They're on the lookout for terrorist financing, speaker says at area event

Friday, October 01, 2010 3:51 AM

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Source: Richmond Times - Dispatch By CAROL HAZARD

The role of anti-money-laundering specialists is more than detecting suspicious transactions. It is about finding threats to our country, including terrorist financing, said the speaker at the inaugural event for the Richmond Chapter of the Association of Certified Anti-Money Laundering Specialists.

"I don't want to be the bank that shows up in the paper that allows terrorist financing or money laundering," said Mike Kelsey, deputy chief compliance officer at Capital One Financial Corp., one of the top employers in the Richmond area.

About 75 people in law enforcement, banking and regulation attended the event Wednesday evening at the Federal Reserve Bank of Richmond.

Kelsey spoke mostly about Wachovia, now owned by Wells Fargo & Co., and its involvement with Mexican currency-exchange houses known as casas de cambio.

Wachovia reached a $160 million settlement in March with the Justice Department for admitting to a failure in bank controls that allegedly helped Mexican drug cartels launder money.

"I am sure this won't be the last enforcement order, but it certainly was the most shocking one," Kelsey said about the possibility of lack controls by other banks.

Wachovia's failure allegedly helped drug traffickers launder at least $373 billion in wire transfers from May 2004 to May 2007. More than $4 billion in bulk cash was shipped from Mexican exchange houses to Wachovia accounts, prosecutors said.

"The Wachovia matter was percolating for a while," Kelsey said. "How could a bank with as good a reputation as Wachovia have problems like this?"

Wachovia avoided criminal prosecution by agreeing to forfeit $110 million to the U.S. and pay a $50 million fine to the Treasury.

The settlement is about as serious as it gets, Kelsey said. "It's incredible to me to think a bank would have such deep relationships with the Mexican casas de cambio."

Wachovia has said this spring that it had spent $42 million improving its compliance program. A Wachovia spokeswoman declined to comment yesterday on Kelsey's statements.

"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," Jeffrey H. Sloman, the federal prosecutor in Miami who handled the case, said in a statement when Wachovia agreed to the settlement.

The case should be a lesson for all banks, Kelsey said, to take a hard look at their compliance systems and be diligent and rigorous about monitoring them.

Contact Carol Hazard at (804) 775-8023 or chazard@timesdispatch.com.

Originally published by CAROL HAZARD; Times-Dispatch Staff Writer.