BANKING FRAUD

Bank fraud  

is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently representing to be a bank or financial institution. In many instances, bank fraud is a criminal offense. While the specific elements of a particular banking fraud law vary between jurisdictions, the term bank fraud applies to actions that employ a scheme or artifice, as opposed to bank robbery or theft. For this reason, bank fraud is sometimes considered a white-collar crime.

Bank impersonation

Fraudsters may set up companies with names that sound similar to existing banks, or assume titles conferring notability to themselves for plausibility, then abscond with the deposited funds.

Stolen checks

Some fraudsters obtain access to facilities handling large numbers of checks, such as a mailroom or post office or the offices of a tax authority (receiving many checks) or a corporate payroll or a social or veterans' benefit office (issuing many checks). A few checks go missing; accounts are then opened under assumed names and the checks (often tampered or altered in some way) deposited so that the money can then be withdrawn by thieves. Stolen blank checkbooks are also of value to forgers who then sign as if they were the depositor.

Cheque kiting

Cheque kiting exploits a system in which, when a cheque is deposited to a bank account, the money is made available immediately even though it is not removed from the account on which the cheque is drawn until the cheque actually clears.

Forgery and altered cheques

Thieves have altered cheques to change the name (in order to deposit cheques intended for payment to someone else) or the amount on the face of cheques, simple altering can change $100.00 into $100,000.00, although transactions of this value are subject to investigation as a precaution to prevent fraud as policy.

Instead of tampering with a real cheque, some fraudsters will attempt to forge a depositor's signature on a blank cheque or even print their own cheques drawn on accounts owned by others, non-existent accounts or even alleged accounts owned by non-existent depositors. The cheque will then be deposited to another bank and the money withdrawn before the cheque can be returned as invalid or for non-sufficient funds.

Accounting fraud

In order to hide serious financial problems, some businesses have been known to use fraudulent bookkeeping to overstate sales and income, inflate the worth of the company's assets or state a profit when the company is operating at a loss. These tampered records are then used to seek investment in the company's bond or security issues or to make fraudulent loan applications in a final attempt to obtain more money to delay the inevitable collapse of an unprofitable or mismanaged firm. Examples of accounting frauds: Enron andWorldCom. These two companies "cooked the books" in order to appear as they had profits each quarter when in fact they were deeply in debt.

Uninsured deposits

There are a number of cases each year where the bank itself turns out to be uninsured or not licensed to operate at all. The objective is usually to solicit for deposits to this uninsured "bank", although some may also sell stock representing ownership of the "bank". Sometimes the names appear very official or very similar to those of legitimate banks. For instance, the "Chase Trust Bank" ofWashington D.C. appeared in 2002 with no license and no affiliation to its seemingly apparent namesake; the real Chase Manhattan Bank[2] is based in New York. Accounting fraud has also been used to conceal other theft taking place within a company.

Demand draft fraud

Demand draft fraud is usually done by one or more dishonest bank employees. They remove few DD leaves or DD books from stock and write them like a regular DD. Since they are insiders, they know the coding, punching of a demand draft. These Demand drafts will be issued payable at distant town/city without debiting an account. Then it will be cashed at the payable branch. For the paying branch it is just another DD. This kind of fraud will be discovered only when the head office does the branch-wise reconciliation, which normally will take 6 months. By that time the money is irrecoverable.

Rogue traders

A rogue trader is a highly placed insider nominally authorised to invest sizeable funds on behalf of the bank; this trader secretly makes progressively more aggressive and risky investments using the bank's money, when one investment goes bad, the rogue trader engages in further market speculation in the hope of a quick profit which would hide or cover the loss.

Unfortunately, when one investment loss is piled onto another, the costs to the bank can reach into the hundreds of millions of dollars; there have even been cases in which a bank goes out of business due to market investment losses.

Some of the largest bank frauds ever detected were perpetrated by currency traders John Rusnak, and Nick Leeson. Jérôme Kerviel, allegedly defrauded Société Générale of 4.9 billion euros ($7.1 billion) us dollars, while trading stock derivatives.

Fraudulent loans

One way to remove money from a bank is to take out a loan, a practice bankers would be more than willing to encourage if they know that the money will be repaid in full with interest. A fraudulent loan, however, is one in which the borrower is a business entity controlled by a dishonest bank officer or an accomplice; the "borrower" then declares bankruptcy or vanishes and the money is gone. The borrower may even be a non-existent entity and the loan merely an artifice to conceal a theft of a large sum of money from the bank. This can also seen as a component within mortgage fraud (Bell, 2010). 

Fraudulent loan applications

These take a number of forms varying from individuals using false information to hide a credit history filled with financial problems and unpaid loans to corporations using accounting fraud to overstate profits in order to make a risky loan appear to be a sound investment for the bank.

Forged or fraudulent documents

Forged documents are often used to conceal other thefts; banks tend to count their money meticulously so every penny must be accounted for. A document claiming that a sum of money has been borrowed as a loan, withdrawn by an individual depositor or transferred or invested can therefore be valuable to a thief who wishes to conceal the minor detail that the bank's money has in fact been stolen and is now gone.

Wire transfer fraud

Wire transfer networks such as the international SWIFT interbank fund transfer system are tempting as targets as a transfer, once made, is difficult or impossible to reverse. As these networks are used by banks to settle accounts with each other, rapid or overnight wire transfer of large amounts of money are commonplace; while banks have put checks and balances in place, there is the risk that insiders may attempt to use fraudulent or forged documents which claim to request a bank depositor's money be wired to another bank, often an offshore account in some distant foreign country. 

There is a very high risk of fraud when dealing with unknown or uninsured institutions.

The risk is greatest when dealing with offshore or Internet banks (as this allows selection of countries with lax banking regulations), but not by any means limited to these institutions. There is an annual list of unlicensed banks on the US Treasury Department site which currently is fifteen pages in length.

Bill discounting fraud

Essentially a confidence trick, a fraudster uses a company at their disposal to gain confidence with a bank, by appearing as a genuine, profitable customer. To give the illusion of being a desired customer, the company regularly and repeatedly uses the bank to get payment from one or more of its customers. These payments are always made, as the customers in question are part of the fraud, actively paying any and all bills raised by the bank. After time, after the bank is happy with the company, the company requests that the bank settles its balance with the company before billing the customer. Again, business continues as normal for the fraudulent company, its fraudulent customers, and the unwitting bank. Only when the outstanding balance between the bank and the company is sufficiently large, the company takes the payment from the bank, and the company and its customers disappear, leaving no-one to pay the bills issued by the bank.

Payment card fraud

Credit card fraud is widespread as a means of stealing from banks, merchants and clients.

Booster cheques

A booster cheque is a fraudulent or bad cheque used to make a payment to a credit card account in order to "bust out" or raise the amount of available credit on otherwise-legitimate credit cards. The amount of the cheque is credited to the card account by the bank as soon as the payment is made, even though the cheque has not yet cleared. Before the bad cheque is discovered, the perpetrator goes on a spending spree or obtains cash advances until the newly-"raised" available limit on the card is reached. The original cheque then bounces, but by then it is already too late.

Stolen payment cards

Often, the first indication that a victim's wallet has been stolen is a phone call from a credit card issuer asking if the person has gone on a spending spree; the simplest form of this theft involves stealing the card itself and charging a number of high-ticket items to it in the first few minutes or hours before it is reported as stolen.

A variant of this is to copy just the credit card numbers (instead of drawing attention by stealing the card itself) in order to use the numbers in online frauds.

Duplication or skimming of card information

This takes a number of forms, ranging from a dishonest merchant copying clients' credit card numbers for later misuse (or a thief using carbon copies from old mechanical card imprint machines to steal the info) to the use of tampered credit or debit card readers to copy the magnetic stripe from a payment card while a hidden camera captures the numbers on the face of the card.

Some thieves have surreptitiously added equipment to publicly accessible automatic teller machines; a fraudulent card stripe reader would capture the contents of the magnetic stripe while a hidden camera would sneak a peek at the user's PIN. The fraudulent equipment would then be removed and the data used to produce duplicate cards that could then be used to make ATM withdrawals from the victims' accounts.

Empty ATM envelope deposits

A criminal overdraft can result due to the account holder making a worthless or misrepresented deposit at an automated teller machinein order to obtain more cash than present in the account or to prevent a check from being returned due to non-sufficient funds. United States banking law makes the first $100 immediately available and it may be possible for much more uncollected funds to be lost by the bank the following business day before this type of fraud is discovered. The crime could also be perpetrated against another person's account in an "account takeover" or with a counterfeit ATM card, or an account opened in another person's name as part of anidentity theft scam. The emergence of ATM deposit technology that scans currency and checks without using an envelope may prevent this type of fraud in the future.[4]

Impersonation

Impersonation has become an increasing problem; the scam operates by obtaining information about an individual, then using the information to apply for identity cards, accounts and credit in that person's name. Often little more than name, parents' name, date and place of birth are sufficient to obtain a birth certificate; each document obtained then is used as identification in order to obtain more identity documents. Government-issued standard identification numbers such as "social security numbers" are also valuable to the fraudster. 

Information may be obtained from insiders (such as dishonest bank or government employees), by fraudulent offers for employment or investments (in which the victim is asked for a long list of personal information) or by sending forged bank or taxation correspondence. Some fictitious tax forms which purported to have been sent by banks to clients in 2002 were: 

W-9095 Application Form for Certificate Status/Ownership for Withholding Tax

W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding

W-8888

The actual origin of these forms is neither the bank nor the taxman – they're sent by would-be identity thieves and W-8888 doesn't exist, W-9095 is also fictitious (the real W-9 asks much less info) and W-8BEN is real but may have been tampered to add intrusive additional questions. The original forms on which these fakes were based are intended to collect information for income tax on income from deposits and investment. 

In some cases, a name/SIN pair is needed to impersonate a citizen while working as an illegal immigrant but often the identity thieves are using the bogus identity documents in the commission of other crimes or even to hide from prosecution for past crimes. The use of a stolen identity for other frauds such as gaining access to bank accounts, credit cards, loans and fraudulent social benefit or tax refund claims is not uncommon. 

Unsurprisingly, the perpertators of such fraud have been known to take out loans and disappear with the cash, quite content to see the wrong persons blamed when the debts go bad or the police come calling. 

Some corporations have engaged in over-expansion, using borrowed money to finance costly mergers and acquisitions and overstating assets, sales or income to appear solvent even after becoming seriously financially overextended.

Prime bank fraud

The "prime bank" operation which claims to offer an urgent, exclusive opportunity to cash in on the best-kept secret in the banking industry, guaranteed deposits in "prime banks", "constitutional banks", "bank notes and bank-issued debentures from top 500 world banks", "bank guarantees and standby letters of credit" which generate spectacular returns at no risk and are "endorsed by the World Bank" or various national governments and central bankers. However, these official-sounding phrases and more are the hallmark of the so-called "prime bank" fraud; they may sound great on paper, but the guaranteed offshore investment with the vague claims of an easy 100% monthly return are all fictitious financial instruments intended to defraud individuals.

The fictitious 'bank inspector'

This is an old scam with a number of variants; the original scheme involved claiming to be a bank inspector, claiming that the bank suspects that one of its employees is stealing money and that to help catch the culprit the "bank inspector" needs the depositor to withdraw all of his or her money. At this point, the victim would be carrying a large amount of cash and can be targeted for the theft of these funds.

Other variants included claiming to be a prospective business partner with "the opportunity of a lifetime" then asking for access to cash "to prove that you trust me" or even claiming to be a new immigrant who carries all their money in cash for fear that the banks will steal it from them – if told by others that they keep their money in banks, they then ask the depositor to withdraw it to prove the bank hasn't stolen it.

Impersonation of officials has more recently become a way of stealing personal information for use in theft of identity frauds.

Phishing and Internet fraud

Phishing operates by sending forged e-mail, impersonating an online bank, auction or payment site; the e-mail directs the user to a forged web site which is designed to look like the login to the legitimate site but which claims that the user must update personal info. The information thus stolen is then used in other frauds, such as theft of identity or online auction fraud.

A number of malicious "Trojan horse" programmes have also been used to snoop on Internet users while online, capturing keystrokes or confidential data in order to send it to outside sites.

Money laundering

The term "money laundering" dates back to the days of Al Capone; Money laundering has since been used to describe any scheme by which the true origin of funds is hidden or concealed.

While Money Laundering is not a form of bank fraud, the two crimes are often committed together. Criminals often commit fraud or other financial crimes and then will launder the funds in order to disassociate the proceeds from the criminal activity through which they were gained. Thus, fraud is considered by the FBI as a "predecessor" or "collateral" crime to Money Laundering. 

Banking fraud by country

Bank fraud in the United States

Under federal law, bank fraud in the United States is defined, and made illegal, primarily by the Bank Fraud Statute in Title 18 of theU.S. Code. 18 U.S.C. § 1344 (Bank Fraud Statute) states:

Whoever knowingly executes, or attempts to execute, a scheme or artifice—

(1) to defraud a financial institution; or

(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;

shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

State law may also criminalize the same, or similar acts. 

The Bank Fraud Statute was passed following the Supreme Court's decision in Williams v. United States, 458 U.S. 279 (1982), in which the Court held that cheque-kiting schemes did not constitute making false statements to financial institutions (18 U.S.C. § 1014). Congress responded by passing the Bank Fraud Statute (18 U.S.C. § 1344). Section 1344 has subsequently been bolstered by theFinancial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Pub. L. No. 101-73, 103 Stat. 500. 

The Bank Fraud Statute criminalizes federally cheque-kiting, cheque forging, non-disclosure on loan applications, diversion of funds, unauthorized use of automated teller machines (ATMs), credit card fraud, and other similar offenses. Section 1344 does not cover certain forms of money laundering, bribery, and passing bad checks. Other provisions cover these offenses. 

In the United States, consumer liability for unauthorized electronic money transfers on debit cards is covered by Regulation-E of the Federal Deposit Insurance Corporation. The extent of consumer liability, as detailed in section 205.6, is determined by the speed with which the consumer notifies the bank. If the bank is notified within 2 business days, the consumer is liable for $50. Over two business days the consumer is liable for $500, and over 60 business days, the consumer liability is unlimited. In contrast, all major credit card companies have a zero liability policy, effectively eliminating consumer liability in the case of fraud.

Bank fraud in China

China has executed bankers for fraudulent activity; some recent cases (Sept 2004) which ended in capital punishment include:

Wang Liming link goes to the wrong person, former accounting officer, China Construction Bank, Henan, with others stole 20 million yuan ($2.4 million in U.S. Currency) from the bank using fraudulent papers, executed.

Miao Ping, an accomplice in the same case, executed.

Wang Xiang link goes to the wrong person, same bank in an unrelated case, also executed for taking 20 million yuan from the bank.

Liang Shihan, Bank of China, Zhuhai, executed for helping cheat his bank out of $10.3 million US.

In China, consumer liability for unauthorized electronic money transfers is covered by an order of the China Banking Regulatory Commission, called The Measures Governing Electronic Banking. Chapter 8 deals with legal liabilities. Article 89 stipulates that if the bank causes any monetary loss for any reason "irrelevant to the customer, it shall bear the liabilities accordingly." This leaves consumer liability open to interpretation. As such, Chinese banks have a policy of refusing to pay any fraud victim their money back unless a lawsuit is filled. If a fraud victim is successful in filling a lawsuit, the bank might settle out of court. If a lawsuit goes to court, the success of the lawsuit depends largely on the disposition of the local court in question. A lawsuit concluded in 2012 in the city of Wenling, Jejiang province made news because the local court ordered the bank to fully reimburse a man who was the victim of card duplication.However, the extent of the uncompensated fraud victim issue is unknown, as a result of China's censored media. 

Famous bank frauds

• Gone in 60 Seconds (bank fraud) – leaded by Ara Keshishyan in Citibank ATMs. 

Other related articles

• Baninter case
• Certified Bank Forensic Accounting
• Cheque fraud
• Mail fraud
• Mortgage fraud
• Nigerian 419 scam
• Wire fraud
• Taylor, Bean & Whitaker, top-10 U.S. wholesale mortgage lending firm that ceased business following multi-billion-dollar fraud revelations

Friday, May 3, 2013

Criminal Banking Scam Whitewashed By The Media

Mick Meaney 

Activist Post

Thousands of British homeowners could be at risk of losing their homes as a result of potential widespread mis-selling of ‘interest-only’ mortgages, it has emerged today.

A report from the Financial Conduct Authority (FCA) hasfound that around 2.6 million ‘interest-only’ mortgage’s are due for repayment over the next 30 years, with one in 10 people having no plan to repay the loan.

It’s thought that banks failed to inform approximately 13% of borrowers that they would need to repay an average debt of £50,000 once their mortgage has ended.

Now the FCA, together with the mainstream media, are attempting to shift blame onto homeowners, citing the need for a ‘wake up call’.

FCA chief executive Martin Wheatley said:

By acting now we are aiming to nip this problem in the bud. 

Mortgage lenders have volunteered to contact their most at-risk customers with a ‘wake-up call’ to highlight the report’s findings and what they need to do without delay.

Yes of course Marty, we can always trust the banks to do the right thing – recent history has shown us that, right? 

So let’s take a look at that history, specifically the organisation who published the report – which is little more than the re-branding of the Financial Services Authority (FSA).

The FCA was created in 2013 as part of a new regulatory structure along with the Bank of England, after the FSA was abolished.

Now, the FSA has a troublesome track record when it comes to finance. It also has a history of protecting companies that have been found guilty of mis-selling.

Before we delve into the nitty-gritty, in December 2012 Andrew Bailey of the FSA warned that “banks are too big to prosecute” and that:

It would be a very destabilising issue. It’s another version of too important to fail. 

Because of the confidence issue with banks, a major criminal indictment, which we haven’t seen and I’m not saying we are going to see… this is not an ordinary criminal indictment.

This tells us something about the mentality of the FSA, and the financial institute as a whole.

In 2005, the group turned a blind eye to payment protection insurance (PPI), taking very little action to prevent banks from profiting from the scam.

In 2008 they considered allowing banks to officially hide important information from the public.

Just months before the economic crash the FSA ignored warning signals from Northern Rock and allowed the bank to continue without a risk mitigation programme.

In 2008 it tried to protect the identity of the LAUTRO scandal. Also in 2008 the FSA staff received 

May 4, 2013

Former US Treasury Official - Gold, Silver, The Fed & Bank Runs

HERE

Today a former US Treasury Official spoke with King World News about gold, silver, the fragility of the banking system, and how the Fed views the current situation.  Dr. Paul Craig Roberts also spoke about the difficulties investors face going forward.  Below is what Dr. Roberts had to say in part II of his extraordinary three part exclusive series of written interviews that will be released today.

Eric King:  “We had a final outcome in Cyprus with regards to depositors’ money.  It looks like up to 75% or more will ultimately be stolen.  You mentioned if that was the template going forward it would collapse the banking system.  They are going to deny this is the template going forward but it’s being written into law in countries like the United States, Canada, England, New Zealand, etc.  If they start to implement this in other countries, talk about what you think will happen.”

Dr. Roberts:  “What it means is that anyone who is alert will simply not have money in excess of the insured amount in a bank account.  This makes it hard for people who have a certain amount of wealth, don’t trust the stock and bond markets, and try to sit in cash.

They would have to spread it around into different banks in order to avoid the confiscation.  I think the confiscation in the United States would come when the Fed can’t print dollars anymore....

“They would still have to finance the federal budget deficit.

I don’t think the Americans are in danger of this until the Fed can’t print because dollar is being abandoned due to the printing.  I think the main effect is going to be that people are not going to have money in a bank in excess of the insured value. 

It will further make people uneasy about all financial institutions and all financial assets.  So if they can seize your bank deposits, why couldn’t they take some share of your pension plan?  I think on the whole this will undermine confidence further in financial institutions.”

Eric King:  “When you say undermine confidence going forward, this has a cumulative as you know.  When does this snowball to a point where there is real panic and we see the flight out of banks begin to accelerate again?  

Dr. Roberts:  “It’s hard to fly out of banks ... You can’t escape the banks, you can only escape how much money you keep in any one bank ... If you pull out (your money), what are you doing to do with it?  Where do you put it?  

Are you going to put it in a safe in your house?  Or you have to look for some other financial asset.  Are you going to put it in the stock market when the stocks are at an all-time high and there is no economic activity, and profits are due to layoffs?  Are you going to put it in the bond market when the real interest rates are negative and the bond market is the biggest bubble in human history?  So they’ve kind of got people trapped.

So what can they do?  They can put it in precious metals, gold and silver, if they can find a place to store it that’s safe.  To prevent that the government and the Federal Reserve short the bullion market in order to drive the prices down, to scare people away from that alternative.

So when you have this kind of rigged system it’s hard for people to protect what they have.  It’s a dangerous time, and it looks like the authorities both in Western Europe and the United States are not really concerned with what happens to the wealth of the citizens, only whether or not a few giant banks can be kept afloat.”

IMPORTANT - Part III of Dr. Paul Craig Roberts remarkable written interview series will be released within hours.  Roberts discusses the gold and silver markets, the collapsing financial and banking systems, the increasingly desperate situation the West faces going forward and much more.  

This write-up is only a small portion of what Dr. Roberts had to say in his extraordinary audio interview.  The KWN audio interview with Dr. Paul Craig Roberts will be available later today and you can hear to it by CLICKING HERE.  

© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged. 

 £20m in bonuses for 2008/09, despite self-acknowledged failures of regulating the financial industry.

In 2009 it was revealed that FSA deputy chairman, Sir James Crosby had fired Paul Moore, a whistleblower who warned of dangerous lending practices at HBOS.

I could go on, but I think we get the picture.

This demonstrates that, in reality, even those who are given the responsibility of protecting the British public from the criminal banking elite, only serve to protect the financial institutes and their corporate masters.

More news and videos can be found at Mick Meaney's site RINF.com where this article first appeared. 

11 THINGS THAT CAN HAPPEN WHEN YOU ALLOW YOUR COUNTRY TO BECOME ENSLAVED BY BANKERS

by Michael Snyder, Contributor

Why are Greece, Spain, Italy, Portugal and so many other countries experiencing depression-like conditions right now? It is because they have too much debt. Why do they have too much debt? It is because they allowed themselves to become enslaved to the bankers. Borrowing money from the bankers can allow a nation to have a higher standard of living in the short-term, but it always results in a lower standard of living in the long term. Why is that?

It is because you always have to pay back more money than you borrowed. And when you get to the point of having a debt to GDP ratio in excess of 100%, you are basically drowning in debt. Huge amounts of money that could be going to providing essential services and stimulating your economy are now going to service your horrific debt.

Today, citizens in Greece, Spain, Portugal and Italy are experiencing a standard of living far below what they should be because the bankers have trapped them in endless debt spirals. Sadly, the vast majority of the people living in those countries have absolutely no idea what is at the root cause of their problems.

The truth is that no sovereign nation on earth ever has to borrow a single penny from anyone.

In theory, there is nothing stopping a government from printing up debt-free money and spending it into circulation.

But that is not the way our world works. Instead, our national governments borrow money that has been zapped into existence out of thin air by central banks.

Now what kind of sense does that make?

Why don’t our governments just create the money themselves?

If the government of Greece had been directly issuing debt-free Greek currency all these years, they would have a national debt of zero and they would not be in the middle of a deep depression today.

So why isn’t anyone proposing that they go to such a system?

Instead, everyone is trying to figure out a way that the Greeks can muddle through this depression and keep paying on their unsustainable debts.

It is such a tragedy what has happened to Greece. The city of Boston has a larger economy than the entire nation of Greece at this point.

But this is what happens when you allow the bankers to trap your country in debt. The central banking systems of the world are designed to be endless debt spirals that systematically transfer wealth from the people through the governments and into the hands of the ultra-wealthy.

Just look at what is happening in the United States. The U.S. national debt is now more than 5000 times largerthan it was when the Federal Reserve was first created.

Greece, Spain, Italy, Portugal and the rest of the nations of the western world did not get into all this debt by accident.

This happened by design.

And we can see what happens when the system starts to unravel by looking at what is happening in Greece and in Spain right now.

The following are 11 things that can happen when you allow your country to become enslaved to the bankers….

#1 At some point nations that are drowning in debt must implement “austerity measures” in an attempt to stay solvent.

This causes economic slowdown and unemployment skyrockets. We are seeing this happen in Greece, Spain and a whole bunch of other nations right now.

Over the past four years, the Greek economy has contracted by close to 25 percent. Just this week it was announced that the unemployment rate in Greece has risen to 23.1 percent.

A year ago it was just 16.8 percent

In Spain, the unemployment rate is even higher. It has hit 24.6 percent, and some analysts expect it to eventually reach 30 percent.

This would have never happened if these nations had not gotten into so much debt.

#2 Economic progress can actually go backwards in a debt-based system.

In Greece, a very large number of citizens have actually been giving up their cars and have gone back to riding bikes….

The high cost of road tax, fuel and repairs is forcing Greeks to ditch their cars in huge numbers. According to the government’s statistics office, the number of cars on Greek roads declined by more than 40 percent in each of the last two years. Meanwhile, more than 200,000 bikes were sold in 2011, up about a quarter from the previous year.

#3 Your banking system will inevitably melt down at some point.

Every debt bubble eventually bursts, and authorities all over Europe are desperately trying to keep the European banking system from completely imploding.

But despite their efforts, people are pulling money out of banks in southern Europe at a staggering pace. Just check out the slow motion bank run that is unfolding in Spain….

Capital outflows from Spain more than quadrupled in May to €41.3 billion ($50.7 billion) compared with May 2011, according to figures released on Tuesday by the Spanish central bank.

In the first five months of 2012, a total of €163 billion left the country, the figures indicate. During the same period a year earlier, Spain recorded a net inflow of €14.6 billion.

#4 In all countries with a debt-based system, eventually your taxes will be raised to ridiculous levels.

When the income tax was introduced in the United States back in 1913, the vast majority of Americans were in the 1 percent tax bracket.

Throughout the years there have been countless promises that taxes would be limited, but those promises always end up getting broken.

Even when they give us “tax cuts” with one hand, they usually end up raising taxes ten different ways with the other hand.

In the United States today, we are literally taxed in dozens and dozens of different ways.

Our politicians love to come up with new and inventive ways to tax us without us really even feeling it.

In the end, they are going to take as much away from us as they can possibly get away with.

Just look at what is happening in France.

The newly elected socialist president of France says that his party plans to raise the top tax rate in France to 75 percent.

But even though our politicians tax us to death, they still manage to run up gigantic mountains of debt on top of that.

#5 Your currency slowly but steadily becomes worthless.

Most people don’t realize that inflation is a tax. Every dollar you currently have in the bank is constantly losing value. That is because in a debt-based system like we have, the total amount of money and the total amount of debt is supposed to keep perpetually expanding.

Since the Federal Reserve was created, the U.S. dollar has declined in value by well over 95 percent.

This did not happen by accident. Every other major currency around the globe has been steadily declining in value as well.

#6 When things get bad enough, there will be rioting in the streets.

A few weeks ago, a total of more than a million public employees took to the streets in more than 80 different Spanish cities. You can view footage of some of the violent clashes with police that took place right here.

#7 When a debt-based economy crashes, money becomes very tight and shortages tend to happen.

Just look at what is happening in Greece. Medicine shortages have become a tremendous problem. The following is from a recent Bloomberg article….

Mina Mavrou, who runs a pharmacy in a middle-class Athens suburb, spends hours each day pleading with drugmakers, wholesalers and colleagues to hunt down medicines for clients. Life-saving drugs such as Sanofi (SAN)’s blood-thinner Clexane and GlaxoSmithKline Plc (GSK)’s asthma inhaler Flixotide often appear as lines of crimson data on pharmacists’ computer screens, meaning the products aren’t in stock or that pharmacists can’t order as many units as they need.

‘When we see red, we want to cry,’ Mavrou said. ‘The situation is worsening day by day.’

The 12,000 pharmacies that dot almost every street corner in Greek cities are the damaged capillaries of a complex system for getting treatment to patients. The Panhellenic Association of Pharmacists reports shortages of almost half the country’s 500 most-used medicines.

#8Your population will eventually become so desperate that they will start banding together to loot food and supplies from stores.

When people have no work and they cannot feed their families they often find themselves doing things that they never imagined that they would do. Just check out what is happening in Spain right now….

Unemployed fieldworkers and other members of the union went to two supermarkets, one in Ecija (Sevilla) and one in Arcos de la Frontera (Cadiz) and loaded up trolleys with basic necessities. They said that the people were being expropriated and they planned to ‘expropriate the expropriators’.

The foodstuffs, including milk, sugar, chickpeas, pasta and rice, have been given to charities to distribute, who say they are unable to cope with all the requests for help they receive. Unemployment in the Sierra de Cadiz is now 40%.

#9 If things get bad enough, even essential services may start shutting down.

Authorities in Greece are legitimately concerned that there may be interruptions in the supply of natural gas and electricity. Suppliers are leaving bills unpaid for extended periods of time, and one day millions of Greeks may wake up to find that the power to their homes has been cut off….

Greece’s power regulator RAE told Reuters on Friday it was calling an emergency meeting next week to avert a collapse of the debt-stricken country’s electricity and natural gas system.

‘RAE is taking crisis initiatives throughout next week to avert the collapse of the natural gas and electricity system,’ the regulator’s chief Nikos Vasilakos told Reuters.

RAE took the decision after receiving a letter from Greece’s natural gas company DEPA, which threatened to cut supplies to electricity producers if they failed to settle their arrears with the company.

#10 In an economic depression, many people begin to totally lose hope.

An increasing number of parents in southern Europe are facing such desperate situations that they are actually abandoning their babies.

The following is from a recent CNBC article….

According to SOS Villages, a European charity that attempts to help families in financial hardship before abandonment occurs, in the last year alone 1,200 children in Greece and 750 in Italy have been abandoned. That is almost double the 400 children abandoned in Italy a year ago, and up from 114 children abandoned in Greece in 2003.

#11 Just like we saw during the Great Depression of the 1930s, there is a spike in suicides when an economy crashes.

Greece has never seen anything like what is happening now. The suicide rate has been absolutely soaring.

The following is from a Reuters article back in April….

On Monday, a 38-year-old geology lecturer hanged himself from a lamp post in Athens and on the same day a 35-year-old priest jumped to his death off his balcony in northern Greece. On Wednesday, a 23-year-old student shot himself in the head.

In a country that has had one of the lowest suicide rates in the world, a surge in the number of suicides in the wake of an economic crisis has shocked and gripped the Mediterranean nation – and its media – before a May 6 election.

If you live in the United States, you need to watch what is happening in Europe very closely, because similar conditions will come to the United States soon enough.

Just like Europe, we have allowed ourselves to become enslaved to the bankers, and now we will suffer the consequences.

Sadly, most Americans do not even realize how we got into this mess. The following is from a recent article by Professor Steven Yates….

It should have been clear that the country—indeed, Western civilization itself—was on the wrong trajectory as governments and central banks, working in tandem, severed ties between their currencies and precious metals, allowing massive credit expansion to run rampant and the national debt to skyrocket—making, e.g., the pseudo-prosperity of the roaring 1990s possible. Nixon had ‘closed the gold window’ on August 15, 1971; our national debt was around $400 billion. Slightly over ten years later, the debt crossed the $1 trillion threshold. Ten years after that, it reached $6 trillion. When George W. Bush left office having been the biggest spending Republican in U.S. history, it had risen to over $11 trillion. Today, under the watch of the catastrophic Obama presidency, by the time this reaches print the national debt might have surmounted $16 trillion with no end in sight.

The United States has accumulated the greatest mountain of debt in the history of the world and it will totally crush us at some point.

Unfortunately, the vast majority of Americans are living paycheck to paycheck and are totally unprepared for the economic chaos that is coming.

One study found that 64 percent of all Americans have less than $1000 in the bank.

Can you believe that?

Even though we could be on the verge of another global food crisis, most Americans do not have enough food in their homes to last a single month.

Even though the U.S. economy is on the verge of another recession, most Americans are still running out and buying toys that they don’t need and paying for them with credit cards that they should not be using.

If you want to see where we are headed, just look at Greece and Spain.

They are going through economic hell, and we will be joining them soon enough.

Get ready while you can. 

You can support this information by voting on Reddit HERE

This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.

Sources:

Activist Post

Jun 29, 2010 11:00 AM GMT+0700

Banks Financing Mexico Gangs Admitted in Wells Fargo Deal

By Michael Smith - 

Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet.

They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. The stash was supposed to have been delivered from Caracas to drug traffickers in Toluca, near Mexico City, Mexican prosecutors later found. Law enforcement officials also discovered something else.

The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.:Wachovia Corp. and Bank of America Corp., Bloomberg Markets magazine reports in its August 2010 issue.

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers.Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers -- including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

The admission came in an agreement that Charlotte, North Carolina-based Wachovia struck with federal prosecutors in March, and it sheds light on the largely undocumented role of U.S. banks in contributing to the violent drug trade that has convulsed Mexico for the past four years.

‘Blatant Disregard’

Wachovia admitted it didn’t do enough to spot illicit funds in handling $378.4 billion for Mexican-currency-exchange houses from 2004 to 2007. That’s the largest violation of the Bank Secrecy Act, an anti-money-laundering law, in U.S. history -- a sum equal to one-third of Mexico’s current gross domestic product.

“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” says Jeffrey Sloman, the federal prosecutor who handled the case.

Since 2006, more than 22,000 people have been killed in drug-related battles that have raged mostly along the 2,000-mile (3,200-kilometer) border that Mexico shares with the U.S. In the Mexican city of Ciudad Juarez, just across the border from El Paso, Texas, 700 people had been murdered this year as of mid- June. Six Juarez police officers were slaughtered by automatic weapons fire in a midday ambush in April.

Rondolfo Torre, the leading candidate for governor in the Mexican border state of Tamaulipas, was gunned down yesterday, less than a week before elections in which violence related to drug trafficking was a central issue.

45,000 Troops

Mexican President Felipe Calderon vowed to crush the drug cartels when he took office in December 2006, and he’s since deployed 45,000 troops to fight the cartels. They’ve had little success.

Among the dead are police, soldiers, journalists and ordinary citizens. The U.S. has pledged Mexico $1.1 billion in the past two years to aid in the fight against narcotics cartels.

In May, President Barack Obama said he’d send 1,200 National Guard troops, adding to the 17,400 agents on the U.S. side of the border to help stem drug traffic and illegal immigration.

Behind the carnage in Mexico is an industry that supplies hundreds of tons of cocaine, heroin, marijuana and methamphetamines to Americans. The cartels have built a network of dealers in 231 U.S. cities from coast to coast, taking in about $39 billion in sales annually, according to the Justice Department.

‘You’re Missing the Point’

Twenty million people in the U.S. regularly use illegal drugs, spurring street crime and wrecking families. Narcotics cost the U.S. economy $215 billion a year -- enough to cover health care for 30.9 million Americans -- in overburdened courts, prisons and hospitals and lost productivity, the department says.

“It’s the banks laundering money for the cartels that finances the tragedy,” says Martin Woods, director of Wachovia’s anti-money-laundering unit in London from 2006 to 2009. Woods says he quit the bank in disgust after executives ignored his documentation that drug dealers were funneling money through Wachovia’s branch network.

“If you don’t see the correlation between the money laundering by banks and the 22,000 people killed in Mexico, you’re missing the point,” Woods says.

Cleansing Dirty Cash

Wachovia is just one of the U.S. and European banks that have been used for drug money laundering. For the past two decades, Latin American drug traffickers have gone to U.S. banks to cleanse their dirty cash, says Paul Campo, head of the U.S. Drug Enforcement Administration’s financial crimes unit.

Miami-based American Express Bank International paid fines in both 1994 and 2007 after admitting it had failed to spot and report drug dealers laundering money through its accounts. Drug traffickers used accounts at Bank of America in Oklahoma City to buy three planes that carried 10 tons of cocaine, according to Mexican court filings.

Federal agents caught people who work for Mexican cartels depositing illicit funds in Bank of America accounts in Atlanta, Chicago and Brownsville, Texas, from 2002 to 2009. Mexican drug dealers used shell companies to open accounts at London-based HSBC Holdings Plc, Europe’s biggest bank by assets, an investigation by the Mexican Finance Ministry found.

Following Rules

Those two banks weren’t accused of wrongdoing. Bank of America spokeswoman Shirley Norton and HSBC spokesman Roy Caple say laws bar them from discussing specific clients. They say their banks strictly follow the government rules.

“Bank of America takes its anti-money-laundering responsibilities very seriously,” Norton says.

A Mexican judge on Jan. 22 accused the owners of six centros cambiarios, or money changers, in Culiacan and Tijuana of laundering drug funds through their accounts at the Mexican units ofBanco Santander SA, Citigroup Inc. and HSBC, according to court documents filed in the case.

The money changers are in jail while being tried. Citigroup, HSBC and Santander, which is the largest Spanish bank by assets, weren’t accused of any wrongdoing. The three banks say Mexican law bars them from commenting on the case, adding that they each carefully enforce anti-money-laundering programs.

HSBC has stopped accepting dollar deposits in Mexico, and Citigroup no longer allows noncustomers to change dollars there. Citigroup detected suspicious activity in the Tijuana accounts, reported it to regulators and closed the accounts, Citigroup spokesman Paulo Carreno says.

Criminal Empires

On June 15, the Mexican Finance Ministry announced it would set limits for banks on cash deposits in dollars.

Mexico’s drug cartels have become multinational criminal enterprises.

Some of the gangs have delved into other illegal activities such as gunrunning, kidnapping and smuggling people across the border, as well as into seemingly legitimate areas such as trucking, travel services and air cargo transport, according to the Justice Department’s National Drug Intelligence Center.

These criminal empires have no choice but to use the global banking system to finance their businesses, Mexican Senator Felipe Gonzalez says.

“With so much cash, the only way to move this money is through the banks,” says Gonzalez, who represents a central Mexican state and chairs the senate public safety committee.

Gonzalez, a member of Calderon’s National Action Party, carries a .38 revolver for personal protection.

“I know this won’t stop the narcos when they come through that door with machine guns,” he says, pointing to the entrance to his office. “But at least I’ll take one with me.”

Subprime Losses

No bank has been more closely connected with Mexican money laundering than Wachovia. Founded in 1879, Wachovia became the largest bank by assets in the southeastern U.S. by 1900. After the Great Depression, some people in North Carolina called the bank “Walk-Over-Ya” because it had foreclosed on farms in the region.

By 2008, Wachovia was the sixth-largest U.S. lender, and it faced $26 billion in losses from subprime mortgage loans. That cost Wachovia Chief Executive Officer Kennedy Thompson his job in June 2008.

Six months later, San Francisco-based Wells Fargo, which dates from 1852, bought Wachovia for $12.7 billion, creating the largest network of bank branches in the U.S. Thompson, who now works for private-equity firm Aquiline Capital Partners LLC in New York, declined to comment.

As Wachovia’s balance sheet was bleeding, its legal woes were mounting. In the three years leading up to Wachovia’s agreement with the Justice Department, grand juries served the bank with 6,700 subpoenas requesting information.

Not Quick Enough

The bank didn’t react quickly enough to the prosecutors’ requests and failed to hire enough investigators, the U.S. Treasury Department said in March. After a 22-month investigation, the Justice Department on March 12 charged Wachovia with violating the Bank Secrecy Act by failing to run an effective anti-money-laundering program.

Five days later, Wells Fargo promised in a Miami federal courtroom to revamp its detection systems. Wachovia’s new owner paid $160 million in fines and penalties, less than 2 percent of its $12.3 billion profit in 2009.

If Wells Fargo keeps its pledge, the U.S. government will, according to the agreement, drop all charges against the bank in March 2011.

Wells Fargo regrets that some of Wachovia’s former anti- money-laundering efforts fell short, spokeswoman Mary Eshet says. Wells Fargo has invested $42 million in the past three years to improve its anti-money-laundering program and has been working with regulators, she says.

‘Significantly Upgraded’

“We have substantially increased the caliber and number of staff in our international investigations group, and we also significantly upgraded the monitoring software,” Eshet says. The agreement bars the bank from contesting or contradicting the facts in its admission.

The bank declined to answer specific questions, including how much it made by handling $378.4 billion -- including $4 billion of cash-from Mexican exchange companies.

The 1970 Bank Secrecy Act requires banks to report all cash transactions above $10,000 to regulators and to tell the government about other suspected money-laundering activity. Big banks employ hundreds of investigators and spend millions of dollars on software programs to scour accounts.

No big U.S. bank -- Wells Fargo included -- has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again.

‘No Capacity to Regulate’

Large banks are protected from indictments by a variant of the too-big-to-fail theory.

Indicting a big bank could trigger a mad dash by investors to dump shares and cause panic in financial markets, says Jack Blum, a U.S. Senate investigator for 14 years and a consultant to international banks and brokerage firms on money laundering.

The theory is like a get-out-of-jail-free card for big banks, Blum says.

“There’s no capacity to regulate or punish them because they’re too big to be threatened with failure,” Blum says. “They seem to be willing to do anything that improves their bottom line, until they’re caught.”

Wachovia’s run-in with federal prosecutors hasn’t troubled investors. Wells Fargo’s stocktraded at $30.86 on March 24, up 1 percent in the week after the March 17 agreement was announced.

Moving money is central to the drug trade -- from the cash that people tape to their bodies as they cross the U.S.-Mexican border to the $100,000 wire transfers they send from Mexican exchange houses to big U.S. banks.

‘Doesn’t Stop Anyone’

In Tijuana, 15 miles south of San Diego, Gustavo Rojas has lived for a quarter of a century in a shack in the shadow of the 10-foot-high (3-meter-high) steel border fence that separates the U.S. and Mexico there. He points to holes burrowed under the barrier.

“They go across with drugs and come back with cash,” Rojas, 75, says. “This fence doesn’t stop anyone.”

Drug money moves back and forth across the border in an endless cycle. In the U.S., couriers take the cash from drug sales to Mexico -- as much as $29 billion a year, according to U.S. Immigration and Customs Enforcement. That would be about 319 tons of $100 bills.

They hide it in cars and trucks to smuggle into Mexico. There, cartels pay people to deposit some of the cash into Mexican banks and branches of international banks. The narcos launder much of what’s left through money changers.

The Money Changers

Anyone who has been to Mexico is familiar with these street-corner money changers; Mexican regulators say there are at least 3,000 of them from Tijuana to Cancun, usually displaying large signs advertising the day’s dollar-peso exchange rate.

Mexican banks are regulated by the National Banking and Securities Commission, which has an anti-money-laundering unit; the money changers are policed by Mexico’s Tax Service Administration, which has no such unit.

By law, the money changers have to demand identification from anyone exchanging more than $500. They also have to report transactions higher than $5,000 to regulators.

The cartels get around these requirements by employing legions of individuals -- including relatives, maids and gardeners -- to convert small amounts of dollars into pesos or to make deposits in local banks. After that, cartels wire the money to a multinational bank.

The Smurfs

The people making the small money exchanges are known as Smurfs, after the cartoon characters.

“They can use an army of people like Smurfs and go through $1 million before lunchtime,” says Jerry Robinette, who oversees U.S. Immigration and Customs Enforcement operations along the border in east Texas.

The U.S. Treasury has been warning banks about big Mexican- currency-exchange firms laundering drug money since 1996. By 2004, many U.S. banks had closed their accounts with these companies, which are known as casas de cambio.

Wachovia ignored warnings by regulators and police, according to the deferred-prosecution agreement.

“As early as 2004, Wachovia understood the risk,” the bank admitted in court. “Despite these warnings, Wachovia remained in the business.”

One customer that Wachovia took on in 2004 was Casa de Cambio Puebla SA, a Puebla, Mexico-based currency-exchange company. Pedro Alatorre, who ran a Puebla branch in Mexico City, had created front companies for cartels, according to a pending Mexican criminal case against him.

Federal Indictment

A federal grand jury in Miami indicted Puebla, Alatorre and three other executives in February 2008 for drug trafficking and money laundering. In May 2008, the Justice Department sought extradition of the suspects, saying they used shell firms to launder $720 million through U.S. banks.

Alatorre has been in a Mexican jail for 2 1/2 years. He denies any wrongdoing, his lawyer Mauricio Moreno says. Alatorre has made no court-filed responses in the U.S.

During the period in which Wachovia admitted to moving money out of Mexico for Puebla, couriers carrying clear plastic bags stuffed with cash went to the branch Alatorre ran at the Mexico City airport, according to surveillance reports by Mexican police.

Alatorre opened accounts at HSBC on behalf of front companies, Mexican investigators found.

Puebla executives used the stolen identities of 74 people to launder money through Wachovia accounts, Mexican prosecutors say in court-filed reports.

‘Never Reported’

“Wachovia handled all the transfers, and they never reported any as suspicious,” says Jose Luis Marmolejo, a former head of the Mexican attorney general’s financial crimes unit who is now in private practice.

In November 2005 and January 2006, Wachovia transferred a total of $300,000 from Puebla to a Bank of America account in Oklahoma City, according to information in the Alatorre cases in the U.S. and Mexico.

Drug smugglers used the funds to buy the DC-9 through Oklahoma City aircraft broker U.S. Aircraft Titles Inc., according to financial records cited in the Mexican criminal case. U.S. Aircraft Titles President Sue White declined to comment.

On April 5, 2006, a pilot flew the plane from St. Petersburg, Florida, to Caracas to pick up the cocaine, according to the DEA. Five days later, troops seized the plane in Ciudad del Carmen and burned the drugs at a nearby army base.

‘Wachovia Knew’

“I am sure Wachovia knew what was going on,” says Marmolejo, who oversaw the criminal investigation into Wachovia’s customers. “It went on too long and they made too much money not to have known.”

At Wachovia’s anti-money-laundering unit in London, Woods and his colleague Jim DeFazio, in Charlotte, say they suspected that drug dealers were using the bank to move funds.

Woods, a former Scotland Yard investigator, spotted illegible signatures and other suspicious markings on traveler’s checks from Mexican exchange companies, he said in a September 2008 letter to the U.K. Financial Services Authority. He sent copies of the letter to the DEA and Treasury Department in the U.S.

Woods, 45, says his bosses instructed him to keep quiet and tried to have him fired, according to his letter to the FSA. In one meeting, a bank official insisted Woods shouldn’t have filed suspicious activity reports to the government, as both U.S. and U.K. laws require.

‘I Was Shocked’

“I was shocked by the content and outcome of the meeting and genuinely traumatized,” Woods wrote.

In the U.S., DeFazio, who had been a Federal Bureau of Investigation agent for 21 years, says he told bank executives in 2005 that the DEA was probing the transfers through Wachovia to buy the planes.

Bank executives spurned recommendations to close suspicious accounts, DeFazio, 63, says.

“I think they looked at the money and said, ‘The hell with it. We’re going to bring it in, and look at all the money we’ll make,’” DeFazio says.

DeFazio retired in 2008.

“I didn’t want anything from them,” he says. “I just wanted to get out.”

Woods, who resigned from Wachovia in May 2009, now advises banks on how to combat money laundering. He declined to discuss details of Wachovia’s actions.

U.S. Comptroller of the Currency John Dugan told Woods in a March 19 letter his efforts had helped the U.S. build its case against Wachovia.

‘Great Courage’

“You demonstrated great courage and integrity by speaking up when you saw problems,” Dugan wrote.

It was the Puebla investigation that led U.S. authorities to the broader probe of Wachovia. On May 16, 2007, DEA agents conducted a raid of Wachovia’s international banking offices in Miami. They had a court order to seize Puebla’s accounts.

U.S. prosecutors and investigators then scrutinized the bank’s dealings with Mexican-currency-exchange firms. That led to the March deferred-prosecution agreement.

With Puebla’s Wachovia accounts seized, Alatorre and his partners shifted their laundering scheme to HSBC, according to financial documents cited in the Mexican criminal case against Alatorre.

In the three weeks after the DEA raided Wachovia, two of Alatorre’s front companies, Grupo ETPB SA and Grupo Rahero SC, made 12 cash deposits totaling $1 million at an HSBC Mexican branch, Mexican investigators found.

Another Drug Plane

The funds financed a Beechcraft King Air 200 plane that police seized on Dec. 29, 2007, in Cuernavaca, 50 miles south of Mexico City, according to information in the case against Alatorre.

For years, federal authorities watched as the wife and daughter of Oscar Oropeza, a drug smuggler working for the Matamoros-based Gulf Cartel, deposited stacks of cash at a Bank of America branch on Boca Chica Boulevard in Brownsville, Texas, less than 3 miles from the border.

Investigator Robinette sits in his pickup truck across the street from that branch. It’s a one-story, tan stucco building next to a Kentucky Fried Chicken outlet. Robinette discusses the Oropeza case with Tom Salazar, an agent who investigated the family.

“Everybody in there knew who they were -- the tellers, everyone,” Salazar says. “The bank never came to us, though.”

New Meaning

The Oropeza case gives a new, literal meaning to the term money laundering. Oropeza’s wife, Tina Marie, and daughter Paulina Marie deposited stashes of $20 bills several times a day into Bank of America accounts, Salazar says. Bank employees got to know the Oropezas by the smell of their money.

“I asked the tellers what they were talking about, and they said the money had this sweet smell like Bounce, those sheets you throw into the dryer,” Salazar says. “They told me that when they opened the vault, the smell of Bounce just poured out.”

Oropeza, 48, was arrested 820 miles from Brownsville. On May 31, 2007, police in Saraland, Alabama, stopped him on a traffic violation. Checking his record, they learned of the investigation in Texas.

They searched the van and discovered 84 kilograms (185 pounds) of cocaine hidden under a false floor. That allowed federal agents to freeze Oropeza’s bank accounts and search his marble-floored home in Brownsville, Robinette says. Inside, investigators found a supply of Bounce alongside the clothes dryer.

Guilty Pleas

All three Oropezas pleaded guilty in U.S. District Court in Brownsville to drug and money-laundering charges in March and April 2008. Oscar Oropeza was sentenced to 15 years in prison; his wife was ordered to serve 10 months and his daughter got 6 months.

Bank of America’s Norton says, “We not only fulfilled our regulatory obligation, but we proactively worked with law enforcement on these matters.”

Prosecutors have tried to halt money laundering at American Express Bank International twice. In 1994, the bank, then a subsidiary of New York-based American Express Co., pledged not to allow money laundering again after two employees were convicted in a criminal case involving drug trafficker Juan Garcia Abrego.

In 1994, the bank paid $14 million to settle. Five years later, drug money again flowed through American Express Bank. Between 1999 and 2004, the bank failed to stop clients from laundering $55 million of narcotics funds, the bank admitted in a deferred-prosecution agreement in August 2007.

Western Union

It paid $65 million to the U.S. and promised not to break the law again. The government dismissed the criminal charge a year later. American Express sold the bank to London-basedStandard Chartered PLC in February 2008 for $823 million.

Banks aren’t the only financial institutions that have turned a blind eye to drug cartels in moving illicit funds. Western Union Co., the world’s largest money transfer firm, agreed to pay $94 million in February 2010 to settle civil and criminal investigations by the Arizona attorney general’s office.

Undercover state police posing as drug dealers bribed Western Union employees to illegally transfer money, says Cameron Holmes, an assistant attorney general.

“Their allegiance was to the smugglers,” Holmes says. “What they thought about during work was ‘How may I please my highest- spending customers the most?’”

Smudged Fingerprints

Workers in more than 20 Western Union offices allowed the customers to use multiple names, pass fictitious identifications and smudge their fingerprints on documents, investigators say in court records.

“In all the time we did undercover operations, we never once had a bribe turned down,” says Holmes, citing court affidavits.

Western Union has made significant improvements, it complies with anti-money-laundering laws and works closely with regulators and police, spokesman Tom Fitzgerald says.

For four years, Mexican authorities have been fighting a losing battle against the cartels. The police are often two steps behind the criminals. Near the southeastern corner of Texas, in Matamoros, more than 50 combat troops surround a police station.

Officers take two suspected drug traffickers inside for questioning. Nearby, two young men wearing white T-shirts and baggy pants watch and whisper into radios. These are los halcones (the falcons), whose job is to let the cartel bosses know what the police are doing.

‘Only Way’

While the police are outmaneuvered and outgunned, ordinary Mexicans live in fear. Rojas, the man who lives in the Tijuana slum near the border fence, recalls cowering in his home as smugglers shot it out with the police.

“The only way to survive is to stay out of the way and hope the violence, the bullets, don’t come for you,” Rojas says.

To make their criminal enterprises work, the drug cartels of Mexico need to move billions of dollars across borders. That’s how they finance the purchase of drugs, planes, weapons and safe houses, Senator Gonzalez says.

“They are multinational businesses, after all,” says Gonzalez, as he slowly loads his revolver at his desk in his Mexico City office. “And they cannot work without a bank.”

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