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Re: US Bank - Dirty Money

1115826

Date    2011-05-05 22:12:26

From   friedman@att.blackberry.net

To        kevin.stech@stratfor.com

Others MessageId: <66180046-1304626302-cardhu_decombobulator_blackberry.rim.net-455500441-@bda2532.bisx.prod.on.blackberry>

InReplyTo: 1918377397.132278.1304626033960.JavaMail.root@core.stratfor.com

Text

I have a cost. It is money spent on something and that has a profit.

 

Sent via BlackBerry by AT&T

 

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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

 

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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

 

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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

Fargostock 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

WashingtonDCthen "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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