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Drug traffickers among HSBC’s best customers

By LUIS MIRANDA | THE REAL AGENDA | NOVEMBER 12, 2012

The British Ministry of Finance and Customs (HMR) has opened an investigation into accounts at HSBC whose owners are British citizens on the island of Jersey, known for its low taxes.

As reported by the Daily Telegraph, the investigation was launched after an anonymous tip that gave details of UK customers with accounts in the island and abroad.

Members of the list of 4388 people include famous people who keep some 699 million pounds out of the country and billions of pounds in investment plans.

The newspaper said the list of people in Jersey includes Daniel Bayes, a famous drug dealer and ex-con who is currently in Venezuela, and Michael Lee, who has been declared guilty of illegal possession of hundreds of weapons. There are also three bankers who in the past were prosecuted for massive fraud.

The bank has the legal obligation to report when in doubt about the origin of the funds deposited in the accounts. The London company increased to $ 1,500 million provision sanctions that it may have to pay the U.S. for money laundering.

Jersey, the largest island of the Channel of La Mancha, is a parliamentary democracy with its own financial, legal and independent judiciary. Its tax haven status increasingly irritated the British, affected by the recession and a significant deficit.

It is not the first time authorities find that HSBC bank and others like Wells Fargo and Wachovia help transfer millions and in some cases billions of dollars across the world even though the origin of such large amounts of money are unknown. Back in May, the Vancouver Sun reported on how HSBC allowed the laundering of large amounts of cash through accounts that belonged to some of its wealthiest customers. In its report, the Sun related how documents and e-mails showed that HSBC not only didn’t inquire about the origin of the funds, but also worked hard to conceal the transfer of the cash from clients of Iranian, Lebanese, Brazilian and Cuban origin. Most suspicious transactions are done through the HSBC’s New York and Miami offices.

Bloomberg also reported on how HSBC, Wachovia, Bank of America laundered billions of dollars from Mexican drug cartels. In that case, smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank of America Corp., Bloomberg Markets magazine reported in its August 2010 issue. Wachovia bank alone laundered $378.4 billion for Mexican-currency-exchange houses from 2004 to 2007. That’s the largest violation of the Bank Secrecy Act, an anti-money-laundering law, in U.S. history.

Much of the drug trafficking money laundered by international banks is said to end in places such as the stock market to which many attribute the fact that the global economy did not completely collapse in 2008. A big chunk of drug money goes to finance intelligence operations for the CIA and the rest goes to buy large portions of land and resources around the planet.

In the case of HSBC, money laundering actions are part of a “disguised scheme that moves trillions of dollars between banks each day. Under this system, banks in the United States are used to move massive amounts of illicit funds,” said Jennifer Shasky Calvery, head of the Justice Department’s Asset Forfeiture and Money Laundering Section, while providing her testimony in a congressional hearing last February.

According to the report on the Vancouver Sun, banks such as HSBC understaffs its anti-money laundering compliance division and hires incompetent personnel to watch over the transactions that are normally kept under the radar. “HSBC failed to review thousands of internal anti-money laundering alerts and generate legally required suspicious activity reports, or SARs, on transactions picked up by the bank’s internal monitoring system.” Suspicious activity is sent to law enforcement to be studied and watched over. Back in May of 2010, HSBC had a stockpile of almost 50,000 reports of suspicious activity which had not been passed on to authorities.

Perhaps the most amazing detail shown in the documents related to the ongoing investigation against HSBC is that “management intentionally decided” not to look into some cases of suspicious activity. “There appear to be instances where Bank employees are misrepresenting data” which is sent to senior managers. In other cases managers simply changed risk ratings for some transactions so that they would not set off the fraud alarms.

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Was Brazilian ‘Lula’ Behind the ‘Mensalão’ Corruption Scheme?

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 18, 2012

Brazilian businessman Marcos Valerio de Souza, one of the people being accused of corruption during the trial for the ‘Mensalão’ scheme, has accused the former president of Brazil Luiz Inacio Lula da Silva of orchestrating a vote-buying plot as part of the scandal that has rocked Brazilian politics in 2011 and 2012. During the depositions and hearings, several members of Lula’s cabinet were cited as involved in the Mensalão scheme together with bankers and businessmen.

“Lula was the head. He ran it all”, said Souza, who has been identified as a “luxury messenger” of the plot laid out by the president, as reported by the Brazilian magazine ‘Veja’. “Everything I did was well known by Lula,” noted the owner of two major advertising companies in Brazil. Souza has argued, according to ‘Veja’, that the Workers Party headed government assured him his sentence would be soft if he kept quite about the Mensalão scandal, in which the defendants received monthly payments in exchange for votes.

Meanwhile, Souza’s lawyer has denied such statements saying that his client has not spoken to the press since 2005. The Brazilian Supreme Court is accusing eight people, including Souza, of money laundering and embezzlement with monies that belonged to the Brazilian Workers Party (PT), which is the political party that launched Lula to the presidency. The Mensalão scandal involving members of the PT was originally made public back in 2005.

Despite the accusations directed at the former president, the Supreme Court refused to investigate Lula’s involvement, much less to charge  him with any wrong doing. Luiz Inacio da Silva ruled over Brazil between 2003 and 2010. The Court did accuse Lula’s right hand man and  chief of staff, Jose Dirceu, who is now one of the eight people accused in the case.

The process has been dubbed as the “trial of the century” in Brazil, a country plagued with corruption from top to bottom and left to right, where politicians and military often get away with their crimes. The Mensalão scandal spreads its tentacles through the politics and business worlds. There are 38 former Lula ministers, legislators, bankers and businessmen involved in one of the biggest corruption scandals in the South American nation.

Thus far, from the 38 defendants — all free — face charges of money laundering, tax evasion, corruption, embezzlement and formation of a criminal organization, among others. The sentences could be of over 30 years in prison. According to ‘Veja’ magazine, the PT had bought political favors to gain support in Congress. The scandal diverted some 101 million reais (40.5 million euros).

The PT had allegedly pledged to pay a large sum of money to legislators of the Brazilian Labor Party (PTB) to give their unconditional support to the government. This illegal agreement was announced following the breakdown of the alliance in 2005. Lula, who is not among the accused, has always denied having knowledge that members of his party and people close to the government had been paid to commit such offenses. In spite of the scandal, the leftist leader was reelected in 2006. Its popularity was always at high levels despite the conflict.

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HSBC Permits Money Laundering for Wealthy Clients

Documents and E-mails show that the bank not only doesn’t inquire about the origin of funds, but also works hard to conceal the transfer of large amounts of cash from clients of Iranian, Lebanese, Brazilian and Cuban origin.

Most suspicious transactions are done through the HSBC’s New York and Miami offices.

By CARRICK MOLLENKAMP, BRETT WOLF and BRIAN GROW | VANCOUVER SUN | MAY 8, 2012

In April 2003, the Federal Reserve Bank of New York and New York state bank regulators cracked the whip on HSBC Bank USA, ordering it to do a better job of policing itself for suspicious money flows. Staff in the bank’s anti-money laundering division, according to a person who worked there at the time, flew into a “panic.”

The U.S. unit of London-based HSBC Holdings Plc quickly rallied. It hired a tough federal prosecutor to oversee anti-money laundering efforts. It installed monitoring systems for operations that had grown unwieldy during the bank’s U.S. expansion. The aim, as HSBC said in an agreement with regulators at the time, was to “ensure that the bank fully addresses all deficiencies in the bank’s anti-money laundering policies and procedures.”

Nearly a decade later, the effort has failed to satisfy law-enforcement officials.

The extent of that failure is laid out in confidential documents reviewed by Reuters that originate from investigations of HSBC’s U.S. operations by two U.S. Attorneys’ offices.

These documents allege that from 2005, the bank violated the Bank Secrecy Act and other anti-money laundering laws on a massive scale. HSBC did so, they say, by not adequately reviewing hundreds of billions of dollars in transactions for any that might have links to drug trafficking, terrorist financing and other criminal activity.

In some of the documents, prosecutors allege that HSBC intentionally flouted the law. The bank created an operation that was a “systemically flawed sham paper-product designed solely to make it appear that the Bank has complied” with the Bank Secrecy Act and is able to detect money laundering, wrote William J. Ihlenfeld II, U.S. Attorney for the Northern District of West Virginia, in a draft of a 2010 letter addressed to Justice Department officials.

In that letter, Ihlenfeld compared HSBC unfavorably to Riggs Bank. In 2004 and 2005, that scandal-plagued Washington bank was fined a total of $41 million after it was found to have violated anti-money laundering laws, and it was acquired by PNC Financial Services.

“HSBC is to Riggs, as a nuclear waste dump is to a municipal land fill,” Ihlenfeld wrote.

The allegations laid out in the Ihlenfeld letter and other documents couldn’t be confirmed. It is possible that subsequent inquiries have led investigators to alter their views of what went on inside HSBC’s compliance operation.

As they are, the documents reviewed by Reuters, combined with regulatory filings, court documents and interviews with current and former HSBC employees, paint a damning portrait of a bank allegedly unable, and unwilling, to police itself or its clients.

HSBC’s U.S. anti-money laundering division – the people charged with ensuring that the bank toes the line of regulators and law enforcement – has experienced high turnover among executives. Since 2005, at least half a dozen overseers have come and gone. Compliance staff also encountered pushback from bankers eager to maintain relationships with lucrative clients whose dealings raised red flags.

In the Miami office – an important center for HSBC’s private-banking and retail operations – a longtime private banker was fired for alleged sexual harassment after he warned compliance officers that clients were engaged in shady dealings.

In one email exchange submitted as evidence in that case, employees debated whether the bank should help a Miami client get around U.S. sanctions by moving the client’s business to HSBC’s Hong Kong office. “I believe that the best outcome would be for the customer to open a relationship with Hong Kong just for leters (sic) of credit purposes. He travels there all the time,” private banker Antonio Suarez wrote in a 2008 email. Suarez has since left the bank and couldn’t be reached for comment.

UNDER THE RADAR

The revelations come as HSBC confronts multiple investigations into its internal policing abilities. The Justice Department, the Federal Reserve, the Office of the Comptroller of the Currency, the Manhattan district attorney, the Office of Foreign Assets Control and the Senate Permanent Subcommittee on Investigations are scrutinizing client activities such as cross-border movements of bulk cash, and transactions linked to Iran and other parties under U.S. economic sanctions, the bank said in a February regulatory filing.

“We continue to cooperate with officials in a number of ongoing investigations,” HSBC spokesman Robert Sherman said. “The details of those investigations are confidential, and therefore we will not comment on specific allegations.” HSBC said in its February filing that it was likely to face criminal or civil charges related to the probes.

A successful case against HSBC could result in an onerous fine and represent one of the most significant money laundering cases ever brought against an international bank. It also would draw unaccustomed attention to the challenges governments — and financial institutions — face in monitoring the trillions of dollars flowing through banks’ back-office operations, flows essential to the daily functioning of the global financial system.

“Disguised in the trillions of dollars that is transferred between banks each day, banks in the U.S. are used to funnel massive amounts of illicit funds,” Jennifer Shasky Calvery, head of the Justice Department’s Asset Forfeiture and Money Laundering Section, said in congressional testimony on organized crime in February.

In response to Reuters inquiries about the investigations, Gary Peterson, chief compliance officer of HSBC’s U.S. bank operations, said: “Since joining HSBC in 2010, I’ve been proud to lead an AML (anti-money laundering) team that has vastly increased investments in people, systems and expertise. We are continuously seeking to strengthen our core AML mission: to detect and deter money laundering and terrorist financing – and our efforts are showing results.”

To date, the only enforcement action detailing any anti-money laundering shortcomings at HSBC was a 2010 consent order from the Office of the Comptroller of the Currency, the Treasury agency that is HSBC’s chief regulator. The OCC, calling HSBC’s compliance program “ineffective,” told the bank to conduct a review to identify suspicious activity. This “look-back” was expected to yield a report to HSBC and regulators. The status of the report isn’t known. A spokesman for the OCC declined to comment.

The West Virginia U.S. Attorney’s probe of HSBC, which ran from 2008 until at least 2010, originated in a case against a local pain doctor who allegedly used HSBC accounts to launder ill-gotten gains from Medicare fraud. Over time, the U.S. Attorney’s office began to discern that, as Ihlenfeld wrote in his letter, the doctor’s case was just “the tip of the iceberg” in terms of the volume of suspicious money sluicing through HSBC.

The U.S. attorney for the Eastern District of New York in Brooklyn – one of the most powerful prosecutors outside of Justice Department headquarters in Washington – has conducted a parallel investigation, in collaboration with the Justice Department’s money laundering section.

Specifics on the investigations have until now been cloaked in secrecy. The documents reviewed by Reuters for the first time fill in some of the details. Taken together, they depict apparent anti-money laundering lapses of extraordinary breadth. Among them, according to the documents:

* The bank understaffed its anti-money laundering compliance division and hired “gullible, poorly trained, and otherwise incompetent personnel.” In 2009, the OCC deemed a senior compliance official at HSBC to be incompetent – the same executive in charge of implementing a new anti-money laundering system.

* HSBC failed to review thousands of internal anti-money laundering alerts and generate legally required suspicious activity reports, or SARs, on transactions picked up by the bank’s internal monitoring system. SARs are important because they are sent to U.S. law enforcement and scrutinized for leads to criminal activity. In May 2010, the bank’s backlog of alerts was nearly 50,000 and “growing exponentially each month,” according to one of the documents.

* Hundreds of billions of dollars moved unchecked each year through various bank operations because of lax due diligence and monitoring of accounts with foreign correspondent banks, which are financial institutions that rely on U.S. banks for processing services. The bank maintained accounts with “high risk” affiliates such as “casas de cambios” – Mexican foreign-exchange dealers – widely suspected of laundering drug-trafficking proceeds, and some Mexican and South American banks.

* In some instances, “management intentionally decided” not to review alerts of suspicious activity. An investigation summary also says, “There appear to be instances where Bank employees are misrepresenting” data sent to senior managers, and where management altered risk ratings on certain clients so that suspect transactions didn’t set off alarms.

Sherman, the HSBC spokesman, said the bank cleared the backlog of alerts and has remained current. Sherman also said the bank “regularly reviews risk ratings. We have revised and strengthened our country risk rating review policies.”

Spokesmen for the U.S. Attorney in Wheeling, West Virginia, and for the U.S. Attorney in Brooklyn declined to comment. The Justice Department in Washington also declined to comment, citing “an ongoing investigation into this matter.”

THE MIAMI CONNECTION

HSBC was born in 1865 as the Hongkong and Shanghai Banking Corp in the then-British colony of Hong Kong. It had little presence in the U.S. market until its purchase in the 1980s of Marine Midland Banks Inc based in Buffalo, New York.

Now the fifth-largest bank in the world in terms of market value, HSBC had $2.6 trillion in assets at the end of 2011 and operations in 85 countries and territories. Its North American business, which includes HSBC Bank USA and a consumer finance unit, accounts for about 5 percent of HSBC’s profit.

In 1999, HSBC’s U.S. unit paid $10 billion to buy Republic New York Corp and a European affiliate, banks controlled by Lebanese financier Edmond Safra. The deal doubled HSBC’s private bank to 55,000 clients with $120 billion in assets and broadened business in New York, Florida, Latin America and Europe.

The purchase also yielded one of the world’s biggest banknote businesses, an operation that handles bulk cash exchanges between central banks and large commercial banks. In 2003, HSBC plunged into the U.S. market for subprime lending, paying $14 billion for Household International Inc.

By then, all banks faced U.S. regulatory pressure aimed at stopping shady money flows. In the wake of the September 11, 2001, attacks, the Patriot Act took effect, attempting, among other things, to choke off terrorist financing by strengthening requirements that banks look for and report suspicious activity. In recent years, U.S. law enforcement added an emphasis on money tied to the illegal drug trade.

When the 2003 order came down from regulators for HSBC to improve its anti-money laundering efforts, the bank had no centrally organized means of monitoring the movement of money across borders. That’s when it hired Teresa Pesce. Pesce came from the high-profile U.S. Attorney’s office in Manhattan, where she made a name for herself as a tough prosecutor overseeing money laundering prosecutions.

Pesce “knew the ropes,” according to a person who worked in compliance at the time, and the sense among many staffers was that a “savior was here.” One of her first initiatives was to order the installation of the Customer Account Monitoring Program, or CAMP, a technology system designed to filter suspicious retail transactions across HSBC’s U.S. operations.

In 2006, regulators lifted their 2003 order, according to people familiar with the situation.

Pesce left the bank in 2007 to run KPMG LLP’s anti-money laundering consulting business. A lawyer for Pesce declined to comment.

Despite Pesce’s efforts, problems with HSBC’s program persisted. In 2009, the OCC determined that Lesley Midzain, a compliance executive with little direct experience running anti-money laundering programs, was incompetent. She was in charge of the installation of a monitoring program to replace Pesce’s CAMP system, which the OCC had determined was “inadequate to support the volume, scope and nature of international money transfer transactions,” according to the documents reviewed by Reuters. Efforts to locate and obtain comment from Midzain were unsuccessful.

The former compliance-division staffer said that in the Miami office in particular, with millions of dollars from Mexico, Brazil, Argentina and other countries flowing through the Premier private-banking business for wealthy clients, “it was a nightmare to figure out what was going on down there.”

Those observations mesh with allegations in a 2010 lawsuit against HSBC brought by Tomas Benitez, a longtime private banker in South Florida who had worked at Republic Bank. Benitez alleged that HSBC fired him in January 2009 after he warned colleagues that clients had violated U.S. restrictions on trade with Iran and Cuba.

HSBC said in a court filing that it fired Benitez for alleged sexual harassment – allegations Benitez denied.

In court documents, Benitez alleged that during an audit meeting in 2008, an unidentified federal bank examiner told HSBC employees that a client referred to only as “CM” “had multiple affiliations whose ties to Iran and Cuba were part of their ordinary course of business.

At a follow-up meeting, the account was discussed because of indications its owner “was funneling large amounts of funds in and out, with no apparent business purpose,” Benitez alleged. He told Clara Hurtado, director of anti-money laundering compliance at HSBC’s private bank in Miami, that the account had ties to Iran and Cuba and “as a result, it should not be maintained,” according to the lawsuit.

After the meeting, Benitez alleged, another banker said “he would not allow Benitez’s word and suspicions to defeat a million-dollar-plus account relationship.” The account wasn’t terminated, Benitez alleged.

Hurtado declined to comment. She left HSBC in 2009, according to her LinkedIn account.

In an email exchange submitted as an exhibit in the lawsuit, Hurtado and other HSBC employees discussed whether the bank could help a Miami client avoid violating U.S. sanctions by issuing letters of credit for the client from the bank’s Hong Kong offices, according to Benitez’s lawsuit. “Clara, we are persuing (sic) another solutions……(anything but losing the account!!!),” Suarez, the private banker, wrote in an email. The banker suggested issuing the letters of credit through Hong Kong.

In January 2009, HSBC fired Benitez. In late 2010, a federal judge dismissed his case and demand for pay, saying there was no evidence of a connection between Benitez’s concerns about the accounts and the firing. The judge didn’t address Benitez’s allegations about illicit transactions.

Benitez’s Miami lawyer, Mark Raymond, declined to comment on his client’s behalf.

HSBC spokesman Sherman declined to comment on Benitez’s case. “It’s inappropriate to comment on unsubstantiated allegations in termination of employment cases,” he said.

OBVIOUS TO STOOGES

Around the time Benitez was sounding warnings in Miami, authorities were accelerating an investigation in West Virginia of Barton Adams, a pain clinic operator in the Ohio River town of Vienna. In 2008, the U.S. Attorney in Wheeling indicted Adams on 157 counts of alleged healthcare fraud and other crimes. They allege that Adams moved hundreds of thousands of dollars in Medicare fraud proceeds between a U.S. HSBC account and HSBC accounts in Canada, Hong Kong and the Philippines.

Adams has pleaded not guilty.

In building their case against him, the West Virginia prosecutors determined that HSBC’s compliance problems were systemic. As Ihlenfeld wrote in his letter to the Justice Department: “The Adams money laundering practices – which Moe, Larry, and Curly would dismiss as too transparent – would not be detected by HSBC regardless of who the customer was, or where any transaction occurred.” HSBC, he said, “systematically and egregiously” violated the Bank Secrecy Act.

One document reviewed by Reuters says HSBC developed a “large appetite for risk” after snapping up business with Mexican foreign-exchange houses formerly handled by Wachovia Corp. In 2010, Wachovia agreed to pay $160 million as part of a Justice Department probe that examined how drug traffickers had moved money through the bank.

West Virginia prosecutors focused much of their attention, according to the documents, on HSBC’s failure to report suspicious activity on hundreds of billions of dollars in business from “high-risk” sources.

For instance, 73 percent of accounts with foreign correspondent banks were rated “standard” or “medium” risk and thus weren’t monitored at all, the documents say, noting that oversight of such accounts was “extremely limited despite indications of possible terror financing.” In one example, the bank “summarily cleared as many as 5,000” internal alerts of suspicious activity from correspondent customers in Argentina after lowering the country’s risk rating.

Investigators cited a litany of failings in the bank’s back-office operations — the vast but mundane business of clearing transactions by moving big sums of money around the globe. In the bank’s “remote deposit capture” business – an operation that electronically zaps checks around the world — HSBC “failed to detect, review and report large volumes of sequentially numbered traveler’s checks” from non-U.S. sources. Such checks are a red flag signaling possible money laundering, regulators have said.

HSBC also repatriated more than $106.5 billion in banknote deposits through foreign correspondent accounts, many of them in Mexico and South America, in a three-year period. And yet, “since 2005, the bank has filed only 19 suspicious activity reports relative to the receipt of bulk cash and banknote activities.”

People familiar with HSBC and the reports said 19 is a low number given the risk of the clients. Between 2005 and 2010, banks and other depository institutions filed more than 3.8 million SARs, according to the Financial Crimes Enforcement Network, a bureau of the Treasury Department.

Similarly, investigators found that HSBC didn’t report any suspicious activity after Drug Enforcement Administration agents posing as drug dealers deposited millions of dollars in Paraguayan banks and then transferred the money to accounts in the U.S. through HSBC. They have also been examining connections between one of the Paraguayan banks and Hezbollah, the Lebanon-based Islamist group classified by the U.S. as a terrorist organization. HSBC has since ended its relationship with the Paraguayan bank, according to government documents.

Ultimately, the U.S. Attorney’s office in West Virginia entered into plea negotiations with HSBC, the documents show. A person familiar with the investigation said a deal could have resulted in one of the largest settlements ever in a bank money laundering case.

For reasons that aren’t clear, prosecutors in West Virginia were told to stand down while the Eastern District of New York and other Justice Department divisions continued to investigate, according to a Justice Department document and an HSBC regulatory filing. The West Virginia probe could ultimately prove to be a narrow slice of a broader case if criminal or civil charges emerge.

Kosovo’s “Mafia State” Sponsors Permanent US Heroin Trade and Money Laundering

By F. WILLIAM ENGDAHL | GLOBAL RESEARCH | APRIL 13, 2012

In one of the more bizarre foreign policy announcements of a bizarre Obama Administration, US Secretary of State Hillary Clinton has announced that Washington will “help” Kosovo to join NATO as well as the European Union. She made the pledge after a recent Washington meeting with Kosovan Prime Minister Hashim Thaci in Washington where she praised the progress of the Thaci government in its progress in “European integration and economic development.” 1

Her announcement no doubt caused serious gas pains among government and military officials in the various capitals of European NATO. Few people  appreciate just how mad Clinton’s plan to push Kosovo into NATO and the EU is.

Basic Kosovo geopolitics

The controversial piece of real estate today called Kosovo was a part of Yugoslavia and tied to Serbia until the NATO bombing campaign in 1999 demolished what remained of Milosevic’s Serbia and  opened the way for the United States, with the dubious assist of EU nations, above all Germany, to carve up the former Yugoslavia into tiny, dependent pseudo states. Kosovo became one, as did Macedonia. Slovenia and Croatia had earlier split off from Yugoslavia with a strong assist from the German Foreign Ministry.

Some brief review of the circumstances leading to the secession of Kosovo from Yugoslavia will help locate how risky a NATO membership or EU membership would be for the future of Europe. Hashim Thaci the current Kosovo Prime Minister, got his job, so to speak, through the US State Department and not via free democratic Kosovo elections. Kosovo is not recognized as a legitimate state by either Russia or Serbia or over one hundred other nations. However, it was immediately recognized when it declared independence in 2008 by the Bush Administration and by Berlin.

 Membership into the EU for Kosovo would be welcoming another failed state, something which may not bother US Secretary Clinton, but which the EU at this juncture definitely can do without. Best estimates place unemployment in the country at as much as 60%. That is not just Third World level. The economy was always the poorest in Yugoslavia and today it is worse. Yet the real issue in terms of the future of EU peace and security is the nature of the Kosovo state that has been created by Washington since the late 1990’s.

 Mafia State and Camp Bondsteel

 Kosovo is a tiny parcel of land in one of the most strategic locations in all Europe from a geopolitical standpoint of the US military objective of controlling oil flows and political developments from the oil-rich Middle East to Russia and Western Europe. The current US-led recognition of the self-declared Republic of Kosovo is a continuation of US policy for the Balkans since the illegal 1999 US-led NATO bombing of Serbia—a NATO “out-of-area” deployment never approved by the UN Security Council, allegedly on the premise that Milosevic’s army was on the verge of carrying out a genocidal massacre of Kosovo Albanians.

 Some months before the US-led bombing of Serbian targets, one of the heaviest bombings since World War II, a senior US intelligence official in private conversation told Croatian senior army officers in Zagreb about Washington’s strategy for former Yugoslavia. According to these reports, communicated privately to this author, the Pentagon goal already in late 1998 was to take control of Kosovo in order to secure a military base to control the entire southeast European region down to the Middle East oil lands.

 Since June 1999 when the NATO Kosovo Force (KFOR) occupied Kosovo, then an integral part of then-Yugoslavia, Kosovo was technically under a United Nations mandate, UN Security Council Resolution 1244. Russia and China also agreed to that mandate, which specifies the role of KFOR to ensure an end to inter-ethnic fighting and atrocities between the Serb minority population, others and the Kosovo Albanian Islamic majority. Under 1244 Kosovo would remain part of Serbia pending a peaceful resolution of its status. That UN Resolution was blatantly ignored by the US, German and other EU parties in 2008.

 Germany’s and Washington’s prompt recognition of Kosovo’s independence in February 2008, significantly, came days after elections for President in Serbia confirmed pro-Washington Boris Tadic had won a second four year term. With Tadic’s post secured, Washington could count on a compliant Serbian reaction to its support for Kosovo.

 Immediately after the bombing of Serbia in 1999 the Pentagon seized a 1000 acre large parcel of land in Kosovo at Uresevic near the border to Macedonia, and awarded a contract to Halliburton when Dick Cheney was CEO there, to build one of the largest US overseas military bases in the world, Camp Bondsteel, with more than 7000 troops today.

 The Pentagon has already secured seven new military bases in Bulgaria and Romania on the Black Sea in the Northern Balkans, including the Graf Ignatievo and Bezmer airbases in Bulgaria and Mihail Kogalniceanu Air Base in Romania, which are used for “downrange” military operations in Afghanistan and Iraq. The Romanian installation hosts the Pentagon’s Joint Task Force–East. The US’s colossal Camp Bondsteel in Kosovo and the use and upgrading of Croatian and Montenegrin Adriatic harbors for US Navy deployments complete the militarization of the Balkans.[ii]

 The US strategic agenda for Kosovo is primarily military, secondarily, it seems, narcotics trafficking. Its prime focus is against Russia and for control of oil flows from the Caspian Sea to the Middle East into Western Europe. By declaring its independence, Washington gains a weak state which it can fully control. So long as it remained a part of Serbia, that NATO military control would be politically insecure. Today Kosovo is controlled as a military satrapy of NATO, whose KFOR has 16,000 troops there for a tiny population of 2 million. Its Camp Bondsteel is one of a string of so-called forward operating bases and “lily pads” as Donald Rumsfeld called them, for military action to the east and south. Now formally bringing Kosovo into the EU and to NATO will solidify that military base now that the Republic of Georgia under US protégé Saakashvili failed so miserably in 2008 to fill that NATO role.

 Heroin Transport Corridor

 US-NATO military control of Kosovo serves several purposes for Washington’s greater geo-strategic agenda. First it enables greater US control over potential oil and gas pipeline routes into the EU from the Caspian and Middle East as well as control of the transport corridors linking the EU to the Black Sea.

 It also protects the multi-billion dollar heroin trade, which, significantly, has grown to record dimensions in Afghanistan according to UN narcotics officials, since the US occupation. Kosovo and Albania are major heroin transit routes into Europe. According to a 2008 US State Department annual report on international narcotics traffic, several key drug trafficking routes pass through the Balkans. Kosovo is mentioned as a key point for the transfer of heroin from Turkey and Afghanistan to Western Europe. Those drugs flow under the watchful eye of the Thaci government.

 Since its dealings with the Meo tribesmen in Laos during the Vietnam era, the CIA has protected narcotics traffic in key locations in order partly to finance its covert operations. The scale of international narcotics traffic today is such that major US banks such as Citigroup are reported to derive a significant share of their profits from laundering the proceeds.

 One of the notable features of the indecent rush by Washington and other states to immediately recognize the independence of Kosovo is the fact that they well knew its government and both major political parties were in fact run by Kosovo Albanian organized crime.

 Hashim Thaci, Prime Minister of Kosovo and head of the Democratic Party of Kosovo, is the former leader of the terrorist organization which the US and NATO trained and called the Kosovo Liberation Army, KLA, or in Albanian, UCK. In Kosovo crime circles he is known as Hashim “The Snake” for his personal ruthlessness against opponents.

 In 1997, President Clinton’s Special Balkans Envoy, Robert Gelbard described the KLA as, “without any question a terrorist group.” It was far more. It was a klan-based mafia, impossible therefore to infiltrate, which controlled the underground black economy of Kosovo. Today the Democratic Party of Thaci, according to European police sources, retains its links to organized crime.

 A February 22, 2005 German BND report, labeled Top Secret, which has since been leaked, stated, “Über die Key-Player (wie z. B. Haliti, Thaci, Haradinaj) bestehen engste Verflechtungen zwischen Politik, Wirtschaft und international operierenden OK-Strukturen im Kosovo. Die dahinter stehenden kriminellen Netzwerke fördern dort die politische Instabilität. Sie haben kein Interesse am Aufbau einer funktionierenden staatlichen Ordnung, durch die ihre florierenden Geschäfte beeinträchtigt werden können.“ (OK=Organized Kriminalität). (Translation: “Through the key players—for example Thaci, Haliti, Haradinaj—there is the closest interlink between politics, the economy and international organized crime in Kosovo. The criminal organizations in the background there foster political instability. They have no interest at all in the building of a functioning orderly state that could be detrimental to their booming business.”3

 The KLA began action in 1996 with the bombing of refugee camps housing Serbian refugees from the wars in Bosnia and Croatia. The KLA repeatedly called for the “liberation” of areas of Montenegro, Macedonia and parts of Northern Greece. Thaci is hardly a figure of regional stability to put it mildly.

 The 44 year old Thaci was a personal protégé of Clinton Secretary of State Madeleine Albright during the 1990s, when he was a mere 30-year old gangster. The KLA was supported from the outset by the CIA and the German BND. During the 1999 war the KLA was directly supported by NATO. At the time he was picked up by the USA in the mid-1990s, Thaci was founder of the Drenica Group, a criminal syndicate in Kosovo with ties to Albanian, Macedonian and Italian organized mafias.  A classified January 2007 report prepared for the EU Commission, labeled “VS-Nur für den Dienstgebrauch” was leaked to the media. It detailed the organized criminal activity of KLA and its successor Democratic Party under Thaci.

 A December 2010 Council of Europe report, released a day after Kosovo’s election commission said Mr Thaci’s party won the first post-independence election, accused Western powers of complicity in ignoring the activities of the crime ring headed by Thaci: “Thaci and these other ‘Drenica Group’ members are consistently named as ‘key players’ in intelligence reports on Kosovo’s mafia-like structures of organised crime,” the report said. “We found that the ‘Drenica Group’ had as its chief – or, to use the terminology of organised crime networks, its ‘boss’ – the renowned political operator … Hashim Thaci.” 4

 The report stated that Thaci exerted “violent control” over the heroin trade. Dick Marty, the European Union investigator, presented the report to European diplomats from all member states. The response was silence. Washington was behind Thaci.5

 The same Council of Europe report on Kosovo organized crime accused Thaci’s mafia organization of dealing in trade in human organs. Figures from Thaçi’s inner circle were accused of taking captives across the border into Albania after the war, where a number of Serbs are said to have been murdered for their kidneys that were sold on the black market. In one case revealed in legal proceedings in a Pristina district court in 2008 organs were said to have been taken from impoverished victims at a clinic known as Medicus – linked to Kosovo Liberation Army (KLA) organ harvesting in 2000.6

 The question then becomes, why are Washington, NATO, the EU and inclusive and importantly, the German Government, so eager to legitimize the breakaway Kosovo? A Kosovo run internally by organized criminal networks is easy for NATO to control. It insures a weak state which is far easier to bring under NATO domination. Combined with NATO control over Afghanistan where the Kosovo heroin controlled by Prime Minister Thaci originates, the Pentagon is building a web of encirclement around Russia that is anything but peaceful.

 The Thaci dependence on US and NATO good graces insures Thaci’s government will do what it is asked. That, in turn, assures the US a major military gain consolidating its permanent presence in the strategically vital southeast Europe. It is a major step in consolidating NATO control of Eurasia, and gives the US a large swing its way in the European balance of power. Little wonder Moscow has not welcomed the development, nor have numerous other states. The US is literally playing with dynamite, potentially as well with nuclear war in the Balkans.

*F. William Engdahl is author of Full Spectrum Dominance: Totalitarian Democracy in the New World Order. He may be contacted via his website, www.engdahl.oilgeopolitics.net

Notes

1 RIA Novosti, US to Help Kosovo Join EU NATO: Clinton, April 5, 2012, accessed in
http://en.rian.ru/world/20120405/172621125.html.

 2 Rick Rozoff, Pentagon and NATO Complete Their Conquest of The Balkans, Global Research, November 28, 2009, accessed in
www.globalresearch.ca/index.php?context=va&aid=16311.

 3 Tom Burghardt, The End of the Affair: The BND, CIA and Kosovo’s Deep State, accessed in

http://wikileaks.org/wiki/The_End_of_the_Affair%3F_The_BND%2C_CIA_and_Kosovo%27s_Deep_State.

 4 The Telegraph, Kosovo’s prime minister ‘key player in mafia-like gang,’ December 14, 2010, accessed in
http://www.telegraph.co.uk/news/worldnews/europe/kosovo/8202700/Kosovos-prime-minister-key-player-in-mafia-like-gang.html.

 5 Ibid.

 6  Paul Lewis, Kosovo PM is head of human organ and arms ring Council of Europe reports, The Guardian, 14 December 2010.

 F. William Engdahl is a frequent contributor to Global Research.  Global Research Articles by F. William Engdahl

Former Mexican Officials Working Undercover for DEA

Breitbart
December 19, 2011

At least 80 former Mexican government officials are currently working as informants for US intelligence agencies, the daily La Jornada reported, citing senior Mexican officials.

Most of them are gathering information for the US Drug Enforcement Agency, the prestigious daily reported.

Senior officials in the attorney general’s office and the interior ministry said that those informants work as spies, gather and analyze information, and follow cases on request.

“We have not dismissed the possibility that current government employees are also working for the Americans in combination with their ex-colleagues,” a senior government official who has participated in counternarcotics meetings with US officials told the newspaper.

The spying case came to light during a probe into whether the DEA has laundered drug money seized from criminal groups in Mexican territory, La Jornada reported.

On December 4, The New York Times reported that undercover US counternarcotics agents have laundered or smuggled millions of dollars in drug proceeds to see how the system works and use the information against Mexican drug cartels.

Some 45,000 people have been killed in Mexico since 2006, when its government launched a major military crackdown against the powerful drug cartels.