Wachovia’s Dirty Money

Is turning a blind eye to your customers’ illegal activities a crime? Apparently so. Wachovia entered a deferred prosecution agreement with federal authorities in Miami this week, agreeing to pay $160 million to settle claims that it willfully failed to establish an anti-money laundering program. The bank failed to effectively monitor for potential money-laundering activity on more than $420 billion in financial transactions with currency exchange houses, or “casas de cambio”, according to a news release by U.S. Attorney Jeffrey Sloman. An investigation into the transactions with CDC’s revealed that Wachovia knowingly failed to identify, detect and report suspicious transaction in third-party payments processor accounts. Not only were Wachovia’s actions irresponsible, but they were actively harmful, providing liquidity to drug cartels in Mexico.

According to court documents, Wachovia was aware, as early as 1996 and through 2004, that high risk drug money was being laundered through CDC’s in Mexico. Wachovia was also aware that other banks had stopped doing business with the CDC’s, however the bank continued to expand its business with the shady exchange houses and providing correspondent banking services to them, including wire transfers, bulk cash, pouch, and remote deposit capture services. In plain English, Wachovia allowed the CDC’s to wire drug money to recipients all over the world and physically transported large sums of money to the U.S. for deposit. These funds were used to purchase airplanes for narcotics trafficking, from which over 20,000 kilograms of cocaine were seized.

Other agencies involved in the case are the attorney general’s office, U.S. Drug Enforcement Administration, U.S. Department of Justice, Internal Revenue Service, Florida Controller’s Office and the Federal Financial Crimes Enforcement Network (FinCEN). While the federal indictment alleged that Wachovia violated the Bank Secrecy Act (BSA), criminal charges are being deferred as long as Wachovia continues to cooperate and implement remedial actions.

Sloman, called the bank’s actions “blatant disregard for our banking laws” by giving international cocaine cartels a virtual carte blanche to finance their operations. As Wachovia merges into Wells Fargo Bank later this month, they have to be wondering if this acquisition was worth the soiled name they are bringing to their business.