TIME: Banking On Cocaine

	LATIN AMERICA	JUNE 1, 1998 VOL. 151 NO. 21
Banking On Cocaine A "STING" OPERATION IN THE U.S. LEADS TO THE ARREST OF THIRTY-ONE BANKERS AND AN INSIGHT INTO THE DIRTY BUSINESS OF MONEY LAUNDERING By TIM PADGETT ike a vast, polluted river overflowing its banks, the illicit drug money spreading across Latin America has long been recognized as the region's most dangerous erosive force. No institution of politics or law enforcement has been immune to the lure of billions in ill-gotten gains, which drug lords have dispensed liberally to protect their empires. The cocaine cartels' biggest problem, in fact, is how to dispose of all their cash, collected on the streets of the U.S. and Europe and piled up in warehouses and safe houses until it can be shipped back home. Even then, the source of the funds must be hidden until the drug mafias can recycle it into property and legitimate businesses that help shield them from the law. Cleaning up dirty money is one of the cartels' most strategic activities--and as shocked citizens across Latin America were discovering last week, it is another source of the corruption that may be the biggest single threat to the region's political and economic stability. It certainly proved to be a threat to the Mexican city of Tepatitlan in Jalisco, a sleepy agrocommunity that, like the rest of the country, was devastated by the peso crash of 1994. Until then, Tepatitlan was known as the egg capital of central Mexico, the heart of an agrobusiness that employed tens of thousands of people. The peso crash brought steep unemployment and staggering debts to many in Tepatitlan--including six local-branch bank managers who seem to have decided to do something about it. The six men, all pillars of the community, apparently turned to Mexico's drug cartels for help. The cartels had a solution: help us clean up our cash. The Tepatitlan bankers complied. Between 1996 and 1998 they allegedly laundered $33 million in cash from drug sales in the U.S. In the process, the bank managers turned their town of 72,000 into a narco-financial center. One charismatic overachiever among the six, Jorge Reyes Ortega, 37, allegedly laundered some $20 million for his Colombian and Mexican drug-cartel clients, netting $200,000 in commissions--10 times his annual salary at Bancomer. To the joyful bankers, it all seemed too good to be true. And it was. On May 16, Reyes and 11 other bankers crossed the border and landed in Las Vegas at the invitation of their criminal associates for a party to celebrate their dirty work. Limousines whisked them to a sumptuous dinner at the Casablanca Hotel, a casino resort 130 km outside the gambling center. They were told that the drug cartels wanted to launder additional hundreds of millions of narco-investment dollars through Tepatitlan. The bankers were apparently happy to oblige. "They were all chitchatting over dinner," says John Hensley, special agent in charge of the U.S. Customs Service's Los Angeles field division. "Everyone was really enjoying himself." Then their hosts announced that it was time to head to a nearby location for "more entertainment." Legalized prostitution outside the Las Vegas city limits being a booming business, there were no arguments. Some 20 minutes later, in the barren Nevada desert, police pulled the limos to the side of the road. Within seconds, the Tepatitlan crew and the other Mexican bankers who had been invited were under arrest. The bust was one of the final acts in an intricate three-year undercover effort by the Clinton Administration to root out drug-money laundering via the U.S. As of last weekend the sting, known as Operation Casablanca, had jailed more than 160 people from six countries and from more than a dozen banks in Mexico and Venezuela, most of them respectable mid-level financial types like Reyes. It had also led to extraordinary criminal indictments against three of Mexico's largest banks, Bancomer, Serfin and Confia, for their alleged role in the money laundering. Customs agents had seized some $150 million in assets from Colombia's powerful Cali cartel and Mexico's Juarez cartel. And they had also opened yet another complicated chapter in U.S.-Latin American relations. Aside from the wounds inflicted on drug lords, the biggest effect of Operation Casablanca was to cause more embarrassment for the Mexican government and its scandal-plagued banking system. The embarrassment was made worse by the fact that U.S. law-enforcement officials had not breathed a word of their scheme to their opposite numbers in Mexico and had lured the unwitting bankers across the border to avoid the delay and red tape of extradition. Even President Ernesto Zedillo Ponce de Leon was unaware of the slick operation--some of it conducted on Mexican soil prior to the Las Vegas finale--until U.S. Attorney General Janet Reno and U.S. Treasury Secretary Robert Rubin announced the results of the sting at a Washington press conference. As prickly nationalists in Mexico's Congress cried foul and accused Washington of using the scheme to "demonize" the entire nation, Zedillo sent a stern letter of protest to the State Department, phoned Clinton and hinted he might take legal action. There was no denying, however, that Operation Casablanca provided an unprecedented glimpse of the way money laundering has permeated Mexico's ill-supervised banks. The U.S. government estimates that up to $15 billion in drug-sale proceeds are laundered in Mexico annually--equal to almost 5% of the gross domestic product. The sting, says economic analyst Rogelio Ramirez de la O, a leading consultant to U.S. corporations investing in Mexico, "was Washington's way of warning that this is just the tip of the iceberg." To many embittered Mexicans, Casablanca was more like a cheap shot. The lack of consultation seemed to imply a lack of confidence in Mexico's first ever efforts this year to monitor and criminalize money laundering. (When Casablanca got under way in 1995, the practice wasn't a crime in Mexico.) "We do feel very threatened by money laundering, and we want to stamp it out," Mexican Treasury Secretary Jose Angel Gurria told TIME. "But we're demanding a detailed accounting from U.S. authorities about this." Even Gurria concedes that the Casablanca arrests could "help get the word across" to bankers that they're being watched more closely than ever. Says a leading Mexican banking analyst: "This is going to be a wake-up call for regulators to give real teeth to their antilaundering programs, not just in Mexico but throughout Latin America." How badly the wake-up call is needed is revealed by the scope of Casablanca. It began in the late summer of 1995, when lieutenants of Colombia's powerful Cali drug cartel first approached undercover U.S. Customs agents who were posing as drug-money launderers on the lookout for new opportunities. The agents claimed to be California partners in a firm called Emerald Empire Corp., a Colombian company already known, says Hensley, for providing money-laundering services. According to Customs officials, the Cali operatives hooked the agents up with Victor Alcala, a finance officer for Mexico's largest drug group, the Juarez cartel, which is Cali's main conduit for moving cocaine and other drugs over the U.S. border. Alcala put the agents in touch with at least 26 mid-level managers from 12 of Mexico's largest banks, including Reyes and the Tepatitlan group, as well as bankers in Tijuana and Guadalajara. Coaxing them into the sting required little effort, says Hensley. "They were anxious to have the money run through their banks," he says, even after they were told that it was illicit cash. (Customs officials say they have those conversations on tape as evidence.) Reyes, according to Customs agents, seemed to treat the whole thing as an incentive scheme, hoping to earn more than his 1% commission by recommending other bankers who wanted in on the deal. The money laundering that followed was a textbook case, making it all the more remarkable that someone higher up in the Mexican banks or the Mexican government didn't sniff out what was going on. The launderers opened up dozens of sham accounts at their branches in 17 locations. (Besides the three indicted banks, they used branches of several other banks, including Banamex, Banpais and Banoro.) Then they opened up similar accounts at major U.S. banks like the Bank of America outside Los Angeles, where their institutions had transbanking facilities, and at Mercury Bank & Trust in the Cayman Islands. (The U.S. banks, say Customs officials, were informed of the sting and cooperated.) The undercover Customs agents then performed the service of collecting dirty cash from depots in the U.S., where as much as $2 million at a time was stashed in gym bags and other rough-and-ready containers. The law-enforcement officers deposited the money in the phony U.S. accounts in inconspicuous amounts. These, in turn, were wire-transferred to the Mexican or Cayman Islands bank branches, where the launderers converted them into legal bank drafts and checks that the Cali cartel bosses could cash almost anywhere, no questions asked. In all, the Mexican bankers laundered $56 million for the cartels during the sting operation. Twenty-two bankers were arrested in the U.S. last week, and Mexican officials collared four others soon after in Mexico. While the Mexican sting proceeded, a virtually identical operation was under way in Venezuela involving four top Caracas banks. One was the Banco Industrial de Venezuela, whose executive vice president, Esperanza Matos de Saad--the sister of a former Venezuelan Cabinet minister--was arrested in the U.S. along with four other high-level bank officers. They are accused of laundering $9.5 million for Cali. Why were no Latin American authorities informed of the sting? U.S. officials insist that the safety of undercover agents was a paramount concern and became even more urgent last year when one of them, who was working as a drug-money courier in New York City, was wounded in a shoot-out with double-crossing traffickers during a $500,000 pickup. Because even high-ranking Mexican law-enforcement officials have been found in the employ of the drug cartels, U.S. officials say privately that they never seriously considered briefing anyone outside the U.S. about Casablanca. An even bigger issue is whether more important figures at the banks were involved. Carlos Gomez y Gomez, president of the Mexican Bankers Association, maintains that Casablanca-style laundering "is not an institutional practice here." For their part, U.S. Customs officials say probing higher for corruption would have set off alarms that could have compromised the sting. They hope that those arrested will point to any other conspirators in order to cut their potential sentences, which could run as high as life in prison. The most important question is how so much money could have been laundered so freely for so long. The fact is that many Mexican and Venezuelan banks have gone through major crises in recent years that reveal inadequate supervision. In Mexico, the banks have been back in private hands only since 1991, after a decade of government control. Last fall, Jorge Lankenau, then the majority shareholder of Confia, fled after being charged with swindling investors out of $170 million and driving the bank into bankruptcy. (He was eventually arrested and has denied the charges.) Confia was bought this month by the U.S. giant Citibank--itself cooperating with a money-laundering investigation in the U.S. after officials discovered in 1995 that Raul Salinas, the brother of former Mexican President Carlos Salinas de Gortari, had funneled more than $100 million through Citibank into Swiss and other foreign accounts. Serfin, owned principally by the Monterrey glassmaking Sada family, almost went bankrupt two years ago under the weight of a bad loan portfolio that ended up costing shareholders $1 billion. In fairness, Mexican investigators have also uncovered money-laundering schemes. In March, for example, the government had to assume control of the Mexico City-based bank Anahuac after a federal investigation revealed that it had allegedly been laundering Juarez-cartel funds through a number of construction firms. The encouraging aspect of the Anahuac scandal was the government's prosecution of the case, a sign that Mexico City is indeed serious about the new antilaundering regime it has been implementing since 1996 and that went into full effect on April 1. Since then, Mexico's National Banking and Securities Commission (CNBV) has mandated that banks report all "suspicious" transactions as well as all cash transactions of more than $10,000 (identical to U.S. rules). Mexico's new laws are tougher than those in the U.S.--at least on paper--because they also cover currency-exchange houses, which has been another favorite launderer for Mexican traffickers. "We're creating a new culture of oversight here," Gurria insists, pointing out that Zedillo has put before Congress reform legislation to strengthen the CNBV's autonomy and its powers over banks. U.S. officials are issuing hearty praise for the reforms--so long as Mexico implements them. Customs agents acknowledge that the new rules, as they emerged during the sting, "were making a difference" in the Mexican launderers' attitudes, forcing them to work more stealthily. Experts on cartel finance note that the U.S. began to criminalize money laundering only 20 years ago. "There will be growing pains in Mexico, just as in the U.S.," says Mike McDonald of the Florida-based watchdog Money Laundering Alert. He recalls that U.S. banks suffered a series of embarrassing, high-profile money-laundering arrests in the early 1980s. For the chagrined and angry Mexican government, however, that seemed for the moment to be small consolation. --With reporting by Brendan M. Case and Rachel Salaman /Mexico City, Dan Cray /Los Angeles and Elaine Shannon /Washington INDICTED As it wound down the operation, U.S. law enforcement took special aim at three Mexican banks BANCOMER Assets $25.8 billion Branches 1,338 Owners Bank of Montreal 16% Mexican gov. 18% Private investors 66% SERFIN Assets $17.5 billion Branches 580 Owners Public 15% Mexican gov. 19% Private investors 46% HSBC Holdings 20% CONFIA Assets $5.0 billion Branches 200 Owner Citibank 100% HOW THE CASABLANCA STING WORKS 1 In 1995 U.S. Customs agents posing as money launderers are hired by the Cali drug cartel. 2 In early 1996 the agents locate employees for 12 large Mexican banks who agree to launder drug money for a 1% commission. The bankers open sham accounts. 3 The undercover agents collect Cali-Juarez drug-sale proceeds on the streets of cities like New York, Chicago, Houston, Miami and even Milan in pick-ups ranging from $150,000 to $2 million. By the summer of 1996, the agents are depositing the cash into the phony accounts via U.S. banks. 4 The money is wire-transferred to the Mexican or Cayman Islands bank branches and converted into cashier's checks made out to the fictitious companies. The checks can be cashed almost anywhere in the world with no questions asked. The drug-cartel origins of the money are now erased. During the three-year operation, more than $50 million is laundered. 5 The agents deliver the cashier's checks to cartel operatives in Cali. 6 In May 1998 the Mexican bankers are arrested by Customs in the U.S. after being lured to "money-laundering sales meetings" in San Diego, Los Angeles and Las Vegas.
time-webmaster@pathfinder.com

LATIN AMERICA

JUNE 1, 1998 VOL. 151 NO. 21

Banking On Cocaine

A "STING" OPERATION IN THE U.S. LEADS TO THE ARREST OF THIRTY-ONE BANKERS AND AN INSIGHT INTO THE DIRTY BUSINESS OF MONEY LAUNDERING

By TIM PADGETT

ike a vast, polluted river overflowing its banks, the illicit drug money spreading across Latin America has long been recognized as the region's most dangerous erosive force. No institution of politics or law enforcement has been immune to the lure of billions in ill-gotten gains, which drug lords have dispensed liberally to protect their empires. The cocaine cartels' biggest problem, in fact, is how to dispose of all their cash, collected on the streets of the U.S. and Europe and piled up in warehouses and safe houses until it can be shipped back home. Even then, the source of the funds must be hidden until the drug mafias can recycle it into property and legitimate businesses that help shield them from the law. Cleaning up dirty money is one of the cartels' most strategic activities--and as shocked citizens across Latin America were discovering last week, it is another source of the corruption that may be the biggest single threat to the region's political and economic stability.

It certainly proved to be a threat to the Mexican city of Tepatitlan in Jalisco, a sleepy agrocommunity that, like the rest of the country, was devastated by the peso crash of 1994. Until then, Tepatitlan was known as the egg capital of central Mexico, the heart of an agrobusiness that employed tens of thousands of people. The peso crash brought steep unemployment and staggering debts to many in Tepatitlan--including six local-branch bank managers who seem to have decided to do something about it. The six men, all pillars of the community, apparently turned to Mexico's drug cartels for help. The cartels had a solution: help us clean up our cash.

The Tepatitlan bankers complied. Between 1996 and 1998 they allegedly laundered $33 million in cash from drug sales in the U.S. In the process, the bank managers turned their town of 72,000 into a narco-financial center. One charismatic overachiever among the six, Jorge Reyes Ortega, 37, allegedly laundered some $20 million for his Colombian and Mexican drug-cartel clients, netting $200,000 in commissions--10 times his annual salary at Bancomer.

To the joyful bankers, it all seemed too good to be true. And it was. On May 16, Reyes and 11 other bankers crossed the border and landed in Las Vegas at the invitation of their criminal associates for a party to celebrate their dirty work. Limousines whisked them to a sumptuous dinner at the Casablanca Hotel, a casino resort 130 km outside the gambling center. They were told that the drug cartels wanted to launder additional hundreds of millions of narco-investment dollars through Tepatitlan. The bankers were apparently happy to oblige. "They were all chitchatting over dinner," says John Hensley, special agent in charge of the U.S. Customs Service's Los Angeles field division. "Everyone was really enjoying himself."

Then their hosts announced that it was time to head to a nearby location for "more entertainment." Legalized prostitution outside the Las Vegas city limits being a booming business, there were no arguments. Some 20 minutes later, in the barren Nevada desert, police pulled the limos to the side of the road. Within seconds, the Tepatitlan crew and the other Mexican bankers who had been invited were under arrest.

The bust was one of the final acts in an intricate three-year undercover effort by the Clinton Administration to root out drug-money laundering via the U.S. As of last weekend the sting, known as Operation Casablanca, had jailed more than 160 people from six countries and from more than a dozen banks in Mexico and Venezuela, most of them respectable mid-level financial types like Reyes. It had also led to extraordinary criminal indictments against three of Mexico's largest banks, Bancomer, Serfin and Confia, for their alleged role in the money laundering. Customs agents had seized some $150 million in assets from Colombia's powerful Cali cartel and Mexico's Juarez cartel. And they had also opened yet another complicated chapter in U.S.-Latin American relations.

Aside from the wounds inflicted on drug lords, the biggest effect of Operation Casablanca was to cause more embarrassment for the Mexican government and its scandal-plagued banking system. The embarrassment was made worse by the fact that U.S. law-enforcement officials had not breathed a word of their scheme to their opposite numbers in Mexico and had lured the unwitting bankers across the border to avoid the delay and red tape of extradition. Even President Ernesto Zedillo Ponce de Leon was unaware of the slick operation--some of it conducted on Mexican soil prior to the Las Vegas finale--until U.S. Attorney General Janet Reno and U.S. Treasury Secretary Robert Rubin announced the results of the sting at a Washington press conference. As prickly nationalists in Mexico's Congress cried foul and accused Washington of using the scheme to "demonize" the entire nation, Zedillo sent a stern letter of protest to the State Department, phoned Clinton and hinted he might take legal action.

There was no denying, however, that Operation Casablanca provided an unprecedented glimpse of the way money laundering has permeated Mexico's ill-supervised banks. The U.S. government estimates that up to $15 billion in drug-sale proceeds are laundered in Mexico annually--equal to almost 5% of the gross domestic product. The sting, says economic analyst Rogelio Ramirez de la O, a leading consultant to U.S. corporations investing in Mexico, "was Washington's way of warning that this is just the tip of the iceberg."

To many embittered Mexicans, Casablanca was more like a cheap shot. The lack of consultation seemed to imply a lack of confidence in Mexico's first ever efforts this year to monitor and criminalize money laundering. (When Casablanca got under way in 1995, the practice wasn't a crime in Mexico.) "We do feel very threatened by money laundering, and we want to stamp it out," Mexican Treasury Secretary Jose Angel Gurria told TIME. "But we're demanding a detailed accounting from U.S. authorities about this."

Even Gurria concedes that the Casablanca arrests could "help get the word across" to bankers that they're being watched more closely than ever. Says a leading Mexican banking analyst: "This is going to be a wake-up call for regulators to give real teeth to their antilaundering programs, not just in Mexico but throughout Latin America."

How badly the wake-up call is needed is revealed by the scope of Casablanca. It began in the late summer of 1995, when lieutenants of Colombia's powerful Cali drug cartel first approached undercover U.S. Customs agents who were posing as drug-money launderers on the lookout for new opportunities. The agents claimed to be California partners in a firm called Emerald Empire Corp., a Colombian company already known, says Hensley, for providing money-laundering services. According to Customs officials, the Cali operatives hooked the agents up with Victor Alcala, a finance officer for Mexico's largest drug group, the Juarez cartel, which is Cali's main conduit for moving cocaine and other drugs over the U.S. border.

Alcala put the agents in touch with at least 26 mid-level managers from 12 of Mexico's largest banks, including Reyes and the Tepatitlan group, as well as bankers in Tijuana and Guadalajara. Coaxing them into the sting required little effort, says Hensley. "They were anxious to have the money run through their banks," he says, even after they were told that it was illicit cash. (Customs officials say they have those conversations on tape as evidence.) Reyes, according to Customs agents, seemed to treat the whole thing as an incentive scheme, hoping to earn more than his 1% commission by recommending other bankers who wanted in on the deal.

The money laundering that followed was a textbook case, making it all the more remarkable that someone higher up in the Mexican banks or the Mexican government didn't sniff out what was going on. The launderers opened up dozens of sham accounts at their branches in 17 locations. (Besides the three indicted banks, they used branches of several other banks, including Banamex, Banpais and Banoro.) Then they opened up similar accounts at major U.S. banks like the Bank of America outside Los Angeles, where their institutions had transbanking facilities, and at Mercury Bank & Trust in the Cayman Islands. (The U.S. banks, say Customs officials, were informed of the sting and cooperated.)

The undercover Customs agents then performed the service of collecting dirty cash from depots in the U.S., where as much as $2 million at a time was stashed in gym bags and other rough-and-ready containers. The law-enforcement officers deposited the money in the phony U.S. accounts in inconspicuous amounts. These, in turn, were wire-transferred to the Mexican or Cayman Islands bank branches, where the launderers converted them into legal bank drafts and checks that the Cali cartel bosses could cash almost anywhere, no questions asked. In all, the Mexican bankers laundered $56 million for the cartels during the sting operation. Twenty-two bankers were arrested in the U.S. last week, and Mexican officials collared four others soon after in Mexico.

While the Mexican sting proceeded, a virtually identical operation was under way in Venezuela involving four top Caracas banks. One was the Banco Industrial de Venezuela, whose executive vice president, Esperanza Matos de Saad--the sister of a former Venezuelan Cabinet minister--was arrested in the U.S. along with four other high-level bank officers. They are accused of laundering $9.5 million for Cali.

Why were no Latin American authorities informed of the sting? U.S. officials insist that the safety of undercover agents was a paramount concern and became even more urgent last year when one of them, who was working as a drug-money courier in New York City, was wounded in a shoot-out with double-crossing traffickers during a $500,000 pickup. Because even high-ranking Mexican law-enforcement officials have been found in the employ of the drug cartels, U.S. officials say privately that they never seriously considered briefing anyone outside the U.S. about Casablanca.

An even bigger issue is whether more important figures at the banks were involved. Carlos Gomez y Gomez, president of the Mexican Bankers Association, maintains that Casablanca-style laundering "is not an institutional practice here." For their part, U.S. Customs officials say probing higher for corruption would have set off alarms that could have compromised the sting. They hope that those arrested will point to any other conspirators in order to cut their potential sentences, which could run as high as life in prison.

The most important question is how so much money could have been laundered so freely for so long. The fact is that many Mexican and Venezuelan banks have gone through major crises in recent years that reveal inadequate supervision. In Mexico, the banks have been back in private hands only since 1991, after a decade of government control. Last fall, Jorge Lankenau, then the majority shareholder of Confia, fled after being charged with swindling investors out of $170 million and driving the bank into bankruptcy. (He was eventually arrested and has denied the charges.) Confia was bought this month by the U.S. giant Citibank--itself cooperating with a money-laundering investigation in the U.S. after officials discovered in 1995 that Raul Salinas, the brother of former Mexican President Carlos Salinas de Gortari, had funneled more than $100 million through Citibank into Swiss and other foreign accounts. Serfin, owned principally by the Monterrey glassmaking Sada family, almost went bankrupt two years ago under the weight of a bad loan portfolio that ended up costing shareholders $1 billion.

In fairness, Mexican investigators have also uncovered money-laundering schemes. In March, for example, the government had to assume control of the Mexico City-based bank Anahuac after a federal investigation revealed that it had allegedly been laundering Juarez-cartel funds through a number of construction firms. The encouraging aspect of the Anahuac scandal was the government's prosecution of the case, a sign that Mexico City is indeed serious about the new antilaundering regime it has been implementing since 1996 and that went into full effect on April 1. Since then, Mexico's National Banking and Securities Commission (CNBV) has mandated that banks report all "suspicious" transactions as well as all cash transactions of more than $10,000 (identical to U.S. rules).

Mexico's new laws are tougher than those in the U.S.--at least on paper--because they also cover currency-exchange houses, which has been another favorite launderer for Mexican traffickers. "We're creating a new culture of oversight here," Gurria insists, pointing out that Zedillo has put before Congress reform legislation to strengthen the CNBV's autonomy and its powers over banks.

U.S. officials are issuing hearty praise for the reforms--so long as Mexico implements them. Customs agents acknowledge that the new rules, as they emerged during the sting, "were making a difference" in the Mexican launderers' attitudes, forcing them to work more stealthily. Experts on cartel finance note that the U.S. began to criminalize money laundering only 20 years ago. "There will be growing pains in Mexico, just as in the U.S.," says Mike McDonald of the Florida-based watchdog Money Laundering Alert. He recalls that U.S. banks suffered a series of embarrassing, high-profile money-laundering arrests in the early 1980s. For the chagrined and angry Mexican government, however, that seemed for the moment to be small consolation.

--With reporting by Brendan M. Case and Rachel Salaman /Mexico City, Dan Cray /Los Angeles and Elaine Shannon /Washington

INDICTED

As it wound down the operation, U.S. law enforcement took special aim at three Mexican banks

BANCOMER

Assets
$25.8 billion

Branches
1,338

Owners
Bank of Montreal 16%
Mexican gov. 18%
Private investors 66%

SERFIN

Assets
$17.5 billion

Branches
580

Owners
Public 15%
Mexican gov. 19%
Private investors 46%
HSBC Holdings 20%

CONFIA

Assets
$5.0 billion

Branches
200

Owner
Citibank 100%

HOW THE CASABLANCA STING WORKS

1 In 1995 U.S. Customs agents posing as money launderers are hired by the Cali drug cartel.

2 In early 1996 the agents locate employees for 12 large Mexican banks who agree to launder drug money for a 1% commission. The bankers open sham accounts.

3 The undercover agents collect Cali-Juarez drug-sale proceeds on the streets of cities like New York, Chicago, Houston, Miami and even Milan in pick-ups ranging from $150,000 to $2 million. By the summer of 1996, the agents are depositing the cash into the phony accounts via U.S. banks.

4 The money is wire-transferred to the Mexican or Cayman Islands bank branches and converted into cashier's checks made out to the fictitious companies. The checks can be cashed almost anywhere in the world with no questions asked. The drug-cartel origins of the money are now erased. During the three-year operation, more than $50 million is laundered.

5 The agents deliver the cashier's checks to cartel operatives in Cali.

6 In May 1998 the Mexican bankers are arrested by Customs in the U.S. after being lured to "money-laundering sales meetings" in San Diego, Los Angeles and Las Vegas.

time-webmaster@pathfinder.com