The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

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The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

redlogarythm
Hi there guys. What follows is an analysis about the tactics and methods used by HSBC Group and Wachovia Bank to launder an indeterminate amount of drug money from the early 2000´s until 2010/2012. Most of the information being shown here has been obtained frmo legal documents (deferred prosecution agreements) as well as from several reports elaborated by the US Senate. As always, my English isn´t the best one and the text contains errors, I apologize for it. As always feel free to point out any errors and make comments or suggest more info.



When organized crime groups obtain profits the usually get cash: a fentanyl sale, a shipment of AK47s, the daily earnings of a brothel or the ransom cash from a kidnapping. All these activities mean a constant flow of cash that must be collected, counted and integrated into the financial system since maintaining it around is extremely dangerous because of the probability of seizures.
The traditional money laundering process is comprised of three basic steps:
1.- Placement: the illicit funds (mainly in form of cash) must be introduced into the financial system through official and stablished institutions (banks or other related agents) This step is the riskiest one since it implies a direct management of dirty cash. It´s a constant headache for professional money launderers since you can´t go (supposedly) to a bank with $250,000 and hand them to the teller. There is a wide variety of strategies and methods used by money launderers to trick serious financial institutions and use them to introduce dirty cash into the financial system.
2.- Layering: the illicit funds already introduced in the financial system (and placed into one or several bank accounts, for example) must be constantly moved all around in order to create a paper trail and disguise any kind of trail that might be tracked. This step is available for professional or experienced money launderers since it means to open several accounts, introduce the money into several businesses or make it travel all around the globe going through several jurisdictions in order to minimize the probability of detection.
3.- Integration: this last step comprises the return of the once illicit and dirty cash into the hands of its owner safe and clean.
Real life example: the Tambovskaya gang from Saint Petersburg obtains a racket payment of $500,000 from a businessman under extortion. The $500,000 in cash is divided into 50 parts of $10,000 each and handed to 50 associates who will introduce each $10,000 into a personal bank account (this method is known as smurfing and reflects the placement step) After the 50 $10,000 cash deposits have been done each of the 50 associates will redirect the $500,000 to the same account at a bank in Cyprus. From Cyprus the $500,000 will be divided into 2 parts of $250,000 each. One of the parts will be transferred to another bank account in Israel. From there the $250,000 will be used to buy gold in Ras al-Khaimah in the United Arab Emirates. The gold will then be sold at a discount rate to a South African company (loosing let´s say $30,000 in the process) and the profits will be used to buy a yacht in Malta which will be re-sold for $200,000. The other initial $250,000 will be transferred to a Hong Kong bank which through its private banking division will buy a shelf company in Delaware managed by a nominal director living in New Zealand that will use the $250,000 to buy a real estate property in Marbella, Spain. The constant movements of the 2 $250,000 quantities are part of the layering process while the purchase and sale of the Maltese yacht and the acquisition of the real estate at Marbella are form of integration. In the end the $500,000 aren´t $500,000 since the most probable thing when laundering huge amounts of money is that you loose a certain percent of it, but a Russian Tambovskaya boss will have $200,000 in pure legitimate cash to buy coke from the N´drangheta or heroin from the Turkish maffiya and a big house at the shores of southern Spain where he can hide or spare time.
The complexity of money laundering schemes varies from child-like to international conspiracies involving dozens of people and hundreds of corporations, but the indicatable fact is that money laundering schemes are set up for two reasons: firstly because the ownership of the dirty cash must be hidden and second because most of the times financial institutions must be deceived in order to put dirty money inside them.

NEVERTHELESS, there are times when financial institutions are part of the conspiracy. They consciously take part in the laundering of dirty money, knowing or suspecting its origins and removing any kind of obstacle to the reception of these funds. When this happens, banks become part of the crime and partners of the organizations obtaining the money. By action or omission, they facilitate the flow of drugs, dollars, yens, diamonds, gold, human lives and any kind of asset that can result in the obtention of profit.
Most of the times criminals are caught: el Chapo in Mexico, Salvatore Riina or Bernardo Provenzano in Sicily, Escobar in Colombia, Gotti in the US or Savimbi in Angola. Nevertheless, the people that had been laundering hundreds of millions for these criminals do not follow them in the havoc. They subsist, hidden behind their carpeted offices in Zurich, the Cayman Islands, Panama, Belice, London or New York. They walk free through the streets, eat in restaurants and return home at night knowing that without them the monsters behind bars and those still free wouldn´t have been able to find the key to transform human suffering into money. In my opinion these fine people are even worse that those generating the blood money. This is the story and methods of some of them.
When criminals find a bank that is able to remove its barriers, making no questions and turning a blind eye into the assets that dubious clients bring with them they´re able to remove on of the two main obstacles to money launderers: the Anti Money Laundering  system every financial institution must erect by law. What I´ll try to do in this report is to analyze how three big financial institutions intentionally relaxed, dismantled and destroyed the system that prevents money laundering. Dirty money is like sand kept inside a closed hand, when it finds a little hole it starts flowing through, first in little quantities and ultimately in such a great amount that it disappears into thin air. The same logic can be applied here. Nevertheless, the sand here would be blood.

THE HSBC CASE:
When the British conquered the northeast of India during the first half of the XVIIIth century they discovered that local population was involved in the manufacturing and trading of opium derived from poppy cultivation. The practice wasn´t and Indian exclusivity. Other regions of the far east were also involved in this kind of trade, among them China, were the opium was used for both recreational and medical use. Quite soon the British started importing huge amounts of opium to China for several reasons: poppies grew everywhere and were a resistant crop, the refining process was simple and cheap, the dependency originated by opium was so strong that it created a massive and constantly growing legion of adepts and opium, as any other drug, enables an astonishing profitability. Very soon millions of Chinese peasants fell under the opium slavery and created a huge army of hopeless people, all of them tied to the consumption of the British product arriving from the poppy fields of Bengala or Pakistan. The debacle among the Chinese population was so big that the Chinese Government banned the opium trade in 1829. From there the chain of events evolved very quickly in a way that resembles the perfect imperialist British way of life. After the Chinese Government started the seizures of tens of thousands of tons of opium when it realized the European entrepreneurs wouldn´t stop the trade, the British Government (led by the amorphous creature known as Queen Victoria) sent an expeditionary force which re imposed the opium trade through two extremely violent wars: the Opium Wars of 1839-1842 and 1856-1860.
After the second Opium War the British entrepreneurs were free to import as much opium as they wanted without any opposition from the Chinese Government who gave Hong Kong to the British Empire as war reparation. Everything was ready (opium as the golden asset, British, French and European entrepreneurs as clients and Hong Kong as the operating base) for the foundation of an institution that would help eastern foreigners to introduce opium through the vast Chinese market, where literally hundreds of millions of people would be considered as potential customers and users of the substance. So, during the spring of 1865, founded with private British capital, the Hong Kong and Shanghai Banking Corporation was founded. A year later, it was officially branded as HSBC.
Since its origins HSBC provided European entrepreneurs with capital to grow, harvest and produce opium in the British colonies and then introduce it in the Chinese mainland. Given the fact that 156 years after its foundation HSBC was caught helping Colombian and Mexican criminal organizations along with the Burmese military junta (maybe the world´s biggest poppy harvesters) to launder literally billions of dollars in drug profits (among them revenues from heroin trafficking) we could say that HSBC´s  corporate behavior and goals haven´t changed too much.
After HSBC reached a deferred prosecution agreement with the US Department of Justice in 2012 agreeing to pay $1,9 billions in fees and reparations (the highest fee imposed to a financial institution for money laundering until now) a certain number of reports analyzing the way HSBC had helped some of the most corrupt, violent, despotic and cruel people in the planet launder their blood money were published. HSBC didn´t help only Mexican and Colombian cartels, it also provided several Governments (among them Gadhafi’s regime, the Burmese military Government, Iran or Sudan) with a gateway to avoid sanctions imposed not only by the US, but also by international institutions for serious human rights abuses. Nevertheless, what I´ll do in this part of the report is to analyze only the methods and structures used by HSBC corporations based in Mexico (HSBC Mexico) and the USA (HSBC USA) to launder dirty money.
HSBC´s structure by the 2000´s:
Before start analyzing the techniques and cases used by HSBC to launder blood money, we should discuss a little bit the structure of HSBC in the 2000´s, when these episodes took place. As any modern corporate structure HSBC is not a single institution. Although the reasons are very boring and lengthy to explain nowadays big corporations involved in multidisciplinary and international activities constitutes themselves as holdings. The holding corporate structure is nothing new, it was born a long time ago to offer big groups a structure through which a main company called matrix controls several other corporations which in turn control other corporations which control other corporations, etc. If you want to understand it immediately imagine the physical concept of a fractal: imagine a banana cluster, from each banana a new cluster starts, and so on. The reasons for such a structure are multiple. The holding structure enables to benefit from loopholes in national law systems so corporations maximize their taxes (or end up paying no tax at all), permitting at the same time to conduct different kinds of activities and reducing administrative and bureaucracy obstacles.
By the 2000´s HSBC had this structure:
As you may recall the matrix of the HSBC Group was (and still is) HSBC Holdings plc., a British company controlling the torso of the financial hydra.
The only part we should analyze are the two HSBC branches involved in the laundering of Mexican and Colombian cartels. HSBC USA and HSBC Mexico. As part of internalization long-term strategies most of financial institutions started during the 1970´s and 1980´s to expand abroad. By 2000 HSBC had started acquiring multiple subsidiaries in every single continent. Latin America wasn´t an exception. A subsidiary called HSBC Latin America Holdings owned several subsidiaries all across Latin America. Among them was HSBC Mexico Sociedad Anonima. HSBC bought HSBC Mexico´s predecessor in August 2002. The bank HSBC acquired was called Grupo Financiero Bital/Banco Bital, the fifth largest Mexican financial institution. It had been founded by several Mexican extremely wealthy families which perceived $1,140 millions for the transaction. At the time of Bital´s purchase it was an institution highly involved in the management of hot-money and highly suspicious activities. When HSBC acquired Banco Bital rebranding it as HSBC Mexico, the firm also acquired a bank which at the time didn´t even have an institutionalized Anti Money Laundering (AML) program, a basic requirement for any bank. Instead of changing this landscape by creating an effective AML policy for its Mexican subsidiary, HSBC let the things go smoothly and gave drug traffickers who had been using Banco Bital since the beginning a direct path into the international financial arena since HSBC capabilities and products where much more developed and internationalized that those previously offered by Banco Bital. Evidence suggests without doubt that the illegal activity inside the institution increased exponentially after the acquisition of Banco Bital by HSBC.
In it´s dirty dealings HSBC Mexico was aided constantly by HSBC Bank USA North America (or HSBC USA), the American subsidiary of the HSBC Group.
The techniques:
When laundering dirty money in high quantities you can rely in a very wide range of techniques or procedures. The first of them must be the introduction of the dirty cash into the financial system, the Placement step we saw earlier. How did HSBC do this?
First of all, we must locate the subsidiary into which the dirty cash was injected. It was HSBC Mexico. In the US you can´t just enter a bank with $250,000 inside a bag and hand them over to the teller. The Bank Secrecy Act imposes the obligation to report to the FinCen any transaction over $10,000 through an administrative form known as Currency Transaction Report (CTR) Nevertheless in Mexico, where the controls were almost non-existent you could do such a thing. According to official documents elaborated by US institutions in the Culiacan branch of HSBC Mexico between 2006 and 2009 (the period during which most of the dirty dealings took place) the several individuals used to show up in the bank offices with card-board boxes filled with dollars which were specially designed to exactly fit into the teller´s hatches. Mexican drug traffickers had been able to eliminate the first barrier to money laundering the introduction of dirty money into the financial system.
Another way Mexican organized crime did this was through traveler checks. Traveler checks are monetary instruments in paper physical format issued by financial institutions which can handle them both to clients or to non-clients after they have deposited some amount of money and pay a fee (from were the bank´s profits come from) After this the check can be transported through the world and cashed in the same bank or even in other institutions on a different location. Since traveler checks can be used to avoid the transportation of bulk currency, they have been labelled by the Financial Action Task Force, the FinCen and several other AML Agencies as high risky assets that must be handled always through proper AML measures. HSBC Mexico of course didn´t handle the checking business properly. When a bank suddenly starts handling thousands of checks not only to clients but to everyone who shows up we can deduct that something is wrong. HSBC Mexico, for example, sold $110 millions in traveler checks between September and December 2004, more than any other HSBC subsidiary in the worldd and 1/3 of the total of traveler checks issued by the Group internationally. This means that during four months thousands of people appeared in HSBC Mexico offices holding dollars, not pesos, and purchased tens of thousands of dollars. The people buying the traveler checks were always the same, acting in little groups. There are some real examples that illustrates how criminals introduced money into HSBC Mexico in order to obtain checks that they later used to buy other assets:
- During 7 months between 2007 and 2008 1,500 traveler checks were bought by a group of people for a total value of $900,000 in the same office of HSBC Mexico. The checks were later used to buy several cars in auctions held at the United States.
- On four different occasions during a period of 16 days in 2008 a great amount of traveler checks were bought at the same HSBC Mexico office. Each time the people operating the scheme bought between $20,000/$30,000 in checks. In the end they bought $109,000 in traveler checks. All the checks were signed by different people who stamped the same illegible sign and were made payable for a toy business in Mexico City. 10 months later all the checks were either cashed or deposited into a bank account by the toy business.
- On 9 separate occasions a total of 188 traveler checks for between $500 and $1,000 each were bought from an American Bank. They totaled $110,000. Between April and June 2010, the 188 checks were cashed at the same HSBC Mexico office by different people who used the same unreadable sign to disguise the entity of the collector.
As we can see the scheme was very simple: exchange dollars for checks that were much safer and easier to carry which would later be used to purchase assets or to pay other parties. The amount of traveler checks, the fact that it was the same people who constantly purchased the checks and the fact that the clients handled dollars, not pesos, should have activated the alarms at HSBC Mexico, nevertheless nothing happened.
Internal reports and e-mails between high-ranking individuals at HSBC indicate that the amount of traveler checks issued started to create some sort of concern because by January 1, 2009 HSBC Mexico stated as a formal policy that their offices would only accept cash dollars from pre-existing clients and would not issue more dollar traveler checks for non-clients.
For a bank such as the HSBC it´s impossible that such an increase on the traveler checks business is not discovered by the AML Compliance divisions. This means that either the people at charge of HSBC Mexico modified the books in order to disguise the numbers or that high-ranking individuals at HSBC Group knew what was happening and directly closed their eyes. In my opinion the fact that the techniques were much more sophisticated in other occasions (as we´re going to see) indicates that the second possibility is true.



Maybe the most interesting tool used by HSBC Mexico were the correspondent dollar accounts the bank had at the American affiliate, HSBC USA. But before analyzing the issue we must talk a about this type of financial product which is any money launderer wet dream.
Imagine we are non-American bank, let´s say from South Africa. Our national currency is the Rand (which equals 0,055 USD) Imagine we want to invest in the United States, manage US currency for international wire transfers or that we want to provide financial services to several South African clients living in the US. One way of doing so would be to request a banking license from the US authorities. If the license is granted, we must open several branches which would require to rent facilities, buy American softwares, hire and train personnel, etc. In summary, this process would be extremely expensive. Nevertheless, there is another option by which we can offer services in America and manage its currency without even opening a little office there: through a correspondent account in a US bank.
The concept of a correspondent account is simple: the South African bank pays a fee to an American bank which will provide the latter with an account on which the South African bank will deposit Rands that have been converted into dollars. Thus, the South African institution will be able to send dollars to one of its clients who wants to pay for a factory in Argentina using the American currency. As you may have recalled this kind of financial product isn´t dirty per se. It´s extremely useful for international banks and can be used for multiple legitimate purposes, but it also represents a very easy entry point to the US financial system for anyone able to convince an American Bank of opening a correspondent account on his behalf.



HSBC Mexico personnel not only provided US dollar correspondent accounts to traffickers but also did so using the offshore jurisdiction of the Cayman Islands, a financial sink used not only by international commercial banks as a platform for subprime mortgages securitization (the practice that led to the 2007 crisis) but also by international drug traffickers, scammers and tax avoiders because of the products offered by this supposedly independent country which in fact is a UK´s proxy in the middle of the Caribbean.
Most of the people or corporations that engage in businesses at offshore jurisdictions do so for two main reasons: first because these countries don not tax (or apply extremely low tax) the benefits imported or generated by foreign businesses locally. Second, because these jurisdictions practice bank and t ax secrecy which makes almost impossible to third States to obtain any kind of information about the businesses conducted by their nationals/corporations in such places.
In this case HSBC Mexico inherited a laundering method created and performed at first instance by Banco Bital, its predecessor. At some point in time during the 80´s or 90´s the amount of US currency gathered by Mexican traffickers became so high that they had to rely on the US financial system to repatriate and invest the money. To stash hundreds of millions in US bank notes in Mexico wasn´t worth it. The money could be sized or stolen by the authorities, it could be lost or damaged (as happened to Escobar´s large US banknotes reserves stashed in plastic bags and barrels through the Colombian countryside) Banco Bital came to the rescue with a solution: why not to introduce the dirty US banknotes into the financial system instead of storing the cash directly in Mexico?
The Mexican law doesn´t allow Mexican citizens to maintain US dollar denominated deposit bank accounts in Mexico unless they were residents of bordering States (Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon and Tamaulipas) or corporations. Thus, drug traffickers and corrupted public officials obtaining dollars from their unlawful activities had to convert the dollars into pesos locally or send the money abroad using international money laundering structures
managed by professionals which increased the risk of forfeiture by tax authorities. These people resorted to Banco Bital who designed the following structure to avoid the obstacle imposed to Mexican citizens by the Mexican tax law. Banco Bital obtained a banking license from the Caymanian authorities to stablish an affiliated shell bank which was nothing more than a license plate hanging in a law firm wall. The Caymanian shell bank was directly operated by Bital personnel in Mexico. They opened correspondent accounts on the behalf of the shell bank into several US banks. Thus, although the dollar correspondent accounts were supposedly managed from outside Mexico, they weren´t. Since the shell bank was nothing mire than a shell corporation operated from Mexico, the Mexican bank directly managed dollars on the behalf of its clients circumventing the Mexican law. This scheme can be highly questionable for its moral dubiousness, but according to the US, Caymanian and Mexican law was perfectly legal.
When HSBC took control of Banco Bital in 2002 it rebranded the Cayman subsidiary as HSBC Cayman and not only continued with the scheme but expanded it by stablishing correspondent accounts for HSBC Cayman at its American subsidiary HSBC USA. By 2008, assets held in the HSBC Cayman correspondent accounts at HSBC USA totaled $2,1 billion USD. According to internal reports of the institution, 15% of the Caymanian correspondent accounts didn´t went through KYC policy, which meant that the HSBC Mexico didn´t even know who its clients were or who had access to HSBC USA accounts through the Cayman subsidiary. The exact number of Caymanian correspondent accounts held at HSBC Cayman is unknown although a 2006 internal audit revealed that in 2005 there were 1,500 dollar-denominated accounts in HSBC Cayman. By September 2008 the amount had increased to 60,000 accounts holding $2,1 billion USD for nearly 50,000 clients. By this time the American authorities (among them the Fed and the FinCen) had spotted several suspicious transactions between HSBC Mexico and its American partner HSBC USA. HSBC Mexico personnel started applying toughr customer due diligence protocols (mainly KYC policy by enforcing the disclosure of the identity of the Caymanian correspondent accounts real owners) Only in 2009 9,000 of such accounts were closed at HSBC Cayman.
The evidence that this system was used by Mexican organized crime became obvious when on July 2008 it was discovered by American authorities that several Caymanian correspondent accounts at HSBC USA had been used to transfer funds to an American company in Miami, Cabello Air Freight Inc, which used the money to buy second hand light planes that were later used to smuggle cocaine through the Mexican border.



HSBC and Casas de Cambio/Money Exchange:
The direct deposit of high amounts of cash was nevertheless only a tiny fraction within the vast Placement scheme designed by HSBC Mexico because the second and by far most effective method used by the financial holding to accept dirty money and at the same time deny their involvement was the provision of financial of services to Casas de Cambio (money exchange businesses). The Casas de Cambio or CDCs, as they´re known in the AML sphere, are very common and useful in Latin America. Most Latin-American countries have experienced large migrations undertook by their local populations. For example, millions of Mexican, Guatemalans, Hondurans and Central Americans have migrated to the US in search of better and safer living conditions. During the late 1990´s and early 2000´s a large number of citizens from Ecuador, Colombia, Bolivia and Peru left their countries and stablished in Spain. In conclusion, after several decades of massive immigrational waves there are a high number of Latin-Americans outside their countries. Of course, a large part of the revenues this people earn in their new locations (where the salaries are higher and paid in stable currencies) is repatriated to their home countries where it is handled to their families. This repatriation of funds is known in Spanish as Remesas (Remittances) and for some poor Latin-American countries do mean an important part of their GDPs. Mexico isn´t an exception, of course. According to a Current Population Survey conducted by the US Government in 2018 there are 36,5 million people of Mexican origin living in the States. A large fraction of these individuals send part of the money they earn back to their families in Mexico (according to official data in 2017 the Remesas sent from within the US totaled nearly $150 billions) and in doing so they use the Casas de Cambio that offer wiring services charging a little fee to the total amount being sent through Money Orders. In sum, the Casas de Cambio are cash intensive businesses which managed most of their assets in cash that is later sent to Mexico and other Latin-American countries. Because of this Criminal Organizations operating in the US and Mexico use Casas de Cambio located both in the US and Mexico to send money abroad concealing the transfers as Remesas being sent by hard working Mexican immigrants working in the US. Since the popularization of the CDCs during the second half of the XXth century they´ve been spotted by AML compliance bodies as high risk businesses specially attractive for organized crime which by the use of multiple and diverse deposits through the smurfing method can in fact deposit and send high amounts of money abroad without using even the banking industry directly.
Nevertheless, the CDCs do maintain business relationships with financial institutions. A CDC operates by compensation mechanism. If a CDC has branch A in the US and branch B in Mexico the CDC must held bank accounts at a Mexican and at an American bank and if both entities belong to the same group things are much simpler. Mexican migrants will deposit dollars in branch A which will charge a commission and deposit the money in its account at the American bank. The Money Order issued by branch A will be received in Mexico by branch B who will handle the dollars sent by the migrant but in local currency (pesos) that had been previously deposited in branch B account at the Mexican bank. In the end branch B accounts is emptied and branch A account is filled with dollars. The branches will later split the reserves and the benefits obtained by the charging of the fee to the migrant. Although this might seem complicated it is not and the CDC bank accounts are extremely profitable for banks since they obtain profits by the application of a fee to the quantities deposited in the accounts. Since CDCs usually manage high amounts of cash those bank accounts always present a highly positive balance which is translated into high commission fees for the banks offering their accounts to the CDCs.
In their business with several Mexican and US CDCs, HSBC deliberately lowered its AML compliance protocols in order to enable the management of large volumes of cash by CDCs through their dollar bank accounts at HSBC USA. For example, HSBC was caught allowing a Money Remittance Service called Sigue Corporation to funnel millions of dollars from Mexican cartels operating in the States from the US to Mexico through bank accounts held at the financial institution. Sigue Corporation was constituted in Delaware in 1995 and based in California as a US Licensed Money Service Business. The main objective of Sigue Corporation was to send money remittances in US dollars from USA to Latin America. Sigue Corporation managed its locales through an operating company called Sigue LLC which was the one sending the dollars directly through more than 7,500 authorized delegates or agents in the US the majority of which were little businesses (corner stores mainly) which had agreed with Sigue Corporation to use the technology and infrastructure they provided to send remittances to Mexico for a percentage of the total of dollars wired. These kind of Money Remittance businesses don´t operate directly but use a decentralized network of partners or agents which using their brand and technology wire the money abroad. Because the revenues for these agents are not fixed and depend on the amount of money the accept and send abroad, they are tempted to lower the already weak AML procedures of the Money Remittance service to obtain a higher percentage. These was what happened with some of Sigue Corp. agents. On January 28 2008 Sigue Corporation signed a deferred prosecution agreement with the US Department of Justice, the Drug Enforcement Administration and the Internal Revenue Service by which they admitted culpability for failing in monitoring and running an efficient AML system. Sigue Corporation explicitly admitted that between 2003 and 2005 it had violated the Bank Secrecy Act systematically and managed more than $24,700,000 in suspicious transaction. This was only possible to know after 59 undercover agents operating in 22 different States sent $500,000 through Sigue Corporation Agents after stating explicitly that they were sending drug money and that they did so because of Sigue´s weak AML protocol. Sigue´s Agents, instead of rejecting the agents posing as drug dealers, instructed them to divide the quantities they wanted to wire in several wires in order to diversify the deposits and to avoid the BSA notification requirements for transactions over $10,000.
After these facts were made public HSBC USA discovered that Sigue Corporation was a client of HSBC Mexico. HSBC USA also discovered that after hearing about this case some employees at HSBC Mexico had suggested to terminate the business relationship with Sigue, but the Commercal Division had suggested to continue the relationship on the basis that the episode had taken place 2 year ago and Sigue had implemented better AML controls.
The business relationship between HSBC Mexico, HSBC USA and Sigue Corporation was complicated and made money laundering efforts far simpler to both parties. Sigue Corporation had opened several bank accounts at HSBC Mexico. These accounts at HSBC Mexico received dollars from HSBC Mexico´s correspondent dollar bank accounts at HSBC USA (as we will see in the second part of this report correspondent accounts are a fundamental tool in order to use foreign and hard currency when a local jurisdiction doesn´t allow the use of foreign currency) Between January and December 2007 HSBC USA channeled 159 wire transfers coming from Sigue Corporation for $485,000,000. It was estimated that a high amount of this money came from narcotics distribution in the US by organized crime affiliated to Mexican distributors.
Another case in which HSBC USA provided a Mexican CDC with a channel through which channel funds to a safe bank account involved the Casa de Cambio Puebla. Puebla was a money exchange business founded in Mexico in the 1980´s and turned out to be one of the biggest laundromats for Mexican cartels because of its business size. On 2004 Puebla opened a dollar bank account at HSBC USA. On February 2005 the account reflected a total cash balance of $15,000,000. By March 2007 the account reflected a cash balance of $113,000,000. The amount of suspicious transactions was such that the already malfunctioning HSBC USA AML Compliance system started generating alerts. Nevertheless, a high-ranking official argued twice that Puebla´s cashflow was increasing so exponentially because it was them, HSBC USA, the one that had provided Puebla with unmatched business opportunities. On a third occasion, when Puebla´s cash volume suddenly raised from $20,000,000 on April 2006 to $76,000,000 on September, the same employee argued that Puebla´s cashflow was increasing because it was being used by Mexican temporary workers to send money back to Mexico.
The relationship between HSBC USA and Casa de Cambio Puebla lasted only three years. On February 2007 Puebla´s bank accounts at Wachovia Bank (one of US biggest banks) were terminated and its funds frozen by the Office of Foreign Assets Control on the charges of funneling millions of dollars on behalf of Mexican cartels. By this time Puebla´s assets held at HSBC USA account had reached $113,000,000 per month. Even though Puebla had been designated as a laundering front on February, HSBC USA didn´t froze Puebla´s assets until 3 months later, on June 30th, demonstrating again how deeply its business relationships with laundering platforms had underwent.
The question we must ask ourselves is how it was possible for HSBC Group to channel extremely high amounts of money through its institutions in the US and Mexico without activating the internal alarms managed by the internal AML Compliance Division? This was possible because HSBC was altering its internal AML protocols and mechanisms in order to obtain lower control patterns that would enable the bank to accept even more money from their clients. In this sense we must explain how this was done. HSBC had a specially designed transaction monitoring program called Customer Account Monitoring Program (CAMP) which filtered the cash inflows and outflows related ordered by its account holders. The CAMP software was designed to activate internal audits through a series of factors, mainly the quantity of the transaction and the location of the client. Another factor used by the CAMP system to generate audits was the level of risk assigned to each client. During this times of malpractice HSBC assigned four different levels of risk to every client depending on his/her country of residence: Standard, Medium, Cautionary and High. The combination of these factors (quantity, risk level and client location) activated alerts that were further analyze by HSBC USA AML Compliance Division. HSBC Group mismanaged its internal Compliance Division deliberately by assigning unskilled personnel and by lowering and tricking the risk factors in order to generate a confusing climate that would facilitate the penetration of dubious origin assets into the bank.
For example, between 2006 and 2009 HSBC USA processed 100 million transaction for a total sum of $300 trillion. 2/3 of these 100 million transactions were originated/came from high risk jurisdictions such as Mexico and Colombia (very known as drug money exporters in the financial sector) which were regarded by the CAMP system only as Standard/Medium risk jurisdictions. By this time HSBC knew that Mexico was a high-risk jurisdiction because the FinCen had already warned it about the risk of doing business and accepting money from Mexican financial institutions. As a result of the lowering of Mexico´s risk label between 2006 and 2009 (when HSBC changed Mexico´s risk level from Standard to High Risk) the CAMP system didn´t monitor 316,000 transaction that totaled $670 billions.
As a direct consequence of these lowering of risk the CAMP system didn´t monitor $200 trillion coming to HSBC Group from multiple jurisdictions between 2006 and 2009. How much of these $200 trillion was money coming from the production and distribution of narcotics? No one will ever be able to provide an exact number, but we can be sure that it was a great part of the total sum.
The deliberate alteration of internal AML detection mechanisms by financial institutions in order to enable more money to enter into their vaults wasn´t performed only by HSBC. Two years ago, on 2018, the Dutch financial giant ING was fined with $835 million by the Dutch authorities for forging their AML Compliance mechanisms by the same methods used by HSBC. Wachovia Bank, as we´ll see, also did a very similar thing in order to avoid implementing the AML mechanisms imposed by the Bank Secrecy Act.

HSBC Banknote Business:
Another business in which HSBC was involved facilitating access to the financial system for dirty money was its Banknotes Business. The Banknotes Business consisted on buying or managing high amounts of cash in the from of banknotes for nearly 600 clients worldwide. These clients weren´t only banks and financial institutions but also big size businesses that due to a massive cashflow didn´t have the necessary infrastructure to account and deposit their daily revenues into the banking system. Thus, these businesses would hire the services of HSBC´s Head of Global Banknotes which was based in New York and operated also in Hong Kong and Singapore. These businesses handed their cash money to HSBC that would directly buy it (to sell it later on the FOREX market) or to deposit it into its banking facilities obtaining revenues for the trading, transporting and storage fees applied during the process. These high amounts of cash were later sent abroad and deposited into the currency vaults operated by HSBC Group overseas. Due to its massive international spectrum, HSBC Group was one of the few banks which had signed an Extended Custodial Inventory Program (ECI) with the Federal Reserve Bank of New York. The ECI Program was designed as the culmination of a Fed operation decentralization process. Its objective is to enable private banking institutions to assist the Fed in the international allocation and distribution of new dollar banknotes printed in the US as well as in the repatriation of outdated or damaged dollar banknotes for their safe destruction. The ECI Program also implies a constant flow of information between the banks and the Fed about the international use and location of US currency. In order to facilitate these objectives, the ECI Program allowed the affiliated banks to directly manage the Fed´s currency vaults located outside the US. HSBC Group operated the Federal Reserve Bank of New York currency Vaults in London, Frankfurt and Singapore. The money deposited into the vaults directly by the Fed was reflected in HSBC´s books and was used to satisfy the demand of dollars coming from foreign financial institutions (including HSBC itself since it wasn´t a US-based company)
The international management of Fed´s funds by private institution is extremely useful since it allows a quick and international dollar supply that is not constrained by political aims imposed by the US Government but it also implies a high risk since if this private entities aren´t properly monitored they can be used to provide or receive hard currency (dollars) from foreign institution that derived them from the dealing in illicit assets. In that sense it´s obvious that HSBC Group provided access directly to the US´ financial core for the dirty dollars obtained by Mexican cartels. It´s extremely heartbreaking to discover how US dollar banknotes handed to Mexican cartels by US-based drug distributors ended up deposited in the Fed, an institution which is largely committed to combat money laundering and its use inside US soil by local banks.
Until 2010, 29 HSBC affiliated banks had 80 banknote-backed accounts at HSBC USA including affiliates from high risk jurisdictions such as Angola, Colombia, the Democratic Republic of Congo, Mexico, Haiti, Panama or Paraguay. Nevertheless, HSBC didn´t assign any level of risk to these clients. The volume of transactions in dollars between some of these jurisdictions and HSBC USA through the dollar accounts was incredibly high, specially with HSBC Mexico.
HSBC Mexico was depositing an extremely high amount of dollars into HSBC USA. In fact, the volume was so high that the Mexican Comision Nacional Bancaria y de Valores (National Banking and Securities Commission) met with several high HSBC Mexico executives in 2008 and told them that the Mexican Government had detected massive illicit flowing being deposited in the bank. A second meeting between HSBC Mexico executives, the CNBV and the Mexican Unidad de Inteligencia Financiera (Financial Intelligence Unit) took place in November 2008. The UIF notified HSBC personnel that they had they knew that much of the dollars being cashed in HSBC Mexico were coming from drug trafficking organizations. Although HSBC Mexico was only the country´s fifth largest financial institution, it was repatriating to the US more money than any of the other bigger banks. For example, between January and September 2008 HSBC Mexico repatriated $3 billions USD to US through accounts held at HSBC USA. This represented a 36% of the volume market and doubled the amount repatriated by the biggest Mexican bank, Banamex. After the November meeting HSBC Mexico finally revealed that 80% of the dollars it had accepted came from Casas de Cambio that didn´t apply a maximum threshold to the dollars that clients could change for pesos. In other words, HSBC Mexico was funneling billions of dollars coming from high risk CDC clients with almost no monitoring over the cash movements. On the other hand, Mexican authorities expressed their fears regarding the relationship between HSBC Mexico and HSBC USA since the latter was doing more businesses with HSBC Mexico than with any other financial institution. HSBC USA was buying so much banknotes from several Mexican banks that they couldn´t justify the high volumes of dollar inflows. In order to demonstrate how HSBC USA operated with drug money let´s analyze the cash inflows and outflows between HSBC USA and several of its Mexican clients between November 2006 and February 2007. In just four months, HSBC USA bought $470,000,000 from Banco Mercantil del Norte, selling only $22,000,000. It bought $281,000,000 from BBVA Bancomer (an institution previously involved in a massive money laundering scheme for the Juarez cartel) while selling only $5,000,000. $196,000,000 from the famous Casa de Cambio Puebla and $194,000,000 from Consultoria Internacional without selling not a single dollar to both entities. And finally, $742,000,000 from HSBC Mexico selling only $1,300,000. In other words, HSBC USA was buying high quantities of US money from Mexican banks while selling extremely little amounts of dollars to these same clients.
There are plenty of examples that show other ways of the corporate malpractice played by HSBC Group but they´re not necessary to understand that this entity run a massive international money laundering ring of such a size that the only time when a bank operating such a big laundering scheme was caught was during the 1990´s when the BCCI was shut down by US and British regulators. Nevertheless, HSBC came out quite clean considering that the US Justice Department imposed a record $1,9 billion fine. Its business volume didn´t decrease but skyrocketed transforming HSBC Group into one of the world´s most successful banking corporations.  


THE WACHOVIA CASE:

On March 2010 it was made public that Wachovia Bank (which at the time was being absorbed by Well´s Fargo and Company) had reached a deferred prosecution agreement with the DEA, IRS and Florida Southern District Attorney Office by which it promised to pay a $160,000,000 fine accepting a certain number of statements that demonstrated that Wachovia Bank had aided several drug trafficking organizations to launder money and introduce it in the US. The analysis of the legal documents surrounding the case reflects how Wachovia built massive business relationships with several Mexican Casas de Cambio knowing at the same time that by doing so they were increasing the risk of being used by criminal organizations to launder money massively.
The investigation started on June 2005 when the DEA, IRS and Florida Attorney Office for Southern District began investigating hundreds if wire transfers coming from Mexico into Wachovia. As they quickly discovered the money were being used to buy aircraft that were later used to smuggle cocaine from Latin America into Central America (including Mexico) These funds were being place into the deposit accounts being held by several Mexican CDCs at Wachovia. These accounts were managed and supervised by a Wachovia business unit located in Miami, Florida.
CDCs are not banks. They don´t provide deposit or saving accounts. They don´t extend lines of credit and do not issue cheques or similar products. They only accept money and monetary instruments from their clients and wire them abroad while at the same time they provide money exchange services (dollars for pesos, pesos for dollars, etc) Of course, since CDCs are cash intensive businesses they´re a very appetizing resource for organized crime. In 1996 the DEA began warning about the high risks associated with doing businesses with CDCs. Moreover, in April 2006 the FinCen had warned US banking and financial institutions about the high risk associated to accepting CDCs as costumers by providing them bank accounts.
On July 2005 Wachovia became aware of the high number of US banks terminating their business relationships with Mexican CDCs and planned to monopolize a certain percentage of the market that was being abandoned by other players. Thus, Wachovia started filling the gap left by the rest of the banks. For example, in September 2005 Wachovia bought the right to acquire the international correspondent banking services with CDCs being abandoned by the Union Bank Of California which was distancing itself from such suspicious clients. After purchasing UBOC´s market share Wachovia´s business volume increased exponentially.
Between September 2005 and December 2007 Wachovia provided financial services to 22 different Mexican CDCs (among them the ell-known Casa de Cambio Puebla) Now, what kind of products did Wachovia offer to its clients, to the Mexican CDCs? According to legal documents there were three main products:
1) Wire transfers. Wachovia allowed to Mexican CDCs to send wire transfers on the orders of thirds clients (the clients of the CDCs) through its infrastructure. In other words, an individual in Mexico would enter a CDC with $10,000, deposit them and gave the bank account of a third party located in New Orleans where the money should be deposited at. The CDC would deposit the $10,000 into its bank account at Wachovia and instruct the bank to wire the money to the bank account designated by the initial client. As we can see this kind of service is the dream of any money launderer since Wachovia didn´t even apply any kind of control to the wire transfers done for third parties. Between May 2004 and May 2007 Wachovia processed $337,630,892,102 in wire transfers on behalf its Mexican CDC clients.
2) Bulk cash services. This product was also offered to CDCs by HSBC Group. Cash bulk services are necessary for cash intensive businesses that do not have the necessary logistical infrastructure to count, manage and deposit the funds they obtain at the end of the day. In this sense what Wachovia did was to collect massive amounts of dollars from the CDCs and repatriate it to the US using armored cars and other safe methods such as special train wagons and commercial aircraft. Once in the US the dollars would be deposited into the Fed earning Wachovia a certain fee calculated from the volume of cash managed and the logistics provided to the CDC. Between May 2004 and May 2207 Wachovia processed $4,728,626,300 in bulk cash coming from Mexican CDCs.
3) Pouch Services. This product is a bit complicated since it requires a highly sophisticated network of info constantly flowing between the CDC and the Bank. CDCs do not accept cash only. They also accept alternative monetary instruments such as cheques or traveler cheques. CDCs in Mexico accepted hundreds of traveler cheques, gathered them in packages and introduced them into a pouch that was delivered to Wachovia. Once in the bank the cheques were cleared, which might mean several options. This system was very useful, but it was slow. To package thousands of checks and delivering them to Wachovia took a lot of time to CDC personnel so on May 2005 both parties agreed to implement a new and modern mechanism known as Remote Deposit Control (RDC) Instead of sending every single cheque cashed on Mexican CDCs to Wachovia American branches the CDCs would scan the document and send Wachovia a scanned copy of the cheque. The bank wouldn’t need to analyze thousands of monetary instruments physically but instead it could rely on thousands of computer files containing scanned documents of the cheques which were far easier to handle. Between May 2004 and May 2007 Wachovia processed at least $47 billion dollars in RDC deposits coming from its correspondent banking clients, including CDCs. There´s an even worse fact, between April 1, 2005 and May 31, 2007 Wachovia processed $20,000,000 on sequentially numbered traveler cheques deposited at Mexican CDCs. Most of these cheques didn´t even have a legible name on it identifying the issuer and 64% of the checks contained combination of alphanumeric codes that are used by smurfing networks in order to deposit massively big amounts of cash through multiple little deposits.

Of course, there´s no need to mention that such high-risk products were a magnet for crime money. In fact, there are some real examples of how several wire transfers managed by Wachovia were used to buy aircraft from American intermediaries that would be later seized containing massive amounts of cocaine.
We all know how cocaine is smuggled from the three Latin American countries producing it (Bolivia, Colombia and Peru) to other neighboring countries. From there their shipped abroad mostly by sea and air. The cocaine leaving South America by air does so normally on light aircraft such ass Cessna planes or little jets. The organizations managing these logistics networks buy their assets properly, in the legal market. Although you can buy aircraft on the black market, they are not very useful since they´re reported as stolen or missing. Nevertheless, you can avoid a lot of problems if you buy a plane legally and try to use it for drug smuggling without anyone noticing. In other words, a plane bought in the black market can serve only to illicit purposes while a plane bought legally can be used for both legal and illegal businesses. During the 2000´s a lot of Mexican drug trafficking organizations bought light aircraft from US aircraft brokers, which are intermediaries seeking to gather people willing to sell a plane and people willing to buy it earning a commission for doing so. Nevertheless, since a plane is an extremely expensive asset in order to secure the payment the aircraft broker constitutes what is known as an escrow. The Escrow (known as fideicomiso in the Spanish Civil Law system) is a legal entity that can be used to conceal an asset which is released only when the terms of a certain contract are fulfilled) Imagine I want to buy a Gulfstream jet for $50 million. I contact a broker who knows the used aircraft market and he finds a Ukrainian company looking for selling a Gulfstream for such a price. I can´t directly pay $50 million to the Ukrainians upfront because maybe the won´t deliver the plane. Instead, I conceal the money into the bank account of an Escrow created by the broker who will retain the money after the Ukrainians deliver the plane to me. Only then will the broker transfer the $50 million to the sellers and the Escrow will be dissolved.
This was the system used by Mexican DTOs to buy airplanes in the US. They used several aircraft brokers which would create multiple escrows with bank accounts opened at local banks. The Mexican organization would deposit money into a CDC and instruct it to wire the transfer to the aircraft broker´s escrow account. The CDC instructed Wachovia to make the wire transfer and the bank would transfer the money to the escrow. In the end the cartels found a deregulated financial product offered by a bank (Wachovia) interested on acting with closed eyes in order to obtain more money from commissions.



For example, in a period of 2 days 10 wire transfers were made by Wachovia on behalf of 4 individuals and a business acting through a Mexican CDC. The destination of the wire transfers was an aircraft broker´s escrow account located at the US. All the wire transfers were made in round numbers, an extremely suspicious trait on the Money Laundering industry. None of the individuals had any relationship with the aircraft world and had shown faked IDs at the CDC while the business turned out to be a shell company with no real activity. The plane bought by the aircraft broker with the money being funneled through Wachovia was later seized with 2,000 kgs. of cocaine on board.
On another occasion a Mexican CDC wired 8 transfers through Wachovia on the behalf of 2 individuals into an aircraft broker´s bank account on the same day. 4 of the wire transfers were ordered by the same individual (2 for $49,000 and the other 2 for $51,000, in round numbers) while the other 4 were sent by another individual ($50,000 each) Both of them showed faked IDs at the CDC Just the next day a different CDC wired 10 transfers through Wachovia to the same aircraft broker bank account. The purpose of the wire transfers was of course the purchase of an aircraft, but US authorities disrupted the plot and seized all the funds before the transaction could take place.
We can ask ourselves: is it possible that Wachovia´s internal AML Compliance mechanisms could not detect these massive inflows of dirty money? The obvious answer is no, of course. In the deferred prosecution agreement reached by Wachovia and US institutions, the bank recognized that it had deliberately lowered its Compliance levels in order to allow business to grow. In fact, Wachovia used the very same techniques used by HSBC in order to disrupt its defense system from the inside. One of the strategies to do so was to design a topped AML software. The Topping (sometimes known as Capping) mechanism is very simple, if during a single day the AML software activates a predetermined maximum number of alerts or red flags related to several categories of money laundering signals, the system just stops monitoring these categories of money laundering signals. Thus, after the Wachovia AML detects 5 or 6 transfers with suspicious money laundering traces, the system just stops monitoring the transactions, it stops working. This of course made things even easier for Wachovia since after the initial moments of the day the AML software collapsed, and they had free bar for channeling as much dirty money as they wanted.
It is highly questionable that the multibillion fines imposed to both HSBC and Wachovia made anything for improving financial institution´s respect towards Anti Money Laundering Efforts. There are two official reasons for imposing a fine to a bank for its bad corporate practice. First, the amount of the fines damages the bank´s balance sheet and dissuades the institution from getting involved in further illegal activity in order to avoid higher losses in the form of fines. Second, a fine imposed to a bank makes the institution appear as corrupt, opaque and unreliable by its clients who will transfer their money to other institutions. Nevertheless, if we analyze the HSBC case both assumptions prove wrong. The $1,9 billion fine might seem enormous for us but for HSBC represented only a small fraction (13,5%) of the money earned in 2012 ($14.027 billions) On the other hand HSBC´s reputation not only didn´t decrease but skyrocketed (HSBC stock increased from $41.80 on July 2012 to $56.86 on January 2013)
Despite their promises to the US authorities, HSBC was caught again in 2013 (only a year after) when a HSBC employee called Hervé Falciani leaked several documents which showed that the bank holding company was running a multibillionaire tax evasion scheme from their Switzerland subsidiary. The scandal became known as The Falciani List and it still is going on in Europe, were local tax authorities do not prosecute the implicated tax evaders on the grounds that Falciani provided them with evidence illegally obtained. It seems that for a bank being founded in the XIXth century to channel the proceeds of opium distribution to stay away from blood money is not a simple task.

BONUS TRACK:

If you want to rejoice yourselves with HSBC´s hypocrisy just watch this add they filmed to years ago:
https://www.youtube.com/watch?v=QS5ueUqNjzM

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Re: The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

Anon
Good stuff as always.

Anon
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Re: The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

Mosco
In reply to this post by redlogarythm
Re-post: LaundryMan: Thanks  for the detailed document ... I have never really understood how dirty money is cleaned up.... and ends up feeding the vultures at the top.

  I made a printout and will study it closely with my morning coffee.  

FYI: Years ago, mid '90s, my wife and I visited an antique shop in Phoenix, AZ.   We looked around at stuff for at least 1/2 hr and these thin-wioerdo looking store employees never came near us as is common in such places. I got suspicious and casually checked them out more carefully.  These two guys had that kind-of herky-jerky "meth-head" look (long story, how I suspected).  Bottom line,  I think this antique store "might" have been a money laundry.  What do yo think?
Mosco
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Re: The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

DopelessHopeFiend
In reply to this post by redlogarythm
Well done yet again. Thank you for your time, dedication, and contributions!
Optimistic pessimist
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Re: The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

Mosco
This post was updated on .
Laundrymen:  Well, as I promised, I finally finished reading your paper on money laundering.  It is a mind blowing expose'.  1n the 1980 to 2003, I lived in a large metro area with a huge community of Latinos (mostly Mexican-Americans and legal and illegal Mexicans.)

  The cities and towns for 100 miles around also have significant Latino populations.  The core city has a robust police department.  However, the surrounding towns have relatively weak ones.  This is important.

Both the core city and the satellite towns around it had many thriving "Casas de Cambio" and "Western Union" outlets. I did not know these places were parts of the huge narco-money laundering fronts.  

In addition, the whole metro area had many "Mexican":bars, restaurants, used auto-dealerships, jewelry stores, food markets, landscaping businesses, roofing ops, used items store, meat markets, bakeries, etc, etc.  Looking back, I now suspect that some of these businesses are probably directly or indirectly part of the money laundering network.  If I am overly suspicious, please enlighten me. 

Anyways, thanks for posting your paper,  It is a valuable contribution to BB and I hope other readers jump in with stories of their experiences with money laundering operations.
Mosco  





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Re: The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

redlogarythm
Thank you guys for your opinions and comments.

Mosco, thank you also for your interest. Look, I´m not saying that high concentrations of latino/Mexican American population equals money laundering. In fact, if you realise, money exchanges are only a tiny fraction of the whole laundering system. Most of the dirty money entering into the US does so through formal banking transfers, and the people to blame for this are American bankers (both in the US and at Mexico), not the migrants. Criminal organizations have chosen the Money Exchange system because it´s extremely huge. Most of the money being channeled through money exchanges belongs to hard-working and decent Mexicans (legal or illegal) but cartels have been able to take advantage of these people and their way of repatriating cash back home (which is perfectly legal though) because it minimizes the risk of a transfer being detected.
In my opinion the problem is not the people using this money exchange services but the money exchanges themselves. This problem of money laundering through alternative wiring services doesn´t only affect Casas de Cambio. For example the Mexican corner shop chain Oxxo also offers wiring services in a very similar way as companies such as Sigue Corp. or MoneyGram do. A year ago I heard rumours of Oxxo shops being very deeply involved in the wiring of dirty money. As long as anyone with a big company is able to stablish his own wiring service (and as long as authorities allow this to happen) it´s only a matter of time that from every 1,000 honest workingmen using them to send their money to their families 1 turns out to be a bastard using the same service to send dirty money abroad.
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Re: The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

canadiana
Administrator
When I was last in Mexicali 5 or 6 years ago the above guilty bank is there from the article (Bank of Hong Kong right)?What really stuck me was the sheer numbers of banks.I've never seen so many banks per square inch in my life!There is lots of casa de cambios (money exchanges) as yeah makes sense it's on the border but banks both big and small right away my thoughts went to money laundrying and there was plenty of money to spare there for all these banks to make a profit or if not it's just a front for the laundry machines.
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Re: The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

Mosco
In reply to this post by redlogarythm
redlogarythm wrote
Thank you guys for your opinions and comments.

Mosco, thank you also for your interest. Look, I´m not saying that high concentrations of latino/Mexican American population equals money laundering. In fact, if you realise, money exchanges are only a tiny fraction of the whole laundering system. Most of the dirty money entering into the US does so through formal banking transfers, and the people to blame for this are American bankers (both in the US and at Mexico), not the migrants. Criminal organizations have chosen the Money Exchange system because it´s extremely huge. Most of the money being channeled through money exchanges belongs to hard-working and decent Mexicans (legal or illegal) but cartels have been able to take advantage of these people and their way of repatriating cash back home (which is perfectly legal though) because it minimizes the risk of a transfer being detected.
In my opinion the problem is not the people using this money exchange services but the money exchanges themselves. This problem of money laundering through alternative wiring services doesn´t only affect Casas de Cambio. For example the Mexican corner shop chain Oxxo also offers wiring services in a very similar way as companies such as Sigue Corp. or MoneyGram do. A year ago I heard rumours of Oxxo shops being very deeply involved in the wiring of dirty money. As long as anyone with a big company is able to stablish his own wiring service (and as long as authorities allow this to happen) it´s only a matter of time that from every 1,000 honest workingmen using them to send their money to their families 1 turns out to be a bastard using the same service to send dirty money abroad.
@Redlogarithym: I really appreciate your addendum... it added more meat and clarified some things.   Here is a tidbit I learned from an illegal Mexican (l refuse to call them undocumented ... Long story) who said that it was life threatening to carry cash back to Mexico. He said cash on you person virtually guaranteed you would be robbed either by cops, officials,,or crooks.  So, yeah, I can see where Casas de cambios are essential utilities for immigrants.
Keep posting you thought on this facinating topic.
Mosco

P.S.  Do Las Vegas casinos play any kinds of roles in the narco-cartels' money laundering scemes?  
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Re: The Laundrymen. Analysis of HSBC and Wachovia´s laundering methods, scheme and tactics

redlogarythm
I´m not an expert on gambling-related money laundering, but I think the golden times of the Chicago Outfit controlling big casinos through people like Spilotro and company are gone. It is indisputable that Las Vegas is a place where dirty money is laundered, but it´s just because of the size of the gambling sector in the region. When big sums of money are channeled through the gambling sector it´s only a matter of time that organized crime comes to the scene trying to launder its money. Nevertheless, to launder money in a casino is far from being easy, specially in the big commercial casinos of Las Vegas. I don´t think  Mexican cartels are heavily involved in laundering money at Las Vegas because they have other methods that are easier and less risky, but there are precedents of their presence there. Zhenli Ye Gon, the Chinese-Mexican owning two pharmaceutical companies through which he provided the Sinaloa cartel with ephedrine to make meth, was an avid gambler and was treated as a vip client by several Las Vegas casinos. There´s also operation Casablanca. During the late 1990´s and earlly 2000´s several undercover US agents posing as money drug traffickers convinced several Mexican bankers laundering money for the Juarez Cartel to open a big casino in Las Vegas called Casablanca. It was just a front and a trap for the launderers, but they agreed and tried to contribute to build a Casino in Las Vegas with several millions.
In the end I suppose that local gangs can be found laundering money there because Casinos make it possible to launder little amounts of money during a limited space of time, but don´t think big laundering schemes designed by Mexican DTOs can be found there.

In my opinion other Casinos, such as those run by Native Americans, do have much more probabilities of being higly involved in laundering money, but just beacuse of their lack of regulation.
If you want to know more about the relationship between casinos and cartels I think that Mexico itself offers better examples than Las Vegas. You have Jorge Hank Rhon, the gambling magnate of Tijuana, controlling most of the gambling sector in the northwest (and even in places such as Michoacan) through his Grupo Caliente emporium. It´s a very well known rumour that Rhon and his clan are involved in laundering money for Organized Crime but no one has ever been able to prove it. Then you have Ciudad Juarez, a place that is sinking economically but where you can find 20 casinos operating normally in the middle of a savage war between DTOs.