Breaking the Curse of Forgotten Places: Reflections from the Comunitario Movement in Michoácan, Mexico

Comunitario at barricade in Michoacan, Mexico“The first successful strategy for community based self-defense against the Knights Templar cartel in Michoacán came about on April 15th, 2011 in the indigenous Purépecha community of Cherán, Michoacán. The implications of the success of this original uprising against the Knights Templar and the narco-government are immeasurable; however, what is evident today is that the strategy has spread contagiously throughout the state and has now even inspired non-indigenous mestizo communities to replicate it. Since February of 2013 a variety of communities, both indigenous and mestizo, have risen up in arms, evicted municipal police from their municipalities, have evicted the Knights Templar cartel from their territories, and have begun to engage in self-governing strategies founded upon a consensus-based general assembly model. Most non-indigenous mestizo communities in the state of Michoacán have been known to be racist towards indigenous peoples and communities of the state. To now see these mestizo communities exercise indigenous strategies for community liberation is truly historic and ground breaking. […] “

Read full article at El Enemigo Común.

Prying native people away from their lands: how narco-traffickers assist with corporate land/resource grabs in Honduras

“[…] Honduras is now infamous for its staggering rates of drug-related violence, but links between drug trafficking and Lobo’s resource-grabbing agenda are rarely made. In fact—especially in La Mosquitia—it is narco-traffickers who act as shock troops in the assault on native homelands, ruthlessly dispossessing residents and rapaciously converting forest commons to private pasture primed for sale. And traffickers simply do not care who owns what. If they want it, it’s theirs. Many observers consider most of the Mosquitia—including the newly titled areas—to be effectively controlled by drug-trafficking organizations (DTOs). But the narcos are not in the land-grabbing business for themselves alone; in the Mosquitia region, they represent the thin end of the corporate wedge prying native peoples from native lands. […]

A landing strip used by drug traffickers near a native community in Honduras, 2011. Photo by K. McSweeney.
A landing strip used by traffickers near a native community, 2011 (Photo by K. McSweeney)

Cocaine has been smuggled along the Mosquitia’s remote coastline since the 1970s. But the region’s trafficking importance grew after 2006, when Mexican DTOs shifted their operations southward after anti-drug crackdowns at home. Then, in 2009, the Honduran coup was followed by a brief suspension of U.S. military aid, temporary withdrawal of U.S. Drug Enforcement Agency (DEA) agents, and a political vacuum within the country. DTOs pounced on the opportunity to further entrench themselves in Honduras. Cocaine flows through eastern Honduras subsequently skyrocketed. By 2012, it was estimated that 86% of drug flights from South America landed first in the Mosquitia.

Traffickers are drawn to the Mosquitia for its strategic location and convenient isolation. Cocaine shipments (by sea and air) are sent to airstrips cleared from interior savannas and forests near indigenous communities. The DEA and Honduran military monitor these “cocaine movements” from three new forward-operating bases. But they rarely reach the ever-shifting landing sites in time to intercept drug shipments, which are quickly transferred to dugout canoes, boats, or 4x4s for transit to inland redistribution hubs.

The flow of drugs leads to land dispossession because traffickers have to secure and control these transit zones, to launder their vast illicit profits, and to legitimize their presence under the guise of frontier cattle ranching. Buying up land accomplishes all three. Where there are pre-existing land titles, local bureaucrats are bribed to falsify title deeds and manipulate tax payments in order to separate long-time residents from their ancestral lands. Traffickers also saturate regional and state bureaucracies with payments to ensure impunity for their illegal land purchases. Those who dare to speak out about the process face death threats and violence. Once-crusading indigenous leaders have been silenced. When they petition state prosecutors for protection or help, their claims are lost or permanently postponed.

If the land is not already in pasture, traffickers pay local residents to clear the very forests they have long used and defended. This “improvement” greatly enhances the land’s value in the Honduran market. Narcos can then profit from the speculative land market that they create. In the Río Plátano Biosphere Reserve, for example, we saw the narco land rush drive land values up by 300% between 2002 and 2010. In some areas, locals report that the low-level traffickers who are buying and clearing these lands are selling to, or are contracted by, foreign narcos (from Mexico, Spain, Colombia, the United States) keen to invest in the Honduran land market. It seems quite possible, then, that the narco-driven enclosure of the Mosquitia is at least partly coordinated and/or financed by external DTOs. If so, this exemplifies a pattern of DTO diversification into rural economies (especially through agribusiness and mining) seen in Mexico and elsewhere.

In the Mosquitia, the result is widespread dispossession, impoverishment, and ecological devastation. Entire communities have scattered; families that stay often survive as hired hands for rancher-traffickers (narcoganaderos). Residents speak under their breath about the climate of fear. As one Tawahka man told us, “There’s too much money, too many weapons—people are scared, I mean, to open their mouths. They’ve killed people!” A Miskitu resident put it simply: “We are afraid of them because they carry guns and threaten to kill us. There is no one here to stop them.”

Satellite imagery attests to this dispossession. The Mosquitia has long been an agricultural frontier, where settlers have chipped away at forest along the region’s western and southern edge. But since trafficking intensified after 2006, pasture clearing has accelerated sharply. Time-series satellite images reveal how the biodiverse patchworks of field, fallow, and forest—characteristic of native landscapes—are giving way to a narco-scape marked by massive, hastily cleared pastures proliferating cancer-like in the heart of indigenous homelands.

If destroying indigenous lives, lands, and livelihoods were not enough, narco-trafficking also intensifies social inequalities within native communities. The very few native families who are complicit in drug trafficking have grown conspicuously wealthy, with lavish homes and consumer luxuries (flat screen TVs, generators, motorboats). Many act as brokers for their own community’s land—consolidating their neighbors’ smallholdings on behalf of narcos further up the chain. As they are enriched at the expense of their neighbors, the governance norms on which indigenous political solidarity is built are profoundly undermined. One villager told us: “the community has disintegrated…everybody fled…All of this conflict is related to the conflicts over land…[Narcos] want to create conflict and division within the communities to continue amassing lands in our area.”

In short: narcos are paving the way for corporate investment in the Mosquitia. In many ways, the Lobo administration could not have engineered a more effective process for quickly and quietly converting biodiverse indigenous commons into ecologically simplified private holdings “open for business.” Narco-trafficking has, after all, been astonishingly efficient at weakening once-powerful indigenous political coalitions, silencing once-outspoken indigenous leaders, and creating a climate of fear in which land is grabbed with impunity. Already, narco-led forest-to-pasture conversion has created a booming (if entirely illegal) land market, attracting outside (criminal) investors. Further, the presence of traffickers justifies militarized intervention in the region. According to many natives, the military presence is used as much to “secure” elite interests in indigenous lands as it is to deter traffickers. The predictable result is an intensification of violence overall: indigenous residents are now killed and intimidated by both narcos and anti-narcotics forces. […]

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Read the full article at: http://nacla.org/news/2014/2/4/prying-native-people-native-lands-narco-business-honduras

U.S. troops protecting the opium/heroin industry in Afghanistan

‘[…] Throughout the forty years of the Cold War, the CIA joined with urban gangsters and rural warlords, many of them major drug dealers, to mount covert operations against communists around the globe. In one of history’s accidents, the Iron Curtain fell along the border of the Asian opium zone, which stretches across 5,000 miles of mountains from Turkey to Thailand. In Burma during the 1950s, in Laos during the 1970s, and in Afghanistan during the 1980s, the CIA allied with highland warlords to mobilize tribal armies against the Soviet Union and China.

U.S. soldier defending Afghan opium poppy fields.In each of these covert wars, Agency assets-local informants-used their alliance with the CIA to become major drug lords, expanding local opium production and shipping heroin to international markets, the United States included. Instead of stopping this drug dealing, the Agency tolerated it and, when necessary, blocked investigations. Since ruthless drug lords made effective anti-communist allies and opium amplified their power, CIA agents mounting delicate operations on their own, half a world from home, had no reason to complain. For the drug lords, it was an ideal arrangement. The CIA’s major covert operations-often lasting a decade-provided them with de facto immunity within enforcement-free zones.

In Laos in the 1960s, the CIA battled local communists with a secret army of 30,000 Hmong-a tough highland tribe whose only cash crop was opium. A handful of CIA agents relied on tribal leaders to provide troops and Lao generals to protect their cover. When Hmong officers loaded opium on the ClA’s proprietary carrier Air America, the Agency did nothing. And when the Lao army’s commander, General Ouane Rattikone, opened what was probably the world’s largest heroin laboratory, the Agency again failed to act.

“The past involvement of many of these officers in drugs is well known,” the ClA’s Inspector General said in a still-classified 1972 report, “yet their goodwill . . . considerably facilitates the military activities of Agency-supported irregulars.”

US Marines patrolling opium poppy fields in Helmand Province, Afghanistan
U.S. Marine Corps Lance Cpl. Antonio Wilccoxen, an M249 Squad Automatic Weapon gunner, and fellow U.S. Marines with 1st Platoon, Company I, Battalion Landing Team 3/8, Regimental Combat Team 8, walk through a poppy field during a security patrol from their patrol base in Helmand province’s Green Zone, west of the Nar-e Saraj canal, March 31(For more photos of U.S. troops in Afghan poppy fields see here and here)

Indeed, the CIA had a detailed know ledge of drug trafficking in the Golden Triangle-that remote, rugged corner of Southeast Asia where Burma, Thailand, and Laos converge. In June 1971, The New York Times published extracts from an other CIA report identifying twenty-one opium refineries in the Golden Triangle and stating that the “most important are located in the areas around Tachilek, Burma; Ban Houei Sai and Nam Keung in Laos; and Mae Salong in Thailand.” Three of these areas were controlled by CIA allies: Nam Keung by the chief of CIA mercenaries for northwestern Laos; Ban Houei Sai by the commander of the Royal Lao Army; and Mae Salong by the Nationalist Chinese forces who had fought for the Agency in Burma. The CIA stated that the Ban Houei Sai laboratory, which was owned by General Ouane, was ‘ believed capable of processing 100 kilos of raw opium per day,” or 3.6 tons of heroin a year-a vast output considering the total yearly U.S. consumption of heroin was then less than ten tons.

By 1971, 34 percent of all U.S. soldiers in South Vietnam were heroin addicts, according to a White House survey. There were more American heroin addicts in South Vietnam than in the entire United States-largely supplied from heroin laboratories operated by CIA allies, though the White House failed to acknowledge that unpleasant fact. Since there was no indigenous local market, Asian drug lords started shipping Golden Triangle heroin not consumed by the GIs to the United States, where it soon won a significant share of the illicit market. […]

Within a few years, the currents of global geopolitics then shifted in ways that pushed the CIA into new alliances with drug traffickers. In 1979, the Soviets invaded Afghanistan and the Sandinista revolution seized Nicaragua, prompting two CIA covert operations with some revealing similarities. During the 1980s, while the Soviets occupied Afghanistan, the CIA, working through Pakistan’s Inter-Service Intelligence, spent some $2 billion to support the Afghan resistance. When the operation started in 1979, this region grew opium only for regional markets and produced no heroin. Within two years, however, the Pakistan-Afghanistan borderlands became the world’s top heroin producer, supplying 60 percent of U.S. demand. In Pakistan, the heroin-addict population went from near zero in 1979 to 5,000 in 1981 and to 1.2 million by 1985-a much steeper rise than in any other nation.

“Opium poppy cultivation in Afghanistan reached a sobering record high in 2013. According to the 2013 Afghanistan Opium Survey, cultivation amounted to some 209,000 hectares, outstripping the earlier record in 2007 of 193,000 hectares, and representing a 36 per cent increase over 2012. […]“

UNODC Afghanistan Opium Survey 2013

CIA assets again controlled this heroin trade. As the Mujaheddin guerrillas seized territory inside Afghanistan, they ordered peasants to plant opium as a revolutionary tax. Across the border in Pakistan, Afghan leaders and local syndicates under the protection of Pakistan Intelligence operated hundreds of heroin laboratories. During this decade of wide-open drug-dealing, the U.S. Drug Enforcement Agency in Islamabad failed to instigate major seizures or arrests.

In May 1990, as the CIA operation was winding down, The Washington Post published a front-page expose charging that Gulbudin Hekmatar, the ClA’s favored Afghan leader, was a major heroin manufacturer. The Post argued, in a manner similar to the San Jose Mercury News’s later report about the contras, that U.S. officials had refused to investigate charges of heroin dealing by its Afghan allies “because U.S. narcotics policy in Afghanistan has been subordinated to the war against Soviet influence there.”

In 1995, the former CIA director of the Afghan operation, Charles Cogan, admitted the CIA had indeed sacrificed the drug war to fight the Cold War. “Our main mission was to do as much damage as possible to the Soviets. We didn’t really have the resources or the time to devote to an investigation of the drug trade,” he told an Australian television reporter. “I don’t think that we need to apologize for this. Every situation has its fallout…. There was fallout in terms of drugs, yes. But the main objective was accomplished. The Soviets left Afghanistan.”

Again, distance and complexity insulated the CIA from any political fallout. Once the heroin left Pakistan’s laboratories, the Sicilian mafia managed its export to the United States, and a chain of syndicate-controlled pizza parlors distributed the drugs to street gangs in American cities, according to reports by the Drug Enforcement Agency. Most ordinary Americans did not see the links between the ClA’s alliance with Afghan drug lords, the pizza parlors, and the heroin on U.S. streets. […]’

Excerpt from Alfred McCoy, “Drug Fallout” (The Progressive, 1997)

 

See also:

* Opium and the CIA: Can the US Triumph in the Drug-Addicted War in Afghanistan?

* More Photos of U.S. Troops Patrolling Opium Fields in Afghanistan (Public Intelligence)

UNODC Afghanistan Opium Survey 2013

“Opium poppy cultivation in Afghanistan reached a sobering record high in 2013. According to the 2013 Afghanistan Opium Survey, cultivation amounted to some 209,000 hectares, outstripping the earlier record in 2007 of 193,000 hectares, and representing a 36 per cent increase over 2012. […]”

UNODC Afghanistan Opium Survey 2013

U.S. Marines Lance Cpl. Zachary Mizasawa, top, an M249 squad automatic weapon gunner, and Lance Cpl. Kevin Gonzalezsierra, a rifleman, both with 1st Platoon, Company I, Battalion Landing Team 3/8, Regimental Combat Team 8, hold in place while a group of Afghan boys tend poppy crops during a security patrol from their patrol base in Helmand province's Green Zone, west of the Nahr-e Saraj canal, April 7, 2011. Elements of 26th Marine Expeditionary Unit deployed to Afghanistan to provide regional security in Helmand province in support of the International Security Assistance Force.
U.S. Marines Lance Cpl. Zachary Mizasawa, top, an M249 squad automatic weapon gunner, and Lance Cpl. Kevin Gonzalezsierra, a rifleman, both with 1st Platoon, Company I, Battalion Landing Team 3/8, Regimental Combat Team 8, hold in place while a group of Afghan boys tend poppy crops during a security patrol from their patrol base in Helmand province’s Green Zone, west of the Nahr-e Saraj canal, April 7, 2011. Elements of 26th Marine Expeditionary Unit deployed to Afghanistan to provide regional security in Helmand province in support of the International Security Assistance Force. (Source)

HSBC, too big to jail, is the new poster child for US two-tiered justice system

Glenn Greenwald in “HSBC, too big to jail, is the new poster child for US two-tiered justice system” (Guardian, 12 December 2012):

“We are constantly told that immunizing those with the greatest power is not for their good, but for our good, for our collective good: because it’s better for all of us if society is free of the disruptions that come from trying to punish the most powerful, if we’re free of the deprivations that we would collectively experience if we lose their extraordinary value and contributions by prosecuting them. […]

A new episode unveiled on Tuesday is one of the most vivid examples yet of this mentality. Over the last year, federal investigators found that one of the world’s largest banks, HSBC, spent years committing serious crimes, involving money laundering for terrorists; “facilitat[ing] money laundering by Mexican drug cartels”; and “mov[ing] tainted money for Saudi banks tied to terrorist groups”. Those investigations uncovered substantial evidence “that senior bank officials were complicit in the illegal activity.” As but one example, “an HSBC executive at one point argued that the bank should continue working with the Saudi Al Rajhi bank, which has supported Al Qaeda.”

Needless to say, these are the kinds of crimes for which ordinary and powerless people are prosecuted and imprisoned with the greatest aggression possible. If you’re Muslim and your conduct gets anywhere near helping a terrorist group, even by accident, you’re going to prison for a long, long time. In fact, powerless, obscure, low-level employees are routinely sentenced to long prison terms for engaging in relatively petty money laundering schemes, unrelated to terrorism, and on a scale that is a tiny fraction of what HSBC and its senior officials are alleged to have done.

But not HSBC. On Tuesday, not only did the US Justice Department announce that HSBC would not be criminally prosecuted, but outright claimed that the reason is that they are too important, too instrumental to subject them to such disruptions. In other words, shielding them from the system of criminal sanction to which the rest of us are subject is not for their good, but for our common good.

[…]

Read full article at: http://www.guardian.co.uk/commentisfree/2012/dec/12/hsbc-prosecution-fine-money-laundering

America’s Illegal Drug Complex: Another Capitalist Racket

via David Rosen (Counterpunch):

American capitalism consists of a constellation of rackets.  The Occupy Wall Street movement has focused a spotlight on the banking and financial-services racket.  Others have exposed the military-industrial complex, the extraction industries, the insurance, pharmaceutical and healthcare system, the agriculture and food combine and the communications trust.

Each racket is distinguished by the self-serving, intimate interrelation of private corporate interests and the public government, whether at the federal, state or local level.  Each racket consist of a host of distinct businesses elements, organized through both vertical and horizontal operations, no matter whether the business is conducted “legally” or not.  Each is charged with maximizing profit.

Rackets succeed by enabling private corporations to exploit the power and wealth of the public trough, the state.  Rackets do this in different ways, combining direct contracts, subsidies and tax breaks that further engorge the corporate bottom line.

One racket involves direct federal contracts to private companies, often with cost-plus agreements; in 2010, an estimated $180 billion went to the top 20 contractors.  This is the model of the military-industrial complex.

A second racket is characterized by the transfer or “externalization” of the social costs associated with a company’s product to consumers and taxpayers.  This is most evident in role of government subsidies and lax breaks associated with the (indirect) health-related costs that underwrite the extraction (e.g., air & water pollution) and food (e.g., obesity) industries.

A third type of racket involves the use of the legal system to maximize private gain and exemplified by the prison-industrial complex.  The criminalization of “illegal” drug taking as an unacceptable practice, like alcohol during Prohibition, has enabled many third parties, including government agencies, banks and private contractors, to profit from other people’s suffering.

Shedding moral pretenses, one needs to look at the illegal drug business in America as just another capitalist racket.   No better, no worse.  The street dope dealer is just another version of the day stock trader, the only difference is their legal status, although their social status, clothing and marketing message might be the same.

[…]

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Read the rest of the article at: http://www.counterpunch.org/2011/11/11/america%E2%80%99s-illegal-drug-complex/print

How a big US bank laundered billions from Mexico’s murderous drug gangs (and got away with it)

(via The Guardian)

On 10 April 2006, a DC-9 jet landed in the port city of Ciudad del Carmen, on the Gulf of Mexico, as the sun was setting. Mexican soldiers, waiting to intercept it, found 128 cases packed with 5.7 tons of cocaine, valued at $100m. But something else – more important and far-reaching – was discovered in the paper trail behind the purchase of the plane by the Sinaloa narco-trafficking cartel.

A soldier guards marijuana that is being incinerated in Tijuana, Mexico.During a 22-month investigation by agents from the US Drug Enforcement Administration, the Internal Revenue Service and others, it emerged that the cocaine smugglers had bought the plane with money they had laundered through one of the biggest banks in the United States: Wachovia, now part of the giant Wells Fargo.

The authorities uncovered billions of dollars in wire transfers, traveller’s cheques and cash shipments through Mexican exchanges into Wachovia accounts. Wachovia was put under immediate investigation for failing to maintain an effective anti-money laundering programme. Of special significance was that the period concerned began in 2004, which coincided with the first escalation of violence along the US-Mexico border that ignited the current drugs war.

Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year’s “deferred prosecution” has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine.

More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico’s gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.

“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank’s $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement.

The conclusion to the case was only the tip of an iceberg, demonstrating the role of the “legal” banking sector in swilling hundreds of billions of dollars – the blood money from the murderous drug trade in Mexico and other places in the world – around their global operations, now bailed out by the taxpayer.

At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were “the only liquid investment capital” available to banks on the brink of collapse. “Inter-bank loans were funded by money that originated from the drugs trade,” he said. “There were signs that some banks were rescued that way.”

Wachovia was acquired by Wells Fargo during the 2008 crash, just as Wells Fargo became a beneficiary of $25bn in taxpayers’ money. Wachovia’s prosecutors were clear, however, that there was no suggestion Wells Fargo had behaved improperly; it had co-operated fully with the investigation. Mexico is the US’s third largest international trading partner and Wachovia was understandably interested in this volume of legitimate trade.

José Luis Marmolejo, who prosecuted those running one of the casas de cambio at the Mexican end, said: “Wachovia handled all the transfers. They never reported any as suspicious.”

“As early as 2004, Wachovia understood the risk,” the bank admitted in the statement of settlement with the federal government, but, “despite these warnings, Wachovia remained in the business”. There is, of course, the legitimate use of CDCs as a way into the Hispanic market. In 2005 the World Bank said that Mexico was receiving $8.1bn in remittances.

During research into the Wachovia Mexican case, the Observer obtained documents previously provided to financial regulators. It emerged that the alarm that was ignored came from, among other places, London, as a result of the diligence of one of the most important whistleblowers of our time. A man who, in a series of interviews with the Observer, adds detail to the documents, laying bare the story of how Wachovia was at the centre of one of the world’s biggest money-laundering operations.

Martin Woods, a Liverpudlian in his mid-40s, joined the London office of Wachovia Bank in February 2005 as a senior anti-money laundering officer. He had previously served with the Metropolitan police drug squad. As a detective he joined the money-laundering investigation team of the National Crime Squad, where he worked on the British end of the Bank of New York money-laundering scandal in the late 1990s.

Woods talks like a police officer – in the best sense of the word: punctilious, exact, with a roguish humour, but moral at the core. He was an ideal appointment for any bank eager to operate a diligent and effective risk management policy against the lucrative scourge of high finance: laundering, knowing or otherwise, the vast proceeds of criminality, tax-evasion, and dealing in arms and drugs.

Woods had a police officer’s eye and a police officer’s instincts – not those of a banker. And this influenced not only his methods, but his mentality. “I think that a lot of things matter more than money – and that marks you out in a culture which appears to prevail in many of the banks in the world,” he says.

Woods was set apart by his modus operandi. His speciality, he explains, was his application of a “know your client”, or KYC, policing strategy to identifying dirty money. “KYC is a fundamental approach to anti-money laundering, going after tax evasion or counter-terrorist financing. Who are your clients? Is the documentation right? Good, responsible banking involved always knowing your customer and it still does.”

When he looked at Wachovia, the first thing Woods noticed was a deficiency in KYC information. And among his first reports to his superiors at the bank’s headquarters in Charlotte, North Carolina, were observations on a shortfall in KYC at Wachovia’s operation in London, which he set about correcting, while at the same time implementing what was known as an enhanced transaction monitoring programme, gathering more information on clients whose money came through the bank’s offices in the City, in sterling or euros. By August 2006, Woods had identified a number of suspicious transactions relating to casas de cambio customers in Mexico.

Primarily, these involved deposits of traveller’s cheques in euros. They had sequential numbers and deposited larger amounts of money than any innocent travelling person would need, with inadequate or no KYC information on them and what seemed to a trained eye to be dubious signatures. “It was basic work,” he says. “They didn’t answer the obvious questions: ‘Is the transaction real, or does it look synthetic? Does the traveller’s cheque meet the protocols? Is it all there, and if not, why not?'”

Woods discussed the matter with Wachovia’s global head of anti-money laundering for correspondent banking, who believed the cheques could signify tax evasion. He then undertook what banks call a “look back” at previous transactions and saw fit to submit a series of SARs, or suspicious activity reports, to the authorities in the UK and his superiors in Charlotte, urging the blocking of named parties and large series of sequentially numbered traveller’s cheques from Mexico. He issued a number of SARs in 2006, of which 50 related to the casas de cambio in Mexico. To his amazement, the response from Wachovia’s Miami office, the centre for Latin American business, was anything but supportive – he felt it was quite the reverse.

As it turned out, however, Woods was on the right track. Wachovia’s business in Mexico was coming under closer and closer scrutiny by US federal law enforcement. Wachovia was issued with a number of subpoenas for information on its Mexican operation. Woods has subsequently been informed that Wachovia had six or seven thousand subpoenas. He says this was “An absurd number. So at what point does someone at the highest level not get the feeling that something is very, very wrong?”

In April and May 2007, Wachovia – as a result of increasing interest and pressure from the US attorney’s office – began to close its relationship with some of the casas de cambio. But rather than launch an internal investigation into Woods’s alerts over Mexico, Woods claims Wachovia hung its own money-laundering expert out to dry. The records show that during 2007 Woods “continued to submit more SARs related to the casas de cambio“.

In July 2007, all of Wachovia’s remaining 10 Mexican casa de cambio clients operating through London suddenly stopped doing so. Later in 2007, after the investigation of Wachovia was reported in the US financial media, the bank decided to end its remaining relationships with the Mexican casas de cambio globally. By this time, Woods says, he found his personal situation within the bank untenable; while the bank acted on one level to protect itself from the federal investigation into its shortcomings, on another, it rounded on the man who had been among the first to spot them.

On 16 June Woods was told by Wachovia’s head of compliance that his latest SAR need not have been filed, that he had no legal requirement to investigate an overseas case and no right of access to documents held overseas from Britain, even if they were held by Wachovia.

Woods’s life went into freefall. He went to hospital with a prolapsed disc, reported sick and was told by the bank that he not done so in the appropriate manner, as directed by the employees’ handbook. He was off work for three weeks, returning in August 2007 to find a letter from the bank’s compliance managing director, which was unrelenting in its tone and words of warning.

The letter addressed itself to what the manager called “specific examples of your failure to perform at an acceptable standard”. Woods, on the edge of a breakdown, was put on sick leave by his GP; he was later given psychiatric treatment, enrolled on a stress management course and put on medication.

Late in 2007, Woods attended a function at Scotland Yard where colleagues from the US were being entertained. There, he sought out a representative of the Drug Enforcement Administration and told him about the casas de cambio, the SARs and his employer’s reaction. The Federal Reserve and officials of the office of comptroller of currency in Washington DC then “spent a lot of time examining the SARs” that had been sent by Woods to Charlotte from London.

“They got back in touch with me a while afterwards and we began to put the pieces of the jigsaw together,” says Woods. What they found was – as Costa says – the tip of the iceberg of what was happening to drug money in the banking industry, but at least it was visible and it had a name: Wachovia.

In June 2005, the DEA, the criminal division of the Internal Revenue Service and the US attorney’s office in southern Florida began investigating wire transfers from Mexico to the US. They were traced back to correspondent bank accounts held by casas de cambio at Wachovia. The CDC accounts were supervised and managed by a business unit of Wachovia in the bank’s Miami offices.

“Through CDCs,” said the court document, “persons in Mexico can use hard currency and … wire transfer the value of that currency to US bank accounts to purchase items in the United States or other countries. The nature of the CDC business allows money launderers the opportunity to move drug dollars that are in Mexico into CDCs and ultimately into the US banking system.

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

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

“As early as 2004,” the court settlement would read, “Wachovia understood the risk that was associated with doing business with the Mexican CDCs. Wachovia was aware of the general industry warnings. As early as July 2005, Wachovia was aware that other large US banks were exiting the CDC business based on [anti-money laundering] concerns … despite these warnings, Wachovia remained in business.”

On 16 March 2010, Douglas Edwards, senior vice-president of Wachovia Bank, put his signature to page 10 of a 25-page settlement, in which the bank admitted its role as outlined by the prosecutors. On page 11, he signed again, as senior vice-president of Wells Fargo. The documents show Wachovia providing three services to 22 CDCs in Mexico: wire transfers, a “bulk cash service” and a “pouch deposit service”, to accept “deposit items drawn on US banks, eg cheques and traveller’s cheques”, as spotted by Woods.

“For the time period of 1 May 2004 through 31 May 2007, Wachovia processed at least $$373.6bn in CDCs, $4.7bn in bulk cash” – a total of more than $378.3bn, a sum that dwarfs the budgets debated by US state and UK local authorities to provide services to citizens.

The document gives a fascinating insight into how the laundering of drug money works. It details how investigators “found readily identifiable evidence of red flags of large-scale money laundering”. There were “structured wire transfers” whereby “it was commonplace in the CDC accounts for round-number wire transfers to be made on the same day or in close succession, by the same wire senders, for the … same account”.

Over two days, 10 wire transfers by four individuals “went though Wachovia for deposit into an aircraft broker’s account. All of the transfers were in round numbers. None of the individuals of business that wired money had any connection to the aircraft or the entity that allegedly owned the aircraft. The investigation has further revealed that the identities of the individuals who sent the money were false and that the business was a shell entity. That plane was subsequently seized with approximately 2,000kg of cocaine on board.”

Many of the sequentially numbered traveller’s cheques, of the kind dealt with by Woods, contained “unusual markings” or “lacked any legible signature”. Also, “many of the CDCs that used Wachovia’s bulk cash service sent significantly more cash to Wachovia than what Wachovia had expected. More specifically, many of the CDCs exceeded their monthly activity by at least 50%.”

Recognising these “red flags”, the US attorney’s office in Miami, the IRS and the DEA began investigating Wachovia, later joined by FinCEN, one of the US Treasury’s agencies to fight money laundering, while the office of the comptroller of the currency carried out a parallel investigation. The violations they found were, says the document, “serious and systemic and allowed certain Wachovia customers to launder millions of dollars of proceeds from the sale of illegal narcotics through Wachovia accounts over an extended time period. The investigation has identified that at least $110m in drug proceeds were funnelled through the CDC accounts held at Wachovia.”

The settlement concludes by discussing Wachovia’s “considerable co-operation and remedial actions” since the prosecution was initiated, after the bank was bought by Wells Fargo. “In consideration of Wachovia’s remedial actions,” concludes the prosecutor, “the United States shall recommend to the court … that prosecution of Wachovia on the information filed … be deferred for a period of 12 months.”

But while the federal prosecution proceeded, Woods had remained out in the cold. On Christmas Eve 2008, his lawyers filed tribunal proceedings against Wachovia for bullying and detrimental treatment of a whistleblower. The case was settled in May 2009, by which time Woods felt as though he was “the most toxic person in the bank”. Wachovia agreed to pay an undisclosed amount, in return for which Woods left the bank and said he would not make public the terms of the settlement.

After years of tribulation, Woods was finally formally vindicated, though not by Wachovia: a letter arrived from John Dugan, the comptroller of the currency in Washington DC, dated 19 March 2010 – three days after the settlement in Miami. Dugan said he was “writing to personally recognise and express my appreciation for the role you played in the actions brought against Wachovia Bank for violations of the bank secrecy act … Not only did the information that you provided facilitate our investigation, but you demonstrated great personal courage and integrity by speaking up. Without the efforts of individuals like you, actions such as the one taken against Wachovia would not be possible.”

The so-called “deferred prosecution” detailed in the Miami document is a form of probation whereby if the bank abides by the law for a year, charges are dropped. So this March the bank was in the clear. The week that the deferred prosecution expired, a spokeswoman for Wells Fargo said the parent bank had no comment to make on the documentation pertaining to Woods’s case, or his allegations. She added that there was no comment on Sloman’s remarks to the court; a provision in the settlement stipulated Wachovia was not allowed to issue public statements that contradicted it.

But the settlement leaves a sour taste in many mouths – and certainly in Woods’s. The deferred prosecution is part of this “cop-out all round”, he says. “The regulatory authorities do not have to spend any more time on it, and they don’t have to push it as far as a criminal trial. They just issue criminal proceedings, and settle. The law enforcement people do what they are supposed to do, but what’s the point? All those people dealing with all that money from drug-trafficking and murder, and no one goes to jail?”

One of the foremost figures in the training of anti-money laundering officers is Robert Mazur, lead infiltrator for US law enforcement of the Colombian Medellín cartel during the epic prosecution and collapse of the BCCI banking business in 1991 (his story was made famous by his memoir, The Infiltrator, which became a movie).

Mazur, whose firm Chase and Associates works closely with law enforcement agencies and trains officers for bank anti-money laundering, cast a keen eye over the case against Wachovia, and he says now that “the only thing that will make the banks properly vigilant to what is happening is when they hear the rattle of handcuffs in the boardroom”.

Mazur said that “a lot of the law enforcement people were disappointed to see a settlement” between the administration and Wachovia. “But I know there were external circumstances that worked to Wachovia’s benefit, not least that the US banking system was on the edge of collapse.”

What concerns Mazur is that what law enforcement agencies and politicians hope to achieve against the cartels is limited, and falls short of the obvious attack the US could make in its war on drugs: go after the money. “We’re thinking way too small,” Mazur says. “I train law enforcement officers, thousands of them every year, and they say to me that if they tried to do half of what I did, they’d be arrested. But I tell them: ‘You got to think big. The headlines you will be reading in seven years’ time will be the result of the work you begin now.’ With BCCI, we had to spend two years setting it up, two years doing undercover work, and another two years getting it to trial. If they want to do something big, like go after the money, that’s how long it takes.”

But Mazur warns: “If you look at the career ladders of law enforcement, there’s no incentive to go after the big money. People move every two to three years. The DEA is focused on drug trafficking rather than money laundering. You get a quicker result that way – they want to get the traffickers and seize their assets. But this is like treating a sick plant by cutting off a few branches – it just grows new ones. Going after the big money is cutting down the plant – it’s a harder door to knock on, it’s a longer haul, and it won’t get you the short-term riches.”

 

The office of the comptroller of the currency is still examining whether individuals in Wachovia are criminally liable. Sources at FinCEN say that a so-called “look-back” is in process, as directed by the settlement and agreed to by Wachovia, into the $378.4bn that was not directly associated with the aircraft purchases and cocaine hauls, but neither was it subject to the proper anti-laundering checks. A FinCEN source says that $20bn already examined appears to have “suspicious origins”. But this is just the beginning.

Antonio Maria Costa, who was executive director of the UN’s office on drugs and crime from May 2002 to August 2010, charts the history of the contamination of the global banking industry by drug and criminal money since his first initiatives to try to curb it from the European commission during the 1990s. “The connection between organised crime and financial institutions started in the late 1970s, early 1980s,” he says, “when the mafia became globalised.”

Until then, criminal money had circulated largely in cash, with the authorities making the occasional, spectacular “sting” or haul. During Costa’s time as director for economics and finance at the EC in Brussels, from 1987, inroads were made against penetration of banks by criminal laundering, and “criminal money started moving back to cash, out of the financial institutions and banks. Then two things happened: the financial crisis in Russia, after the emergence of the Russian mafia, and the crises of 2003 and 2007-08.

“With these crises,” says Costa, “the banking sector was short of liquidity, the banks exposed themselves to the criminal syndicates, who had cash in hand.”

Costa questions the readiness of governments and their regulatory structures to challenge this large-scale corruption of the global economy: “Government regulators showed what they were capable of when the issue suddenly changed to laundering money for terrorism – on that, they suddenly became serious and changed their attitude.”

Hardly surprising, then, that Wachovia does not appear to be the end of the line. In August 2010, it emerged in quarterly disclosures by HSBC that the US justice department was seeking to fine it for anti-money laundering compliance problems reported to include dealings with Mexico.

 

“Wachovia had my résumé, they knew who I was,” says Woods. “But they did not want to know – their attitude was, ‘Why are you doing this?’ They should have been on my side, because they were compliance people, not commercial people. But really they were commercial people all along. We’re talking about hundreds of millions of dollars. This is the biggest money-laundering scandal of our time.

“These are the proceeds of murder and misery in Mexico, and of drugs sold around the world,” he says. “All the law enforcement people wanted to see this come to trial. But no one goes to jail. “What does the settlement do to fight the cartels? Nothing – it doesn’t make the job of law enforcement easier and it encourages the cartels and anyone who wants to make money by laundering their blood dollars. Where’s the risk? There is none.

“Is it in the interest of the American people to encourage both the drug cartels and the banks in this way? Is it in the interest of the Mexican people? It’s simple: if you don’t see the correlation between the money laundering by banks and the 30,000 people killed in Mexico, you’re missing the point.”

Woods feels unable to rest on his laurels. He tours the world for a consultancy he now runs, Hermes Forensic Solutions, counselling and speaking to banks on the dangers of laundering criminal money, and how to spot and stop it. “New York and London,” says Woods, “have become the world’s two biggest laundries of criminal and drug money, and offshore tax havens. Not the Cayman Islands, not the Isle of Man or Jersey. The big laundering is right through the City of London and Wall Street.

“After the Wachovia case, no one in the regulatory community has sat down with me and asked, ‘What happened?’ or ‘What can we do to avoid this happening to other banks?’ They are not interested. They are the same people who attack the whistleblowers and this is a position the [British] Financial Services Authority at least has adopted on legal advice: it has been advised that the confidentiality of banking and bankers takes primacy over the public information disclosure act. That is how the priorities work: secrecy first, public interest second.

“Meanwhile, the drug industry has two products: money and suffering. On one hand, you have massive profits and enrichment. On the other, you have massive suffering, misery and death. You cannot separate one from the other.

“What happened at Wachovia was symptomatic of the failure of the entire regulatory system to apply the kind of proper governance and adequate risk management which would have prevented not just the laundering of blood money, but the global crisis.”

Of Landlords and Counterinsurgency

Via NACLA:

[…] the Western Hemisphere Subcommittee’s congressional hearing “Has Merida Evolved? Part One: The Evolution of Drug Cartels and the Threat to Mexico’s Governance.” The opening statement by Connie Mack (R-FL) reads like a call to military action against a “well funded criminal insurgency raging along our southern border, threatening the lives of U.S. citizens and harming the U.S. economy by undermining legal business,” such as, of course, real estate in Nogales. “It is time that our determination to eradicate the cartels matches the cartels’ determination to undermine the freedom, security, and prosperity of the United States, Mexico, and the entire hemisphere,” Mack writes. According to Mack, U.S. drug war efforts, in the form of the $1.5 billion counter-drug package called the Merida Initiative, are not succeeding and are like, “showing up to a burning house, late, with a half assembled hose is a waste of time and tax payer dollars.”

Connie MackMack does not share the analysis of other Merida Initiative critics who say that the demand for drugs needs to be reduced, or that trade agreements that provoke poverty need to be renegotiated or revoked, because they help the illicit drug industry flourish.

Instead, Mack concurs with McCaffrey and insists that the United States has to develop a counterinsurgency strategy that includes doubling Border Patrol agents, “fully funding needed border protection equipment such as additional unmanned aerial vehicles and the completion of double layered security fencing in urban, hard to enforce areas of the border.” Don’t worry, there is also an educational part of the plan, a “culture of lawfulness program” that will insure that local populations “support the government, the rule of law, over the cartels.”

When the State Department responded to Mack’s statements saying that the Merida Initiative was working just fine, Mack accused them of “not closely tracking threat of Mexican drug cartels.” In the September 16 response, Mack even refers to the testimony of Dr. Gary M. Shiffman, managing director of the Chertoff Group, who identified  “drug cartels as businesses that must utilize political manipulation to ensure profit: this is an insurgency.” What Mack doesn’t mention is that the for-profit Chertoff Group has a vested interest in the homeland security market, and a counterinsurgency effort would be profitable for them and other like-minded businesses. While local landlords might feel the economic fist of the border reality, other bigger fish are poised to profit from it.

As always, this proposed increased militarization would more likely impact unauthorized migrants crossing into the United States than drug traffickers, or “narco-terrorism,” as McCaffrey puts it, and make them go to greater lengths to evade the border enforcement apparatus.

Though used for other reasons, the very existence of the Nogales tunnels are also a good indication of the many creative and resourceful ideas people have to get past the boundary, regardless of the U.S. anti-drug, counterinsurgency, or immigration deterrence plan. As scholar David Spener says in his ground-breaking book Clandestine Crossings,”Every obstacle placed thus far in their path . . . has been probed, evaluated, and ultimately evaded or overcome by millions of migrants whose principal ‘weapons’ in their struggle against their involuntary territorial confinement are their collective inventiveness, persistence, and traditions of mutual aid in the face of adversity.”

In terms of drugs, considering that most illicit narcotics come through the official ports of entry, and major U.S. banks in the United States launder drug money, there surely is a better answer than counterinsurgency.

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Read the full article at: http://nacla.org/blog/2011/9/28/landlords-and-counterinsurgency