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
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.