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BRIEF

Mexican Cartels and the US Banking System

MEXICO / 2 APR 2011 BY INSIGHT CRIME EN
  • An investigation by British newspaper The Observer details how the Mexican-based Sinaloa Cartel laundered billions of dollars through Wachovia, once one of the biggest players in the American banking industry. The scandal began to unfold in 2006 when Mexican authorities intercepted a large drug and money cargo on a plane in Ciudad del Carmen, in the Gulf of Mexico. Agents from the Drug Enforcement Administration (DEA), the Internal Revenue Service (IRS) and other agencies spent almost two years investigating the haul, which led them to Wachovia. They found that some $378.4 billion dollars had been transferred into accounts at the bank via Mexican “casas de cambio” (currency exchange houses). Wachovia was ordered in March 2010 to pay a total of $160 million dollars (part as a fine and part as forfeiture) for failing to track large sums of money that were connected to Mexican organized crime. According to Martin Woods, senior anti-money laundering officer for the bank during the evolution of the scandal, "What happened at Wachovia was symptomatic of the failure of the entire regulatory system to apply the kind of proper governance and adequate risk management which would have prevented not just the laundering of blood money, but the global crisis."
  • As violence has surged in many parts of Mexico, Mexico City has seen a different pattern unfolding. Many kingpins from the major cartels established themselves in the capital city to run money laundering operations and hide out from enemies, which translated into lower murder rates for the city. But since last year a series of beheadings and homicides have shaken this apparent calm, giving rise to fears of large-scale drug violence. But authorities analyze the situation otherwise, reports the Associated Press. According to the report small-time gangs are behind the new wave of violence, caught up in disputes over micro-trafficking territories in the capital. Despite these groups' connection with the major drug trafficking organizations, authorities say it is unlikely that the violence is a result of fighting between cartels, as they do not dispute over such small markets. Concerns over rising drug sales in the city are backed by information on drug consumption, according to Patricia Reyes, adviser to the city's Health Secretary (Secretaria de Salud). The official said that eight percent of students in high schools have now experimented with drugs, compared to some 2.5 percent in 1998.
  • In El Salvador, El Diario de Hoy reports that small-scale gangs are apparently working to penetrate the country's security forces in order to corrupt officers, obtain intelligence, and stock up on arms, according to a statement from Defense Minister David Munguia Payes. InSight has reported that common criminals are often used by major players in Colombia to carry out tasks such as these. It would be no surprise if major criminal organizations in El Salvador and Central America are following the same tactic, commissioning small groups to pursue their ends.
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