Mexico: foreign banks investigated in drug money laundering

The US Senate is expected to issue a report on July 17 about international money laundering through the London-based corporation HSBC, Europe’s largest bank; much of the focus is reportedly on the laundering of drug money through the group’s Mexican subsidiary, HSBC Mexico. The US Justice Department is also investigating, and the bank is expected to end up paying a fine of more than $1 billion, both for the Mexican operation and for HSBC’s business activities with parties in Iran, in violation of US trade sanctions against that country.

The Reuters wire service reports that it has reviewed documents showing that “US law-enforcement agencies have examined Mexican money that moved from [Mexican] exchange houses, known as casas de cambio, into the HSBC banking system” and that “[t]he transactions were tied to laundered drug proceeds.” The HSBC subsidiary is one of Mexico’s five largest banks. The country has 42 banking companies, but the top five hold 70% of the assets; four of them are owned by foreign companies, a result of neoliberal measures in the 1990s that opened Mexican banking up to foreign investment.

Mexico’s government has introduced measures to control money laundering, but according to the US State Department’s 2012 International Narcotics Control Strategy Report, drug money continues to flow back and forth between Mexico and the US, in part because of the “combination of a sophisticated financial sector and a large cash-based informal sector” in Mexico. In addition to laundering money into the US banking system through exchange houses in Mexico, the drug cartels also ship drug sale proceeds from the US into Mexico, mostly “via couriers, armored vehicles, and wire transfers,” the report says. US authorities estimate that “drug trafficking organizations send between $19 and $39 billion annually to Mexico from the United States.” The Mexican government disputes the number. (La Jornada, Mexico, July 14, from Reuters, July 15, from staff; Reuters, July 14, via Latinos Post)

(Much of the drug money remains in the US. A United Nations official reported in 2010 that the majority of the gross profits from cocaine sales never leave the US)

Until now the largest case of money laundering by Mexican cartels through a foreign-owned bank involved the Wachovia Corporation of Charlotte, North Carolina, which was acquired in 2008 by Wells Fargo & Company. In 2010 Wachovia paid the US $160 million in penalties for allowing $378.3 billion to pass from Mexican exchange houses into its system from 2004 to 2007 without adequate safeguards against money laundering. As of 2011 investigators said about $20 billion of this money appeared to have “suspicious origins.” Some of the money that passed through Wachovia was used to buy a DC-9 airplane the Mexican military intercepted in April 2006 in Ciudad del Carmen, Campeche; it was carrying 5.7 tons of cocaine. (The Guardian, UK, April 2, 2011)

From Weekly News Update on the Americas, July 15.

See our last post on Mexico.