Money laundering and the moral world of bankers


by David Malone

In the four years between 2004 and 2007, one of America’s largest banks, Wachovia, now owned by Wells Fargo, laundered $378.4 billion of Mexican Drug money.

Just to give you an idea of the scale of Wachovia’s criminality, $387 billion is 4147 tons of $100 bills – in four years.  Wachovia executives say they didn’t spot it. I can see that. A few thousand tons of 100 dollar bills is the sort of thing that probably can slip behind a filing cabinet.

Of course one of their own anti-money laundering experts, Englishman Martin Woods, an ex Scotland Yard man working in Wachovia’s London office, did warn them.  But they didn’t listen. In fact, as the Observer newspaper reports,

“Woods was told by Wachovia’s head of compliance that his latest SAR [Suspicious Activity Report] 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.”

Which is how Wachovia became the open mouth for dirty money to enter the banking system. And getting dirty money IN to the system is the first and hardest part of money laundering. Wachovia obliged 378 billion times in four years.

The US 1970 Bank Secrecy Act, which is America’s main anti money laundering law, stipulates that there is a duty upon banks to ‘know your customer’ as the first line of defence against money laundering. As far back as 2004 Wachovia had admitted to investigators that it had been quite well aware of the potential for money laundering in its Mexican business.  That business involved a close relationship with Mexican Currency exchange businesses, Casas de cambio, – The CASH business of choice for any money launderer wanting to change and bank cash.  As one of the Mexican prosecutors quoted by The Observer said: “Wachovia handled all the transfers. They never reported any as suspicious.”

Sadly, despite over 6000 subpoenas served upon Wachovia regarding its Mexican cash transactions, Wachovia did nothing and largely ignored the subpoenas.

The Bank Secrecy act also requires ANY transaction involving  more than $10,000 must be reported to regulators. Now, $378 billion is over 37 million lots of 10,000.  Which means Wachovia executives DIDN’T report anything suspicious to the regulators about 37 million times.  Was it on their ‘to do’ list?

Federal investigators spent 22 months compiling their case. In the end, however, no one at all at Wachovia was prosecuted. The ‘Justice’ Department settled the criminal case against Wachovia, in which the Bank admitted at the charges against it, using what is called a “Deferred Prosecution Agreement”. In Deferred Prosecution Agreements the banks pays a fine, promises not to break the law again and not only get to walk away, but after a year the actual criminal prosecution is removed from their record as if it never happened. This is so the Bank’s reputation and its ability to do business in future, are not impaired.

So Wachovia paid a fine of $160 million which was less than 2% of its profits for just the year 2009 and walked away. A year later it was scot free. Wachovia refused to say how much profit it had made from all the money laundering. And the day after the court settlement last month, its shares traded up 1%.

The thing to remember is that much money for that long means this money laundering was a large and sustained part of Wachovia’s income and operation. This was not just ‘a few bad apples’. And it will not have stopped. There are still drugs being sold in the US and therefore there is still the need for the proceeds to be laundered. Which means that flow of several hundred billion dollars will have been accepted in to other banks. Those other banks will know about Wachovia’s operation. They will know who among their clients is likely to be passing drug money. They will, today, willingly launder that money.

Turns out HSBC, Santander and BBVA (Spain’s two largest banks) also dealt with Mexico’s Casas and had dirty money slip through their defences. I think HSBC may have closed their operation. Santander and BBVA are still major players. They both also have US subsidiaries. And both banks need cash like a bleeding man needs blood.

The truth about money laundering is while it only makes the papers now and again, it is a large part of normal everyday banking. It is business as normal for banks. Nearly all the large banks do it. American Express Bank International was caught laundering Mexican drug money twice in the recent past. In 1994 they were found guilty and fined. The bank ‘promised’ not to do it again and with that feather light touch, were allowed to carry on as normal. But sadly the bank did do it again. From 1998 till 2004 the bank was busy making profits from laundering – again. Once again the bankers promised – double promised, crossed their hearts – again the bank walked away and a year later the entire thing was wiped off their record so they could be sold as an upright AAA rated concern to Standard Chartered, for $823 million.

Another huge American bank, Citi, went one better than its rivals and simply bought a bank that laundered money – Banamex. Of course Citi had already been indicted itself for laundering. But it makes sense to get local experts as well, I suppose.  The sordid Citi story is well known.

I find it odd that people, I can only really speak of Britain but I cannot believe the same is not generally true, have and accept the concept of ‘institutionally racist’, for example. We accept that one can talk about a culture within an organisation. It is not to say that every person in that organisation shares the ‘culture’ equally, but that there are a set of norms and practices which are prevalent and have the support of the hierarchy of the organisation.  In Britain, government and the law have taken action against what was deemed to be a poisonous culture of racism within an organisation – in this case a major police force in the UK. Yet despite overwhelming evidence that there is a culture of criminality within not just a bank, but within banking as a general enterprise, no one is willing to suggest banks, banking and bankers as a group of people are institutionally corrupt.  Why?

Banking corruption is a global reality. It is a potent force undermining all the laws which we pass. We have laws against drug use and drug pushing. Yet the banks on our high streets enable the trade every day of every week.  They are not the only ones of course but that is no defence. Up and down every country, banks accept money which they already know, or could easily find out if they cared to, was drug money. But they chose not to.  Every bank knows there is software which can easily track patterns of deposits and flag up those which are unreasonably cash heavy.  The software exists and the law would allow the banks to use it. They don’t.

Global banker criminality not only undermines our civil society but also operates against our democratically decided foreign policies as well.  The banks ignore international law as freely as they do national ones.

Mexico is one place this happens but lest you think Mexico is the only banker’s narco-playground, let’s look at Burma. In Burma it’s gas and heroin. And would you believe it, there are banks around Burma like flies on shit.  The main players in Burma are France, the UK, America and Singapore. The big banks are PNB Paribas and JP Morgan.

The giant french Bank PNB Paribas is the bank for the Burmese junta’s Yadana gas pipeline project. Nothing wrong with helping a country develop it’s natural resources, you might say. The corporate partners in the gas pipeline are Total, Chevron, the Thai company PTTEP and the Burmese military Junta. However, in a devastating report and several follow up reports by the NGO Earthrights International, that got wide international praise and attention, Earthrights found that less than 1% of Burma’s income from the gas makes it into the state budget. 99% goes to bank accounts off-shore, often in the name of the members of the ruling military dictatorship.

BNP Paribas was, until 2008 (and may still be through subsidiaries or partnership, they won’t say) what is called the Paying Agent for the project and also its main Depositary bank. The paying agent collects the revenues and pays them in to accounts in the Depository bank. The Paying Agent for the Yadana project was a PNB Paribas Jersey Trust in the Channel Islands. The Depository bank was PNB Paribas’ Singapore branch. The bank collected the cash, divided up and made sure it went to its customer’s accounts. Sadly the Burmese people did not have an account and were not one of the bank’s clients.

But, as the study found
, PNB Parisbas’ services did not end there.  

“According to our research, the BNP Paribas branch in Singapore was, and may still be, not only the depository bank of the project but also the primary bank of the Burmese regime itself. The Burmese people’s gas revenue was transferred from BNP Jersey accounts in the BNP Singapore branch to other accounts at the same bank, accounts held by the military regime.

“What’s more, BNP Jersey acted as trustee for the military regime, holding at least one account for the regime in BNP Jersey’s own name. That means the Burmese military dictatorship relied on an account in the largest French bank to move its funds – funds which should be benefiting the people of Burma.”

Burmese money, in a French Bank, via one of the UK’s Channel Island off-shore, tax havens deposited in Singapore. From BNP in Singapore the money then appears to move to two other big Singapore banks Overseas Chinese Banking Corporation and the DBS Group.  My question is why it was left to a small NGO to bring this to light?

But that’s just Burma’s gas. Burma is also one of the world’s largest producers of heroin.  Which, of course, the Junta and some of its special friends control and profit from. The question, of course, is where does all the money go? And the answer is Singapore. How it gets there, where it goes next and with whose help, leads us to the behemoth of American banking, JP Morgan.

This story was run by Australian television and The Nation magazine in the US.  Despite denials from JP Morgan the story is true. The proof is that JP Morgan was not able to stop The Nation publishing the story nor sue it once it did. It couldn’t because it is true. This is an old story from 1988. I tell you it because, as with Mexico, the drug trade has not gone away and therefore neither have the banks laundering the profits. The bank involved may have changed, though there is no reason to suppose a bank would willingly stop a profitable business arrangement.

The short version of the story goes like this: Singapore is a global banking centre. It is right next to Burma. The Burma junta and powerful drug traffickers have heroin money. They need a bank to put it in, Singapore has banks, which thoroughly enjoy the flow of cash and doing business with the drug traffickers who have all that money.

The Burmese junta also had a ‘Sovereign Wealth Fund’ called the Myanmar Fund.  According to the Nation article,

“Singapore’s largest government-controlled financial institution – the Government of Singapore Investment Corporation (GIC) – is listed in the documents along with Morgan Guaranty Trust Bank (a J.P. Morgan subsidiary separate from the Trust Company) as a core shareholder in the Myanmar Fund.”

JP Morgan back when the article was written owned 42% of the Myanmar fund. That is 42% of a fund run by a vicious military dictatorship which deals in Heroin on a global scale.  In the War on Drugs whose side, exactly, are JP Morgan on?

The Myanmar fund was registered in – guess where – Jersey, Channel Islands.  The trusts registration was done in – Ireland.  Jersey and Ireland mean secrecy and tax avoidance. The Singapore government fund GIC is itself secret. It publishes no accounts and has no public oversight despite using public funds. But that is the definition of Singapore. Just weeks after the GIC’s shares in the Myanmar Trust were listed on the Irish exchange in late 1994, they disappeared. The Nation discovered they had been re-registered under a company called Ince & Co which, it turns out was set up by JP Morgan to hold the shares. Since then the shares moved again to a company called Hare & Co. A little bit of digging shows Hare & Co have the same address as Bank of New York.  Which is part of Bank of New York Mellon.

Hare and Co. appears to be a company set up to hold titles and may or may not receive payments for a great many companies and deals.  Mellon is a huge player in the Paying Agent market. It is especially big in Ireland. Whether Mellon is doing this for itself, for JP Morgan or another, I don’t and can’t know.  Banking secrecy rules!

The Myanmar Fund, after the bad publicity was placed into liquidation in 1997. The Singapore government says no other fund has been set up to replace it. So what has happened to all the money and assets in it and what is happening today to the flow of profits and money from heroin? All that has to have gone somewhere.

There are funds from Myanmar around today. I found one yesterday. Myanmar funds© is the trading name of Myanmar Star Corporation Limited.  It is listed at 71a Knightsbridge. When I called them a worried, Russian sounding woman recognised the company name but said they were no longer there. When I asked if she had ever worked for them and told her I was a journalist, she said she would have to talk to her husband and could I call back in two hours. I’ll let you know how that goes.

Myanmar Star Corporation Limited says it is c/o Brunswick Capital LLP which describes its business as,

“The Origination and operation of Close-end Offshore Enterprise/Country Capital Funds.”

And the best bit, for me, is their advertising strap line – “The Oligarch’s Choice”. Says it all! But it is also rather eerily accurate. Banks are the oligarchs choice and banks like it that way. Banks love dictators, embezzlers, thieves, drug traffickers and monsters of every kind so long as they have money to bank.  Banking is a world without moral compass ruled by moral cripples.

Just look at the more recent services which European banks have joyously performed for the juntas, dictators and despots of the world.

September 2010 Barclay’s was found guilty of having, for over a decade, done a roaring trade as banker to torturers, embezzlers, dictators and narco-states, systematically disguising and laundering money it was moving for the governments of Gaddafi’s Libya, The military Junta in Burma (Myanmar), Castro’s Cuba, the Mullah’s of Iran and Bashir of Sudan despite it being against US law to do so. No one went to prison. The bank paid a $298 million fine and walked away.

ABN Ambro, now owned by RBS, also profited from moving money for Sudan, Iran and Libya. It too paid a fine – $350 million. Credit Suisse was doing the same and also walked away with a fine – $536 million.

If people rob a bank a fine is not an option. They go to goal. If a bank robs an entire nation, however, by helping drug criminals or abetting dictators and military juntas to steal from their people, a small fine and a promise to behave better in future is considered quite sufficient.  In what way does that make us all equal before the law?  What reason should you and I have for NOT believing the law to be a whore?

To those in the banks who are making the decisions and reaping the bonuses, are the fines they pay, anything more than a simple and, in the grand scale of the profits and bonuses being made, rather trifling business tax on the bank’s ongoing practices?  No one in the banks upper ranks risks any personal punishment, while the authorities seem content simply to take a small share of the profits.

The fact of the matter is that dictators and military juntas will pay top dollar to a willing bank.  And dollars they have in abundance. The narcotics business is the largest cash business in the world. No one buys their heroin or coke with a debit card. It’s cash, which trickles and flows until someone has so much of it they just have to get it in to a bank.  And if there is one thing all banks love, especially since this banking debacle began, it’s cash.  And all the banks need, in order to get their share, is to have in their employ bankers of a certain moral degeneracy and politicians ready to protect them.

And that is the world we live in. Even those, like Bloomberg, who cheerlead for the world of finance, admit,

“No big U.S. bank — Wells Fargo included — has ever been indicted for violating the Bank Secrecy Act or any other federal law.

“Large banks are protected from indictments by a variant of the too-big-to-fail theory.”

According to Mr Jack Blum, who was for 14 years a U.S. Senate investigator and is now a consultant to international banks and brokerage firms on money laundering, the logic is:

“Indicting a big bank could trigger a mad dash by investors to dump shares and cause panic in financial markets. There’s no capacity to regulate or punish them because they’re too big to be threatened with failure,” Blum says. “They seem to be willing to do anything that improves their bottom line, until they’re caught.”

The people at the top of banking are moral cripples and parasites. If we let them, they are intent on remaking our world in their image.


David Malone is the author of the book Debt Generation. You can read and listen to excerpts from his book here: