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Posted on 05/22/2014 1:55:42 PM PDT by mgist
The Sinaloa Cartel, headquartered on Mexico's northern Pacific Coast, is constantly exploring new ways to launder its gargantuan profits. The State Department reports that Mexican trafficking organizations earn between $19 and $29 billion every year from selling marijuana, cocaine, heroin and methamphetamines on the streets of American cities.
And Sinaloa is reportedly the richest, most powerful of them all, according to the Drug Enforcement Administration. The capture last month of the Mexican druglord Joaquin "Chapo" Guzman has cast a spotlight on the smuggling empire he built.
One key to the Sinaloa Cartel's success has been to use the global banking system to launder all this cash.
"It's very important for them to get that money into the banking system and do so with as little scrutiny as possible," says Jim Hayes, special agent in charge of Homeland Security Investigations for the New York office of Immigration and Customs Enforcement, or ICE. He was lead agent in the 2012 case that revealed how Sinaloa money men used HSBC, one of the world's largest banks, as their private vault.
ICE says in 2007 and 2008, the Sinaloa Cartel and a Colombian cartel wire-transferred $881 million in illegal drug proceeds into U.S. accounts.
Huge Daily Deposits
According to a subsequent investigation by the U.S. Senate Permanent Subcommittee on Investigations, cartel operatives would sometimes deposit hundreds of thousands of dollars in cash in a single day using boxes designed to fit the exact dimensions of the teller's window at HSBC branches in Mexico.
More In The Borderland Series
Parallels At The Border, The Drugs Go North And The Cash Goes South
Borderland: Dispatches From The U.S.-Mexico Boundary The bank ignored basic anti-money laundering controls, as the investigation found. In 2007 and 2008, the bank's personnel in Mexico wired $7 billion dollars to corresponding U.S. dollar accounts in New York. These were more dollars than even larger Mexican banks wired to U.S. accounts. ICE says some of it was drug proceeds.
Parallels A U.S. Border Shelter That Attracts Asylum Seekers Far And Wide Yet no red flags were raised because of what a bank official later described as, a "lack of a compliance culture" in the Mexico affiliate, according to the Senate report.
Moreover, the dollar transfers earned HSBC hefty fees. The Senate investigation quoted an HSBC email lamenting how the bank would lose $2.6 billion in revenue from U.S. dollar accounts that it was forced to close because of the Mexico fiasco.
"When I was told that there could be in the billions of dollars being moved through these accounts, it was very difficult to believe," says senior ICE agent Jim Hayes. "A lot of people have asked, 'Was this complicit?' We don't believe that they (HSBC personnel) knew for certain that the money being moved was drug money, but they should have known."
A Simple Plan
In Culiacán, the prosperous capital of Sinaloa, where people live cheek by jowl with the cartel, even they were shocked that narco-dollars could be laundered so brazenly.
"You see the building, the office, the cars, the papers, the men in suits. Everything looks legal. That's what frightens us," says Javier Valdez, an author and journalist in Culiacan who writes about narcotrafficking.
"The DEA loves to sell the idea that these guys are super sophisticated criminal masterminds," says Alejandro Hope, a security analyst in Mexico City and a former federal intelligence agent. "It's so simple. It's so unsophisticated. That is what to me is the most disturbing part of this. These guys are not even trying that hard."
The consequences for ignoring the torrent of dirty money flowing into its Mexico bank vaults were severe for HSBC.
The Department of Justice levied penalties and forfeitures of $1.9 billion on the bank. Of course, with $2.6 trillion in assets, for HSBC this represented a man with a hundred dollars in his pocket paying a fine of seven cents. HSBC was also faulted for hiding prohibited transactions with nations like Iran and Cuba.
The bank emailed a statement to NPR:
"HSBC has made progress in remediating anti-money laundering sanctions compliance deficiencies. But we recognize that protecting against financial crime is an ongoing journey and we have much more to do. Since 2011, we have implemented reforms and new controls, enhanced our monitoring systems, and strengthened and expanded our global financial crime and compliance organization. For example, the number of fulltime employees in financial crime and regulatory compliance is up 54 percent between 2012 and 2013." ICE agent Jim Hayes says fallout from the HSBC case continues.
"We think this forfeiture is significant enough to make other banks to look and make sure they're in compliance," he says.
Banks Still Vulnerable
In the wake of HSBC, other banks boosted their anti-money laundering budgets, increased know-your-customer rules, and in some cases dumped high-risk clients.
Which might make you think, well, now they've got money laundering under control.
"Despite all of the efforts, banks are still vulnerable to money laundering and it's kind of an age-old thing," says Kieran Beer, editor of the news website of the Association of Certified Anti-Money Laundering Specialists.
"The drug trade is overwhelming in terms of how that money finds paths—like water — to come into the global financial system," Beer continues.
HSBC wasn't the first or last bank money-laundering scandal.
In 2010, prosecutors detailed how Wachovia Bank had been used by Mexican currency exchange houses to launder at least $110 million in drug profits.
In 2012, The Wall Street Journal reported on an FBI affidavit that laid out how the Zetas Cartel used Bank of America to launder cash through a racehorse operation in Texas.
And last month, Western Union agreed to do more to beef up vulnerabilities in its money transfer business along the southwest border.
Back in Culiacán, and throughout Mexico, currency exchange houses operate under strict new rules that are supposed to limit the size of dollar transactions, investigators are watching to see what the narcos next money-laundering ploy will be.
Yes and no.
I'm a small businessman trying to purchase real estate outside the USA. You have no idea how difficult it is to open an account in a foreign country because banks don't want to deal with the USA Fed. govt.. Also, if you transfer more than $10,000 to a foreign country expect to be audited.
IOW, under the guise of "fighting crime" the fed govt is making it very difficult to move any assets out of the country, not really the behavior of a "free society".
This is more realistic insight of what is corrupting our country, and controlling our politicians and media.
Benghazi was all about arming Syrian rebels who have pledged allegiance to Al Qaeda, a heroin cartel.
One step forward two steps back? Though one Wall Street megabank, Credit Suisse, finally faced a bit of justice for criminal activity it seems there still has not been much of a change in some of the bankster community’s more unsavory practices – such as money laundering for drug cartels.
First HSBC famously got off with a fine for laundering massive amounts of money for Latin American drug cartels and now Reuters is reporting that both Charles Scwhab and Bank of America owned Merril Lynch are looking the other way as drug cartels in Mexico use their services to finance their opulent lifestyles and move money around the world.
The SEC is reportedly investigating the firms for failing to follow anti-money laundering rules that mandate the company find out who they are doing business with before helping customers move money.
The SEC’s investigation so far has found Charles Schwab and Merrill did not pay close enough attention to their clients’ true identities, and accepted shell companies and individuals with fake addresses as clients, two sources said.
In both cases, some of the accounts, whose ownership the brokerages did not adequately investigate, were eventually linked to drug cartels, they said.
A lack of due diligence or an HSBC style assist? In either case, the financial service professionals were totally disinterested that accounts setup near the Mexican border “contained hundreds of thousands of dollars while others held millions.”
It’s good to know in our ever increasingly panopticon society that there are one group of people left who bend over backwards to ensure they don’t collect any valid personal information. They would rather not know who you are or where the money came from.
Often thought that the first generation bankers from countries along the Afganistan poppy routes that were connected to 0 and company in Chicago was suspicious. Sure would like to see more proven and arrests made
Casinos are still the best way to launder money that has ever been invented.
What you are dealing may have to do with the country you are buying in.
Most Wall Street banks have offices in every major nation. Almost every bank has offices in offshore tax havens, which aren’t even audited.
I have assets overseas and haven’t had a problem. I am also ne to follow the rules because there is no amount of money worth risking jail for and I like to sleep well at night.
Heck of a writer...”the consequences were severe for HSBC...”.
Followed by a sentence that spells out why they were anything but.
There are plenty of private “bank” owners. Soros owns one here, and in Colombia.
Miami has a few independently owned banks.
Wonder if this is related to the recent propensity of bankers to attempt human flight off the top of tall buildings...?
Then there are the private Hedge Funds that can’t be touched.
If the inflated profits of Prohibition disappeared tomorrow, I suspect many banks would go under.
NPR is - you may find this amazing - pure, 100% new world order to its core.
What Pieter ? That’s an astounding statement.
Why would they run this story, then ?
It’s called taking control of the storyline - getting out in front of your PR problems.
If NPR takes the lead in this storyline...
they can neatly filter out the information that is really damning against new world order financial elites.
If you look at public TV, listen to NPR, you’ll see the organizations are 100% New York City financial elites focused. They are funded by the elites’ foundations, they cover the elites’ Broaday, Lincoln Center, Carnegie Hall, “the arts”, etc., etc. All from an old-money New York perspective. They cover all the “left-leaning” movements as saint-like endeavors.
The folks who are the real backing of NPR are the folks in the same leauge as folks who attend “benefit galas” like this one from 2006:
http://www.newyorksocialdiary.com/socialdiary/2006/12_07_06/socialdiary12_07_06.php
You claim some investor deposited a million in your bank...
vs.
I claim some schmuck lost a million at my craps table...
Which one is easier to prove / trace?
Of course, the smart investigator takes clues from WHEREVER he can find them, and pieces the puzzle together.
So clues from NPR are just as good as clues from anywhere.
IMHO, it’s just wise to know what NPR is...
IMHO, great post.
Meanwhile this comes up on my playlist:
http://www.youtube.com/watch?v=hx-tsLrZqEU
Nothing really new here. Drugs are a cash business and profitable, and in the end so are banks.
Possibly. Often have wondered if they were launched by others!
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