April 16, 2011

http://wvgazette.com/Opinion/Editorials/201104151115

In 2008, at the height of the world financial crisis, the chief of the U.N. office on drugs and crime warned that large narcotics cartels were funneling billions into U.S. banks. Antonio Costa said drug profits were "the only liquid investment capital" available to endangered banks, and there were "signs that some banks were rescued that way."

In 2008, at the height of the world financial crisis, the chief of the U.N. office on drugs and crime warned that large narcotics cartels were funneling billions into U.S. banks. Antonio Costa said drug profits were "the only liquid investment capital" available to endangered banks, and there were "signs that some banks were rescued that way."

Afterward, a mammoth example of such money-laundering engulfed Charlotte-based Wachovia, now part of the Wells Fargo conglomerate. London's Observer gave this account:

British police detective Martin Woods was hired by Wachovia's London branch in 2005 to guard against illicit laundering. Woods soon noticed that Mexican currency exchanges were sending billions to Wachovia -- while Mexico was sinking in the horrible narcotics war that has killed 30,000 people. Billions came in pouches of cash or in bundles of traveler checks with sequential serial numbers and dubious signatures. Much of the money later was used to buy aircraft.

The detective filed numerous "suspicious activity reports" -- but Wachovia executives ignored him, then denounced him and put him on sick leave. At a Scotland Yard function, Woods related his suspicions to U.S. drug agents, which led to a major investigation.

In 2006, Mexican soldiers seized a DC-9 jet containing 5.7 tons of cocaine, worth an estimated $100 million. They traced the plane's ownership and found it had been purchased by a narcotics cartel with money funneled through Wachovia.

Eventually, Wachovia was charged with laundering $378 billion -- equal to one-third of Mexico's gross national product. A year ago, the bank paid a $110 million forfeiture and a $50 million fine. No individual bankers were charged. Further criminal prosecution was deferred for a year, then dropped.

Detective Woods filed a whistleblower suit and collected a secret settlement from Wachovia. He told the British newspaper:

"This is the biggest money-laundering scandal of our time. These are the proceeds of murder and misery in Mexico, and of drugs sold around the world.... If you don't see the correlation between the money-laundering by banks and the 30,000 people killed in Mexico, you're missing the point."

Narcotics trafficking expert Robert Mazur said he suspects that Wachovia was let off with slight punishment because "the U.S. banking system was on the edge of collapse." In response, a sour commentator wrote that "too big to fail" has become "too big to jail."