Martin Woods, a former senior anti-money laundering officer at the London office of Wachovia Bank says that New York and London 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”, he underlined in a long interview in The Observer’s Sunday edition.
Whistleblower Woods says that the US Wachovia bank from North Carolina, later absorbed by Wells Fargo in 2008, was completely involved in laundering money of the Mexican drug cartels and the Miami branch, allegedly with the blessing from the bank’s board, systematically denied him information on billions of US dollars in suspected transactions.
“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”, argues Woods.
It all started 10 April 2006, when Mexican soldiers intercepted a DC-9 jet which landed in the port city of Ciudad del Carmen, on the Gulf of Mexico. They found 128 cases packed with 5.7 tons of cocaine, valued at 100 million USD. 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.
The authorities uncovered billions of dollars in wire transfers, traveler’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 program. 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 378.4 billion US dollars, 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.
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 says Woods.
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.
The full article can be read at The Guardian/Observer Sunday’s edition: “How a big US bank laundered billions from Mexico's murderous drug gangs”