MEXICO BANKS CHARGED IN DRUG CRIMES MONEY LAUNDERING ALLEGED BY U.S.

The United States yesterday accused three of Mexico's largest banks of
knowingly aiding drug traffickers in laundering hundreds of millions of
dollars in illicit proceeds from the United States 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. In addition to charging three banks with knowingly aiding drug
traffickers, the indictment alleges that officials from 12 of Mexico's 19
largest banking institutions were involved in money-laundering activities.

Treasury Secretary Robert E. Rubin and Attorney General Janet Reno said in
a statement that the indictment, which was unsealed in U.S. District Court
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."

The operation netted only a small fraction of the estimated $40 billion to
$60 billion in illicit drug proceeds reaped from U.S. sales each year, much
of which finds its way to traffickers in Mexico and Colombia. But senior
law enforcement officials said the case provided the best view U.S.
officials have yet had into the increasingly sophisticated world of
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 frozen in the United States and
Europe, officials said.

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
through casinos and promised them dinner and a big party, senior law
enforcement officials said. Most of the arrests were made Saturday night as
the dinners were ending.

No U.S. banks or citizens were indicted and U.S. officials said that
Mexican officials were not informed of the operation even though it
involved three of the nation's largest banks. Reno said that she and other
senior U.S. officials had talked to their Mexican counterparts yesterday
morning to inform them of the operation and that the Mexican government had
promised its "full cooperation."

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 of the money deposited.

In this case, officials said, drug traffickers would collect the drug money
off the streets 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 trafficking.

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 wire-transferred or
hand-delivered to drug traffickers in Mexico.

"By infiltrating the highest level of this 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 told a news
conference. "Today we hurt the drug cartels where it hurts the most, in
their pocket books."

In Mexico, officials from the president's office and the finance ministry
refused to comment. Officials from the three major banks involved said they
were caught by surprise by the allegations and said they would not comment
until they had more details.

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 involved
in the U.S. sting operation. The statement also said that Mexican
authorities already had an arrest order against one of the men charged in
the sting but declined to specify the Mexican charges against him.

In addition to the indictments, the Federal Reserve announced it had issued
temporary "cease and desist" orders suspending the U.S. operations of the
three banks that were indicted, as well as those of Banco Nacional de
Mexico (Banamex), the nation's largest bank; Bital, Mexico's fourth-largest
bank; and Banco Santander, the nation's fifth-largest bank. The order means
the banks have "serious deficiencies in their anti-money laundering
programs," according to a statement by the Federal Reserve. To resume
U.S.-based operations, officials said, the banks will have to implement new
money laundering controls.

Distrust between U.S. and Mexican law enforcement officials has long been a
strain on relations between the two nations, even while commercial
relations are booming -- including the opening of U.S. branches of several
major Mexican banks. Senior Mexican counterdrug officers have been arrested
for aiding and abetting drug traffickers in recent years.

Because of fear of compromising the operation and placing the lives of U.S.
agents in danger, according to Raymond Kelly, the Treasury Department's
undersecretary for law enforcement, information about the investigation
"was not shared with the Mexican government."

The indictment is the first time Mexican banks, as institutions, have been
charged with knowingly helping drug traffickers in the process.

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

Senior 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.

© Copyright 1998 The Washington Post Company

Checked-by: Mike Gogulski