Getting dirty money clean

A Need to Know investigation reveals just how common it is for major U.S. banks to launder money from drug traffickers.

Produced by Catherine Upin

The story of one of the biggest money laundering investigations in recent history began in Miami in 2005. When a drug sniffing DEA dog at the Miami airport hit upon a shipment of cocaine in a private jet, little did DEA and IRS agents suspect that the trail would lead them through the fourth largest bank in the United States — that millions of dollars that paid for drug cartel operations had gone through accounts at Wachovia Bank.

Drug money totaling $110 million, federal prosecutors in Miami announced this March, flowed through Wachovia Bank – the largest criminal violation ever of the Bank Secrecy Act, the federal law that requires banks to prevent money laundering.

“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations by laundering at least $110 million in drug proceeds,” U.S. Attorney Jeffrey Sloman said at a press conference.

The tale of Wachovia is part of a decades-long pattern, critics say, of the failure of law enforcement, government regulators and certain banks to address a problem that brings in so much cash for the banks. Money laundering, says law enforcement, is what keeps criminal enterprises going.

“Drug trafficking is a cash-driven industry and that cash has to be moved,” said John Arvanitis, head of financial investigations for the Drug Enforcement Administration, the agency that broke the Wachovia case.

He explained how drug cartels launder money through American banks:

The U.S. market for illegal drugs churns out vast quantities of cash that can’t simply be deposited into a U.S. bank. Deposits of more than $10,000 raise red flags. So vehicles filled with drug profits – enormous shipments of bulk cash – head south into Mexico to casas de cambio – licensed currency exchanges where Mexicans and tourists can change currency and transfer money. There the laundering begins. The dirty money in U.S. dollars is changed into clean-looking wire transfers and traveler’s checks to complete the circular journey back into U.S. banks.

“Wachovia Bank willfully failed to establish an anti-money laundering program,” said U.S. Attorney Sloman.

Without a program to detect money laundering, here’s what happened: From 2003 to 2008, $420 billion flowed through Wachovia Bank from Mexico – including all that drug money – with no effective oversight. According to prosecutors, many millions went to purchase aircraft to transport cocaine – 20,000 kilos of it. Wachovia has admitted to all of this.

In fact, Wachovia – along with other U.S. banks – was warned by federal regulators as early as 1996 and again in 2006 to watch out for red flags of money laundering from casas de cambio. Those warning signs included large bulk cash deposits and multiple wire transfers.

Wachovia was also aware that other U.S. banks stopped business with casas de cambio because of these concerns.

But Wachovia wanted the business. Between May 2004 and May 2007, it accepted $373 billion in wire transfers from the casas de cambio – more than $4 billion in bulk cash.

To resolve the charges, Wachovia agreed to pay the government $160 million in fines and forfeitures. In exchange, the Department of Justice agreed to delay prosecution and drop the case in a year if Wachovia paid the fine and improved its anti-money laundering program – a deal known as a “deferred prosecution.”

Several U.S. banks have admitted to violating the Bank Secrecy Act and allowing dirty money to flow through their banks. American Express’s private banking unit, Union Bank of California and Bank Atlantic all paid fines and forfeitures for lax oversight of drug money laundering.

Riggs Bank pleaded guilty to willfully failing to report suspicious transactions by Chilean Dictator Augusto Pinochet. Bank of America also acknowledged not stopping laundered money from illegal South American money brokers. And this past February, Bank of America was reprimanded at a Senate hearing for not flagging accounts of a known illegal arms dealer.

“Nobody is held to account. Machines do not launder money. People launder money,” said Martin Woods, a whistleblower who spent four years as an anti-money laundering officer in Wachovia Bank’s compliance section. Before that, he was a detective and worked 18 years in the British police force.

“Ordinarily in banks, the compliance officers – and it’s a standing joke – are seen as the business prevention officers,” said Woods.

‘Why are you picking on us?’

That’s what happened at Wachovia, according to a lawsuit he settled with the bank last year. In 2006, the suit charges, Woods became suspicious when he noticed lots of sequentially numbered travelers checks coming into the London office from Mexican casas de cambio.

“I could see the context of the transactions in relation to the activities in Mexico,” said Woods. “The dollars coming out of Mexico are conflict dollars. They’re blood dollars. Many of those dollars are stained with the blood of dead people, because that was the outcome of this whole drug trafficking war that’s taking place in Mexico.”

 
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Comments

  • Chris Kerr

    Robert Mazur’s “The Infiltrator” is a must-read. It is a compelling, well-written first-hand account of his amazing undercover work in one of the biggest money laundering investigations in history.

  • JanisL

    Florida is drowning in rampant banking corruption. The high number of foreclosures is clear evidence of mortgage fraud gone wild during the Bush years, 2000-2008 and beyond. The “asleep at the wheel” culture in Tallahassee, dictated by Bush’s brother Jeb. The edict went out here in 1998: no regulation of business, banking, the Chamber of Commerce’s dream! No consumer protection–you make a complaint to Tally, they ignore it! This culture still exists as Charlie Crist just left the worst of it in place! If you are cheated by a developer, a business, a scammer–you are on your own, there is no recourse in Florida. Mr. Mazur, take a look at the money laundering here, the FDOT laundering illegal foreign campaign contributions for the GOP/Bush, the murder of Raymond Lemme, a Florida investigator who tripped over this high crime prior to the prez election, and paid for it with his life! There is nothing the ruthless GOP powers that be will stop at to get their man in office! The pay to play has rendered state representation of ordinary Floridians nonexistent. It’s all about the high-roller special interests–developers, builders, corrupt, corrupt, corrupt!

  • D. Tigert

    Thanks to all involved in getting this out for the public to see and be enlightened. This other facet of Banking, money laundering, certainly adds much evidence to the corruption that is allowed by the very ones that are entrusted and paid to stop the very thing that they encourage.
    Can faces and names be attached to the OCC? How do they get their jobs and who has been responsible for putting them there? Can Congress see these banks in the same light that I see them; as more conscienceless, greedy, money snatching CEO machines? Evidently not. I guess that looking from the top has acompletely different perspective. Who could we goad into taking some action?

  • Steve Cook

    After reading Bob Mazur’s chilling report of banker’s laundering drug monies for large cartels and others, it becomes quiet clear what a dangerous position Mazur was in during his undercover work for the U.S. government. It also demonstrates how only a very few agents have the abilities to with stand the extreme pressures of working under for long months, knowing every move is being watched, and the criminals have the ability to kill and will, at any time in order to protect their millions and positions. I’m sure Mazur worked on other undercover cases that led up to his BCCI case that stunned the world, and still underscores just how far some dirth bankers will go to make a dollar.

  • Bill Andrews

    What is the Drug dealers going to do when the Government starts micro- chipping money to track over the borders to drug dealers…( Encapsulating Times ? ) The long trail back home ?…

  • Frank Gonzalez

    Our country owes a great debt to Mr. Mazur for risking his life and that of his family. It takes super guts to do what he did. Bank officials need to first visit the medical examiners office and view the bodies of those they helped kill by drug cartels as well as those who died from the drugs that they helped bring into this country, and then be placed in jail for a very long time. That will be the shot heard by the other banks.

  • Daniel Balestriere

    The Infiltrator gives an outstanding insight into the world of illegal drug money laundering. Bob Mazur and his fellow undercover agents risked their lives and infiltrated the organization of one of the most cold blooded criminals of all time, Pablo Escobar. Mazur and his cohorts should have been awarded the US Treasury Department Medal of Valor for their outstanding work. The book is an outstanding read.

  • John

    I am neither surprised nor shocked by this story. The simple fact of the matter is that our systems are corrupts and have been corrupt for decades. Corruption is the rule as long as you can get away with it. Playing by the rules is for small fries. Welcome to the world of Corporate business…anything goes as long as the profits outweigh the risk…just ask BP about that one.

  • http://guzzothecontrarian.com/2010/08/16/wachovia-getting-dirty-money-clean/ Guzzo the Contrarian – Wachovia – Getting Dirty Money Clean

    [...] Need To Know on PBS SHARETHIS.addEntry({ title: "Wachovia – Getting Dirty Money Clean", url: [...]

  • http://wagner.edu/wagnermagazine/?p=4 Mystery Man | Wagner Magazine

    [...] Watch the PBS Need to Know episode on June 1, 2010, that used Bob Mazur as a source, “Getting Dirty Money Clean: A Need to Know investigation reveals just how common it is for major U.S. banks to launder money from drug traffickers” HERE [...]