MEXICAN BANKS, BANKERS CHARGED WITH LAUNDERING DRUG PROFITS

WASHINGTON -- Culminating a three-year undercover sting operation described
as the largest drug money-laundering case in American history, a federal
grand jury in Los Angeles on Monday charged three Mexican banks and 26
Mexican bankers with laundering millions of dollars in drug profits. The
indictments were announced here by Treasury Secretary Robert Rubin and
Attorney General Janet Reno, who said that the charges marked the first
time Mexican banks and bank officials were directly linked to laundering
U.S. drug proceeds for the Cali cartel of Colombia and the Juarez cartel of
Mexico. The three Mexican banks that were charged are Bancomer and Banca
Serfin, Mexico's second and third-largest banks, respectively, as well as
Banca Confia, a smaller institution which was recently purchased by
Citibank. Both Bancomer and Banca Serfin have branches in New York and Los
Angeles and could face sanctions by regulators here.

In connection with Monday's indictments, the Federal Reserve Board also
announced on Monday that it was filing civil actions against five banks
with branches in the United States. Besides Bancomer and Serfin, temporary
cease and desist orders were issued against Banco Nacional de Mexico, Banco
Internacional, and Banco Santander of Spain.

It was unclear how an American prosecution against these Mexican financial
institutions would proceed. When pressed at the news conference on Monday,
U.S. officials said that the banks could face civil penalities by banking
regulators.

Dubbed "Operation Casablanca," the investigation, led by the U.S. Customs
Service, resulted in the arrests of 22 bankers from 12 of Mexico's 19
largest banking institutions after they traveled to the United States last
weekend. Arrest warrants for others were issued on Monday. In addition, the
authorities said that over the three-year investigation that they had
seized $35 million in illegal proceeds from drug money, two tons of
cocaine, and four tons of marijuana.

The Mexican bankers who were arrested on Saturday had planned on a much
more celebratory weekend. Undercover agents had used several ruses to lure
them to this country. Some had arrived in San Diego, where they had thought
that they would be attending a banking conference on money laundering.
Others, with whom undercover agents had participated in money laundering
activity, were told to come to a purported casino opening in Mesquite,
Nev., where, they were told, their drug cash would be welcomed.

"By infiltrating the highest levels of the international drug trafficking
financial infrastructure, Customs was able to crack the elaborate financial
schemes the drug traffickers developed to launder the tremendous volumes of
cash acquired as proceeds from their deadly trade," Rubin said on Monday.
Although law enforcement officials stressed that Monday's action failed to
cripple the drug cartels, Reno said that the arrests and seizures disrupted
a major money laundering operation that had served as an engine of the
international drug trafficking trade.

Since its beginning in November 1995, the undercover inquiry was kept
secret from the Mexican government. The first Mexican officials learned of
the investigation was from Reno on Monday when she notified her counterpart
by phone, Mexican attorney general Jorge Madrazo Cuellar. Rubin also
alerted his counterpart, Jose Angel Gurria Trevino, the secretary of
finance and public credit in Mexico. Both pledged to cooperate with the
inquiry, Reno said. Mexican officials were largely taken by surprise by the
indictments and were scrambling to prepare comments late on Monday. Carlos
Gomez y Gomez, the president of the Mexican Bankers Association, said that
the banks would cooperate with U.S. authorities. He said that the bankers
do not expect to see their operations closed in the United States. He said
that the alleged crimes were committed by "individuals. This is not a
systemic practice of Mexican banks."

The authorities said that they found that nearly 100 bank accounts in the
United States had been used by drug traffickers to deposit laundered funds.
On Monday, investigators seized those accounts which, they estimated, held
approximately $122 million.

However, the authorities said that they had not found any evidence that
officials from American banks had been aware of the source of the money
that was transferred from Mexican banks.

The inquiry began after the Customs Office in Los Angeles discovered that
drug cartel members had laundered proceeds from American drug sales in
branches of Mexican banks near the border. The investigation expanded to
include the financial infrastructure of the Cuidad Juarez cartel. On
Monday, warrants were issued for the arrest of the cartel's money manager,
Victor Alcala Navarro, and one of its leaders, Jose Alvarez Tostado, the
authorities said.

The investigation used Customs Service undercover agents who posed as
middlemen between the cartel financial directors and the Mexican bankers,
mostly mid-level executives, who agreed, for a fee of 4 or 5 percent, to
launder the funds. The bankers had established phony accounts and used bank
drafts to dodge money laundering regulations, the authorities said. Raymond
Kelly, the Treasury Department's undersecretary for enforcement, who is
awaiting confirmation as head of the Customs Service, described the case as
"extremely significant" because of the amount of money involved and because
it involved "a systematic scheme to launder money via a large number of
Mexican financial institutions."

A spokesman for Citibank Mexico said that the institution would make no
comment because officials only learned about the indictments on Monday.
Citibank closed the deal to purchase Banca Confia, a mid-sized retail
banking group, on May 11 after months of negotiations.

Checked-by: Mike Gogulski