MEXICAN OFFICIALS BELITTLE DRUG-MONEY STING

Police: The banking commission president says the U.S. is taking the
laundering bust 'out of contex.' Mexico City- Mexican officials sought
Tuesday to belittle the results of a huge U.S. undercover operation that
exposed the laundering of drug money in 12 Mexican banks.

On Monday a federal grand jury in Los Angeles unsealed three indictments
against Mexican bankers and their clients in drug organizations based in
Cali, Colombia, and Ciudad Juarez, Mexico. More than $72 million in drug
proceeds was seized during the three-year undercover operation, which spread
across six countries and involved about 200 agents from the U.S. Customs
Service and other agencies.

Three Mexican banks - Bancomer, Banca Serfin and Banca Confia - were
indicted as institutions. U.S. Justice Department officials said they felt
that the pattern of money-laundering through these banks was so systemic
that it would not be enough to indict individual employees.

The indictments dealt a shock to Mexico, revealing a much easier and more
pervasive movement of narcotics proceeds through the financial system than
Mexican officials have been willing to acknowledge.

The investigation revealed gaping loopholes in U.S. and Mexican laws that
allowed traffickers to move their proceeds relatively easily.

Yet Eduardo Fernandez Garcia, the president of the National Banking
Commission, Mexico's bank regulatory agency, dismissed the indictments as
overblown.

"I didn't like the way the United States authorities announced this,"
Fernandez said in a television interview Tuesday. "They made it seem as
though they were announcing something terribly important. But I think this
has been taken out of context. It seems much more important than it really
is."

Fernandez noted that none of the Mexican bank employees arrested were
top-level executives. Most of the 14 bankers arrested since May 16 were
local managers and executives who worked in Tujuana and Gaudalajara.

Finance Minister Jose Angel Gurria Trevino said that although millions of
dollars passed through the money-laundering scheme, the amounts were not
large enough to pose any risk to the banking system as a whole.

The huge undercover operation exposed connections between several of
Mexico's most important banks and the top financial operator for the Juarez
organization, Jose Alvarez. Alvarez set up a network of willing bankers and
stockbrokers across Mexico and eventually introduced them to undercover
customs agents who were posing as brokers for Colombian drug barons, customs
officials said. Alvarez is still at large.

The operation started in 1995, when customs agents in Colombia were
approached by members of the Cali cartel looking for ways to bring home the
profits from cocaine and marijuana sales in the United States, customs
officials said.

The Colombians introduced the undercover agents to Victor Alcala, Alvarez's
top deputy. As American agents gained the confidence of the Juarez
traffickers, they were contracted to broker millions of dollars in drug
proceeds from sales in Chicago, Miami, Houston, New York and Los Angeles.

"We did not approach any bankers," a customs official said. "They all came
to us." He said the Mexican bankers were all told the money came from drug
transactions.

In the United States, operatives for the Colombian and Mexican drug
organizations collected cash profits from street sales. Undercover agents
then turned the money over to American banks that were cooperating with the
sting, among them Bank of America in Los Angeles.

The U.S. banks then sent the funds by internal wire transfers to fictitious
corporate accounts at banks in Mexico, where bankers converted the funds
into cashier's checks made out to fictitious individuals.

These checks were sent on to Cali drug operatives in Colombia, or stashed
away in secret customs accounts. American officials acknowledged that o
avoid suspicion they completed laundering transactions worth million of
dollars for Mexican and Colombian dealers.

Checked-by: "Rolf Ernst"