Wachovia Now Off the Hook for Role in Mexican Drug Cartels' Money Laundering Scheme

Off the hook for millions in money laundering.

​Happy Anniversary, Wachovia!

A year after the bank admitted to handling hundreds of millions in Mexican drug money -- and paid $160 million in fines and penalties -- the company is now off the hook for further punishment.

According to the British paper the Guardian, government documents also show the Magic City played a central role in the money-laundering operation. Like a true junkie, it seems Miami just can't quit the drug scene.

In March 2010, Wachovia promised to fork over $110 million for approving transactions later proved to be connected to drug smuggling. The DEA and IRS also hit the bank with a $50 million fine after funds from its accounts were used to ship 22 tons of cocaine.

"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," Jeffrey Sloman, U.S. Attorney for the Southern District said at the time. "[They] laundered at least $110 million in drug proceeds."

DEA photo via Wikimedia Commons

Cocaine. Lots and lots of cocaine.

​The feds built their case around Wachovia's relationship with Mexican exchange banks called CDCs (or casas de cambio). Bank execs knew as early as 1996 that the Mexican CDCs were hot spots for drug money but kept doing business with them anyway.

The penalties were announced at a news conference in Miami. According to the Guardian, it was no coincidence. Miami had played a central role in the Mexican cartels' money-laundering operation.

When Martin Woods, a senior anti-money laundering officer for Wachovia, complained to his higherups that the CDCs looked suspicious, bank execs in Miami blew him off. It later turned out the suspect CDCs were supervised and managed by a business unit -- where else? -- in Wachovia's Miami office.

According to the Guardian:

"On numerous occasions," say the court papers, "monies were deposited into a CDC by a drug-trafficking organisation. Using false identities, the CDC then wired that money through its Wachovia correspondent bank accounts for the purchase of airplanes for drug-trafficking organisations." The court settlement of 2010 would detail that "nearly $13m went through correspondent bank accounts at Wachovia for the purchase of aircraft to be used in the illegal narcotics trade. From these aircraft, more than 20,000kg of cocaine were seized."

All this occurred despite the fact that Wachovia's office was in Miami, designated by the US government as a "high-intensity money laundering and related financial crime area", and a "high-intensity drug trafficking area". Since the drug cartel war began in 2005, Mexico had been designated a high-risk source of money laundering.

In other words, the days of the cocaine cowboys might be behind us, but Miami is still playing a central role in the drug trade. Investigators say Wachovia failed to scrutinize as much as $378 billion in transfers.

But Wachovia struck a nice bargain with its $160 million settlement: The feds agreed to "defer" criminal charges for a year.

The deadline for prosecution came and went last month, meaning Wachovia handled cash for the most ruthless, violent organized crime groups in the world and got off by basically saying, Our bad!

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