American Banks ‘High’ On Drug Money_Part 2

Link to part 1 – http://oathkeepers.org/oath/2011/06/18/american-banks-high-on-drug-money_part-1/

*

American Banks ‘High’ On Drug Money: How a Whistleblower Blew the Lid Off Wachovia-Drug Cartel Money Laundering Scheme

How Martin Woods Exposed Wachovia’s Drug Money Laundering Scheme

Back in 2001, Martin Woods played an instrumental role in helping U.S. authorities to crack a Russian-based money laundering scheme involving Lucy Edwards, Vice President of Bank of New York. Wood’s tenacious undercover work led the FBI to charge Edwards and her husband with laundering illegal proceeds for the Russian Mob.

In March 2005, as mentioned earlier, Woods joined the London branch of Wachovia Bank as a senior anti-money laundering officer. Woods strategic M.O. was to safeguard the company from cleverly disguised illegal proceeds by implementing bank policies referred to as “Know Your Client” (KYC).

KYC requires investigators and banking officials to identify dirty money ranging from fraud, tax evasion, drug trafficking, and terrorist financing as the primary target.

Once fraud was detected, Woods was charged with reporting to Wachovia Bank headquarters in Charlotte, North Carolina. So when the Mexico-based Casa Cambios began sending suspicious funds into the bank, Woods implemented an enhanced transaction monitoring program to retrieve more intricate details on customers making deposits. He struck gold.

Woods identified similar numerous “suspicious transactions” of proceeds deposited into Wachovia banks that was traced back to Casa Cambios in Mexico.

The funds in question were traveler cheques in euros. A close inspection of the cheques showed the lack of “know your client” information and the cheques had no legible signatures.

“It was basic work,” Woods later recalled in his whistleblower lawsuit against Wachovia. He pointed out how the Mexico-based CDC failed to answer simple questions: “Is the transaction real? Does the cheques meet the protocols? Is it all there, and if not, why not?”

Prior to Wachovia hiring Martin Woods in 2005, the U.S. Treasury Department had already issued warning alerts to foreign and American-based banks explaining that Mexico-based CDCs were primarily owned by kingpin drug cartel Joaquin “el Chapo” Guzman. In 2006, the Feds, working with Mexico identified six CDCs that laundered $120 million dollars in drug money for the Arellano Felix cartel.

Treasury officials said the CDCs were used exclusively by money launderers to transfer or exchange the value of Mexican hard currency that was sent to bank accounts in the United States or other countries to conduct financial commerce.

The U.S. government further said that the CDCs did not operate in the same manner the way banks operated in the United States, nor did the CDCs provide or maintained checking accounts, savings accounts or any commercial banking services.

Alarmed over the CDC transactions, Woods reviewed previous wire transfers that CDC sent and he was shocked to learn that the techniques the CDC had used earlier duplicated the scheme. For instance, a retrack of CDC transactions revealed lack of sufficient information to identify the true identities of the individuals that sent the money from the CDC businesses in Mexico.

Realizing the wire transfers from the CDCs was most likely a money laundering operation, Martin Woods began an inquiry by filing “suspicious activity reports” (SARs) and sent them to the London authorities and he also sent duplicate SARs to Wachovia supervisors in Charlotte, North Carolina.

Following the SARs alert, Woods requested the Wachovia banking system to deny Mexico-based CDCs sequentially numbered traveler’s cheques.

Satisified he’d done his job, Woods expected Wachovia to respond accordingly with an internal investigation into his discovery of the CDCs banking operations.

As an investigator, Martin Woods held the belief that it was his duty to prevent criminals from polluting Wachovia Bank with illegal proceeds and that the bank would back him up.

He was wrong.

Dirty work at the cross road awaited him. Wachovia’s top-level officials became his worst enemy that culminated into a force of subterfuge to undermine his superior work and destroy his credibility.

According to court records, on June 16, 2007, Wachovia officials challenged Woods for filing the “suspicious activity reports” (SAR). They argued that the SARs’ should have never been filed against Mexico-based CDCs’ and that Woods had no legal clout to investigate a foreign case.

Adding injury to insult the bank officials said Woods had no ‘right’ to access sensitive documents held overseas from Britain, regardless if Wachovia maintained the documents.

Following confrontations with Wachovia staff, Woods received a letter from a manager calling him a failure to perform at acceptable standards.

Apparently the controversy surrounding the proceeds that CDC was sending into the bank finally took effect. A few months later Woods noticed something odd: the Casa Cambio Puebla, simultaneously stopped routing traveler’s checks through Wachovia’s London branch.

A gut instinct motivated the investigator to ask Wachovia’s American-based banks if they [had] seen a similar routing change involving CDC traveler’s checks.

His request caused an uproar from Wachovia’s Miami-based manager Carlos Perez. Perez managed the Latin American accounts owned by the CDC Puebla. Visibly upset, Perez angrily questioned Woods, demanding to know “why he had problems when there was no problems when the CDC sent traveler’s checks to London.”

Meanwhile Martin Woods was overwhelmed with stress and frustration. Each attempt he made to crack this monstrous case his superiors sabotaged the investigation. During a conference held in London with foreign and U.S. federal law enforcement agents, Woods informed the DEA and FBI of his suspicion about the amount of questionable funds that the CDCs’ were sending into Wachovia banking systems.

He further told the agents that he suspected the involvement of certain top-level officials in helping the CDCs’ to launder drug profits into Wachovia banks.

U.S. federal authorities immediately started an investigation beginning with the Wachovia branch in Miami Florida. “A narcotic investigation always involves two things and that’s drugs and money,” said Mark R. Trouville, the Special Agent in charge of Miami’s DEA field division.

Once U.S. investigators confirmed Woods’ suspicion they put in a lot of time to examine the SARs’ that he sent from London to Wachovia’s headquarters in Charlotte, North Carolina.

And Wachovia offered no blunt resistance or sabotage. “I felt good that the U.S. federal government wouldn’t be intimidated by Wachovia,” Woods wrote in an email sent to the author of this story.

Following a long deceitful trail of cover-ups by Wachovia to protect the CDCs’ illegal proceeds the Feds soon discovered that Casa Cambio Puebla, one of Wachovia’s long-term customers, had deposited hundreds of millions of dollars into different accounts at the bank.

The mastermind behind CDC Puebla was Pedro Alatorre, a savvy businessman who fronted the CDCs as a money laundering operation for the Mexico cartels, specifically the Sinaloa and Gulf drug syndicates. Evidence showed the CDC Puebla owned over 40 interbank accounts at Wachovia branches in Miami, New York and London.

Things began to heat up. On May 26, 2007, DEA seized CDC Puebla accounts at Wachovia’s bank in Miami Florida. The Feds contacted Mexico law enforcement and they agreed to help.

During the investigation Mexico agents started watching Alatorre’s operation and they observed undercover couriers carrying “clear plastic bags” stuffed with cash that was transported to Alatorre’s Puebla branch located at the Mexico City Airport.

“I am sure Wachovia knew what was going on,” says Mexico Attorney General Jose Luis Marmolejo, who supervised the investigation against Wachovia’s CDC customers.

In May 2008, the U.S. Justice Department charged Alatorre and his group with federal money laundering charges. Alatorre is fighting extradition to the United States. Investigators made additional arrests of cartel members who deposited drug proceeds into Bank of America in Brownsville Texas. Drug money was also detected in banks in Chicago, Miami, Atlanta, and New York.

Infuriated over the mistreatment by certain members of Wachovia’s staff, Martin Woods, took a leave of absence to seek counseling. Convinced he was battling against enemies from within his work place, Woods filed a whistleblower lawsuit in May 2009 against Wachovia with London Employment Tribunal.

Cocaine Airplanes: The Wachovia Connection

Journalist Daniel Hopsicker is the host and writer of the prominent website Madcowmorningnews. He’s also the exclusive producer of the highly-rated documentary DVD movie “American Drug Lords”. Hopsicker is the investigative journalist who reported on his website the embarrassing, but true details of the two airplanes caught red-handed on separate occasions with tons of cocaine on board including Wachovia’s connections with these aircrafts.

In an interview for this article, Hopsicker explained, “When Wachovia paid a $160 million fine for a decade-long history of laundering billions of drug money for Mexican drug cartels, it spotlighted the preferential treatment given some participants in the international drug trade.”

Hopsicker deadpanned, “An incredible $378 billion dollars had been laundered through Wachovia Bank whose money origins, according to U.S. prosecutors, were murky.”

Hopsicker posed the billion dollar question: “How much did Wachovia make for washing all that filthy lucre?”

“The figure was never revealed although Wachovia had been operating as what federal prosecutors called, ‘continuing criminal enterprise.’ Yet Wachovia was allowed to plead guilty to laundering a fraction of that amount and was only fined $160 million dollars, then sold off to Wells Fargo.”

Regarding Wachovia’s dark secrets involving the purchase of U.S. registered narco airplanes that were caught transporting cocaine, Hopsicker unraveled the dirty trail.

“Both of the drug-running American airplanes cited — a DC-9 airliner (tail# N900SA) [were] also caught in the Yucatan in 2008 carrying 4 tons of cocaine which had connections with the CIA and the Department of Homeland Security.”

Hopsicker gave the low down on the second airplane. “The Gulfstream was — or had been — a CIA plane. And the officers of Skyway Aircraft which owned the airplanes included former CIA and NSA (National Security Agency) operatives.”

“One would think an important story of this magnitude would make headlines in every American newspaper and major TV networks including cable programs. But none of the prominent news media outlets reported the story of the U.S. registered aircraft caught with the narcotics.”

Hopsicker concluded, “with the exception of several stories written by Tampa Tribune reporter Howard Altman, those embarrassing details received zero exposure in America’s mainstream media.” Hopsicker also pointed out that Bloomberg Magazine reporter Michael Smith who wrote an extensive article about Wachovia’s sordid history of laundering drug money for Mexican drug cartels did little to inspire interest.

“My investigation into the airplanes further uncovered a paper trail of FAA registration documents that revealed hidden connections between Mexico’s Sinaloa cartel, Wachovia Bank and their American partners: people who the DEA insists don’t exist: “The American Drug Lords.”

Greed and Corruption: A Continuing Criminal Enterprise

A confession by Wachovia Bank executives last year indicating they laundered billions of dollars in drug money for the CDC was historic, and highly revealing of their approach to business. The executives had already been warned by U.S. Treasury Department of the serious risks associated with the CDCs.

As early as June 2004, the Treasury Department and banking regulators sent letters to U.S. banks indicating that the CDCs’ were illegal money laundering operations; the letter appeared to encourage, not dissuade Wachovia from going after the CDC’s drug tainted money.

In the legal agreement, Wachovia confessed to taking over other large banks after terminating their contract with Mexico-based CDCs’ based on warnings from FBI, DEA and Treasury Department. Despite repeated warnings, Wachovia washed the bloody profits belonging to Mexican drug cartels to take their own cut.

To fill the void left behind by other competing banks who maintained business accounts for the CDC, Wachovia executed a clever scheme. In September 2005, Wachovia purchased the “rights” to solicit the international banking customers of Union Bank of California (UBOC).

The UBOC had backed off from doing business with the CDCs after warning letters from the Treasury Department. Wachovia wooed the CDC customers of UBOC into doing business with Wachovia although UBOC had already paid the government a fine of $31.6 million dollars for laundering over $20 million dollars in drug money for a Mexico-based currency operation called Ribadeo Casa.

Once UBOC ceased the CDC operation, Wachovia “sweetened the deal” by hiring a former UBOC manager who previously supervised the CDC accounts and the manager even helped Wachovia’s Miami branch to set up the structure of wire transfers. This under-the-table scheme increased Wachovia’s business volume with the regular CDC customers.

Under Deferred Prosecution Agreement, here is an additional list of Federal Banking rules and laws that Wachovia also apparently violated to wash billions in profits:

(1) Pursuant to Title 31, U.S. Code, Section 5318, Wachovia failed to establish and maintain an anti-money laundering (AML) compliance program which provides internal policies, procedures and controls designed to guard against money laundering.

(2) Under same Federal Statue, Wachovia failed to implement risk-based programs to verify and record the identity of customers, like the Mexico-based CDCs’. If Wachovia officials would have properly complied with their own AML procedures they would have traced the origins of the CDCs’ suspicious transactions, first reported by whistleblower Martin Woods.

(3) Wachovia was also required, Pursuant to rule 31, U.S. code, to file ’suspicious activity report’ called the “SAR” with U.S. Treasury Department. But when investigator Woods filed SARs’, he was demonized, bullied, and demoted in rank by Wachovia management.

(4) Wachovia intentionally violated banking policies and ignored their own internal policies to assist the CDCs to launder illegal money into the U.S. Financial System and also failed to govern the repatriation of nearly $14 billion that came from the high-risk CDC business.

(5) Failure to detect and report suspicious activity in a timely manner of the $378.4 billion that Wachovia processed through wire transfers for Mexico-based CDCs’.

(6) When British investigator Martin Woods warned Wachovia of the CDCs’ suspicious traveler’s checks without legible names and that the names were either handwritten or stamped with numbers and letters, the bank also failed to properly investigate Woods complaints—thus allowing the CDC to launder illegal funds from May 1, 2004, through May 31, 2007.

(7) Between September 2005 and December 2007, Wachovia provided correspondent banking service to several Mexico-based Casa Cambios and also provided them with three valuable services to wash drug profits:

–Unlimited wire transfers of funds without IRS intervention.

–Bulk cash: Without detection the CDC co-workers used armor trucks and undercover vans to transport and deposit over $4 billion dollars in cash into a Wachovia business account.

–Around May 2005, Wachovia introduced a new delivery technique to accept international check deposits called “Remote Deposit Capture” (RDC). RDC allowed the CDCs’ to scan deposits into a digital format and the scanned files were forwarded electronically to Wachovia for credit.

Another clever tactic used by Wachovia to buy airplanes for drug dealers who had business accounts at Wachovia was the “structured wire transfer” (SWT). SWT included other serious charges against Wachovia.

Under SWT violation the Feds said that between November 2005 and January 2006, Wachovia, on behalf of the CDC Puebla, transferred over $300,000 dollars from the CDC into a Bank of America account in Oklahoma City.

To assist the CDC to purchase airplanes to transport cocaine, ten wire transfers by four different individuals were sent to Wachovia and deposited into a business account owned by an aircraft broker.

With headline stories across the nation exposing massive fraud and money laundering schemes infiltrating the American financial systems: how could it have been so difficult for the Feds to establish criminal intent for these lawbreakers?

Although in selected cases, a civil complaint filed by the SEC (Security Exchange Commission) is usually offered to corporations and banks that allow them to wiggle out of a criminal indictment in exchange for a fine. A civil fine is usually the norm but the bulk of wrongdoing goes unpunished.

Experts familiar with large corporations and banks that violate the law have said the fine these companies pay the government is merely the cost of doing business.

High profile criminal defense attorney Kent Schaffer of Houston Texas is familiar with the disparity in treatment of criminal defendants by the federal government. Schaffer recently represented Allen Stanford, a former owner of several U.S.banks and offshore banks. Stanford is charged in a multi-billion dollar fraud case.

“Federal prosecutors [would] rather have a fine from banks and corporations that violate the law because prosecutors know the banks have the money.” When this journalist asked Schaffer if any of his clients were offered a deferred prosecution for laundering drug money, the attorney said, “no, most of them went to prison.”

Therefore we must question why bank executives and corporate CEOs’ rarely face criminal indictments. And if by chance a series of criminal indictments are handed down the ripple effect of the massive injuries and loss of investor’s funds outweigh the civil penalties and fines levied against the ‘big wigs.’

A recent Associated Press story provides a penetrating insight into the broader picture illustrating the mindset of prosecutors regarding whether or not to pursue prosecutions in major white collar crimes.

According to prosecutors attending Florida’s Anti-money Laundering Conference this past March, the lack of prosecutions of executives and CEOs’ boils down to standards of proof to deal with the case criminally or civil.

“You don’t find the smoking gun email where an executive said,” “I know it’s drug money but go do it anyway,” New York federal prosecutor Evan Weitz told the AP reporter.

Bypassing criminal charges the prosecutors usually hit a bank with a civil indictment known in the legal circle as ‘deferred prosecution agreement’, the same deal Wachovia accepted despite overwhelming evidence of intentional criminal conduct.

Adam Kaufman, chief of the investigative division of the Manhattan D.A. office defended the approach in the AP story, by saying, “prosecutors could have indicted low-level bank employees who handled the transactions on a daily basis. But that wouldn’t get the executives;  making the decisions and figuring out exactly who that is can be daunting.”

Kaufman continued, “An indictment can be a death sentence for a financial institution and ruining large banks can trigger unforeseen economic ripple effects.”

The DA summed up what many believe is true, that banks and corporations are “too-big-to fail and too-big-to jail.”

U.S. Treasury Secretary Tim Geithner echoed Kaufman’s sentiments. Geithner once described the financial system as a “target rich environment” for financial fraud. Geithner further explained how massive a problem it can be: “if banks and corporations were criminally indicted the results would inflict disaster for investors and stockholders.”

To prevent financial institutions from facing criminal indictments for intentional violation of federal bank laws, the Feds often press the executives, in exchange for a civil fine, and be put on probation, to confess illegal activity that is particularly described in the media as an oversight to uphold federal policy rules.

Or the government can recommend a “deferred prosecution” or drop the matter altogether.

A deferred prosecution guarantees zero jail time. In 2003, U.S. Justice Department issued a memo commending deferred prosecution as a legal approach. “With cooperation by the corporation, the government may be able to reduce tangible losses, limit damage to their reputation and preserve assets for restitution.”

The memo included cozy safeguards: “a deferred prosecution or non-prosecution agreement can help restore the integrity of a company’s operation and preserve the financial viability of a corporation involved with criminal conduct.”

We are currently living under government more interested in preserving the integrity of financial operations that it has investigated for fraud and money laundering. Even more appalling is the fact our government found the institutions guilty of intentionally breaking the law. And still no real punishment.

Whistleblower Vindicated

British investigator Martin Woods felt a relief of vindication when he received the news that Wachovia confessed to all the illegal activity that he brought to their attention. But instead of being commended for a job well done when he uncovered the “dirty money” scheme the executives made him the villain.

In May 2009 he settled the “whistleblower” lawsuit for an undisclosed amount of compensation against Wachovia. Martin Woods is on the rebound and now runs a London-based company called “Hermes Solution,” drawing on his expertise.

-

Clarence Walker is a veteran Houston-based journalist who writes on criminal justice issues. He can be reached at cwalkerinvestigate@gmail.com

Link to part 1 – http://oathkeepers.org/oath/2011/06/18/american-banks-high-on-drug-money_part-1/