Wachovia: Official bank of the Sinaloa Cartel – How sly bankers moved $378 billion for the nastiest of narcos
“This is the biggest money laundering scandal of our time”
By 2005 Martin Woods had realized that something very strange was going on at Wachovia (now under Wells Fargo), the bank he worked for as an anti-money-laundering officer.
Woods had noticed a number of highly suspicious transactions from Mexican currency exchange clients: Travelers checks with sequential numbers and questinoable signatures being deposited in Euros, in much, much larger sums than any benign traveler would ever need to carry. And Woods couldn’t find any information at all on these banking clients. Who were they? And where was their money coming from?
That was a big red flag to Woods. For banks, knowing your clients (especially large ones) is paramount to keeping dirty money out of the system. If banks just took money from every shady character without doing some background snooping, criminals would be their largest source of income.
And yet Wachovia seemed to know nothing at all about these particular patrons. They were essentially faceless.
"It was basic work," Woods told the Guardian in a 2011 interview. "They didn't answer the obvious questions: 'Is the transaction real, or does it look synthetic? Does the traveler's check meet the protocols? Is it all there, and if not, why not?'"
So, in 2006, Woods began submitting suspicious activity reports (SARs) to both the authorities and to his superiors at the Wachivia headquarters in Charlotte, North Carolina. Maybe this was a case of tax evasion? Or fraud of some kind? Surely someone from HR would find this interesting.
However, his superiors proved to be very unhelpful in getting to the bottom of this matter — even though it was their bank’s reputation on the line. Because they knew damn well who was making those deposits in Mexico. Or, at the very least, they had a pretty clear idea who it was: the Sinaloa Cartel; the meanest, most powerful drug organization in Mexico.
It was an under-the-table hustle that would transfer $378 billion through their bank. Laundering all that dirty money for one of the most dangerous criminal organizations on the planet.
Which, is not even remotely legal.
Back in the days of Pablo Escobar, cartels had to keep their cash on hand. They locked it up in vaults, stuffed it into mattresses, crammed it into oil barrels and buried them in the Colombian jungle (many of which are still out there). That was the old way. Now, though, the cartels have wizened up: they invest their dirty money in businesses and technology, in art and in property, thereby “cleaning” it.
But they’re also using banks, like Wachovia. Wachovia was knowingly taking money directly from the cartel and injecting it straight into US circulation — blood money pumped into the wallets and the bank accounts of the American People.
Of course, at the time, there was no way for Woods to know all this. Still, he was pretty certain that something fishy was going on. So he continued to send SARs up the ladder, hoping that someone would start investigating WTF was going on.
But, much to his confusion and dismay, Woods’ superiors essentially told him to cease and desist; telling their own anti-money-laundering officer that he had no legal requirement to investigate money laundering overseas, at another Wachovia branch.
“Their attitude was, 'Why are you doing this?' They should have been on my side, because [I thought] they were compliance people, not commercial people,” Woods recalled. “But really they were commercial people all along.”
While the higher ups at Wachovia weren’t taking Woods seriously, eventually he found someone who would: in 2007 Woods got ahold of the DEA. And unlike his bosses, they actually listened. And they found the story Woods told them very interesting.
That encounter would lead to a full-on investigation by the US Drug Enforcement Administration, the Internal Revenue Service, Federal Reserve and the office of comptroller of currency in Washington DC. And what that investigation revealed should have shaken the banking industry to its core.
As it turned out, Wachovia was providing three main services for their cartel clients: wire transfers, a ‘bulk cash service’ and a ‘pouch deposit service’ to accept things like checks and traveler's checks (which was what tuned Woods into the problem in the first place).
In total, Wachovia processed $378.3 billion from the Sinaloa cartel. Wachovia cleaned all of that blood money for them like a laundromat, legitimizing their revenue and not only treating those criminals like lawful and respected customers, but protecting them against inquisitive eyes, like Woods'.
“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?’” Woods asks. “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.”
Which is the real nut of this whole issue: by taking the Sinaloa cartel’s money, Wachovia was fueling the insane violence that they perpetuate. Woods called this the biggest money laundering scandal of our time.
And in the end, nothing was done about it. Criminal proceedings were brought against Wachovia, but the bank was let off with a slap on the wrist. No one went to jail. They were fined $110 million in forfeiture, and $50 million for “failing to monitor cash used to ship 22 tons of cocaine.” Then, Wachovia was acquired by Wells Fargo in 2008 — who, to twist the knife, American taxpayers ended up bailing out that very same year.
There was no regulatory change, though. No rules put in place to prevent it from happening again. The banking loopholes that allowed Wachovia to do this are still gaping and likely, still being taken full advantage of.
“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,” Woods says. “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.”