DRUG-MONEY STING NETS MEXICO BANKS

The U.S. government yesterday accused three of Mexico's largest banks of
knowingly laundering millions of dollars in proceeds from illicit drug
sales in the U.S. and painted a grim picture of the Mexican financial
sector's complicity in the drug trade.

In an indictment, the government said the banks were charged after a
three-year sting operation in which about 200 undercover U.S. Customs
agents helped Mexican bankers launder millions of dollars through an
elaborate scheme of shuffling the money between U.S. and Mexican bank
accounts. The indictment also alleges that officials from 12 of Mexico's 19
largest banking institutions were involved in money laundering.

Treasury Secretary Robert Rubin and Attorney General Janet Reno said in a
statement that the indictment, unsealed yesterday in Los Angeles, was the
culmination of "the largest, most comprehensive drug-money-laundering case
in the history of U.S. law enforcement, representing the first time Mexican
banks and bank officials have been directly linked to laundering . . . U.S.
drug profits."

Senior law-enforcement officials said the case provided the best view U.S.
officials have yet had into drug-related money laundering.

The Mexican bankers allegedly worked on behalf of the Juarez cartel in
Mexico and the Cali cocaine and heroin syndicate in Colombia, officials
said. U.S. authorities arrested 70 people over the weekend in connection
with the scheme, including 14 Mexican banking officials.

About $35 million was seized immediately, and an additional $122 million is
expected to be recovered from more than 100 bank accounts in the United
States and Europe, officials said. Illicit drug proceeds from U.S. sales
are estimated at $40 billion to $60 billion a year.

Most of those arrested were lured to either Las Vegas or Los Angeles by
undercover agents who offered to show them new ways to launder money and
promised them dinner and a big party, senior law-enforcement officials
said. U.S. officials said Mexican officials were not informed of the
operation.

Money laundering is the process whereby criminals take their illegal
proceeds and put them into the financial sector in different ways so the
money appears to have a legitimate origin. For their services,
law-enforcement officials said, the banks received a cut of between 4
percent and 5 percent.

Officials said drug traffickers would collect the drug money in the United
States, and undercover agents would then deposit the money into accounts in
Los Angeles. The money was then transferred by wire and accumulated in
Mexican bank accounts, where bankers allegedly were aware the money came
from drug sales.

Mexican bankers then issued bank drafts under fictitious names and mailed
or hand-delivered the drafts to undercover agents in Los Angeles, who
redeposited the money into the accounts. Because the money appeared as
"clean" deposits from Mexico, it could be transferred to drug traffickers.

In Mexico, officials from the three major banks involved said they were
caught by surprise by the allegations.

Carlos Gomez, president of the Mexican Bankers Association, said, "These
are operations from some employees and officials acting in an individual
way, and it doesn't represent any systematic operations of the banks
themselves."

The Mexican attorney general's office said in a statement issued last night
that it would launch its own investigation into the Mexican banks.

Rubin said three banks were indicted: Bancomer, Mexico's second-largest
bank; Banca Serfin, Mexico's third-largest bank; and Confia, also among the
top 20 banks.

Law-enforcement officials said the banks were indicted because of the high
number of illegal transactions at each, the large number of employees aware
that the money in the accounts was from drug trafficking, and because the
institutions, and not just individuals, profited from the money laundering.

The Federal Reserve also cited three other banks, Banco Nacional de Mexico,
the nation's largest bank; Bital, Mexico's fourth-largest bank; and Banco
Santander, the nation's fifth-largest bank, as having "serious deficiencies
in their anti-money-laundering programs."