Foreign Policy Blogs

Wachovia's Dirty Secret: Millions in Narco-Dollars Still Undiscovered?

Law enforcement officials often suggest money laundering is too complex a process for the average person to understand. Factor in an understandable concern that interfering, even from afar, in the business of big banking could always affect one’s own bottom-line, and you can see why reports of financial crimes do not receive the same attention, from the press, the public, or the government, as say, the current BP debacle or Lindsay Lohan’s recent sentencing for too many DUIs.

Google “Lindsay-DUI,” for instance, and the search engine returns 830,000 sites in 53 seconds. Google “Wachovia-money laundering,” and the return is a skimpy 50,900.

What we need perhaps is a simpler view of how the US-Mexico banking relationship supports transnational crime and how that relationship is nourished and sustained by NAFTA. We also need to understand what part  the wire transmitting operations know as “Casa de Cambios” (CDCs) play, and why, in the case of Wachovia’s laundering of millions in dirty dollars, these CDCs have been so critical to operational success.

NAFTA, which created a unified trade bloc, also created a transnational financial bloc. During the last two decades, foreign institutions have been binging on a menu of mergers and acquisitions, acquiring significant interest and, in some cases, outright control of banks and other financial services providers in Mexico.

Large, powerful US banks like Wachovia, Bank of America, American Express, Citigroup, Spain’s BBVA and London-based HSBC have been setting up shop in a nation burdened by a $39 billion per annum illegal drug industry, a history of corruption in both the private and public sectors, and ongoing civil unrest spawned by the quest for criminal control of Mexico’s drug trade.

One important result is an opportunity for cash to move seamlessly from Mexico’s casa de cambios to their accounts in Mexican banks, and then to correspondent accounts in US banks. Drugs move from Mexico into the US, and drug money then moves south, through Mexico, and back to the US or wherever the trafficker wants his ‘clean’ money to land.

For criminal entrepreneurs who need to place dirty currency into legitimate bank accounts in Mexico (placement: the first phase of money laundering), move it into correspondent accounts in the US (layering: the second phase of money laundering) and then move it into the international financial markets (integration: the third phase of money laundering), the symbiosis between Mexican and US banks provides the key.

Increasingly, when traffickers launder money through Mexican accounts, they are for all intents and purposes, moving the money through US banks as well — the proverbial distinction without a difference.

Wachovia, now owned by Wells Fargo, may be off the hook, but the questions still keep coming–something the Permanent Subcommittee on Investigations, chaired by Senator Carl Levin (D-Mich) may yet find deserving of closer examination.

The rest of the story:

  • Thirteen casa de cambios in Mexico remit $378 billion over a period of 3 years and deposit these funds into their Wachovia bank accounts in Mexico.


  • These funds, totaling $378 billion, are transferred into corresponding accounts in US branches of Wachovia Bank.


  • Once these funds ($378 billion) have been deposited into Wachovia/USA, the funds are directed to locations across the world—no one has so far investigated or traced the movement of these criminally generated funds out of Wachovia/USA to their unknown intermediate or final destinations.


  • The FBI and DEA trace $110 million out of $378 billion deposited into Wachovia/USA to a drug transaction: traffickers use $110 million from Wachovia/Bank of America account to purchase aircraft to transport cocaine from Venezuela to Mexico–the scheme fails and federal agents apprehend traffickers and 5.7 tons of cocaine. As a result, the US Government offers Wachovia a Deferred Prosecution Agreement as an alternative to criminal prosecution. Wachovia is civilly fined $110 million (the amount cited by the FBI and DEA as having been used in the  drug transaction) and receives a $50 million Treasury penalty.


  • Only 1 casa de cambio known to have transmitted revenue to Wachovia — the Casa de Cambio Puebla is investigated. How much more of the $378 billion transmitted via the remaining 12 casa de cambios to Wachovia accounts represents criminal revenues is anyone’s guess, because no further inquiries have been undertaken by either the United States or Mexico into the origin, ownership, or management of the other 12 Mexican wire remitters involved in this operation.


  • Authorities discover the Casa de Cambio Puebla it is operated by Pedro Alfonso Alatorre Damy, the major money launderer for Mexico’s Pacific Cartel, sometimes called the Sinaloa Cartel.


  • The Mexican press also reports that Jose Ramon Gutierrez de Velasco, former mayor of Vera Cruz, and associate of former Mexican President Vicente Fox, is a partner in the Casa de Cambio of Puebla exchanges. The remaining 12 casa de cambios escape official scrutiny.


  • There are 15 major Mexican banks, most controlled by the US, Canada, and Spain, with combined total assets of 160 billion.


  • The 13 casa de cambios that transmitted funds to Wachovia nearly met or exceeded that amount—$160 billion in remittances and deposits—in each of the 3 years it is alleged they aided in the laundering of drug/criminal revenues.


  • The GDP for Mexico is 1.3 trillion annually.


  • The 13 casa de cambios transferred about 1/3 that amount into the Wachovia accounts in 3 years.


  • The estimate of all drug, other crime and terrorist funds in circulation each year is estimated to be 500 billion.


  • You do the math.









Kathleen Millar

Kathleen Millar began her career in public affairs working for Lyn Nofziger, White House Communications Director. She has gone on to write about a wide range of enforcement and security issues for DHS, for the US Department of the Treasury (Customs & Border Patrol), for Senator Olympia Snowe (R-ME), then a Member of the Senate Intelligence Committee, and for top law enforcement officials in the United States and abroad.

A Founding Member of the Department of Homeland Security, Millar was also the deputy spokesperson-senior writer for the United Nations Office on Drugs and Crime in Vienna, Austria. She has authored numerous speeches, articles and opeds under her own and client bylines, and her work, focusing on trafficking, terrorism, border and national security, has appeared in both national and international outlets, including The Washington Post, The Washington Times, The International Herald Tribune, The Financial Times, and Vital Speeches of the Day.

Kathleen Millar holds an MA from Georgetown University and was the recipient of a United Nations Fellowship, International Affairs, Oxford. She is a member of the Georgetown University Alumni Association, Women in International Security (GU), the Women’s Foreign Policy Group, and the American News Women’s Club in Washington, DC. Kathleen Millar is currently teaching and writing about efforts to combat transnational organized crime.