Pubdate: Sun, 05 Aug 2012
Source: El Paso Times (TX)
Copyright: 2012 El Paso Times
Contact: http://www.elpasotimes.com/townhall/ci_14227323
Website: http://www.elpasotimes.com/
Details: http://www.mapinc.org/media/829
Author: Diana Washington Valdez

DRUG CASH FUELS MONEY LAUNDERING

While drug trafficking, gruesome killings and big drug seizures tend
to grab the public's attention, experts say, the real action is in the
money -- billions of dollars worth of it.

A recent U.S. Senate report on money laundering provides some insight 
into just how much money the drug cartels are generating. The U.S. 
Senate Permanent Subcommittee on Investigations on July 17 released its 
report titled "U.S. Vulnerabilities to Money Laundering, Drugs, and 
Terrorist Financing: HSBC Case History."

In its simplest terms, money laundering is turning "dirty money"
obtained through illegal means into clean money used for legitimate
purposes.

The report says HSBC Mexico, the HSBC subsidiary in Mexico, in 2008
alone moved $4 billion in bulk cash to the bank's U.S. affiliate HSBC
Bank USA. The bulk cash is of suspicious origin, but due to bank
secrecy laws, financial institutions do not disclose who deposited the
money.

The report also says that Wachovia Bank, which was purchased later by
Wells Fargo, handled $4.7 billion in bulk cash over a three-year
period, and "also processed $20 billion in sequentially numbered
travelers cheques, the majority of which contained illegible names and
unusual markings."

Money exchange houses (casas de cambio) in Mexico were used to wire
money to Wachovia in Florida, the report said. U.S. officials had said
that they suspected many of the proceeds for the laundered funds came
from the Sinaloa drug cartel led by Joaquin "Chapo" Guzman.

Wachovia, accused of laundering about $378 billion from Mexico and
facing U.S. criminal charges, got off last year by paying a $160
million fine. According to the Drug Enforcement Administration, about
$13 billion of the $378 billion was traced to the Sinaloa cartel.

Raymond W. Baker, director of of Global Financial Integrity, or GFI,
and an expert on corruption, money laundering, growth and foreign
policy issues, said some big banks appear to be lax in cracking down
on suspicious transactions, and often wait until regulators are on top
of them.

"The reason for this kind of laxness in anti-money-laundering scrutiny
may be that there is so much money involved in drug-trafficking," Baker 
said.

He said that an estimated $1 trillion in dirty money is laundered each
year through Western banks and businesses, and that about half of that
money comes from illegal trafficking in drugs, arms and humans.

GFI is a program of the Center for International Policy, a group in
Washington, D.C., that conducts research and promotes policies and
safeguards against money laundering and the illegal flow of money.

Baker said Mexican drug cartels smuggle cash from drug proceeds into
Mexico, and then that money is wired back to U.S. banks, where it is
used to purchase products or services.

On Thursday, the U.S. Attorney's Office for the Southern District of
New York announced that Mario E. Villanueva, 64, had pleaded guilty to
conspiring to launder $19 million in bribe payments he received from
the Juarez drug cartel from 1994 to 1999.

Officials said Villanueva was governor of Quintana Roo when he
received the drug-cartel bribes. Officials said Villanueva used a
Lehman Brothers investment representative to help him hide the funds.
He used banks and brokerage accounts in the U.S., Switzerland, the
Bahamas, Panama and Mexico, as well as shell corporations in the
British Virgin Islands.

"In 1994, (Villanueva) entered into an agreement with the Juarez
cartel that would ensure its cocaine shipments traveled through
Quintana Roo without interference. E Under the agreement, (Villanueva)
received payments of between $400,000 and $500,000 for each shipment
of cocaine that the cartel transported through his state," U.S.
officials said in a statement.

Based on previous cases, U.S. authorities found that drug-smuggling
organizations, including ones that operate in the El Paso-Juarez
region, have laundered money by investing in real estate, jewelry,
auto dealerships, flower shops, tractor-trailers, nightclubs,
restaurants, medical clinics and aircraft.

Economics analyst Carlos Aguilar said that a lot of money laundering
probably takes place in El Paso-Juarez, which is a major smuggling
corridor, but that it's hard to report and prove.

"I reported an instance of money laundering once, but the authorities
were not interested because they said the amount of money possibly
involved was too small," Aguilar said. "You have to make the cost of
the punishment greater than the benefit of the crime."

In May, a U.S. grand jury indicted 14 people in connection with an
alleged $20 million money-laundering operation of the Zetas drug
cartel to buy, sell and race quarter horses, including at the Ruidoso
Downs Racetrack and Casino.

Authorities said the operation allegedly used proceeds from cocaine
trafficking and other illicit activities to buy race horses.

FBI officials said the suspects involved in the alleged scheme used
Bank of America accounts to conduct their investment
transactions.

The bank is not accused of wrongdoing, and bank officials said in a
statement that they are cooperating with authorities.

A U.S. district judge in Texas scheduled the trial in that case to
begin in October.

Last year, the owner of the Gateway Hotel in Downtown El Paso was
found guilty of money laundering in relation to a human-trafficking
scheme. Officials said the owner used the hotel transactions to
launder proceeds from the smuggling.

Baker said "money laundering also occurs through shell companies and
offshore accounts."

According to U.S. drug investigators, Amado Carrillo, founder of the
Carrillo Fuentes cartel in Juarez, was grossing about $200 million a
week during the 1990s, requiring the cartel to develop new ways to
clean staggering quantities of drug money.

Phil Jordan, former director of the El Paso Intelligence Center, said
U.S. investigators learned that the kingpin also had owned a bank in
El Paso. U.S. officials would not disclose the bank's name.

Last week, the U.S. Treasury Department added relatives of alleged
drug lord Jose "Azul" Esparragoza to its list of companies and
individuals under the U.S. Drug Kingpin Act, which prohibits people
from conducting business with these people and freezes their U.S.
assets. The U.S. government had already added Esparragoza to the list.

Esparragoza, a former Mexican federal police officer, reportedly left
the Carrillo Fuentes cartel to ally himself with the rival Sinaloa
drug organization.

Mexican authorities have attributed more than 10,000 homicides in
Juarez since 2008 to the warring cartels.

In a new twist to the problem of money laundering, the Mexican
National Securities and Banking Commission announced earlier last week
that the commission fined HSBC Mexico $28 million for failing to
prevent money laundering through its accounts.

Mexican officials did not say whether any of the laundered money was
connected to drug-trafficking proceeds, and HSBC agreed to pay the
fine.

The U.S. Senate report said the London-based HSBC Bank used to be
known as the Hongkong and Shanghai Banking Corp. Historically, in its
oldest incarnation, the bank was created in the 1800s to help
merchants involved in the opium trade between Britain and China around
the period of the Opium Wars.
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