Changes in Anti Money Laundering Laws in Mexico being Countered by Cartels

Not many experts in Mexico are willing or brave enough to discuss the country’s recently amendedanti-money laundering laws, designed to hamper the drug cartels from trying to legitimize their ill-gotten gains

The foot-dragging reticence is more understandable when you realize that it's about more than just hard feelings or toes stepped upon. Mexico is the largest transit area for illegal narcotics in the world. Northwards flow the tons of drug shipments into the United States, and southwards return bundles of cash and stacks of guns. This illicit trade which has grown and developed into a booming and highly profitable illicit industry is now annually worth well in excess of $40 billion - and counting.

Yet the days of chucking cash around like confetti to buy luxury goods and haciendas, and using so-called safe houses to stack from basement to rafters piles of high denomination banknotes, are numbered.

The new, more carefully tailored laws, which were designed to detect and curb transactions of illegal proceeds or the financing of terrorism, have some very strict parameters and curbs.

Banned transactions, in national or international currencies, include the sale of real estate or property valued at more than 520,000 pesos ($40,000). Boats, cars or planes over 200,000 pesos are on the list, which also includes anything from jewellery, precious metals, gems, watches to artwork.

Insurance and retail services, credit cards, pre-paid cards or a travellers' checks, when not offered by financial institutions, also fall under this category.

Implementing the law

Those who are charged with identifying what is termed the performance of vulnerable acts have to follow a clear set of obligations. These include: To identify clients or users, to retain documentation related to vulnerable activity for five years from the done deed, and to file relevant data to the finance ministry.

Alberto Elias Beltran has been appointed by the finance ministry to implement these laws. And he points out that they're specifically designed to cover the spectrum of money laundering, illegal funds, drug trafficking, arms trafficking and people trafficking. He explains that the aim is to better detect the operations and financial structures of organized crime to be able to squeeze and impact them.

He concedes that by the very nature of the beast, there isn't a methodology to determine just how much money is being laundered in a region, let alone a country. But the number of denunciations to the Attorney General's Office, arrests, convictions jail sentences and seizures of illegal funds by the state, are a reasonable benchmark to start with.

Mexico's drug cartels have been creative with their illicit trade in the past

Omar Fayad, President of the Mexican Senate's Justice Commission, says the new law does make life easier for law enforcement officials.

"If you watch how the money moves, you can do a lot of things, that's the reason Mexico's Congress approved this anti-money laundering legislation. If you can hit the drug cartels' economic power, then certainly their field of action is affected. But I think that they have the capacity to adapt to these new circumstances. That's why it's so important to modify legislation not just once. The government must be dynamic and willing to modify the legislation constantly. It's the first step combined with others to follow, in order to fight against the drug cartels in Mexico. But the cartels are like viruses. They have the ability to change and transform fast."

Tightening the loopholes

Ramon Garcia Gibson is the CEO of Garcia Gibson Consulting - a Mexican firm specializing in the prevention of money laundering and financing of terrorism. He says the new law tightens loopholes: "It establishes measures and procedures to prevent and detect operations involving resources of illicit origin. And definitely with this law, it's going to make life more difficult for organized crime because Mexican authorities will have information about transactions, which limits the use of cash from their illegal activities."

Accountant Jose Raul Alvarez Flores of ASI Contadores says estimates of how much money slips through the net annually add up to the equivalent of $10 billion. That also includes individuals and companies who avoid paying taxes, but the majority of the gigantic overall swindle boils down to the common denominator of organized crime.

It's not just the drug capo who's slammed down 3 million pesos or considerably more on the table to buy a house outright. This new law filters down as far as buying a quality watch or splashing out on jewellery. And the sanction of not complying, reporting and playing the game by the new rules is: "Go to jail, go directly to jail."

More cohesion

The new law also draws the relevant entities together into a tighter and more cohesive team spearheaded by the finance ministry, combined with the Attorney General's Office and with the closer cooperation of the banking industry.

As Ramon Garcia Gibson says, "it establishes a proper coordination between authorities responsible for preventing but also prosecuting money laundering."

All of this sounds like a good idea and appears to be making life more difficult for the drug cartels. But the cartels themselves count amongst their ranks specialists in finance, logistics, forward planning and business.

The days of focusing on cash transactions may be over as the cartels look for new options

One example is the notorious Arellano Felix drug cartel. Five of the seven brothers who ran it are under lock and key and two have been shot dead. Since the arrest of her brother Eduardo in 2008, Enedina, one of their four sisters and a university trained accountant, has taken over the illicit enterprise with her son Luis Fernando.

Accordingly, the focus is much more strictly applied to prudent business practice, financing and various sophisticated methods of money laundering to generate bigger profits.

Not surprisingly, the new methods do not focus exclusively on antiquated cold, hard cash. And the wanton first option of violence has also been refined and adapted. The new-found expertise is going to be considerably more difficult to disrupt and dislodge.

Michael Hearns an Anti Money Laundering specialist with over 27 years of AML experience can also be found at:www.launderingmoney.com and on twitter at :http://twitter.com/#!/LaunderingMoneyas well as his blog at:http://moneylaunderingworld.blogspot.com

Mexican Drug Cartels Laundering Money through Horse Stables

By George H Wittman
American Spectator

In recent weeks Mexican cartel money laundering operations in the United States have been exposed as imaginative and daring. In the two principal cases uncovered, very different devices were used by the drug trafficking managers. These cases are an introduction to the breadth of mechanisms available to turn dirty money clean.
Perhaps the operation that had the most elaborate cover, yet a still relatively simple financial structure, was the most forward-looking. One of the top figures in Mexico's Los Zetas drug organization, Miguel Angel Trevino Morales, had a younger brother who liked horses, needed a job, and was available to manage a ranch (bought through an intermediary with drug profits) south of Oklahoma City.

Along with his wife and three children, young José Treviño Morales set about to establish himself as an owner/breeder of quarter horses. He paid for everything in cash or by using false names and accounts of supposed partners. Treviño Morales and his considerable ranch staff of fourteen built a reputation of fair bargaining and quick payment. The 400-plus horse enterprise was the envy of many other breeders with less deep pockets, but any annoyance was quickly salved by the fair and generous business practices of the Treviño Morales operation.

Meanwhile millions of dollars in cash accrued by the drug trafficking operation of the Zetas was "cleansed" in the accounting for the high maintenance quarter horse breeding and racing business. The stable's reputation grew as it began to turn out serious winners on the track and at the auctions in Oklahoma, Texas, New Mexico, and California. The overall operation was incorporated since 2008 as Tremor Enterprises LLC -- and they paid all their bills on time.

The New York Times once again appears to have had an inside source within law enforcement, for when it broke the story on June 12 citing its "investigations lasting months" and anonymous sources, federal authorities, including FBI Special Agents, swooped in on the ranch the same day. They were able to arrest only 7 of the 14 indicted, including José Treviño Morales and his wife. Whether this was due to the Times's early publication has not been surfaced. At this point, however, the U.S. Government has seized 41 of the choicest horses and is arranging for the care of the other 384.

While the Treviño Morales horse breeding operation reportedly successfully "cleaned" tens of millions of dollars -- and won some very large racing purses on the side -- another less romantic money laundering and drug trafficking dance was in process in nearby Western and Midwestern states. Due to the United States' tightening of controls on the production of chemicals used in the making of methamphetamine, the manufacture and shipment of meth from Mexico has grown exponentially.

Many mid-sized American gangs purchase cargos of meth either directly from Mexican cartel producers or intermediaries who have illegally transported the product over the Mexican/U.S. border using both witting and unwitting truck drivers. The meth is then carried from border sites to middlemen in California, Colorado, and elsewhere central to the customer base. One such operation, according to the DEA, owned both a legitimate trucking company and an import/export firm. The latter carried licenses to import goods from China, thus allowing a legal route for money to flow to China and then return in goods or money transfers to Mexico -- and the cycle would begin again.

While there are several versions of the foregoing used in money laundering, one of the most reliable remains the utilization of the real estate market. Purchase and resale of high-end real estate properties (residential or commercial) has been a natural route for cleaning dirty money. Resale at an appropriate price to a bona fide entity creates a cleansed account and money that can be transferred anywhere in the world.

There are many mechanisms now employed by the drug cartels to clean up the cash they obtain through illicit drug sales in the United States and Canada. All that is needed is an intermediary that can maintain the appearance of a legitimate cash flow (such as service and import/export concerns), and careful accounting takes care of the rest. Casinos and high volume restaurants are always an attractive money laundering target. While new and different mechanisms always become available, funneling money into the American stock and commodity markets remains a high priority objective.

The establishment of a legitimate-appearing identity is the sole criterion for creating an investment account allowing considerable sums to be moved around domestically and internationally. Clean identities have evolved through repeated transfers of money from Mexico and other Latin American sources to the Gulf States of the Middle East, China, Southeast Asia and eventually to the usual small countries with discreet banking and taxation laws. It takes quite a bit of imaginative accounting, but it's worth the effort to cover the original sources.

Thus it is the establishment of an acceptable identity that is the key to all illegal money movement. It need not be as elaborate as horse breeding; it can be as simple as what the KGB used to call a "documented legend" that involves a birth certificate, Social Security number -- or equivalent -- and exclusive club membership plus well-distributed cash. This and a few other accoutrements and the money launderer is ready to have a respected friend call his local hard-charging broker with a new client. The securities business swears it's much harder than that, but the Bernie Madoff case showed how social connections and well-covered accounting make a swindle work. The laundering con works the same way



Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Griselda Blanco Queen of Cocaine....hardly!

By Michael Hearns
http://launderingmoney.com


The recent murder of Griselda Blanco in Medellin Colombia closes a sad a and tragic chapter on the brutality of the cocaine trade. At least that is what many would like for you to believe.  Griselda Blanco's murder should be viewed for exactly what it is; another violent end to marginalized sociopath who has been given undeserved iconic status by the print and visual media.

Griselda Blanco was a sociopathic remorseless entrepreneur who slithered through a crevice in American law enforcement that was unprepared and without capable resources and foresight to recognize the tsunami of illicit dollars and power that was being ushered in through the cocaine trade of the 1980's and 90's. Griselda Blanco was an opportunistic individual who used her guile and sociopathology to insulate her as she trampled across the boundaries of decency in what we know to be an indecent business; drug trafficking. She has been given demigod status  for her harsh, abrasive, quick tempered, ruthless, conniving ways and her fast penchant for ordering the execution of those she opposed by her spineless groveling minions.  For all the bluster and for all the talk that that her hired henchmen now spout from the confines of this nation's penitentiaries they themselves had plenty of opportunity to dispatch Griselda Blanco but for either lack of conviction or lack of cerebral mass they  continued to carry out her murderous ways helping to support the fallacy of  Griselda Blanco as a Godmother of Cocaine.

Lets face facts. Griselda Blanco was an integral cocaine trafficker within the Medellin Cartel and she sanctioned, paid for, and demanded that many of her competitors, those who crossed her, and those who stood in the way of her ascension for wealth be murdered. Her distinction from her contemporaries was simply gender. Aside form that she is no different than many of the male drug traffickers who partook in their craft in the 1980's and 90's. As a society we lionize women villains because it grates against the American psyche of women being maternal, nurturing, and a source of comfort. Ma Barker, Bonnie Parker, Aileen Wournos, and Annie Palmer have all ascended to a folklore like status as queens or godmothers of crime and murder.

It is easy to view the life of Griselda Balnco from the viewfinder of a movie camera or the soft glow of a computer monitor and surmise she was the "Queen of Cocaine" or "The Godmother of Cocaine."  Not having the privilege of either but being one of the few who actually had his feet on the ground in the cocaine world for a long time  it is apparent to me that the reality is she was a large scale cocaine trafficker who clawed, cheated, and murderously existed in a business that rewards the victor regardless of the method.

Nothing more.
Nothing less.

The biggest current mistake being made is the assumption that Griselda Blanco was murdered  to settle an old score or to appease a long time  former adversary. More than likely it is because the criminal element of Medellin has been able to exist quietly in the shadow of the Mexican Cartel and Griselda Blanco's notoriety was becoming troublesome. Talks of more movies and books have filled the air. Crime and notoriety usually never mix well. In this case the celluloid film and the pen may have actually been stronger the sword.


Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney  and http://moneylaunderingworld.blogspot.com/  

Where the Mob Keeps Its Money

By Roberto Saviano

New York Times

The global financial crisis has been a blessing for organized crime. A series of recent scandals have exposed the connection between some of the biggest global banks and the seamy underworld of mobsters, smugglers, drug traffickers and arms dealers. American banks have profited from money laundering by Latin American drug cartels, while the European debt crisis has strengthened the grip of the loan sharks and speculators who control the vast underground economies in countries like Spain and Greece.

Mutually beneficial relationships between bankers and gangsters aren’t new, but what’s remarkable is their reach at the highest levels of global finance. In 2010, Wachovia admitted that it had essentially helped finance the murderous drug war in Mexico by failing to identify and stop illicit transactions. The bank, which was acquired by Wells Fargo during the financial crisis, agreed to pay $160 million in fines and penalties for tolerating the laundering, which occurred between 2004 and 2007.

Last month, Senate investigators found that HSBC had for a decade improperly facilitated transactions by Mexican drug traffickers, Saudi financiers with ties to Al Qaeda and Iranian bankers trying to circumvent United States sanctions. The bank set aside $700 million to cover fines, settlements and other expenses related to the inquiry, and its chief of compliance resigned.

ABN Amro, Barclays, Credit Suisse, Lloyds and ING have reached expensive settlements with regulators after admitting to executing the transactions of clients in disreputable countries like Cuba, Iran, Libya, Myanmar and Sudan.

Many of the illicit transactions preceded the 2008 crisis, but continuing turmoil in the banking industry created an opening for organized crime groups, enabling them to enrich themselves and grow in strength. In 2009, Antonio Maria Costa, an Italian economist who then led the United Nations Office on Drugs and Crime, told the British newspaper The Observer that “in many instances, the money from drugs was the only liquid investment capital” available to some banks at the height of the crisis. “Interbank loans were funded by money that originated from the drugs trade and other illegal activities,” he said. “There were signs that some banks were rescued that way.” The United Nations estimated that $1.6 trillion was laundered globally in 2009, of which about $580 billion was related to drug trafficking and other forms of organized crime.

A study last year by the Colombian economists Alejandro Gaviria and Daniel Mejía concluded that the vast majority of profits from drug trafficking in Colombia were reaped by criminal syndicates in rich countries and laundered by banks in global financial centers like New York and London. They found that bank secrecy and privacy laws in Western countries often impeded transparency and made it easier for criminals to launder their money.

At a Congressional hearing  in February, Jennifer Shasky Calvery, a Justice Department official in charge of monitoring money laundering, said that “banks in the U.S. are used to funnel massive amounts of illicit funds.” The laundering, she explained, typically occurs in three stages. First, illicit funds are directly deposited in banks or deposited after being smuggled out of the United States and then back in. Then comes “layering,” the process of separating criminal profits from their origin. Finally comes “integration,” the use of seemingly legitimate transactions to hide ill-gotten gains. Unfortunately, investigators too often focus on the cultivation, production and trafficking of narcotics while missing the bigger, more sophisticated financial activities of crime rings.

Mob financing via banks has ebbed and flowed over the years. In the late 1970s and early 1980s organized crime, which had previously dealt mainly in cash, started working its way into the banking system. This led authorities in Europe and America to take measures to slow international money laundering, prompting a temporary return to cash.

Then the flow reversed again, partly because of the fall of the Soviet Union and the ensuing Russian financial crisis. As early as the mid-1980s, the K.G.B., with help from the Russian mafia, had started hiding Communist Party assets abroad, as the journalist Robert I. Friedman has documented. Perhaps $600 billion had left Russia by the mid-1990s, contributing to the country’s impoverishment. Russian mafia leaders also took advantage of post-Soviet privatization to buy up state property. Then, in 1998, the ruble sharply depreciated, prompting a default on Russia’s public debt.

Although the United States cracked down on terrorist financing after the 9/11 attacks, instability in the financial system, like the Argentine debt default in 2001, continued to give banks an incentive to look the other way. My reporting on the ’Ndrangheta, the powerful criminal syndicate based in Southern Italy, found that much of the money laundering over the last decade simply shifted from America to Europe. The European debt crisis, now three years old, has further emboldened the mob.

IN Greece, as conventional bank lending has gotten tighter, more and more Greeks are relying on usurers. A variety of sources told Reuters last year that the illegal lending business in Greece involved between 5 billion and 10 billion euros each year. The loan-shark business has perhaps quadrupled since 2009 — some of the extortionists charge annualized interest rates starting at 60 percent. In Thessaloniki, the second largest city, the police broke up a criminal ring that was lending money at a weekly interest rate of 5 percent to 15 percent, with punishments for whoever didn’t pay up. According to the Greek Ministry of Finance, much of the illegal loan activity in Greece is connected to gangs from the Balkans and Eastern Europe.

Organized crime also dominates the black market for oil in Greece; perhaps three billion euros (about $3.8 billion) a year of contraband fuel courses through the country. Shipping is Greece’s premier industry, and the price of shipping fuel is set by law at one-third the price of fuel for cars and homes. So traffickers turn shipping fuel into more expensive home and automobile fuel. It is estimated that 20 percent of the gasoline sold in Greece is from the black market. The trafficking not only results in higher prices but also deprives the government of desperately needed revenue.

Greece’s political system is a “parliamentary mafiocracy,” the political expert Panos Kostakos told the energy news agency Oilprice.com earlier this year. “Greece has one of the largest black markets in Europe and the highest corruption levels in Europe,” he said. “There is a sovereign debt that does not mirror the real wealth of the average Greek family. What more evidence do we need to conclude that this is Greek mafia?”

Spain’s crisis, like Greece’s, was prefaced by years of mafia power and money and a lack of effectively enforced rules and regulations. At the moment, Spain is colonized by local criminal groups as well as by Italian, Russian, Colombian and Mexican organizations. Historically, Spain has been a shelter for Italian fugitives, although the situation changed with the enforcement of pan-European arrest warrants. Spanish anti-mafia laws have also improved, but the country continues to offer laundering opportunities, which only increased with the current economic crisis in Europe.

The Spanish real estate boom, which lasted from 1997 to 2007, was a godsend for criminal organizations, which invested dirty money in Iberian construction. Then, when home sales slowed and the building bubble burst, the mafia profited again — by buying up at bargain prices houses that people put on the market or that otherwise would have gone unsold.

In 2006, Spain’s central bank investigated the vast number of 500-euro bills in circulation. Criminal organizations favor these notes because they don’t take up much room; a 45-centimeter safe deposit box can fit up to 10 million euros. In 2010, British currency exchange offices stopped accepting 500-euro bills after discovering that 90 percent of transactions involving them were connected to criminal activities. Yet 500-euro bills still account for 70 percent of the value of all bank notes in Spain.

And in Italy, the mafia can still count on 65 billion euros (about $82 billion) in liquid capital every year. Criminal organizations siphon 100 billion euros from the legal economy, a sum equivalent to 7 percent of G.D.P. — money that ends up in the hands of Mafiosi instead of sustaining the government or law-abiding Italians. “We will defeat the mafia by 2013,” Silvio Berlusconi, then the prime minister, declared in 2009. It was one of many unfulfilled promises. Mario Monti, the current prime minister, has stated that Italy’s dire financial situation is above all a consequence of tax evasion. He has said that even more drastic measures are needed to combat the underground economy generated by the mafia, which is destroying the legal economy.

Today’s mafias are global organizations. They operate everywhere, speak multiple languages, form overseas alliances and joint ventures, and make investments just like any other multinational company. You can’t take on multinational giants locally. Every country needs to do its part, for no country is immune. Organized crime must be hit in its economic engine, which all too often remains untouched because liquid capital is harder to trace and because in times of crisis, many, including the world’s major banks, find it too tempting to resist

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Houston money laundering ring accused of moving $27 million

 

 

By Dane Schille
Houston Chronicle
Federal authorities arrested at least three people as part of a $27 million scheme known as the "Black Market Peso Exchange," which provided professional money-laundering services to drug traffickers through Houston banks.
Specifically, the culprits are charged with using the various Houston accounts to mask drug proceeds as legitimately earned cash, federal prosecutors said.
The banks are not yet named, aside from one involved in a $90,000 wire transfer to buy an airplane later used to shuttle bulk cash.
Those charged so far include Enrique Morales, 42, who lived in Houston and Guadalajara, Mexico, and was arrested upon entering the United States at Laredo; Willie Whitehurst, 44, of Houston; and Sarah Combs, 48, of Dickinson.
The names of other defendants, both in the United States and Mexico, are being kept secret by prosecutors pending their arrests.
Prosecutors claim the ring picked up money from drugs sales in several cities, including Dallas and Charlotte, N.C., and also had that money dropped off at their headquarters in Houston, which they then deposited in banks.
"Professional money launderers are integral to criminal organizations," Assistant U.S. Attorney General Lanny Breuer said Friday in a statement from the U.S. Department of Justice.
"According to the indictment, the defendants enabled dangerous narcotics traffickers to access their ill-gotten gains and evade law enforcement."
Morales was a director for the conspiracy and apparently recruited clients who had large amounts of U.S. dollars they wanted converted to Mexican pesos. He is accused of instructing Whitehurst to travel to various cities to pick up the drug proceeds. Combs was an office manager for the organization at an office at 16215 Westheimer, Suite 107, in Houston.

Funds seized 4 times
None of them could be reached for comment.
The indictment describes four instances last year in which money was seized, including $364,810 by Houston police in April; $350,178 and $319,430 in June; $220,998 by police in North Carolina in August; and $319,430 by police in Georgia in November. It does not name anyone charged or convicted with drug trafficking, or point to any specific trafficking organization.
The $27 million would be a fortune to an individual, but considered small compared to the many billions of dollars a year generated by multinational drug cartels.
Money-laundering prosecutions are rare compared to the number of people charged with trafficking drugs, but they get to the heart of some of the biggest problems for traffickers: where to hide and how to spend their riches without drawing heat.

'Shell companies'
The money-transmitting business operated from October 2009 through September 2011, records show.
Money laundering often involves a complex series of moves aimed at making it difficult to know for sure where earnings originated, as well as make it tough for authorities to prove the funds were gained illegally.
The drug money supposedly was first tucked into bank accounts in the name of "shell companies," owned and controlled by those arrested. The money was then transferred to accounts owned by "retailers" in the United States and Mexico.
In exchange for this, pesos were transferred back into accounts for the defendants' clients.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Fresno men indicted in money laundering and drug trafficking case

A federal grand jury returned an indictment against 41-year-old Joseph Edwin Gable, aka Mike Jones; 41-year-old Elgeron Graves; 52-year-old Vincent Graves; 45-year-old Herman Graves; 43-year-old Damone Kelley; 45-year-old Catatea James; all of Fresno, and 27-year-old Kevin Eugene Spencer Jr. of Roseville.
The indictment charges Gable, Elgeron Graves, Vincent Graves, and Kelley with conspiring to cultivate, distribute and possess with intent to distribute marijuana, distributing marijuana, and possessing marijuana with intent to distribute. Elgeron and Herman Graves are also charged with cultivating marijuana in Fresno County. Gable is charged with structuring cash derived from marijuana trafficking in order to evade currency transaction reporting requirements. Gable, Kelley, James and Spencer are charged with conspiring to launder the proceeds of marijuana trafficking and with several counts of money laundering.
According to court documents, Gable allegedly was in charge of a long-term interstate marijuana-trafficking conspiracy. Some of the marijuana was grown by Elgeron Graves and his brother, Herman Graves, on property leased by Elgeron Graves in Fresno County. The Graves brothers recruited people to obtain California medical recommendations from a local physician for the purpose of growing marijuana, which was in fact being shipped to Alabama, Michigan, Ohio, Georgia, Louisiana, Mississippi, Tennessee, and North Carolina. The Graves brothers also allegedly used a now defunct marijuana dispensary in Fresno as a front business for the interstate shipment of marijuana.
Kelley and Vincent Graves, who is unrelated to the Graves brothers, are alleged to have transported or assisted in the transportation of marijuana to Birmingham, Alabama for distribution through DK Transport, a trucking business owned by Kelley. DEA has already seized a DK Transport semi-tractor trailer valued at $25,000 and equipped with a hidden compartment used to conceal marijuana that was shipped outside of California.
During the course of the conspiracy, Gable allegedly obtained over $600,000 from the sale of marijuana in Alabama and directed the deposit of those funds into bank accounts of friends and relatives in California and Oregon in amounts less than $10,000 in order to avoid IRS reporting requirements. He directed his friends and relatives to withdraw the cash in amounts less than $10,000 and give the money back to him. According to court documents, most of the drug proceeds went through bank accounts maintained by James, an IRS employee and Gable’s half-sister, and Spencer, formerly of Fresno.
“The defendants in this case are alleged to have used California medical marijuana recommendations to camouflage a profitable interstate trafficking network,” said U.S. Attorney Wagner. “Unfortunately, the misuse of California laws on medical marijuana by those who seek to profit from the interstate sale of marijuana for non-medical purposes has become all too common.”
This case is the product of an investigation by the DEA and IRS Criminal Investigation with assistance from the Treasury Inspector General of Tax Administration (TIGTA), U.S. Postal Inspection Service in Birmingham, Ala., the California Highway Patrol, the Fresno County Sheriff’s Office, the Fresno Police Department, and the Madera County Narcotics Enforcement Team (MADNET). If convicted, each drug offense carries a statutory mandatory minimum prison term of five years and a maximum prison term of 40 years, along with a fine of up to $5 million. The money laundering charges carry a maximum prison term of 20 years and a fine of more than $1 million. The structuring charge carries a maximum prison term of 10 years and a fine of up to $250,000. The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt. The defendants are scheduled to appear in federal court in Fresno for arraignment on Tuesday, February 21, 2012 before U.S. Magistrate Judge Gary S. Austin.


Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Colombia says 8 Israelis involved in money laundering and drug trafficking

Local media reports claim Israeli 'former military men' also suspected of money laundering, exploitation of minors. Suspects deny allegations: 'We're legit businessmen' Eight Israelis were arrested in Colombia on suspicion of drug trafficking, money laundering and exploitation of minors, the country's chief prosecutor told local media outlets on Tuesday.

The suspects, who were described in the reports as "former military men," reside in the city of Taganga. According to one of the reports, they are suspected of sexually exploiting teenage girls.

As part of a separate investigation, the suspects are also being questioned about their ties to a local drug trafficking ring. The chief prosecutor noted that the Israeli men were under surveillance during the past year, after arousing the suspicion of local police officers and community leaders. One of the reports claimed that police obtained tape recordings, some in Hebrew, which might incriminate the suspects.

The suspects denied the allegations, claiming that they were legitimate businessmen. In January 2011, Colombia asked Israel to extradite former Israeli army Lt. Col. Yair Klein, who was convicted by a Colombian court and sentenced in absentia to nearly 11 years in prison for training drug-traffickers' assassins in the late 1980s.Klein was convicted in Colombia of criminal conspiracy in 2001 for organizing training by Israeli mercenaries in "military tactics and techniques" including bomb-making for gunmen employed by ranchers and drug traffickers.

Some of the trainees would go on to commit some of Colombia's most heinous massacres. As well, US and British investigations determined two decades ago that Klein was also involved in smuggling 400 Galil assault rifles and 100 Uzi submachine guns bought from Israeli into Colombia in 1989 when his plans to create a mercenary-ran training camp on the Caribbean island of Antigua unraveled. Arrested in Moscow in 2007, Klein spent three years in a Moscow prison on a Colombian extradition request before being freed in November 2010 after the European Court of Human Rights ruled that Colombia could not guarantee his physical safety owing to his poor human rights record.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Mexican drug kingpin Benjamin Arellano Felix pleads guilty to US charges in San Diego

Mexican drug kingpin Benjamin Arellano Felix pleaded guilty Wednesday to racketeering and conspiracy to launder money, avoiding the spectacle of a trial for the leader of a cartel that once smuggled hundreds of tons of cocaine and marijuana into the United States and dissolved bodies of its rivals in vats of lye.
Under an agreement with federal prosecutors, Arellano Felix, 58, can be sentenced to no more than 25 years in prison — a lighter punishment than ordered for lower-ranking members of his once-mighty, Tijuana-based cartel.
Prosecutors agreed to dismiss other charges that could have brought 140 years in prison if he was convicted.
The half-hour hearing was an anticlimactic finish to the U.S. government’s pursuit of one of the world’s most powerful drug bosses during the 1990s. His cartel, with its iron-tight grip on the drug trade along California’s border with Mexico, was portrayed in the Steven Soderbergh film “Traffic” but has struggled in recent years as other cartels have become more ruthless than ever.
Laura Duffy, the U.S. attorney in San Diego who built much of her career on the case, said Arellano Felix will likely spend the rest of his life in U.S. prison but did not elaborate on the reasoning for the plea deal.
“Today’s guilty plea marks the end of his reign of murder, mayhem and corruption, and his historic admission of guilt sends a clear message to the Mexican cartel leaders operating today: The United States will spare no effort to investigate, extradite and prosecute you for your criminal activities,” Duffy said.
Arellano Felix stood attentively in court, acknowledging his guilt as U.S. District Judge Larry Burns recited parts of a 17-page plea agreement. He told the judge that he has been suffering migraine headaches almost daily but that the problem didn’t impair his judgment to accept the plea agreement.
Anthony Colombo Jr., Arellano Felix’s attorney, said his client could be released from U.S. prison in 20 years if credited for time served in this country and good behavior, assuming he gets the maximum 25-year sentence. As a Mexican citizen, he would then be deported to Mexico, where he still has nine years left on a sentence for related crimes.
Colombo said the government may have agreed to the deal to avoid having to bargain with 21 potential government witnesses for reduced sentences in exchange for their testimony. They also may have wanted to avoid a lengthy trial.
“They have to consider years and years of litigation, plus the expense, is avoided by this resolution,” Colombo told reporters.
John Kirby, a former federal prosecutor who co-wrote the 2003 indictment against Arellano Felix, said the case rested entirely on cooperating witnesses, instead of wiretaps or physical evidence. He said those cases weaken over time as witnesses die, get into more trouble or change their minds about testifying.
“This kind of case is based solely on witness testimony, and it slowly disintegrates,” Kirby said. “Maybe from the time when we put it together and now, it’s not such a great case anymore.”
The cost of a trial was unlikely to have influenced prosecutors, Kirby said.
“The government doesn’t care about the expense, the government cares about winning,” he said.
Francisco Javier Arellano Felix, a younger brother who led the cartel after Benjamin was arrested in Mexico in 2002, was sentenced in San Diego to life in prison in 2007, a year after he was captured by U.S. authorities in international waters off Mexico’s Baja California coast. Jesus Labra Aviles, a lieutenant under Benjamin Arellano Felix, was sentenced in San Diego to 40 years in prison in 2010.
Benjamin Arellano Felix was extradited from Mexico in April 2011 to face drug, money-laundering and racketeering charges, one of the highest-profile kingpins to face prosecution in the United States.
The U.S. indictment said Arellano Felix was the top leader of a cartel he led with his brothers, going back to 1986. It says the cartel tortured and killed rivals in the United States and Mexico as it smuggled Mexican marijuana and Colombian cocaine.
“He was the top of the chain,” Kirby said. “The brothers were at the top, and he was at the very top. He had the final say ... He was like the CEO of the operation.”
The cartel began to lose influence along California’s border with Mexico after Arellano Felix was arrested in 2002. A month earlier, his brother, Ramon, called the cartel’s top enforcer, died in a shootout with Mexican authorities.
Benjamin Arellano Felix was incarcerated in Mexico after his 2002 arrest and was later sentenced to 22 years in prison on drug trafficking and organized crime charges.
Arellano Felix also agreed to forfeit $100 million, a figure that will be difficult for the government to collect.
“Whether there is anything out there that (the government) can seize, I don’t know,” Colombo said.
Sentencing was set for April 2.


Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Hezbollah Money Laundering Probe Focuses On Tulsa Car Dealership

Havonnah Johnson,

News 9

The DEA launches an investigation into a multi-million dollar money laundering scheme which starts in Oklahoma and involves Americans helping terrorists.

The scheme begins at used cars lots which are used as a cover for drugs and illegal activity.

Federal agents say it is a complicated scheme to cover the funding of terrorists. It involves 20 states and least 30 used car lots. The investigation is just beginning.

Undercover agents closed in on one used car dealership in Tulsa Friday. It is but one of dozens officials say are involved in a multi-layered money laundering scheme

Fifty-six terrorists groups all over the world are looking for new sources of funding. One of the ways they can find it is through drug sourcing activities.

Here is how it works. Used cars are shipped from the U.S. to several West African countries. After they are sold at a 15- to 20-percent mark-up, the profit goes to Hezbollah. Some money then gets returned to the United States to buy more cars.

In all, 30 domestic companies are being investigated. The red flag for the deal? A small call dealership in Tulsa. Authorities say Ace Auto in Tulsa received more than $20 million in wire transfers.

A joint terrorism task force is looking for more than $480 million dollars from Lebanese institutions.

No one was arrested in Tulsa, but authorities should reveal more in the coming weeks

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Leader of Zapata drug trafficking, money laundering organization convicted

By Jim Kouri,

Public Safety Examiner

Pedro Navarro Jr., of Zapata, Texas, pleaded guilty Thursday before U.S. Magistrate Judge Guillermo Garcia to his roles in distributing marijuana and methamphetamine and then laundering proceeds from those drug sales.

The 36-year old Navarro is the leader of a drug trafficking and money laundering organization operating out of the Zapata, Texas, area from approximately June 2006 through June 2011.

During his plea hearing Thursday, Navarro admitted that between February 2008 and June 2011, he was responsible for transporting numerous shipments of controlled substances from the Zapata area to other parts of Texas and beyond.

Some of these drug shipments were interdicted by law enforcement, including numerous loads of marijuana totaling thousands of kilograms and approximately five kilograms of methamphetamine which was seized in Beasley, Texas, on April 5, 2011.

During his plea hearing, Navarro also confessed to being a member and leader of the drug trafficking conspiracy responsible for these marijuana and methamphetamine loads. In addition to being responsible for transporting drugs, he also admitted he used a residence on Falcon Lake to store the marijuana after it had been smuggled from Mexico into the United States.

This marijuana would normally be ferried across the lake from Mexico at night in small boats, which would pull up to his residence on the lake where individuals would then unload the marijuana. Later, Navarro would then ensure the marijuana was loaded into passenger vehicles at the residence which would be driven to wherever the drugs were destined

Navarro also admitted that he conspired with others to launder money, which represented the proceeds of his drug trafficking. He agreed to transport large amounts of United States currency, which were the proceeds of drug trafficking, from the Zapata area to Mexico, and did so with the intention of promoting the continued operation of his drug trafficking business.

Navarro specifically agreed to help transport this money to Mexico, where it would be given to other members of the drug trafficking and money laundering conspiracies.

These persons provided the drugs which were being trafficked as well as provided them the money in question, thereby ensuring their illegal drug trafficking business would continue in operation. One of the specific loads of money for which Navarro was responsible included approximately $23,425 seized at or near Hebbronville, Texas, on March 9, 2010.

Navarro also used some of the proceeds he made from drug trafficking to build a residence in Zapata. During the course of the drug trafficking conspiracy, the members of conspiracy were responsible for generating proceeds from that activity in the amount of at least $18 million.

Navarro's sentencing date has yet to be scheduled.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Money Laundering Crackdown Flounders in Mexico, But Does it Really Matter?

By Patrick Corcoran

Insight Crime

Despite a gathering consensus around the idea of making financial ops a key part of Mexico's anti-drug strategy, cracking down on money laundering will never be able to make a real impact on organized crime in the country.A series of articles published by the Los Angeles Times last weekend illustrate how Mexican criminal groups use the global system to move billions of dollars from the U.S. to Mexico on an annual basis, with both governments thus far unable to make much of a dent in the illicit flow of cash.

As the Los Angeles Times reports:

Even President Felipe Calderon, who sent the army into the streets to chase traffickers after taking office in 2006, an offensive that has seen 43,000 people die since, concedes that Mexico has fallen short in attacking the financial strength of organized crime.

"Without question, we have been at fault," Calderon said during a meeting last month with drug-war victims. "The truth is that the existing structures for detecting money-laundering were simply overwhelmed by reality."

The report also delivers a series of statistics demonstrating the government's failure to crack down on the proceeds of the drug trade. According to the articles’ authors, the amount of illicit cash seized by Mexican authorities peaked in 2008 at $71.4 million. The figure dropped to less than $60 million in 2009, $24 million in 2010, and the government is on pace to seize just $12 million this year. Estimates of the amount of cash laundered in Mexico run from roughly $10 billion to $45 billion annually, which suggests that in its best year in recent memory, the government was able to seize, at best, no more than 0.7 percent of all the illicit cash in the country.

In light of these statistics, the logical conclusion might be that neither the U.S. nor the Mexican government is doing enough to tamp down on money laundering. However, it’s also worth considering another possibility: the figures are so paltry because anti-money laundering (AML) efforts are exceedingly difficult, which makes it unlikely that AML will ever be a significant tool in the fight against organized crime. Therefore, increasing the government resources dedicated to cracking down on dirty money could divert resources away from more fruitful methods of attacking criminal groups.

The impediments to tracking illicit money were documented for InSight Crime by Alejandro Hope several weeks ago: the small size of the drug trade relative to the economy as a whole -- Mexico’s annual GDP is more than a trillion dollars in nominal terms, and almost $1.6 trillion by purchasing power parity -- makes tracking dirty money akin to searching for a needle in a haystack. Furthermore, the fact that gangsters cannot finance their purchases on credit means that they need to immediately reinvest a high proportion of their revenues to keep themselves in operation. This further reduces the amount of dirty money laundered in the legal economy, and further complicates AML efforts.

Another problem is the size of the informal economy. The IMF, for instance, estimates that 30 percent of Mexico’s economy is informal, and other Latin American nations have a similarly high rate. Such a huge space for cash-only, virtually untraceable transactions offers a ready sanctuary for gangs looking to hide the proceeds of drug sales. Not coincidentally, one of the more significant criminal trends in recent years is gangs like the Zetaa increasingly involving themselves in pirate merchandising.

As the LA Times reported, trade between Mexico and the U.S. provides another avenue for gangs looking to pass illicit cash across the border. But with legitimate commerce between the two nations estimated at $400 billion annually, the playing field will always be tilted toward the gangsters who want to move tens of thousands of dollars at a time.

Even beyond the operational obstacles to cracking down on criminal revenues, there are conceptual problems. Neither Mexico nor the U.S. government has adequately defined the goal of AML: is it to reduce the amount of revenues, or is it to dismantle existing gangs?

If it is merely to reduce the profits, it’s worth noting once again the tiny size of the amounts seized thus far. Is the legislation being proposed going to lead to exponentially larger amounts of dirty cash being seized? The seems an unlikely result. This doesn’t make stricter AML laws a bad idea, but government officials and analysts alike would do well to temper their enthusiasm and weigh the potential benefits against the costs to the legitimate economy.

If the primary goal is to dismantle existing groups, then the question becomes whether AML is successful where other law enforcement tactics -- infiltrating smuggling networks, electronic surveillance, etc. -- fail to bring about a criminal group’s demise. While there may be some isolated instances of this dynamic, they are the exception rather than the rule. In any event, no one arguing for stronger AML provisions is making this case.

An alternative argument for AML laws is that captured criminals and their families should be prevented from enjoying ill-gotten wealth. This may be valid, but it means that attacking dirty money is essentially an after-the-fact, punitive measure rather than the head of the law enforcement spear.

Many analysts point to crackdowns on terrorist financing as evidence of the AML’s potential for organized crime, but there is an important difference between the two: money is a terrorist group’s means to the end, i.e. launching terrorist attacks. Governments do not worry about terrorist groups having large bank accounts, per se, but rather about them being more able to carry out attacks on civilians. AML efforts reduce the ability of terrorist groups to kill civilians, even if they don’t necessarily lead to prosecutions.

The dynamic with organized crime groups is fundamentally different. A large bank account is the end in and of itself for a capo like Joaquin Guzman, alias "El Chapo." Therefore, attacking his assets doesn’t reduce his ability to harm society the way it does for a terrorist boss. If anything, in fact, it does the opposite; a capo could very well compensate for a marginal reduction in his profits by ramping up production of illegal drugs and flooding the market with more merchandise.

Most of the contenders for the 2012 Mexican presidential election --including the overwhelming favorite, Enrique Peña Nieto -- have also paid lip service to the idea that stronger AML efforts are a vital part of the next administration’s security strategy. From the standpoint of politics, this makes sense; calling on the government to go after the criminals’ financial networks sounds determined and serious. But advocates of AML have made little effort to justify what remains a relatively novel and untested approach.

With regard to stopping money laundering, neither the "how" nor the "why" have been fully answered.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at www.launderingmoney.com and on twitter at : http://twitter.com/#!/LaunderingMoney

International banks have aided Mexican drug gangs

 

 

Raul Salinas de Gortari, brother of former President Carlos Salinas de Gortari, used a maze of accounts in New York-based Citibank and other U.S. banks to secretly transfer millions of dollars to Switzerland in the 1980s and '90s, when he was employed as a middle-ranking bureaucrat.

Despite strict rules, some banks have failed to 'know their customer' or ask about the source of large amounts of cash, allowing billions in dirty money from Mexico to be laundered.

By Tracy Wilkinson and Ken Ellingwood,
Los Angeles Times

Money launderers for ruthless Mexican drug gangs have long had a formidable ally: international banks.

Despite strict rules set by international regulatory bodies that require banks to "know their customer," make inquiries about the source of large deposits of cash and report suspicious activity, they have failed to do so in a number of high-profile cases and instead have allowed billions in dirty money to be laundered.

And those who want to stop cartels from easily moving their money express concern that banks that are caught get off with a slap on the wrist.

Banking powerhouse Wachovia Corp. last year agreed to pay $160 million in forfeitures and fines after U.S. federal prosecutors accused it of "willfully" overlooking the suspicious character of more than $420 billion in transactions between the bank and Mexican currency-exchange houses — much of it probably drug money, investigators say.

Federal prosecutors said Wachovia failed to detect and report numerous operations that should have raised red flags, and continued to work with the exchange houses long after other banks stopped doing so because of the "high risk" that it was a money-laundering operation.

Wachovia was moving money on behalf of the exchange houses through wire transfers, traveler's checks, even large hauls of bulk cash, investigators said. Some of the money was eventually traced to the purchase of small airplanes used to smuggle cocaine from South America to Mexico, they said.

"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," U.S. Atty. Jeffrey H. Sloman said in announcing the case last year, hailed at the time by authorities as one of the most significant in stopping dirty money from contaminating the U.S. financial system.

Wachovia paid the $160 million in what is called a deferred-prosecution agreement; no one went to prison, and the fines represented a tiny fraction of the money the bank had filtered. In court documents cited by the U.S. Drug Enforcement Administration, Wachovia acknowledged serious lapses.

In a similar case, another banking giant, HSBC Bank, is being monitored by U.S. regulators after a probe last year focused on bulk cash that the bank's U.S. branch received from Mexican exchange houses, money suspected to be drug proceeds.

One of the regulators, the U.S. Office of the Comptroller of the Currency, said HSBC had "critical deficiencies" in its 2006-2009 reporting of suspicious activities and its monitoring of bulk-cash transfers.

The OCC issued a cease-and-desist order against HSBC, noting, "The bank's compliance program and its implementation are ineffective, and accompanied by aggravating factors, such as highly suspicious activity creating a significant potential for unreported money-laundering or terrorist financing."

After U.S. federal prosecutors issued grand jury subpoenas, some believed that regulators might try to use the HSBC case to set an example and prosecute individual bankers. Instead, HSBC agreed to strengthen its compliance program and has said it is cooperating with investigators, without acknowledging wrongdoing, part of a so-called consent order.

Bryan Hubbard, a spokesman for the OCC, said last month that "OCC examiners continue to monitor actions by the bank to correct deficiencies and comply with that [consent] order."

In Mexico, authorities say they have taken steps to control and monitor money-laundering. Banking regulations in force since 1997 require reporting and canceling of suspicious accounts, and additional measures last year that put limits on dollar deposits in banks further tightened the restrictions.

"We have been able to establish a system of prevention that is quite robust," Jose Alberto Balbuena, head of the Finance Ministry's Financial Intelligence Unit, said in an interview. "We have a much clearer picture today of what dollars are entering the financial system, where they came from, where they are."

The restrictions have also forced traffickers and their launderers to channel more money into other sectors, such as real estate and commerce, avoiding banks altogether. Mexican and U.S. officials are looking to plug those gaps.

Complicity by banks has a deep history that still resonates in Mexico.


U.S. congressional investigators alleged that Raul Salinas' wife personally carried check after check to the bank, where Citibank executives asked no questions — despite rampant rumors that linked Salinas to drug lords, and even when Salinas was held on charges that he masterminded the assassination of a top politician. The Salinases claimed that they were victims of a political persecution, the Justice Department and Switzerland investigated, and there were calls for reform of banking secrecy laws.

No criminal charges of money-laundering or illicit enrichment were filed against Salinas. He is a free and wealthy man today. In 2008, Switzerland, which had frozen his bank accounts, returned most of the money.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney