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Apr-27-2008Wachovia faces money-laundering probe: report(topic overview)
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WASHINGTON -- Federal prosecutors are investigating Wachovia Corp. as part of a broad probe of alleged laundering of drug proceeds by Mexican and Colombian money-transfer companies, according to people familiar with the matter. Wachovia is one of several large U.S. banks that have come under scrutiny for their relationships with such companies. It is in discussions with the Justice Department about reforms in its compliance system and faces a possible deferred-prosecution agreement that would require extensive federal oversight. [1] CHICAGO (Reuters) - Wachovia Corp (WB.N: Quote, Profile, Research ) is being investigated by federal prosecutors as part of a probe into alleged laundering of drug proceeds by Mexican and Colombian money-transfer companies, The Wall Street Journal reported on Saturday.[2] Federal prosecutors are investigating Wachovia as part of a broader probe of alleged money-laundering by Mexican and Colombian money-transfer companies, The Wall Street Journal reported Saturday, citing people familiar with the matter.[3]
April 26 (Bloomberg) -- Wachovia Corp. is one of several U.S. banks under federal investigation as part of a probe of alleged drug-money laundering by Mexican and Colombian money- transfer companies, the Wall Street Journal reported, citing people familiar with the probe.[4] April 26 (Bloomberg) -- Wachovia Corp.' s business practices drew scrutiny for the second time in as many days after a report that the bank has been ensnared in a federal probe of drug-money laundering tied to Mexican and Colombian transfer companies. The Wall Street Journal reported today that Charlotte, North Carolina-based Wachovia is one of several large U.S. banks that have drawn the attention of federal authorities for their relationships with remittance companies.[5]
WASHINGTON (AFP) — U.S. justice authorities are investigating Wachovia Corp, one of the top five U.S. banks, as part of a probe into Latin American drug money laundering, the Wall Street Journal reported Saturday.[6] The Wall Street Journal says Wachovia Corporation is part of a Justice Department probe into Latin American drug money laundering. It says agents have seized more than $US11 million in 23 Wachovia accounts that belong to Mexican money exchange chain Casa de Cambio Puebla.[7] The Wall Street Journal reports the U.S. Department of Justice is investigating drug money laundering through hundreds of money transfer businesses, known as "casas de cambio", that mostly handle remittances to Latin American countries by workers inside the United States. It says the remittance businesses process about $US50 billion a year.[7]
U.S. authorities suspected the money was the laundered funds of a drugs syndicate. The probe into Wachovia is part of a larger investigation into money laundering by drug cartels through the money transfer firms that involves both U.S. and Mexican authorities. The Journal said both Union Bank of California and American Express Bank International have paid authorities multi-million-dollar penalties as part of laundering investigations and charges that they fail to implement effective anti-money-laundering programs. Phillips-Brown said that late last year Wachovia decided to exit its business with the casas de cambio, which she termed "a corporate decision."[6] The Journal reported an unnamed Wachovia official saying the company was cooperating with an investigation. The Journal said Wachovia was one of several large U.S. banks to face scrutiny for their relationships with money-exchange houses on the U.S.-Mexican border. The companies help workers remit money across the border, but the Journal said federal agents and prosecutors are concerned that they're used to launder proceeds from illegal drugs. Banks have provided these companies with lines of credit and processing services. Wachovia said it stopped doing business with these companies last year.[3]
The probe is related to the alleged laundering of drug revenue by Mexican and Colombian money-transfer companies, the report said. Wachovia is one of several large banks that officials have investigated because of relationships with such companies, according to the report. Wachovia and "some other" U.S. banks cut off their ties to Mexican foreign-exchange companies in December and January following inquiries in the government's investigation, the report added.[8] An official of Wachovia said it is cooperating in the probe. Wachovia, based in Charlotte, N.C., and some other U.S. banks severed relationships with Mexican foreign-exchange firms in December and January after authorities began their inquiries. Some have struck agreements with the government to improve their efforts to fight money laundering, avoiding prosecution. The remittance industry transmits more than $50 billion from the U.S. to Latin America annually, mostly legitimate wages from immigrants caring for their relatives.[1]
A Wachovia ( WB, Fortune 500 ) official said the bank is cooperating in the probe, which is also scrutinizing several other large U.S. banks, according to the newspaper. The bank severed its ties to these money transfer firms in December and January, when the investigation began. The industry charges high fees to transfer these funds.[9]
NEW YORK - Prosecutors at the U.S. Justice Department are investigating Wachovia Corp, the fourth largest U.S. bank, as part of a broader probe involving links to alleged drug laundering activities involving Latin American countries, according to a report. Get stories by e-mail on this topic.[10] The status of Wachovia's talks with federal prosecutors about a possible deferred-prosecution agreement couldn't be learned. In a such an agreement signed with Union Bank of California in September, the Justice Department faulted the bank for "failing to maintain an effective anti-money-laundering program" and failing to report suspicious money-transfer activities. The case detailed how two since-jailed drug suspects used accounts of Ribadeo Casa de Cambio to transfer millions of dollars in alleged drug proceeds. Federal prosecutors identified $295 million in transfers from various Union Bank accounts to their account, with only $29 million being repaid.[1] Separately, the U.S. Office of the Comptroller of the Currency said yesterday that Wachovia, the nation's fourth- largest bank by assets, will pay as much as $144 million to settle claims that poor oversight allowed telemarketers and payment processors to withdraw millions of dollars from customers' accounts. "It's pretty striking that Wachovia would face this kind of pretty bad publicity for two straight days,'' Carl Tobias, professor of law at the University of Richmond, said in an interview today. Wachovia is talking with the U.S. Justice Department about a deferred-prosecution agreement that would require federal oversight of its compliance system, the Journal reported. Wachovia spokeswoman Christy Phillips Brown denied that such talks were taking place. "Wachovia is not currently nor has it in the past engaged in those discussions,'' she said in a telephone interview today.[5] The bank is talking with the U.S. Justice Department about a deferred-prosecution agreement that would require federal oversight of the Charlotte, North Carolina-based company's compliance system, the Journal said. "Wachovia is not currently nor has it in the past engaged in those discussions,'' Wachovia spokeswoman Christy Phillips- Brown told Bloomberg News in a telephone interview.[4]
The Journal reported that the Charlotte bank was discussing a possible deferred prosecution agreement with the Justice Department -- a point disputed Saturday by a Wachovia spokeswoman as "not true." "Wachovia is not currently and has not in the past been engaged in any such discussions," Wachovia spokeswoman Christy Phillips-Brown said. She said the bank does not comment on the status or existence of government investigations and did not do so to the Journal "as implied" in its story.[3] Bank spokesperson Christy Phillips-Brown refused to confirm or deny any investigation, saying the bank "does not comment on the status or existence of government investigations". She says Wachovia is committed to maintaining a strong anti-money laundering programme. She also says the statement in the article that Wachovia is discussing a deferred prosecution agreement with the Justice Department is not true. "Wachovia is not currently and has not in the past been engaged in any such discussions." Ms Phillips-Brown says Wachovia decided late last year to exit its business with the casas de cambio.[7]
The government's latest assault on drug-money laundering focuses on casas de cambio, or money-exchange houses, which dot the U.S.-Mexico border to facilitate workers' remittances and other cross-border transfers. Wachovia built up its ties to casas de cambio as a way to tap the Hispanic market, which doesn't always bank through traditional Main Street outlets.[1]
According to filings made in court in Miami, in May of last year the U.S. government froze more than $11 million in assets deposited in 23 accounts at Wachovia tied to a Mexican exchange house called Casa de Cambio Puebla.[10] In a case in U.S. court in Miami, federal agents seized more than $11 million in 23 Wachovia accounts belonging to Casa de Cambio Puebla, a Mexican chain. U.S. and Mexican prosecutors said they believed the money was being laundered, according to legal papers filed by Puebla.[1] Court papers show federal agents seized more than $11 million in 23 Wachovia accounts belonging to Casa de Cambio Puebla, a Mexican foreign exchange chain, alleging the money belonged to a drug cartel.[11]
"Internal emails and documents filed in federal courts in Miami, Chicago and New York describe former ties between Wachovia and money-changing firms," the Journal said. It said Miami court documents show that U.S. agents have seized over 11 million dollars in 23 Wachovia accounts that belonged to the Mexican chain Casa de Cambio Puebla.[6] In a case in federal court in New York and Chicago, Wachovia is suing to retrieve $38 million from a firm called Majapara Casa de Cambio.[1]
The bank has sued one of the firms, Majapara Casa de Cambio, to retrieve $38 million, according to the Journal.[3]
Federal prosecutors are investigating the alleged role of some remittance firms, known as casas de cambio, in money laundering by narcotics traffickers, according to the Journal.[5] The bank is being investigated by prosecutors as part of a probe into alleged drug money laundering by Mexican and Colombian money-transfer companies, according to the Wall Street Journal.[9] The investigation is "part of a broad probe of alleged laundering of drug proceeds by Mexican and Colombian money-transfer companies," according to The Wall Street Journal (subscription required). Several companies with accounts that have been seized claim to be legitimate businesses and that if they cannot get at their funds, they may go out of business.[12]
The Wall Street Journal report about Wachovia came one day after it agreed to pay $US144m in fines and claims after an investigation into telemarketing fraud that involved the use of Wachovia accounts. Earlier this month the bank posted a quarterly loss of $US393m. [7] The report, in Saturday's Wall Street Journal, cited people familiar with the matter. It said Wachovia is talking to the Justice Department about reforming its compliance system and faces a possible deferred-prosecution deal that would give the government significant oversight of the bank.[8] Federal prosecutors and the bank are discussing reforms for its compliance system and the bank also faces possible a deferred-prosecution agreement which would require federal oversight, the Wall Street Journal reported on Saturday, citing people familiar with the matter.[10]
"Internal emails and documents filed in federal courts in Miami, Chicago and New York describe former ties between Wachovia and money-changing firms," The Wall Street Journal says.[7]
Saturday's report was the latest round of bad news for the nation's No. 4 bank by assets. Earlier this month, Wachovia reported a first-quarter loss, cut its dividend and raised $8 billion in new capital as it reels, like many banks, from rising loan losses and writedowns from mortgage-related investments. On Friday, the bank reached a settlement with federal regulators that could total $144 million in restitution and other penalties over its relationship with third-party telemarketers.[3] The probe comes on top of other recent problems for Charlotte, N.C. -based Wachovia. The bank agreed to pay as much as $143.9 million in restitution and penalties to end an investigation into telemarketers who allegedly used their relationships with Wachovia to steal money from individuals.[8]
Wachovia WB is being investigated by federal prosecutors as part of a larger probe of alleged laundering of drug money, according to a published media report.[8] CHARLOTTE, N.C., April 26 (UPI) -- U.S. investigators are looking into the role of Wachovia Corp. in an alleged money laundering scheme involving Mexican and Colombian drug money, officials said.[11] Wachovia is one a several large U.S. banks being examined for relations with Mexican and Colombian money-transfer and foreign exchange firms directly involved in the laundering, the Journal said.[6] Wachovia is one of several large banks being investigated for relationships with the money-transfer companies, the Journal said.[2]
Phillips-Brown refused to confirm or deny any investigation, saying the bank "does not comment on the status or existence of government investigations and did not comment for the Journal article as implied in the story." "Wachovia is committed to maintaining a strong anti-money laundering program," she added.[6] A spokeswoman for Wachovia, Christy Phillips-Brown, said, "Wachovia is committed to maintaining a strong anti-money-laundering program." The investigation is the latest headache for the North Carolina bank, which has also been pressured by the credit turmoil and fallout from its 2006 acquisition of a California home lender. Wachovia recently cut its dividend and raised $8 billion in capital to shore up its financial state.[1]
Wachovia, the court papers filed by Majapara said, provided "largely unsecured credit well in excess of $100 million on any given day." Majapara said that it previously gave its business to several banks, but that in February 2007, after Wachovia extended its large credit facility, it transferred virtually all of its business to Wachovia.[1] Regulators said on Friday that Wachovia has agreed to pay as much as $144 million to settle allegations it failed to help consumers who fell prey to schemes operated by telemarketers that maintained accounts at the bank. Wachovia this month posted a surprise first-quarter loss as credit problems from mortgages and other debt soared.[2] The probe comes at a difficult time for the bank, which announced on Friday that it will pay $144 million to settle federal charges that it failed to stop telemarketers from taking advantage of thousands of elderly consumers. On April 14, the North Carolina-based bank posted a $350 million loss in the first quarter - its first quarterly loss since 2001.[9] The bank forfeited $55 million. Its Miami branch was being used to launder drug profits, according to federal prosecutors.[1]
In 2005, it introduced the Dinero Directo card to facilitate cross-border remittances. The bank pushed into the business despite well-publicized concerns from U.S. law enforcement that such firms were sometimes used to launder drug money. Wachovia declined to discuss why it pursued this business despite the warnings.[1] The remittance industry transmits more than $50 billion from the U.S. to Latin America annually, the Journal said. Most of the money involves wages being sent to relatives, although drug traffickers may use the system to move proceeds from their U.S. narcotics sales.[4] The companies transmit an estimated $50 billion a year to Latin America, mostly wages earned by immigrants to the U.S. The Journal cited unidentified people familiar with the probe.[5]
The Journal said, remittance outfits can also be used by narcotics traffickers seeking to move the proceeds of drug sales between the U.S. and Latin America.[9]
The Journal also said the bank is possibly facing a deferred-prosecution agreement with the U.S. Department of Justice that would subject it to "extensive federal oversight."[6] "The statement in the article that Wachovia is discussing a deferred prosecution agreement with the Justice Department is not true," spokeswoman Christy Phillips-Brown told AFP. "Wachovia is not currently and has not in the past been engaged in any such discussions," she said.[6]
The Department of Justice is investigating drug-money laundering through the hundreds of money-transfer businesses -- known in Spanish as casas de cambio -- around the country that mostly handle remittances to Latin American countries by workers inside the United States.[6] The investigation involves casas de cambio or money-exchange house, which allow people to send remittances abroad. In its ties to exchange houses, Wachovia held deposits and provided financial services.[10] Wachovia held deposits belonging to foreign-exchange houses and provided back-office services to the businesses known as casas de cambio.[11]
As early as the mid-1990s, U.S. regulators and drug investigators were warning U.S. banks that Mexican casas de cambio presented a significant money-laundering risk.[1]
The open question is whether Wachovia employees knew about the transactions. It is hard to imagine a well-run bank like Wachovia would be involved in such blatant aid to drug operations from outside the U.S. Perhaps that is why its shares are down almost 50% this year.[12]
Internal emails filed in court show Wachovia executives alerting Majapara officials that "Bulk Cash deposits will not be accepted or collected after Dec. 20, 2007." In response to Majapara's assertion that the bank summarily terminated the relationship, Wachovia's Ms. Phillips-Brown said, "Their claims are without merit."[1] Wachovia contends, among other things, that Majapara was "engaged in illegal loans." Lawyers for Majapara said in court papers that it is on the verge of bankruptcy, in part because Wachovia cut off the banking relationship, even though there was nothing illicit about its business.[1]
There are reports U.S. authorities are investigating America's fourth largest bank, which has a business relationship with the New Zealand grid operator. [7] Investors have complained about the bank's decision to pay more than $24 billion for Golden West Financial Corp. in 2006 just before the U.S. housing boom peaked. At its annual meeting on April 22, Chief Executive Officer Kennedy Thompson faced an hour of questions from shareholders and demands for his resignation.[5] Golden West was a leading issuer of so-called option adjusted rate mortgages (ARMs) - loans that give borrowers the right to pay less than the full bill. Wachovia boosted its reserve for possible loan losses on Golden West's portfolio, valued at roughly $120 billion, to $1.1 billion, as late payments nearly doubled to 3.1% of the loans.[9] Wachovia took a $2 billion charge for "market-disruption" losses in the quarter, and also signaled difficulties with Golden West Financial, which Wachovia acquired in 2006 for $24.6 billion.[9]
Wachovia has also suffered from the fallout of the subprime-mortgage meltdown. Its 2006 purchase of Golden West Financial gave it significant mortgage exposure, and it recently had to raise $8 billion in capital to bolster its financial position.[8] The report "couldn't come at a worse time because of the problems Wachovia is having,'' said Ken Thomas, a Miami-based banking consultant. Wachovia sold $8 billion of stock and cut its dividend this month after writedowns of mortgage-backed securities and bad home loans in California triggered the first quarterly loss since 2001.[5]
The news about Wachovia came one day after it agreed to pay 144 million dollars in fines and claims after an investigation into telemarketing fraud that involved the use of Wachovia accounts. [6] An official of Charlotte, North Carolina-based Wachovia, the country's fourth largest banking firm, said the company is cooperating with the investigation, the newspaper said. The Journal did not identify the Wachovia official and it attributed its information about the investigation to "people familiar with the matter."[2] Wachovia developed ties to remittance firms as a way of tapping the Hispanic market, the Journal said.[5] The remittance business processes about 50 billion dollars a year, the Journal said.[6]
I don't see what's so hard to imagine. it wasn't long ago that Wachovia was also involved in some way to be laundering money and /or doing business with muslim terrorists. [12] The Feds are looking into whether drug money was laundered by Wachovia (NYSE: WB ).[12]
The newspaper said Wachovia and the other banks severed ties with the Mexican foreign-exchange firms in December and January after inquiries began.[11] In a recent affidavit, a U.S. representative for Majapara said that Wachovia had provided the Mexican firm with lines of credit, overdraft privileges and remittance-processing services.[1]
Last August, American Express Bank International, a unit of American Express Co., entered into a federal deferred-prosecution agreement on charges of failing to maintain an effective anti-money-laundering program. [1] Prosecutors faulted Union Bank for failing to corroborate the legitimacy of the transfers.[1] According to prosecutors, the bank failed to catch the large volumes of traveler's checks, bulk cash deposits and wire transfers structured to fall below limits requiring reporting.[1]
SOURCES
1. Wachovia Is Under Scrutiny In Latin Drug-Money Probe - WSJ.com
2. Wachovia part of probe into Latin drug money: report | Reuters
3. Charlotte Observer | 04/27/2008 | Federal inquiry looks at Wachovia
4. Bloomberg.com: Worldwide
5. Bloomberg.com: Worldwide
6. AFP: Wachovia probed over drug-money laundering: report
7. Radio New Zealand News : Latest News : 200804271804 : Transpower not worried by Wachovia investigation
8. Report: Prosecutors Look at Wachovia in Money-Laundering Probe | Banks | WB - TheStreet.com
9. Feds look at Wachovia in drug money probe - Apr. 26, 2008
10. U.S. Probes Wachovia Over Links to Alleged Money Laundering: Report - International Business Times -
11. Wachovia caught in money-laundering probe - UPI.com
12. A little drug money laundering at Wachovia? - BloggingStocks
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