Money Laundering in the United States: The Forgotten Tale of Wachovia Part 1

Roughly 1 to 2 trillion dollars are embezzled around the world every single year, according to experts, who estimate that between 2-5% of global GDP is laundered money. In terms of where this money is laundered, the United States makes up for a significant portion of laundered money.

One particular reason for this is that our financial institutions are large enough to hide large sums of money in, and the oversight of those institutions is particularly relaxed, even after the amendments to the Bank Secrecy Act were made in 2001, following 9/11. In the past decade, one particular case stands out that highlights the nefarious underbelly of money laundering in United States, and it all started with Wachovia…

The jet that started it all

In April of 2006, Mexican authorities intercepted and raided a jet in the Ciudad del Carmen. Within the confines of that DC-9 were 128 suitcases full of cocaine. All in all, this raid yielded nearly 6 tons of cocaine, and was worth around $100 million. While this may sound that a major blow towards the international drug trade, the actual monetary value that was diverted was merely a drop in the bucket.

The information gathered from this raid was considerably more valuable, at least as it pertains to combatting illicit activities. An investigation of the plane that was being used showed that the capital used to purchase it was laundered through Wachovia, which was the fourth-largest bank in the United States, at the time.

Dirty money laundered in the United States

A further look into the money being laundered through accounts handled at Wachovia showed that the bank had failed to utilize any measures meant to fight money laundering operations on over $378 billion in transfers from CDC (casas de cambio, or currency exchange houses) accounts and bulk cash exchanges from the period of May 2004 and May 2007. These were classified as transfers are at a high risk of money laundering activity.

For scale, consider that approximately $300 billion from illicit activities are laundered through the United States every year, and the amount of money possibly laundered is a third of the entirety of Mexico’s GDP. For this oversight, Wachovia eventually paid $160 million to authorities in two separate payments (one for allowing the purchase of the plane, and the other for the entirety of these transactions).

This article continues in Part 2.