Dirty Laundry

Multinational banks as bagmen
for global crime syndicates

by Ron Chepesiuk

Toward Freedom magazine, June/July 2001


It's one of the twisted ironies of the war on drugs. While the US spends billions of dollars trying to interdict illegal drugs from abroad, the country's banking system has been making it easy for drug lords to launder their profits. About half of the estimated trillion dollars in dirty money that comes in large part from drug trafficking- hut also from criminal activities such as gambling, auto theft, and child prostitution- moves through the US financial system, according to government estimates.

This startling revelation came to light in March when the US Permanent Subcommittee on Investigations released a report that identified four of the six largest US banks (Citibank, J.P Morgan, Bank of America, and First Union) as having "weak due diligence practices" and "inadequate'' money-laundering controls. Michigan Senator Carl Levin characterized the hanks as "asleep at the switch."

But that's much to mild a cliché to describe the role of' the US banking system in money laundering. How about turning a blind eye"? While several legislators in Congress express shock that such activities could be so brazenly carried on by some of the country's leading financial institutions, the truth is that the connection between the crime world and US bankers has been known for some time.

For instance, California Congresswoman Maxine Waters brought Citibank's ongoing relationship with criminal syndicates to public attention in 199S, charging that its "private banking appeared to be financed by these global criminals, because of [Citibank's] 'don't ask, don't tell policy towards its wealthiest, and sometimes dirtiest, clients."

Waters made the charge as part of her effort to rally congressional support to block a proposed merger between Citigroup (the parent company of Citibank) and Travelers Group Inc., creating the world's largest financial institution. Waters feared that the merger would create even better money laundering.

Waters charge against Citibank is well documented, thanks to recent investigations. In one of the most high profile cases, Raul Salinas, the brother of former Mexican President Carlos Salinas, funneled $100 million in drug money into his Swiss bank accounts with the help of Citibank, according to a Government Accounting Office (GAO) investigation. The GAO revealed that Citibank set up a shell investment company in the Cayman Islands and accounts in London and Switzerland to help Raul quietly transfer funds between 1992 and 1994.

Among other revelations: Citibank failed to conduct a background check on Raul and allowed his wife to wire funds from Mexico to New York City using another name.

The money involved in the Salinas case was pocket change compared to the $7 billion in suspected dirty money that passed from Russian banks through three accounts at the Bank of New York in 1999. Although investigators knew the Russian mafia had infiltrated the New York banking system, the extent of this operation surprised them. Still, they believe that the $7 billion is most likely a mere fraction of the money being laundered. The Russian lnterior Ministry estimates that, in the period from 1994 to 1998 alone, criminals illegally transferred $50 to $250 billion out of Russia.

The laxity in federal oversight of the US s banking system is evident in the findings of a recent one-year US senate investigation of two Citibank-owned off-shore banks in the Bahamas and the Cayman Islands. The investigation disclosed that Citibank failed to close the Cayman Islands bank for 21 months after US Customs seized its funds as a part of a drug money laundering operation. Prosecutors charged that the Cayman Islands' bank funneled $7.7 million from Mexico's Juarez drug cartel through two Citibank accounts in New York. According to Senator Levin, Citibanks "delayed reaction" helped its Bahamas shell company to move an additional $300 million through a New York account between the time of the seizure and the closure of the account in early 2000.


Ron Chepesiuk is a Rock Hill, S.C.-based journalist. He is the author of Hard Target The U.S. s War Against International Drug Trafficking and The War on Drugs: An International Encyclopedia.

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