Mexico Banks Charged in Drug Crimes
Money Laundering Alleged by U.S.

The United States yesterday accused three of Mexico's largest banks of knowingly aiding drug traffickers in laundering hundreds of millions of dollars in illicit proceeds from the United States and painted a grim picture of the Mexican financial sector's complicity in the drug trade.

In an indictment, the government said the banks were charged after a three-year sting operation in which about 200 undercover U.S. Customs agents helped Mexican bankers launder millions of dollars through an elaborate scheme of shuffling the money between U.S. and Mexican bank accounts. In addition to charging three banks with knowingly aiding drug traffickers, the indictment alleges that officials from 12 of Mexico's 19 largest banking institutions were involved in money-laundering activities.

Treasury Secretary Robert E. Rubin and Attorney General Janet Reno said in a statement that the indictment, which was unsealed in U.S. District Court in Los Angeles, was the culmination of "the largest, most comprehensive drug money laundering case in the history of U.S. law enforcement, representing the first time Mexican banks and bank officials have been directly linked to laundering . . . U.S. drug profits."

The operation netted only a small fraction of the estimated $40 billion to $60 billion in illicit drug proceeds reaped from U.S. sales each year, much of which finds its way to traffickers in Mexico and Colombia. But senior law enforcement officials said the case provided the best view U.S. officials have yet had into the increasingly sophisticated world of drug-related money laundering.

The Mexican bankers allegedly worked on behalf of the Juarez cartel in Mexico and the Cali cocaine and heroin syndicate in Colombia, officials said. U.S. authorities arrested 70 people over the weekend in connection with the scheme, including 14 Mexican banking officials. About $35 million was seized immediately and an additional $122 million is expected to be recovered from more than 100 bank accounts frozen in the United States and Europe, officials said.

Most of those arrested were lured to either Las Vegas or Los Angeles by undercover agents who offered to show them new ways to launder money through casinos and promised them dinner and a big party, senior law enforcement officials said. Most of the arrests were made Saturday night as the dinners were ending.

No U.S. banks or citizens were indicted and U.S. officials said that Mexican officials were not informed of the operation even though it involved three of the nation's largest banks. Reno said that she and other senior U.S. officials had talked to their Mexican counterparts yesterday morning to inform them of the operation and that the Mexican government had promised its "full cooperation."

Money laundering is the process whereby criminals take their illegal proceeds and put them into the financial sector in different ways so the money appears to have a legitimate origin. For their services, law enforcement officials said, the banks received a cut of between 4 percent and 5 percent of the money deposited.

In this case, officials said, drug traffickers would collect the drug money off the streets in the United States, and undercover agents would then deposit the money into accounts in Los Angeles. The money was then transferred by wire and accumulated in Mexican bank accounts, where bankers allegedly were aware the money came from drug trafficking.

Mexican bankers then issued bank drafts under fictitious names and mailed or hand-delivered the drafts to undercover agents in Los Angeles, who redeposited the money into the accounts. Because the money appeared as "clean" deposits from Mexico, it could be wire-transferred or hand-delivered to drug traffickers in Mexico.

"By infiltrating the highest level of this international drug-trafficking financial infrastructure, Customs was able to crack the elaborate financial schemes the drug traffickers developed to launder the tremendous volumes of cash acquired as proceeds from their deadly trade," Rubin told a news conference. "Today we hurt the drug cartels where it hurts the most, in their pocket books."

In Mexico, officials from the president's office and the finance ministry refused to comment. Officials from the three major banks involved said they were caught by surprise by the allegations and said they would not comment until they had more details.

Carlos Gomez, president of the Mexican Bankers Association, said, "These are operations from some employees and officials acting in an individual way, and it doesn't represent any systematic operations of the banks themselves."

The Mexican attorney general's office said in a statement issued last night that it would launch its own investigation into the Mexican banks involved in the U.S. sting operation. The statement also said that Mexican authorities already had an arrest order against one of the men charged in the sting but declined to specify the Mexican charges against him.

In addition to the indictments, the Federal Reserve announced it had issued temporary "cease and desist" orders suspending the U.S. operations of the three banks that were indicted, as well as those of Banco Nacional de Mexico ( Banamex), the nation's largest bank; Bital, Mexico's fourth-largest bank; and Banco Santander, the nation's fifth-largest bank. The order means the banks have "serious deficiencies in their anti-money laundering programs," according to a statement by the Federal Reserve. To resume U.S.-based operations, officials said, the banks will have to implement new money laundering controls.

Distrust between U.S. and Mexican law enforcement officials has long been a strain on relations between the two nations, even while commercial relations are booming -- including the opening of U.S. branches of several major Mexican banks. Senior Mexican counterdrug officers have been arrested for aiding and abetting drug traffickers in recent years.

Because of fear of compromising the operation and placing the lives of U.S. agents in danger, according to Raymond Kelly, the Treasury Department's undersecretary for law enforcement, information about the investigation "was not shared with the Mexican government."

The indictment is the first time Mexican banks, as institutions, have been charged with knowingly helping drug traffickers in the process.

Rubin said the banks indicted were: Bancomer, Mexico's second-largest bank; Banca Serfin, Mexico's third-largest bank; and Confia, also among the top 20 banks.

Senior law enforcement officials said the banks were indicted because of the high number of illegal transactions at each, the large number of employees aware that the money in the accounts was from drug trafficking, and because the institutions, and not just individuals, profited from the money laundering.

© Copyright 1998 The Washington Post Company