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Whistleblower Who Blew the Lid Off the 2010 Multi-Million Dollar Wachovia Money Laundering Scandal Asks “Has Anything Changed”?

Despite all of the talk about reform in banking procedures and compliance, little has changed in the industry. AML Services International LLC has gathered the foremost experts on the subject to analyze this issue in an upcoming seminar in New York.


Thirteen years after the Bank of New York money laundering scandal, and two years after the largest anti-money laundering penalty ever imposed on a U.S. bank, questions of compliance attitude still loom. Martin Woods, who investigated bank officials of Bank of New York, and who blew the lid off the 2010 Wachovia money laundering scandal, believes that little has changed.
“I investigated Bank of New York employees for the laundering of $10B of money of dubious Russian origin through the bank.  That was 1999, so what has changed? I am not convinced there has been sufficient change in attitudes and culture at banks,” says Woods.
Law-enforcement scrutiny is increasingly focused on narcotics proceeds moving between the U.S. and Mexico. Wachovia Bank (now Wells Fargo) received $160 million in money laundering penalties in 2010, the largest penalty ever obtained under federal anti money laundering laws. The bank acknowledged its failure to adequately monitor the billions of dollars it processed for Mexican currency-exchange houses between 2004 and 2007, a money flow including at least $110 million of narcotics proceeds from Mexican drug cartels. The bank escaped prosecution, and so far, no employees have been indicted.
The lack of prosecutions of American financial institutions and senior management is frustrating. “Within the “Occupy” movement, perhaps we need a small group of former compliance officers who work to eliminate bad compliance practices,” he says.
The $160M penalty against Wachovia was supposed to send a message to the financial institutions that compliance mistakes can be costly. But banks make too much money moving dirty money. “There is a great imbalance in the trillions of dollars banks earn by moving dirty money and the tiny part of that money that’s being paid in penalties,” says Saskia Rietbroek, partner of   
All these cases are connected. The Mexican money exchange houses, which were laundering money for the Mexican cartels, first banked with Union Bank of California. When this bank left the Mexican market because of regulatory pressure, Wachovia took over these clients. In just the three years, Wachovia processed $373 billion in wire transfers, $47 billion in checks and $4 billion in bulk cash deposits from the currency exchanges. When Wachovia left the Mexican market after receiving a $160M penalty for laundering, who took over the business? HSBC was Wachovia’s competitor in Mexico. HSBC was criticized in a 2010 enforcement action for having inadequate anti-money laundering controls in bulk cash and foreign correspondent banking. “The parallels with the Wachovia case appear to be striking,” says Rietbroek. 
Rietbroek further adds “Earlier this year, HSBC put a $1B reserve on its balance sheet for enforcement actions. That points to more than just “inadequate anti-money laundering policies and procedures”. That points to dirty money.”
HSBC Holdings PLC is reported under investigation by a U.S. Senate panel in a money-laundering inquiry.
“The money that Wachovia has admitted laundering came from Mexico, the drugs come from and through Mexico, the 50,000+ murders took place in Mexico. All of these things are connected, this is the big picture.” says Woods.
Money laundering is not a victimless crime. The money people seek to launder through banks is connected to major crime, drug trafficking, people trafficking and murder. Our action or inaction can have a real impact upon the outcome.
“I hope to teach people who work in compliance and want to do the right thing. I am not sure what it takes to change attitudes and cultures at big financial institutions. The Dodd Frank Act will lead to more changes and more instances of whistleblowing. Firms need to have an internal program which engenders the confidence of both employees and regulators. The public is fast running out of patience. The media has shown them the connections between the drugs, the guns, the murders and the laundering and they want action,” says Woods.
Dennis Lormel, a former FBI agent, says: “The most surprising and troubling thing I realize is that the “tone at the top” in all these cases was not one of compliance.  One would think that the marquee cases of the last few years would have changed that mind set.  The still unfolding Wal-Mart case demonstrates the fracture between the business side of a major company and the compliance side.  It also demonstrates that the business side trumps the compliance side.”
Lormel, Woods and Rietbroek will be speaking at a Seminar in New York on June 21, featuring intense compliance training using real life enforcement cases including HSBC, Wachovia, Lebanese Canadian Bank, Wal-Mart corruption, critical AML trends, challenges of working as a compliance officer wanting to do the right thing, and detecting money laundering and terrorist financing.
Our goal is to enhance the expertise, the ethics policies and operations and professionalism of people who work in anti-money laundering,” said Saskia Rietbroek, Partner at AML Services International. will continue to produce first-rate, hard-charging, independent informational and training services that are integral to the goals of fighting financial crime.


 compliance risk
 money laundering
 anti money laundering
 bank fraud

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