- signed again, as senior vice-president of Wells Fargo. The documents
- show Wachovia providing three services to 22 CDCs in Mexico: wire
- transfers, a "bulk cash service" and a "pouch deposit service", to
- accept "deposit items drawn on US banks, eg cheques and traveller's
- cheques", as spotted by Woods.
- "For the time period of 1 May 2004 through 31 May 2007, Wachovia
- processed at least $$373.6bn in CDCs, $4.7bn in bulk cash" - a total of
- more than $378.3bn, a sum that dwarfs the budgets debated by US state
- and UK local authorities to provide services to citizens.
- The document gives a fascinating insight into how the laundering of drug
- money works. It details how investigators "found readily identifiable
- evidence of red flags of large-scale money laundering". There were
- "structured wire transfers" whereby "it was commonplace in the CDC
- accounts for round-number wire transfers to be made on the same day or
- in close succession, by the same wire senders, for the ... same
- account".
- Over two days, 10 wire transfers by four individuals "went though
- Wachovia for deposit into an aircraft broker's account. All of the
- transfers were in round numbers. None of the individuals of business
- that wired money had any connection to the aircraft or the entity that
- allegedly owned the aircraft. The investigation has further revealed
- that the identities of the individuals who sent the money were false and
- that the business was a shell entity. That plane was subsequently seized
- with approximately 2,000kg of cocaine on board."
- Many of the sequentially numbered traveller's cheques, of the kind dealt
- with by Woods, contained "unusual markings" or "lacked any legible
- signature". Also, "many of the CDCs that used Wachovia's bulk cash
- service sent significantly more cash to Wachovia than what Wachovia had
- expected. More specifically, many of the CDCs exceeded their monthly
- activity by at least 50%."
- Recognising these "red flags", the US attorney's office in Miami, the
- IRS and the DEA began investigating Wachovia, later joined by FinCEN,
- one of the US Treasury's agencies to fight money laundering, while the
- office of the comptroller of the currency carried out a parallel
- investigation. The violations they found were, says the document,
- "serious and systemic and allowed certain Wachovia customers to launder
- millions of dollars of proceeds from the sale of illegal narcotics
- through Wachovia accounts over an extended time period. The
- investigation has identified that at least $110m in drug proceeds were
- funnelled through the CDC accounts held at Wachovia."
- The settlement concludes by discussing Wachovia's "considerable
- co-operation and remedial actions" since the prosecution was initiated,
- after the bank was bought by Wells Fargo. "In consideration of
- Wachovia's remedial actions," concludes the prosecutor, "the United
- States shall recommend to the court ... that prosecution of Wachovia on
- the information filed ... be deferred for a period of 12 months."
- But while the federal prosecution proceeded, Woods had remained out in
- the cold. On Christmas Eve 2008, his lawyers filed tribunal proceedings
- against Wachovia for bullying and detrimental treatment of a
- whistleblower. The case was settled in May 2009, by which time Woods
- felt as though he was "the most toxic person in the bank". Wachovia
- agreed to pay an undisclosed amount, in return for which Woods left the
- bank and said he would not make public the terms of the settlement.
- After years of tribulation, Woods was finally formally vindicated,
- though not by Wachovia: a letter arrived from John Dugan, the
- comptroller of the currency in Washington DC, dated 19 March 2010 -
- three days after the settlement in Miami. Dugan said he was "writing to
- personally recognise and express my appreciation for the role you played
- in the actions brought against Wachovia Bank for violations of the bank
- secrecy act ... Not only did the information that you provided
- facilitate our investigation, but you demonstrated great personal
- courage and integrity by speaking up. Without the efforts of individuals
- like you, actions such as the one taken against Wachovia would not be
- possible."
- The so-called "deferred prosecution" detailed in the Miami document is a
- form of probation whereby if the bank abides by the law for a year,
- charges are dropped. So this March the bank was in the clear. The week
- that the deferred prosecution expired, a spokeswoman for Wells Fargo
- said the parent bank had no comment to make on the documentation
- pertaining to Woods's case, or his allegations. She added that there was
- no comment on Sloman's remarks to the court; a provision in the
- settlement stipulated Wachovia was not allowed to issue public
- statements that contradicted it.
- But the settlement leaves a sour taste in many mouths - and certainly in
- Woods's. The deferred prosecution is part of this "cop-out all round",
- he says. "The regulatory authorities do not have to spend any more time
- on it, and they don't have to push it as far as a criminal trial. They
- just issue criminal proceedings, and settle. The law enforcement people
- do what they are supposed to do, but what's the point? All those people
- dealing with all that money from drug-trafficking and murder, and no one
- goes to jail?"
- One of the foremost figures in the training of anti-money laundering
- officers is Robert Mazur, lead infiltrator for US law enforcement of the
- Colombian Medellin cartel during the epic prosecution and collapse of
- the BCCI banking business in 1991 (his story was made famous by his
- memoir, The Infiltrator, which became a movie).
- Mazur, whose firm Chase and Associates works closely with law
- enforcement agencies and trains officers for bank anti-money laundering,
- cast a keen eye over the case against Wachovia, and he says now that
- "the only thing that will make the banks properly vigilant to what is
- happening is when they hear the rattle of handcuffs in the boardroom".
- Mazur said that "a lot of the law enforcement people were disappointed
- to see a settlement" between the administration and Wachovia. "But I
- know there were external circumstances that worked to Wachovia's
- benefit, not least that the US banking system was on the edge of
- collapse."
- What concerns Mazur is that what law enforcement agencies and
- politicians hope to achieve against the cartels is limited, and falls
- short of the obvious attack the US could make in its war on drugs: go
- after the money. "We're thinking way too small," Mazur says. "I train
- law enforcement officers, thousands of them every year, and they say to
- me that if they tried to do half of what I did, they'd be arrested. But
- I tell them: 'You got to think big. The headlines you will be reading in
- seven years' time will be the result of the work you begin now.' With
- BCCI, we had to spend two years setting it up, two years doing
- undercover work, and another two years getting it to trial. If they want
- to do something big, like go after the money, that's how long it takes."
- But Mazur warns: "If you look at the career ladders of law enforcement,
- there's no incentive to go after the big money. People move every two to
- three years. The DEA is focused on drug trafficking rather than money
- laundering. You get a quicker result that way - they want to get the
- traffickers and seize their assets. But this is like treating a sick
- plant by cutting off a few branches - it just grows new ones. Going
- after the big money is cutting down the plant - it's a harder door to
- knock on, it's a longer haul, and it won't get you the short-term
- riches."
- The office of the comptroller of the currency is still examining whether
- individuals in Wachovia are criminally liable. Sources at FinCEN say
- that a so-called "look-back" is in process, as directed by the
- settlement and agreed to by Wachovia, into the $378.4bn that was not
- directly associated with the aircraft purchases and cocaine hauls, but
- neither was it subject to the proper anti-laundering checks. A FinCEN
- source says that $20bn already examined appears to have "suspicious
- origins". But this is just the beginning.
- Antonio Maria Costa, who was executive director of the UN's office on
- drugs and crime from May 2002 to August 2010, charts the history of the
- contamination of the global banking industry by drug and criminal money
- since his first initiatives to try to curb it from the European
- commission during the 1990s. "The connection between organised crime and
- financial institutions started in the late 1970s, early 1980s," he says,
- "when the mafia became globalised."
- Until then, criminal money had circulated largely in cash, with the
- authorities making the occasional, spectacular "sting" or haul. During
- Costa's time as director for economics and finance at the EC in
- Brussels, from 1987, inroads were made against penetration of banks by
- criminal laundering, and "criminal money started moving back to cash,
- out of the financial institutions and banks. Then two things happened:
- the financial crisis in Russia, after the emergence of the Russian
- mafia, and the crises of 2003 and 2007-08.
- "With these crises," says Costa, "the banking sector was short of
- liquidity, the banks exposed themselves to the criminal syndicates, who
- had cash in hand."
- Costa questions the readiness of governments and their regulatory
- structures to challenge this large-scale corruption of the global
- economy: "Government regulators showed what they were capable of when
- the issue suddenly changed to laundering money for terrorism - on that,
- they suddenly became serious and changed their attitude."
- Hardly surprising, then, that Wachovia does not appear to be the end of
- the line. In August 2010, it emerged in quarterly disclosures by HSBC
- that the US justice department was seeking to fine it for anti-money
- laundering compliance problems reported to include dealings with Mexico.
- "Wachovia had my resume, they knew who I was," says Woods. "But they did
- not want to know - their attitude was, 'Why are you doing this?' They
- should have been on my side, because they were compliance people, not
- commercial people. But really they were commercial people all along.
- We're talking about hundreds of millions of dollars. This is the biggest
- money-laundering scandal of our time.
- "These are the proceeds of murder and misery in Mexico, and of drugs
- sold around the world," he says. "All the law enforcement people wanted
- to see this come to trial. But no one goes to jail. "What does the
- settlement do to fight the cartels? Nothing - it doesn't make the job of
- law enforcement easier and it encourages the cartels and anyone who
- wants to make money by laundering their blood dollars. Where's the risk?
- There is none.
- "Is it in the interest of the American people to encourage both the drug
- cartels and the banks in this way? Is it in the interest of the Mexican
- people? It's simple: if you don't see the correlation between the money
- laundering by banks and the 30,000 people killed in Mexico, you're
- missing the point."
- Woods feels unable to rest on his laurels. He tours the world for a
- consultancy he now runs, Hermes Forensic Solutions, counselling and
- speaking to banks on the dangers of laundering criminal money, and how
- to spot and stop it. "New York and London," says Woods, "have become the
- world's two biggest laundries of criminal and drug money, and offshore
- tax havens. Not the Cayman Islands, not the Isle of Man or Jersey. The
- big laundering is right through the City of London and Wall Street.
- "After the Wachovia case, no one in the regulatory community has sat
- down with me and asked, 'What happened?' or 'What can we do to avoid
- this happening to other banks?' They are not interested. They are the
- same people who attack the whistleblowers and this is a position the
- [British] Financial Services Authority at least has adopted on legal
- advice: it has been advised that the confidentiality of banking and
- bankers takes primacy over the public information disclosure act. That
- is how the priorities work: secrecy first, public interest second.
- "Meanwhile, the drug industry has two products: money and suffering. On
- one hand, you have massive profits and enrichment. On the other, you
- have massive suffering, misery and death. You cannot separate one from
- the other.
- "What happened at Wachovia was symptomatic of the failure of the entire
- regulatory system to apply the kind of proper governance and adequate
- risk management which would have prevented not just the laundering of
- blood money, but the global crisis."
- On 5/4/11 9:29 PM, Sean Noonan wrote:
- this is in OS.
- Many big stories on it.
- On 5/4/11 7:53 PM, Fred Burton wrote:
- One of my trusted former CIA cronies reports Wachovia laundered $70
- billion (yes billion) for the MX drug cartels per an on-going
- investigation. His company has been hired by the MX govt to look for
- drug money.
- --
- Sean Noonan
- Tactical Analyst
- Office: +1 512-279-9479
- Mobile: +1 512-758-5967
- Strategic Forecasting, Inc.
- www.stratfor.com
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