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Banks Are “Where the Money Is” In The Drug War

December 19, 2012

This article by Bill Conroy is re-posted from Narco News.

Citigroup, JP Morgan Chase & Co., Wachovia (acquired by Wells Fargo in 2009), HSBC Holdings, ING Bank, Standard Chartered, American Express Bank International, and not a few others, have a common bond beyond ranking among the largest banks in the world.Drug War_Money Laundering

All have been accused within the past five years (and several this year) of failing to comply with US anti-money laundering laws — thereby enabling, collectively, hundreds of billions of dollars worth of suspicious transactions to move through the banking system absent adequate monitoring or oversight.

Yet not one these banks, nor any of their top executives, has been hit with criminal sanctions.

All, with the exception of Britain’s HSBC  (which is still under investigation), have agreed to pay fines for their alleged transgressions after being served cease-and-desist orders or have entered into so-called deferred-prosecution pacts — under which a lender agrees to pay a fine and to comply with the law going foward in exchange for dismissal of all charges at the end of a specified government monitoring period.

But again, not one bank has been charged with a crime nor have any top executives been forced to do the perp walk, bound by handcuffs, in front of the adoring media throng.

Imagine if you or I were pulled over by the cops while transporting in the trunk of our car even $10,000 in bills that traced back to individuals suspected of being involved in illegal activities, such as narco-trafficking. What are the odds that we would walk away with only a traffic ticket?

That’s essentially what is happening in these cases involving big banks, who, for all practical purposes, are allowing their money transportation systems to be rented, for a fee, by criminals, while the banks’ leadership pleads ignorance: “I didn’t know that money was in the trunk. I’ll have to look into that.”

Now, if you take that same $10,000, or even millions of dollars, and put it inside an armored car under contract to a big bank, suddenly the dirty money gains the presumption of legitimate commerce, and is likely to have a police escort as opposed to being subjected to a police inspection.

“All financial crime has a money laundering component,” says Charles A. Intriago, president of the Miami-based Association of Certified Financial Crime Specialists. “… If you’re an individual, and get caught, you get hammered.

“But if you’re a big bank, and you’re caught moving money for a terrorist or drug dealer, you don’t have to worry. You just fork over a monetary penalty, and then raise your fees to make up for it.

“Until we see bankers walking off in handcuffs to face charges in these cases, nothing is going to change,” Intriago adds. “These monetary penalties are just a cost of doing business to them, like paying for a new corporate jet.”

Broken System

The world’s financial system is incredibly complex and capable of moving trillions of dollars in many directions, across multiple borders, with the push of a button in our digital age, making it difficult for banks to truly know their customers in all cases.

Still, the law demands that they do just that, and have systems in place to assure against money laundering.

From the regulators’ perspective, suspecting that a transaction is dirty is not the same as proving it is so. Financial crimes, by design, are hard to track and involve a considerable expenditure of law enforcement resources to investigate and litigate.

Bryan Hubbard, a spokesman for the US Office of the Comptroller of the Currency (OCC), which regulates national banks, when interviewed by Narco News, stressed that his office is charged with enforcing a wide range of legal and regulatory matters, and has a number of enforcement actions underway at any given time, but it does not have a “special focus” on money laundering — though, he adds, the OCC is committed to enforcing anti-money laundering laws.axpbeshciaaw7eh

Given the reality of scarce resources, anti-money laundering laws depend, in large measure, on having the banks police themselves — by assuring that suspicious activity reports are filed with regulators when transactions exceed certain monetary thresholds or don’t pass the smell test, or that compliance departments are well-staffed and on top of their systems.

The problem, however, is that there are many holes in that system, due, in large measure, to lax enforcement by overworked or even incompetent regulators — with the added problem that some of those regulators see the lenders they regulate as potential future employers.

For example, there’s the case of HSBC (the subject of a recent US Senate investigation focused on suspected money-laundering activities). One of the former chief compliance officers for the lender’s US subsidiary (called HBUS) served previously as a bank examiner for the OCC, US Senate records show. In addition, two of HBUS’ past Anti-Money Laundering directors worked previously for the US government — one as a federal prosecutor and the other as a US Treasury official.

And, in equal measure, similar power-relationship problems exist within bank compliance departments, whose employees can put at risk millions of dollars in revenue if they aggressively pursue money-laundering suspicions — with another downside being that if they are wrong, they risk angering powerful bank customers as well as their bosses.

It is that cycle of disincentives that makes it far easier for crooks to get in the door in the first place, because the risk of a bank getting caught violating anti-money laundering laws simply doesn’t seem to outweigh the benefits of looking the other way.

This past August, Standard Chartered agreed to pay a $340 million fine to get a New York bank regulator off its back after the British lender was accused of illegally concealing billions of dollars worth of transactions related to Iranian interests, in violation of US laws.

“That fine of $340 million represented only 4.5 percent of Standard Chartered’s profits in 2011,” Intriago points out. “It’s chump change to the bank.”

Repeating History

But Standard Chartered isn’t alone in standing accused of using the US banking system to move money for shady characters. In the 1990s, Raul Salinas de Gortari, the brother of former Mexican President Carlos Salinas, tapped US-based Citibank to help transfer up to $100 million out of Mexico and into Swiss bank accounts. Although US authorities investigated the suspicious money movements, ultimately no charges were brought against Raul Salinas or Citibank — a Citigroup Inc. subsidiary.

Again, in January 2010, Citigroup popped up on banking regulators’ radar, this time in Mexico, when a Mexican judge accused a half dozen casa de cambios (money transmitters) of laundering drug funds through various banks, including Citigroup’s Mexican subsidiary. In that case, Citigroup again was not accused of violating any laws.

However, in April of this year, a US bank regulator, the OCC, issued a cease-and-desist order against Citigroup due to the lender’s “internal control weaknesses, including the incomplete identification of high-risk customers in multiple areas of the bank.”

Again, Citigroup was not charged with any criminal violations and also did not admit or deny any wrongdoing, but promised to institute reforms.

Narco News is well aware of Citigroup’s banking history, particularly in Mexico.

Narco News publisher Al Giordano and Mexican journalist Mario Menendez, publisher of the Mexican daily Por Esto!, stood as defendants in libel litigation filed in 2000 against them by the powerful lender Banco Nacional de Mexico S.A.(Banamex). At the time, Banamex was controlled by banker Roberto Hernandez Ramirez.

At the heart of the litigation, filed in New York state court, was the following claim, spelled out in a Dec. 5, 2001, New York Supreme Court ruling that dismissed the case against Giordano and Menendez in a major victory for Internet publications’ First Amendment rights:

“Plaintiff [Banamex] alleges that defendants [Giordano and Menendez] made accusations that Mr. Hernandez Ramirez is involved in criminal drug trafficking and specifically, the Colombian drug trade.”

While the litigation against Giordano and Menedez was still underway, Citigroup struck a deal, announced in May 2001, to acquire Banamex, then Mexico’s second largest bank, for some $12.5 billion in cash and stock.

To read the entire article, click here.

One Comment leave one →
  1. kas0157 permalink
    December 19, 2012 4:17 pm

    Hollywood should consider making a movie about legal money laundering, not that it would solve the problem but it may give more light on the subject.

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