Laundering Drug Money

April 2, 2011 5:12 PM

At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were "the only liquid investment capital" available to banks on the brink of collapse. "Inter-bank loans were funded by money that originated from the drugs trade," he said. "There were signs that some banks were rescued that way." How a big US bank laundered billions from Mexico's murderous drug gangs

From May 2004 through May 2007, Wachovia processed at least $373.6 billion in CDCs [Casas de Cambio, Mexican currency exchange houses], $4.7 billion of it in bulk cash. [...]

In March 2010 Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami...It paid federal authorities $110m in forfeiture...

more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.

"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement. [...]

Robert Mazur, lead infiltrator for US law enforcement of the Colombian Medellín cartel during the epic prosecution and collapse of the BCCI banking business in 1991, [says:] "If you look at the career ladders of law enforcement, there's no incentive to go after the big money. People move every two to three years. The DEA is focused on drug trafficking rather than money laundering. You get a quicker result that way – they want to get the traffickers and seize their assets. But this is like treating a sick plant by cutting off a few branches – it just grows new ones.

Related:
U.S. Banks Resist Efforts To Prevent Corrupt Money Flows

How Wall Street Crooks Get Out of Jail Free

posted by The Emperor of Ice Cream (30 comments total)

But this is like treating a sick plant by cutting off a few branches – it just grows new ones.

Going 'after the big money' would be like yanking the plant out of the ground. Legalize and tax the drug trade. That way you don't have to kill the plant and everyone can enjoy the fruit it bears.
posted by carsonb at 5:24 PM on April 2, 2011 [5 favorites]

Shouldn't someone be serving a long federal sentence? Someone must be responsible for choosing to launder money. If I did, I'm sure I'd serve hard time.

Mind, I'm not a billionaire banking CEO, so I deserve jail; he doesn't.
posted by five fresh fish at 5:26 PM on April 2, 2011 [3 favorites]

Previously.
posted by jedicus at 5:34 PM on April 2, 2011 [1 favorite]

Legalize and tax the drug trade.

But there appears to be a financial incentive to keep the drug trade illegal, in that it injects a massive pool of laundered, liquid cash into the global financial system.
posted by The Emperor of Ice Cream at 5:36 PM on April 2, 2011

YOU DON'T SAY.
posted by carsonb at 5:36 PM on April 2, 2011 [5 favorites]

Look, people, it's simple: drugs are BAD, so we need to fund federal and local SWAT teams and narc squads and make sure that the law enforcement community has a constant supply of increasingly powerful weaponry and increasingly intrusive surveillance techniques to deploy against anyone they claim is a suspect.

But once you turn those drugs into money? Money is all GOOD, baby! Free markets! Woo hoo! BAM! How you like that gold-encrusted jet ski? Don't float? BAM! BUY A BIGGER ONE. Because once those BAD drugs turn into that GOOD money, we're ALL addicts, baby, and Wachovia just wants you to have a little taste for old time's sake.
posted by BitterOldPunk at 5:38 PM on April 2, 2011 [13 favorites]

I have given up any hope that Reforming the Financial System (and punishing the evildoers) may be possible without causing the entire system to collapse. The corruption is now "hard-coded" into the system. So we have two choices: to fall into a Great Depression that will no doubt dwarf the one of the 1920s-30s, or live through an ongoing decline in living standards for all but .01% of the population for the foreseeable future. So, by avoiding being thrown into mass poverty now, we doom our grandchildren to the same fate.
posted by oneswellfoop at 5:40 PM on April 2, 2011 [4 favorites]

Wacokevia
posted by The Emperor of Ice Cream at 5:42 PM on April 2, 2011

Who's being naive, Kay?
posted by 2bucksplus at 5:47 PM on April 2, 2011

That way you don't have to kill the plant and everyone can enjoy the fruit it bears.

I think I'm getting stoned off of your metaphor.
posted by nzero at 5:50 PM on April 2, 2011 [2 favorites]

in that it injects a massive pool of laundered, liquid cash into the CIA, the Bush Family, various arms dealers, several 100 short lived Mexican nationals, a few ex Nazis in South American, some really fun guys in Afghanistan, Pakistan and Iraq, and probably the Vatican the global financial system.
posted by doctor_negative at 5:51 PM on April 2, 2011 [14 favorites]

Drug runner submarines
posted by mkb at 6:17 PM on April 2, 2011 [2 favorites]

Remember kids: Drugs are dangerous because they're illegal.

No, wait a minute ...
posted by ZenMasterThis at 6:26 PM on April 2, 2011

Wachovia == Watch-over-ya
posted by goodsignal at 6:39 PM on April 2, 2011

There is a time and place for everything, the bankers are getting rich but also accelerating their fate. This will not end well.
posted by Max Power at 6:50 PM on April 2, 2011

So, by avoiding being thrown into mass poverty now, we doom our grandchildren to the same fate.

My guess is that whatever comes, it will come sooner than that.
posted by drezdn at 6:54 PM on April 2, 2011 [1 favorite]

I'll assume the billionaire bankers are still with us in the War On Terror, at least.
posted by bonobothegreat at 7:14 PM on April 2, 2011

I'll assume the billionaire bankers are still with us in the War On Terror, at least.

Despite laws and sanctions, based on recent history that's not necessarily what I'm assuming.
posted by The Emperor of Ice Cream at 7:36 PM on April 2, 2011

This thread reads like we assume someone's actually running this circus.
posted by Samuel Farrow at 8:18 PM on April 2, 2011 [2 favorites]

When is that wikileaks hard disk going public? I think Obama could get his popularity rating onto the stratosphere of he just affected half the bankers now that the crisis has past.
posted by humanfont at 8:24 PM on April 2, 2011

The DEA is focused on drug trafficking rather than money laundering. You get a quicker result that way – they want to get the traffickers and seize their assets. But this is like treating a sick plant by cutting off a few branches – it just grows new ones.
Previously
posted by Jazz.bot at 8:51 PM on April 2, 2011

Man, stick to be weed and BB guns.
posted by clavdivs at 8:55 PM on April 2, 2011

they’ve been dubbed drug subs by the press, but they’re incapable of diving or maneuvering like real submarines.

So far, or at least they've not caught one yet. The sub pictured looks a lot more sophisticated then the ones they were making a few years ago.
posted by doctor_negative at 10:23 PM on April 2, 2011

I liked the part where the USA throws millions of people in jail for doing drugs. (p.s. this is what it sounds like when doves cry in an echo chamber.)
posted by d1rge at 10:34 PM on April 2, 2011

Wachovia == Watch-over-ya

More like wank-over-ya, imo.
posted by PeterMcDermott at 3:02 AM on April 3, 2011

onefellswoop makes a great point: the system is so fundamentally ruined and broken that the ONLY thing holding it together is the belief and myth that everything is okay. Confessions of a Wall Street Nihilist is a good read if you want to get a better understanding of just how close we came to complete and total meltdown and armageddon a few years back.

Like all ponzi and pyramid schemes, at some point it will break. It may be from an indebted nation telling the banking system to fuck off (*cough* Ireland *cough*) or it may be from an entirely unexpected black swan nobody thought of. Regardless, at some point the system will collapse under the weight of its own hypocrisy and corruption. When it does, be prepared to grab your ankles and pray...
posted by tgrundke at 6:14 AM on April 3, 2011

I can assure you, for better or worse, law enforcement loves going after the money.

I'd rather drug money was IN the system than not.

Blaming "the banksters" or "corporations" as a group is a convenient wail, but crimes can only be committed by individuals doing (or failing to do) something. Find the people who broke the laws and punish them. But don't blame "the system" when "the system" is incapable of acting.
posted by gjc at 6:44 AM on April 3, 2011

Hmmm...was Gary Trudeau thinking about this story when he drafted this comic?
posted by Mental Wimp at 11:56 AM on April 3, 2011

It strikes me as somewhat ironic that in the context of money laundering "effective" means what we all think it should mean. As in, "does its job," or "is useful for this purpose," but in other areas of the law, it has been decided to merely mean "intended for this purpose."

If "effective" meant in the anti-money laundering laws what it means in the DMCA, there would be no crime here. Or if "effective" meant in the DMCA what it means in the anti-money laundering laws, very few acts of circumvention would actually be illegal.

Funny, that.
posted by wierdo at 1:03 PM on April 3, 2011

Wachovia == Walkalloverya
posted by kirkaracha at 3:51 PM on April 3, 2011