Sunday, May 29, 2011

CRIME - The bank that liked (too) dirty money

On April 10, 2006 at sunset, a DC-9 landed at Ciudad del Carmen, a port city in the Gulf of Mexico. Mexican soldiers who were waiting to board are 5.7 tons of cocaine - there at the time, for 100 million dollars. But the reconstruction of the circumstances of the purchase of the unit by the cartel Sinaola will lead to a discovery far more important.

After a survey of twenty-two month investigation by the Drug Enforcement Agency [U.S. agency responsible for enforcing the law on drugs], the Internal Revenue Service [the IRS] and other federal agencies, it appears that traffickers paid the plane with money laundering by one of the largest U.S.

banks, Wachovia - which would be bought by the group in 2008 Wells Fargo. Investigators uncover payments of several billion dollars in the form of transfers, travelers checks and cash in accounts of Wachovia by casas de cambio (CDC), exchange offices in Mexico. Very significant fact, the beginning of these operations was in 2004, which began in the US-Mexico border escalation of violence that spawned the current war on drugs.

Criminal proceedings are instituted against the bank - without targeting anyone in particular - but the case never goes to trial. In March 2010, Wachovia in a transaction rule "amicably" the biggest action ever brought under the U.S. law on bank secrecy: the bank pays $ 110 million to federal authorities before the District Court Miami, for harboring transactions in drug trafficking, and a fine of $ 50 million for not checked the money used to finance transport 22 tons of cocaine.

Most shocking and most importantly, the bank has been penalized for failing to implement [1 May 2004 to May 31, 2007] money laundering measures appropriate for transfers totaling 378.4 billion dollars (a sum equivalent to one third of GDP Mexican), performed on dollar accounts from so-called casas de cambio with which the bank was working.

"The blatant disregard of Wachovia with respect to our banking regulations has virtually given carte blanche to international cocaine cartels to finance their operations," said Jeffrey Sloman, the federal prosecutor. However, total penalties do not even represent 2% of the 12.3 billion dollars in profits made by the bank in 2009.

This case illustrates the role of banking sector legal in laundering hundreds of billions of dollars from the deadly drug trafficking in Mexico and elsewhere - a banking sector that taxpayers have been forced to bail out [after the financial crisis of 2008]. The Observer has obtained documents submitted well before the opening of the official investigation, financial regulators.

They show that Wachovia had been an early warning by an employee of London, Martin Woods, one of the most remarkable whistleblowers [whistleblower] of our time. During a series of interviews with The Observer, Martin Woods has detailed how Wachovia has been at the heart of one of the biggest cases of money laundering of dirty money in the world.

Originally from Liverpool, Martin Woods, who is now past forty, had been hired by the London branch of Wachovia in February 2005 as one of the leaders of the anti-money laundering service. He previously served in the drug squad of British police. Within the National Crime Squad, he investigated in particular the ramifications of the scandal of British money laundering through the Bank of New York in the late 1990s.

Even now, Woods is expressed as a police officer - in the best sense of the term: rigorous and precise, with a mischievous sense of humor and high moral. It was an ideal recruit for a bank willing to conduct an effective risk management and the fight against the laundering of dirty money.

Woods has the eye exercised and the instinct of a police officer - not those of a banker. This has influenced his method, but also his mindset. "I think there are lots of things more important than money and it puts you to share in the culture that seems to prevail in many banks in the world," he observes.

His specialty was to apply the technique of the police "know your customer" (CAC). "CVC, says it is a fundamental approach in the fight against money laundering, tax evasion and the financing of terrorism. Who are your customers? The information provided is accurate? A correct and responsible banking business has always depended on his knowledge of the customers, and this principle is still valid today.

"The first thing I notice is that Wachovia Woods CVC information is deficient. And among the first reports to his superiors at the headquarters of the bank located in Charlotte, North Carolina, included several comments regarding the inadequacy of information collected by the CVC London subsidiary of Wachovia, failure to which he undertook to remedy.

Meanwhile, it is implementing a program of enhanced surveillance of transactions of gathering information about customers with money in pounds sterling or euros, passes through the services of the London bank. By August 2006, Woods identified several suspicious transactions from customers related casas de cambio.

The basics of business These operations are mainly deposits denominated traveler's checks in euros. These titles have numbers in sequence, represent amounts far greater than what a normal traveler may need, include information vague or nonexistent and CVC are questionable signatures. "This is the basics of business," says Woods.

Obvious questions remained unanswered: the transaction is it real, or does it seem artificial? The traveler's check it meets the protocol? Do we have all the information and, if not, why? "Woods expressed his doubts laundering Wachovia responsible for correspondent banking, which estimates that the checks can be concealing tax evasion.

Woods embarks on what the world bank calls a "retrospective", sifting through previous transactions, and, after his research, he sends several reports of suspicious activities to the British authorities and his superiors Charlotte. In this context, it recommends freezing the operations of several named parties and block long series of traveler's checks in from Mexico.

In 2006, he established a series of reports of suspicious activities, including fifty concern casas de cambio. To his amazement, the Wachovia office in Miami, which oversees operations in Latin America, brings him no support - it's the least we can say. Martin Woods has got it right yet.

At that time, justice is beginning to pay close attention to the activities of Wachovia in Mexico. The Bank receives many requests for information about its operations in this country. Woods was later learned that Wachovia had received more than 6000 assignments. "It's insane," he said.

When does a senior he begins to realize that then something is seriously wrong? "In April and May 2007, under increasing pressure it is subjected by the Department of Justice, Wachovia begins to sever his ties with some casas de cambio. But instead to conduct an internal investigation on the basis of the alerts by Woods, the bank is simply the button its own money laundering expert.

The documents show that during 2007, Woods continued to send reports of suspicious activity on casas de cambio ". In July 2007, the last ten Mexican exchange offices continued to operate through the London branch of Wachovia suddenly stop doing so. A few months later, when the U.S. financial media begin talking about the investigation, the bank terminates its relationship with all the casas de cambio.

Woods' personal situation has become untenable. On 16 June, Wachovia's money laundering charge was served his last report suspicious activity was not necessary, he had no legal power to investigate a case involving foreign and had no right of access to documents held abroad, even if they were in the hands of the bank.

Woods was undergoing a difficult period. He took sick leave to enter the hospital to seek treatment slipped disc, but the bank informed him that he did not file its request within the rules. When it resumed its work in August 2007, after three weeks of absence, a letter from the regulator internal waiting on his desk.

This letter lists several "specific examples of [his] inability to perform [his] work at an acceptable level." At the edge of depression, Woods put on sick leave by her doctor, and thereafter it follows a psychiatric treatment, enrolled in a program for managing stress and taking medicine.

In late 2007, Martin Woods is invited to a reception hosted by Scotland Yard in honor of American colleagues. On this occasion, he met a representative of the Drug Enforcement Agency and discussed with him the casas de cambio, its suspicious activity reports and reaction from his employers.

Following this meeting, officials from the Federal Reserve and other financial supervisory authorities begin paring reports that Woods had sent to his superiors, in Charlotte. "They contacted me shortly after and we began to piece together the puzzle," he recalls. The text of the settlement agreement entered into between Wachovia and the District Court in Miami in March 2010 gives a striking insight into the way the laundering of drug money.

But he also stresses the "substantial cooperation [bank] and the strong measures taken to remedy the situation" after its acquisition by Wells Fargo. "In view of the measures taken by Wachovia, claims the prosecutor, the United States will recommend to the court [...] that the charges against Wachovia based on information drawn [...] will be postponed by twelve months." This suspension is a form of probation after which, if the bank complies with the law for one year, the prosecution will be dropped.

Thus, last March, Wachovia has regained her virginity. The clink of handcuffs At the time the prosecutor trying the case, Martin Woods is sidelined and abandoned to its fate. Just before Christmas 2008, his lawyers assigned to Wachovia harassment and harmful behavior toward a whistleblower.

In May 2009, while Woods has the feeling of being "the person most toxic of the bank," an agreement is reached: Wachovia agrees to pay him money in return for leaving the bank. The correctness of his approach is finally formally recognized, not by Wachovia, but by the Comptroller of the Currency John Dugan [one of the leaders of the American banking regulations].

"I personally am writing to express my gratitude for the role you played in the actions against Wachovia because of its violations of the rules on bank secrecy [...]," he says in a letter dated March 19, 2010 - three days after the conclusion of the agreement in Miami. "Not only the information you have provided have facilitated our investigations, but you showed great courage and great integrity by denouncing the malpractices.

Without the efforts of people like you, actions such as that which was conducted against Wachovia would not be possible. "But the deal amicably with Wachovia which terminated the proceedings against that person leaves much - first and foremost to Woods himself - a bitter aftertaste. Robert Mazur is a major responsibility for training of officers to fight against money laundering.

This former Customs officer has succeeded in the late 1980s to infiltrate the BCCI and prove his involvement in laundering drug money from Colombian Medellin cartel. Mazur, whose company Chase & Associates works closely with law enforcement, has closely followed the case Wachovia. He said "the only thing that can make banks more vigilant is the prospect of hearing the handcuffs click in the board room.

Number of persons charged with the enforcement of the law have been disappointed by the conclusion of an amicable settlement. But I know that external circumstances have played in favor of Wachovia, not least that the U.S. banking system was on the verge of collapse. "" I train every year thousands of agents to fight against money laundering, Mazur continues.

And I tell them: 'Think big. The headlines that will make headlines in seven years will be the result of the work you do today. " In the case of BCCI, we spent two years to build the record, two years to perform work under cover, and another two years to bring the matter before the courts.

If you want to do something ambitious, such as tracing the origin of money, it's time to take. Yet, he concludes, the system of career advancement in this sector is not conducive to look for where the money comes from. People are transferred every two or three years. The Drug Enforcement Agency is more interested in drug trafficking at laundering dirty money.

This allows for faster results. She just wants to stop traffickers and seize their property. But it's like trying to treat a diseased plant by cutting a few branches - it soon grows new ones. Figure out where the money is to cut the plant at the root - but it is more difficult and it takes longer.

"According to Antonio Maria Costa, who led the UN Office against Drugs and Crime (UNODC) from May 2002 to August 2010, "the connection between organized crime and financial institutions has been established between the late 1970s and early 1980s when the Mafia has gone global ". Hitherto, criminal money circulated mainly in the form of cash and the authorities made a big regular seizure or arrests spectacular.

At the time Costa was director for economics and finance at the European Commission [1987 to 1992] measures were taken against money laundering by banks, and "criminal money came out of the financial system. It was then that several events occurred: the financial crisis in Russia, after the emergence of the Russian mafia, and the crises of 2003 and 2007-2008.

The banking sector then found himself short of cash and the banks themselves are exposed to crime syndicates, who held the cash. "In 2009, Costa said that" interbank loans [were] financed by the drug money. All [left] to think that some banks were saved this way .* "Corruption in large-scale Antonio Maria Costa casts doubt on the willingness of governments and regulatory authorities to counter this large-scale corruption in the global economy: "The regulators have shown what they were doing when the problem has suddenly become one of money laundering by terrorist organizations - then all of a sudden, they became serious and have changed their attitude." "The people of Wachovia knew my resume, they knew who I was, again Martin Woods.

But they did not know what was happening. Wachovia is the biggest scandal of laundering dirty money of our time. And yet, nobody went to jail. What this settlement does contribute to the fight against cartels? Nothing. It does not facilitate the work of police and justice and encourages cartels and those who want to earn big money by laundering crime dollars.

Where is the risk? There are none. Is it the interest of the American people and encourage cartels and banks? That of the Mexican people? It's simple: if you do not see the connection between money laundering dirty money and 30,000 people killed in Mexico is that you really do not understand.

"Woods is not resting on its laurels . The consulting firm he founded, Hermes Forensic Solutions, exposes banks to the dangers they face to launder criminal money and explains how to identify and neutralize it. "New York and London, he assures, have become the two largest global centers of money laundering crime and drugs.

The biggest tax havens in the world are not the Cayman Islands or the Isle of Man or Jersey. Laundering on a large scale is made in the City of London and on Wall Street. What happened to Wachovia, he says, illustrates the failure of the entire regulatory system. It has failed to implement the kind of good governance and risk management that could prevent not only the laundering of money from the blood but also the global financial crisis.


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