MEXICANS STUNNED BY US DRUG ARRESTS

The Mexican government, stunned by revelations that the country's biggest
banks are involved in laundering drug money, yesterday promised "full
co-operation" with Operation Casablanca, the United States' massive
anti-drugs sweep which has netted more than 130 suspects so far. More
arrests are said to be imminent.

Jose Angel Gurria, the finance minister, said: "The Mexican authorities
will do everything to punish those guilty of committing crimes in Mexican
territory, as well as to continue the fight against this part of the
drug-trafficking chain."

The statement came a day after the US charged staff from some of Mexico's
biggest banks with involvement in laundering US drug profits reaped by
Colombian and Mexican drug lords.

Twenty-two middle-ranking Mexican bankers were held at the weekend after a
three-year operation, about which the Mexican authorities were never informed.

According to the US attorney-general, Janet Reno, and the treasury
secretary, Robert Rubin, another 112 people had been arrested and $35
million (£24 million) seized, along with two tonnes of cocaine and four
tonnes of marijuana.

It was not only the most extensive operation mounted against the
money-launderers but the first in which Mexican bankers had been shown to
be "directly linked to laundering the Cali and Juarez cartels' drug
profits", the US said.

At least another 40 arrests are anticipated, along with the seizure of
another $110 million in US accounts held by Mexican banks.

Among the banks whose employees are involved are Bancomer, Serfin and
Confia, all of whose US operations are now under official supervision.
Confia has just been bought by Citibank, itself the subject of a separate
money-laundering inquiry.

Despite the much-vaunted co-operation between US and Mexican authorities in
combating the cartels, the Mexican government - as well as the banks
concerned - were kept in the dark, in what amounts to a resounding vote of
no-confidence.

No mention was made of Operation Casablanca at any of the meetings of the
"high-level contact group" set up over two years ago to co-ordinate
anti-drugs operations between the two countries.

The Mexican attorney-general's office, the leading anti-drugs agency here,
was reduced to repeating the information made public in Washington and
expressing its supposed "satisfaction" at the news.

The bomb dropped just as the Mexican congress was beginning to react to the
$63 billion cost of rescuing the recently privatised banks from
irresponsible lending policies and fraudulent operations.

The bankers themselves, whose public image is not much better than that of
the drug traffickers, responded to the news from Washington by minimising
its significance and promising to co-operate.

"We have unanimously decided to co-operate with the US authorities in
following up this investigation, in co-ordination with the Mexican
authorities," the chairman of the bankers' association, Carlos Gomez y
Gomez, said.

Philip Willan in Rome adds: Five people were arrested in the Italian end of
Operation Casablanca after Carabinieri in the northern city of Bergamo
posed as financiers willing to participate in money-laundering operations
on behalf of the Colombian drug cartels, said Pierluigi Dell'Osso, a
prosecutor at the National Anti-Mafia Prosecutor's Office in Rome who
helped to co-ordinate the inquiry.

Three major Italian banks and three Milanese goldsmiths are under
investigation in connection with the alleged money-laundering.

Checked-by: Mike Gogulski