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Traficantes de drogas entre los mejores clientes de HSBC

POR LUIS MIRANDA | THE REAL AGENDA | 14 NOVIEMBRE, 2012

El Ministerio británico de Hacienda y Aduanas (HMR) ha abierto una investigación sobre cuentas bancárias en Banco de Hong Kong and Shanghai (HSBC), cuyos propietarios son ciudadanos británicos en la isla de Jersey, conocida por sus bajos impuestos.

Según ha informado el Daily Telegraph, la investigación se inició tras una denuncia anónima que dio detalles de las cuentas de clientes del Reino Unido en la isla y en el extranjero.

Los miembros de la lista de 4.388 personas incluyen a personas famosas que mantienen unos £ 699 millones fuera del país y miles de millones de libras en planes de inversión.

El diario dijo que la lista de personas en Jersey incluye a Daniel Bayes, un famoso traficante de drogas y ex con, quien se encuentra en Venezuela, y Michael Lee, que ha sido declarado culpable de posesión ilegal de cientos de armas. También hay tres banqueros que en el pasado fueron procesados ​​por fraude masivo.

El banco HSBC tiene la obligación legal de informar en caso de duda sobre el origen de los fondos depositados en las cuentas. La compañía de Londres aumentó a 1.500 millones de dólares las sanciones que tendrá que pagar a los EE.UU. por lavado de dinero.

Jersey, la isla más grande del Canal de la Mancha, es una democracia parlamentaria con su propio poder judicial, financiero, legal e independiente. Su condición de paraíso fiscal irrita cada vez más a los británicos, afectados por la recesión y un déficit significativo.

No es la primera vez que las autoridades encuentran que el banco HSBC y otros como Wells Fargo y Wachovia ayudan a transferir millones y, en algunos casos miles de millones de dólares en todo el mundo a pesar de que el origen de esas grandes cantidades de dinero son desconocidos. En mayo, el Vancouver Sun informó sobre cómo HSBC permite el lavado de grandes cantidades de dinero a través de cuentas que pertenecían a algunos de sus clientes más ricos. En su informe, el Sun relató como documentos y correos electrónicos mostraron que HSBC no sólo no preguntaba sobre el origen de los fondos, sino que también hizo todo lo posible para disimular la transferencia del dinero de los clientes de origen Iraniano, Libanés, Brasileño y Cubano. La mayoría de las transacciones sospechosas se realizaron a través de las oficinas de HSBC en Nueva York y Miami.

Bloomberg informó también sobre cómo HSBC, Wachovia, Bank of America lavaron miles de millones de dólares de los cárteles mexicanos de la droga. En ese caso, los traficantes habían comprado un avión DC-9 con fondos lavados que habían transferido a través de dos de los bancos más grandes en los EE.UU.: Wachovia Corp. y Bank of America Corp., informó la revista Bloomberg Markets en agosto de 2010. El Banco Wachovia lavó $ 378,4 mil millones originadas en  casas de cambio de moneda mexicana, entre 2004 y 2007. Esa es la mayor violación de la Ley de Secreto Bancario, una ley contra el blanqueo de dinero, en la historia de EE.UU..

Gran parte del dinero del narcotráfico lavado por los bancos internacionales usualmente termina en lugares como el mercado de valores a lo que muchos atribuyen al hecho de que la economía global no colapsara completamente en 2008. Una gran parte del dinero de la droga sirve para financiar las operaciones de inteligencia de la CIA y el resto va a comprar grandes porciones de tierras y recursos de todo el planeta.

En el caso de HSBC, las acciones de lavado de dinero forman parte de un esquema “encubierto que mueve miles de millones de dólares entre los bancos cada día. Bajo este sistema, los bancos en los Estados Unidos se utilizan para mover grandes cantidades de fondos ilícitos “, dijo Jennifer Shasky Calvery, jefe de Confiscación de Activos y Lavado de Dinero del Departamento de Justicia de Estados Unidos, en su testimonio en una audiencia del Congreso en febrero pasado.

De acuerdo con el informe del Vancouver Sun, bancos como HSBC debilitó su departamento que vigila el blanqueo de capitales y contrató a personas incompetentes para vigilar las operaciones que normalmente se mantenían por debajo del radar. “HSBC no ha examinado miles de alertas internas contra el lavado de dinero y no ha generado los reportes legales requeridos, informes de actividades sospechosas en las transacciones recogidas por el sistema de control interno del banco.” Actividad sospechosa se envía a la policía para ser estudiada y vigilada. En mayo de 2010, HSBC tenía un arsenal de cerca de 50.000 informes de actividades sospechosas que no habían sido transmitidas a las autoridades.

Quizás el detalle más sorprendente que se muestra en los documentos relacionados con la investigación en curso en contra de HSBC es que la gerencia  intencionalmente decidió no mirar en algunos casos de actividad sospechosa. “Parece que hay casos en que los empleados del Banco están tergiversando los datos”, que se envían a los altos directivos. En otros casos, los administradores simplemente cambiaron las calificaciones de riesgo para algunas transacciones, ara no alarmar a nadie del fraude que estaba siendo cometido.

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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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New U.S. Data Reveals Billions in Foreign Bailouts

Among bailed-out banks are the Central Bank of Libya, the Bank of China, Societe Generale and JP Morgan

By Christopher J. Petherick
April 12, 2011

Texas Republican Rep. Ron Paul announced on April 4, as head of the powerful House Domestic Monetary Policy Subcommittee, he will be initiating congressional hearings into reports the Federal Reserve made hundreds of billions of dollars worth of sweetheart loans to foreign banks.

Fed officials had tried desperately to keep the details of these transactions under wraps by repeatedly appealing a lawsuit that was brought by two reporters working for the New York-based Bloomberg News. They argued that, if the details of such deals are released, the public would lose confidence in the banking system.

In late March, however, the Supreme Court upheld previous rulings by lower courts that the Fed must comply with the information requests. So, the Fed dumped hundreds of pages of records onto the public. Over the course of the April Fools Day weekend, AFP’s editors were able to examine a portion of the Fed’s documents, only to learn that the joke has always been on the American people.

In 2008, banks around the world were struggling to stay solvent as their risky trading in complex derivatives weighed heavily on their balance sheets. As a result, the Fed, at varying times, made hundreds of billions of dollars worth of emergency loans at its “discount window.”

Such transactions are usually only reserved for lending of last resort to institutions that could not get funding from anywhere else, such as by floating more stock or selling bonds.

Some of the largest banks, such as Wachovia and Morgan Stanley, repeatedly hit up the Fed for short-term loans worth billions of dollars. From Sept. 18, 2008 to Sept. 24, 2008, Washington Mutual borrowed $2 billion every day until its collapse on Sept. 25, 2008. It was eventually bought out by JPMorgan in a now-infamous fire sale.

But what shocked Fed watchers the most was the volume of transactions the private central bank conducted with foreign banks. In thousands of “emergency loans,” foreign banks repeatedly came to the Fed asking for U.S. dollars at near-zero percent interest rates.

At varying times, some of the top borrowers included Brussels-based Dexia Bank ($33.5 billion), Dublin-based Depfa Bank ($24.5 billion), Parisbased Societe Generale ($5 billion), Tokyo-based Norinchukin ($6 billion), Bank of China ($198 million) and two Deutsche Bank AG divisions ($1 billion each).

One of the most controversial was the Arab Banking Corp., which borrowed more than $35 billion. Arab Banking Corp. is 35 percent owned by the Central Bank of Libya. Regardless of what readers may think of Libya, the Federal Reserve made an estimated 73 loans to the Central Bank of Libya—the national bank of a country the U.S. military is currently bombing.

In an official statement on the Fed’s data dump, Rep. Paul said: “These lending activities provided no benefit to American taxpayers, the American economy or even directly to American banks. . . . It is becoming more and more obvious that the Fed operates for the benefit of a few privileged banks, banks that never suffer for bad decisions they make. Quite the opposite—as we have seen since October 2008, under our current monetary system politically connected banks are paid to make bad decisions.”

HSBC, Wachovia, Bank of America Launder Mexican Drug Money

Bloomberg

Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 mileseast of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet.

They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. The stash was supposed to have been delivered from Caracas to drug traffickers in Toluca, near Mexico City, Mexican prosecutors later found. Law enforcement officials also discovered something else.

The 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 reports in its August 2010 issue.

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers — including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

The admission came in an agreement that Charlotte, North Carolina-based Wachovia struck with federal prosecutors in March, and it sheds light on the largely undocumented role of U.S. banks in contributing to the violent drug trade that has convulsed Mexico for the past four years.

‘Blatant Disregard’

Wachovia admitted it didn’t do enough to spot illicit funds in handling $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 — a sum equal to one-third of Mexico’s current gross domestic product.

“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” says Jeffrey Sloman, the federal prosecutor who handled the case.

Since 2006, more than 22,000 people have been killed in drug-related battles that have raged mostly along the 2,000-mile (3,200-kilometer) border that Mexico shares with the U.S. In the Mexican city of Ciudad Juarez, just across the border from El Paso, Texas, 700 people had been murdered this year as of mid- June. Six Juarez police officers were slaughtered by automatic weapons fire in a midday ambush in April.

Rondolfo Torre, the leading candidate for governor in the Mexican border state of Tamaulipas, was gunned down yesterday, less than a week before elections in which violence related to drug trafficking was a central issue.

45,000 Troops

Mexican President Felipe Calderon vowed to crush the drug cartels when he took office in December 2006, and he’s since deployed 45,000 troops to fight the cartels. They’ve had little success.

Among the dead are police, soldiers, journalists and ordinary citizens. The U.S. has pledged Mexico $1.1 billion in the past two years to aid in the fight against narcotics cartels.

In May, President Barack Obama said he’d send 1,200 National Guard troops, adding to the 17,400 agents on the U.S. side of the border to help stem drug traffic and illegal immigration.

Behind the carnage in Mexico is an industry that supplies hundreds of tons of cocaine, heroin, marijuana and methamphetamines to Americans. The cartels have built a network of dealers in 231 U.S. cities from coast to coast, taking in about $39 billion in sales annually, according to the Justice Department.

‘You’re Missing the Point’

Twenty million people in the U.S. regularly use illegal drugs, spurring street crime and wrecking families. Narcotics cost the U.S. economy $215 billion a year — enough to cover health care for 30.9 million Americans — in overburdened courts, prisons and hospitals and lost productivity, the department says.

“It’s the banks laundering money for the cartels that finances the tragedy,” says Martin Woods, director of Wachovia’s anti-money-laundering unit in London from 2006 to 2009. Woods says he quit the bank in disgust after executives ignored his documentation that drug dealers were funneling money through Wachovia’s branch network.

“If you don’t see the correlation between the money laundering by banks and the 22,000 people killed in Mexico, you’re missing the point,” Woods says.

Cleansing Dirty Cash

Wachovia is just one of the U.S. and European banks that have been used for drug money laundering. For the past two decades, Latin American drug traffickers have gone to U.S. banks to cleanse their dirty cash, says Paul Campo, head of the U.S. Drug Enforcement Administration’s financial crimes unit.

Miami-based American Express Bank International paid fines in both 1994 and 2007 after admitting it had failed to spot and report drug dealers laundering money through its accounts. Drug traffickers used accounts at Bank of America in Oklahoma City to buy three planes that carried 10 tons of cocaine, according to Mexican court filings.

Federal agents caught people who work for Mexican cartels depositing illicit funds in Bank of America accounts in Atlanta, Chicago and Brownsville, Texas, from 2002 to 2009. Mexican drug dealers used shell companies to open accounts at London-based HSBC Holdings Plc, Europe’s biggest bank by assets, an investigation by the Mexican Finance Ministry found.

Following Rules

Those two banks weren’t accused of wrongdoing. Bank of America spokeswoman Shirley Norton and HSBC spokesman Roy Caple say laws bar them from discussing specific clients. They say their banks strictly follow the government rules.

“Bank of America takes its anti-money-laundering responsibilities very seriously,” Norton says.

A Mexican judge on Jan. 22 accused the owners of six centros cambiarios, or money changers, in Culiacan and Tijuana of laundering drug funds through their accounts at the Mexican units of Banco Santander SA, Citigroup Inc. and HSBC, according to court documents filed in the case.

The money changers are in jail while being tried. Citigroup, HSBC and Santander, which is the largest Spanish bank by assets, weren’t accused of any wrongdoing. The three banks say Mexican law bars them from commenting on the case, adding that they each carefully enforce anti-money-laundering programs.

HSBC has stopped accepting dollar deposits in Mexico, and Citigroup no longer allows noncustomers to change dollars there. Citigroup detected suspicious activity in the Tijuana accounts, reported it to regulators and closed the accounts, Citigroup spokesman Paulo Carreno says.

Criminal Empires

On June 15, the Mexican Finance Ministry announced it would set limits for banks on cash deposits in dollars.

Mexico’s drug cartels have become multinational criminal enterprises.

Some of the gangs have delved into other illegal activities such as gunrunning, kidnapping and smuggling people across the border, as well as into seemingly legitimate areas such as trucking, travel services and air cargo transport, according to the Justice Department’s National Drug Intelligence Center.

These criminal empires have no choice but to use the global banking system to finance their businesses, Mexican Senator Felipe Gonzalez says.

“With so much cash, the only way to move this money is through the banks,” says Gonzalez, who represents a central Mexican state and chairs the senate public safety committee.

Gonzalez, a member of Calderon’s National Action Party, carries a .38 revolver for personal protection.

“I know this won’t stop the narcos when they come through that door with machine guns,” he says, pointing to the entrance to his office. “But at least I’ll take one with me.”

Subprime Losses

No bank has been more closely connected with Mexican money laundering than Wachovia. Founded in 1879, Wachovia became the largest bank by assets in the southeastern U.S. by 1900. After the Great Depression, some people in North Carolina called the bank “Walk-Over-Ya” because it had foreclosed on farms in the region.

By 2008, Wachovia was the sixth-largest U.S. lender, and it faced $26 billion in losses from subprime mortgage loans. That cost Wachovia Chief Executive Officer Kennedy Thompson his job in June 2008.

Six months later, San Francisco-based Wells Fargo, which dates from 1852, bought Wachovia for $12.7 billion, creating the largest network of bank branches in the U.S. Thompson, who now works for private-equity firm Aquiline Capital Partners LLC in New York, declined to comment.

As Wachovia’s balance sheet was bleeding, its legal woes were mounting. In the three years leading up to Wachovia’s agreement with the Justice Department, grand juries served the bank with 6,700 subpoenas requesting information.

Not Quick Enough

The bank didn’t react quickly enough to the prosecutors’ requests and failed to hire enough investigators, the U.S. Treasury Department said in March. After a 22-month investigation, the Justice Department on March 12 charged Wachovia with violating the Bank Secrecy Act by failing to run an effective anti-money-laundering program.

Five days later, Wells Fargo promised in a Miami federal courtroom to revamp its detection systems. Wachovia’s new owner paid $160 million in fines and penalties, less than 2 percent of its $12.3 billion profit in 2009.

If Wells Fargo keeps its pledge, the U.S. government will, according to the agreement, drop all charges against the bank in March 2011.

Wells Fargo regrets that some of Wachovia’s former anti- money-laundering efforts fell short, spokeswoman Mary Eshet says. Wells Fargo has invested $42 million in the past three years to improve its anti-money-laundering program and has been working with regulators, she says.

‘Significantly Upgraded’

“We have substantially increased the caliber and number of staff in our international investigations group, and we also significantly upgraded the monitoring software,” Eshet says. The agreement bars the bank from contesting or contradicting the facts in its admission.

The bank declined to answer specific questions, including how much it made by handling $378.4 billion — including $4 billion of cash-from Mexican exchange companies.

The 1970 Bank Secrecy Act requires banks to report all cash transactions above $10,000 to regulators and to tell the government about other suspected money-laundering activity. Big banks employ hundreds of investigators and spend millions of dollars on software programs to scour accounts.

No big U.S. bank — Wells Fargo included — has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again.

‘No Capacity to Regulate’

Large banks are protected from indictments by a variant of the too-big-to-fail theory.

Indicting a big bank could trigger a mad dash by investors to dump shares and cause panic in financial markets, says Jack Blum, a U.S. Senate investigator for 14 years and a consultant to international banks and brokerage firms on money laundering.

The theory is like a get-out-of-jail-free card for big banks, Blum says.

“There’s no capacity to regulate or punish them because they’re too big to be threatened with failure,” Blum says. “They seem to be willing to do anything that improves their bottom line, until they’re caught.”

Wachovia’s run-in with federal prosecutors hasn’t troubled investors. Wells Fargo’s stock traded at $30.86 on March 24, up 1 percent in the week after the March 17 agreement was announced.

Moving money is central to the drug trade — from the cash that people tape to their bodies as they cross the U.S.-Mexican border to the $100,000 wire transfers they send from Mexican exchange houses to big U.S. banks.

‘Doesn’t Stop Anyone’

In Tijuana, 15 miles south of San Diego, Gustavo Rojas has lived for a quarter of a century in a shack in the shadow of the 10-foot-high (3-meter-high) steel border fence that separates the U.S. and Mexico there. He points to holes burrowed under the barrier.

“They go across with drugs and come back with cash,” Rojas, 75, says. “This fence doesn’t stop anyone.”

Drug money moves back and forth across the border in an endless cycle. In the U.S., couriers take the cash from drug sales to Mexico — as much as $29 billion a year, according to U.S. Immigration and Customs Enforcement. That would be about 319 tons of $100 bills.

They hide it in cars and trucks to smuggle into Mexico. There, cartels pay people to deposit some of the cash into Mexican banks and branches of international banks. The narcos launder much of what’s left through money changers.

The Money Changers

Anyone who has been to Mexico is familiar with these street-corner money changers; Mexican regulators say there are at least 3,000 of them from Tijuana to Cancun, usually displaying large signs advertising the day’s dollar-peso exchange rate.

Mexican banks are regulated by the National Banking and Securities Commission, which has an anti-money-laundering unit; the money changers are policed by Mexico’s Tax Service Administration, which has no such unit.

By law, the money changers have to demand identification from anyone exchanging more than $500. They also have to report transactions higher than $5,000 to regulators.

The cartels get around these requirements by employing legions of individuals — including relatives, maids and gardeners — to convert small amounts of dollars into pesos or to make deposits in local banks. After that, cartels wire the money to a multinational bank.

The Smurfs

The people making the small money exchanges are known as Smurfs, after the cartoon characters.

“They can use an army of people like Smurfs and go through $1 million before lunchtime,” says Jerry Robinette, who oversees U.S. Immigration and Customs Enforcement operations along the border in east Texas.

The U.S. Treasury has been warning banks about big Mexican- currency-exchange firms laundering drug money since 1996. By 2004, many U.S. banks had closed their accounts with these companies, which are known as casas de cambio.

Wachovia ignored warnings by regulators and police, according to the deferred-prosecution agreement.

“As early as 2004, Wachovia understood the risk,” the bank admitted in court. “Despite these warnings, Wachovia remained in the business.”

One customer that Wachovia took on in 2004 was Casa de Cambio Puebla SA, a Puebla, Mexico-based currency-exchange company. Pedro Alatorre, who ran a Puebla branch in Mexico City, had created front companies for cartels, according to a pending Mexican criminal case against him.

Federal Indictment

A federal grand jury in Miami indicted Puebla, Alatorre and three other executives in February 2008 for drug trafficking and money laundering. In May 2008, the Justice Department sought extradition of the suspects, saying they used shell firms to launder $720 million through U.S. banks.

Alatorre has been in a Mexican jail for 2 1/2 years. He denies any wrongdoing, his lawyer Mauricio Moreno says. Alatorre has made no court-filed responses in the U.S.

During the period in which Wachovia admitted to moving money out of Mexico for Puebla, couriers carrying clear plastic bags stuffed with cash went to the branch Alatorre ran at the Mexico City airport, according to surveillance reports by Mexican police.

Alatorre opened accounts at HSBC on behalf of front companies, Mexican investigators found.

Puebla executives used the stolen identities of 74 people to launder money through Wachovia accounts, Mexican prosecutors say in court-filed reports.

‘Never Reported’

“Wachovia handled all the transfers, and they never reported any as suspicious,” says Jose Luis Marmolejo, a former head of the Mexican attorney general’s financial crimes unit who is now in private practice.

In November 2005 and January 2006, Wachovia transferred a total of $300,000 from Puebla to a Bank of America account in Oklahoma City, according to information in the Alatorre cases in the U.S. and Mexico.

Drug smugglers used the funds to buy the DC-9 through Oklahoma City aircraft broker U.S. Aircraft Titles Inc., according to financial records cited in the Mexican criminal case. U.S. Aircraft Titles President Sue White declined to comment.

On April 5, 2006, a pilot flew the plane from St. Petersburg, Florida, to Caracas to pick up the cocaine, according to the DEA. Five days later, troops seized the plane in Ciudad del Carmen and burned the drugs at a nearby army base.

‘Wachovia Knew’

“I am sure Wachovia knew what was going on,” says Marmolejo, who oversaw the criminal investigation into Wachovia’s customers. “It went on too long and they made too much money not to have known.”

At Wachovia’s anti-money-laundering unit in London, Woods and his colleague Jim DeFazio, in Charlotte, say they suspected that drug dealers were using the bank to move funds.

Woods, a former Scotland Yard investigator, spotted illegible signatures and other suspicious markings on traveler’s checks from Mexican exchange companies, he said in a September 2008 letter to the U.K. Financial Services Authority. He sent copies of the letter to the DEA and Treasury Department in the U.S.

Woods, 45, says his bosses instructed him to keep quiet and tried to have him fired, according to his letter to the FSA. In one meeting, a bank official insisted Woods shouldn’t have filed suspicious activity reports to the government, as both U.S. and U.K. laws require.

‘I Was Shocked’

“I was shocked by the content and outcome of the meeting and genuinely traumatized,” Woods wrote.

In the U.S., DeFazio, who had been a Federal Bureau of Investigation agent for 21 years, says he told bank executives in 2005 that the DEA was probing the transfers through Wachovia to buy the planes.

Bank executives spurned recommendations to close suspicious accounts, DeFazio, 63, says.

“I think they looked at the money and said, ‘The hell with it. We’re going to bring it in, and look at all the money we’ll make,’” DeFazio says.

DeFazio retired in 2008.

“I didn’t want anything from them,” he says. “I just wanted to get out.”

Woods, who resigned from Wachovia in May 2009, now advises banks on how to combat money laundering. He declined to discuss details of Wachovia’s actions.

U.S. Comptroller of the Currency John Dugan told Woods in a March 19 letter his efforts had helped the U.S. build its case against Wachovia.

‘Great Courage’

“You demonstrated great courage and integrity by speaking up when you saw problems,” Dugan wrote.

It was the Puebla investigation that led U.S. authorities to the broader probe of Wachovia. On May 16, 2007, DEA agents conducted a raid of Wachovia’s international banking offices in Miami. They had a court order to seize Puebla’s accounts.

U.S. prosecutors and investigators then scrutinized the bank’s dealings with Mexican-currency-exchange firms. That led to the March deferred-prosecution agreement.

With Puebla’s Wachovia accounts seized, Alatorre and his partners shifted their laundering scheme to HSBC, according to financial documents cited in the Mexican criminal case against Alatorre.

In the three weeks after the DEA raided Wachovia, two of Alatorre’s front companies, Grupo ETPB SA and Grupo Rahero SC, made 12 cash deposits totaling $1 million at an HSBC Mexican branch, Mexican investigators found.

Another Drug Plane

The funds financed a Beechcraft King Air 200 plane that police seized on Dec. 29, 2007, in Cuernavaca, 50 miles south of Mexico City, according to information in the case against Alatorre.

For years, federal authorities watched as the wife and daughter of Oscar Oropeza, a drug smuggler working for the Matamoros-based Gulf Cartel, deposited stacks of cash at a Bank of America branch on Boca Chica Boulevard in Brownsville, Texas, less than 3 miles from the border.

Investigator Robinette sits in his pickup truck across the street from that branch. It’s a one-story, tan stucco building next to a Kentucky Fried Chicken outlet. Robinette discusses the Oropeza case with Tom Salazar, an agent who investigated the family.

“Everybody in there knew who they were — the tellers, everyone,” Salazar says. “The bank never came to us, though.”

New Meaning

The Oropeza case gives a new, literal meaning to the term money laundering. Oropeza’s wife, Tina Marie, and daughter Paulina Marie deposited stashes of $20 bills several times a day into Bank of America accounts, Salazar says. Bank employees got to know the Oropezas by the smell of their money.

“I asked the tellers what they were talking about, and they said the money had this sweet smell like Bounce, those sheets you throw into the dryer,” Salazar says. “They told me that when they opened the vault, the smell of Bounce just poured out.”

Oropeza, 48, was arrested 820 miles from Brownsville. On May 31, 2007, police in Saraland, Alabama, stopped him on a traffic violation. Checking his record, they learned of the investigation in Texas.

They searched the van and discovered 84 kilograms (185 pounds) of cocaine hidden under a false floor. That allowed federal agents to freeze Oropeza’s bank accounts and search his marble-floored home in Brownsville, Robinette says. Inside, investigators found a supply of Bounce alongside the clothes dryer.

Guilty Pleas

All three Oropezas pleaded guilty in U.S. District Court in Brownsville to drug and money-laundering charges in March and April 2008. Oscar Oropeza was sentenced to 15 years in prison; his wife was ordered to serve 10 months and his daughter got 6 months.

Bank of America’s Norton says, “We not only fulfilled our regulatory obligation, but we proactively worked with law enforcement on these matters.”

Prosecutors have tried to halt money laundering at American Express Bank International twice. In 1994, the bank, then a subsidiary of New York-based American Express Co., pledged not to allow money laundering again after two employees were convicted in a criminal case involving drug trafficker Juan Garcia Abrego.

In 1994, the bank paid $14 million to settle. Five years later, drug money again flowed through American Express Bank. Between 1999 and 2004, the bank failed to stop clients from laundering $55 million of narcotics funds, the bank admitted in a deferred-prosecution agreement in August 2007.

Western Union

It paid $65 million to the U.S. and promised not to break the law again. The government dismissed the criminal charge a year later. American Express sold the bank to London-based Standard Chartered PLC in February 2008 for $823 million.

Banks aren’t the only financial institutions that have turned a blind eye to drug cartels in moving illicit funds. Western Union Co., the world’s largest money transfer firm, agreed to pay $94 million in February 2010 to settle civil and criminal investigations by the Arizona attorney general’s office.

Undercover state police posing as drug dealers bribed Western Union employees to illegally transfer money, says Cameron Holmes, an assistant attorney general.

“Their allegiance was to the smugglers,” Holmes says. “What they thought about during work was ‘How may I please my highest- spending customers the most?’”

Smudged Fingerprints

Workers in more than 20 Western Union offices allowed the customers to use multiple names, pass fictitious identifications and smudge their fingerprints on documents, investigators say in court records.

“In all the time we did undercover operations, we never once had a bribe turned down,” says Holmes, citing court affidavits.

Western Union has made significant improvements, it complies with anti-money-laundering laws and works closely with regulators and police, spokesman Tom Fitzgerald says.

For four years, Mexican authorities have been fighting a losing battle against the cartels. The police are often two steps behind the criminals. Near the southeastern corner of Texas, in Matamoros, more than 50 combat troops surround a police station.

Officers take two suspected drug traffickers inside for questioning. Nearby, two young men wearing white T-shirts and baggy pants watch and whisper into radios. These are los halcones (the falcons), whose job is to let the cartel bosses know what the police are doing.

‘Only Way’

While the police are outmaneuvered and outgunned, ordinary Mexicans live in fear. Rojas, the man who lives in the Tijuana slum near the border fence, recalls cowering in his home as smugglers shot it out with the police.

“The only way to survive is to stay out of the way and hope the violence, the bullets, don’t come for you,” Rojas says.

To make their criminal enterprises work, the drug cartels of Mexico need to move billions of dollars across borders. That’s how they finance the purchase of drugs, planes, weapons and safe houses, Senator Gonzalez says.

“They are multinational businesses, after all,” says Gonzalez, as he slowly loads his revolver at his desk in his Mexico City office. “And they cannot work without a bank.”