Foreign Policy Blogs

Hamas and Hezbollah Using Mexican Banks to Launder Funds

According to the Washington Times (March 2009), “Hezbollah is using the same southern narcotics routes that Mexican drug kingpins do to smuggle drugs and people into the United States, reaping money to finance its operations and threatening U.S. national security, current and former U.S. law enforcement, defense and counterterrorism officials say.”

Now there are more recent reports that Mexico’s banks, largely owned by the US, Canada, and Spain, are reaching out to new customers, among them, Hamas and Hezbollah.

We know that banks like Wachovia are handling accounts for Mexican druglords, but the word is that Hamas and Hezbollah are also funneling money through Mexico, with the intention, one assumes, of moving it into correspondent accounts in the US or sending it back to accounts in Indonesia (a preferred banking center for traffickers and terrorists), to Europe, or to other remote/off-shore destinations.

So, you ask — cannot Mexico’s banks undertake any transactions they choose?

Is Mexico not a sovereign nation?

Answer — not when so many major US financial institutions own controlling shares of Mexican banks engaged in the laundering of funds for some of the world’s most dangerous saboteurs–criminals, traffickers and terrorists intent on destabilizing economic and national security in the Americas.

The dilemma, of course, is a familiar one: immediate profit (top of the list in recession-riven 2010) trumps still relatively (hopes Washington) distant and politically complicated threats.

Mexico is our second largest trading partner, the land of NAFTA-promise and prosperity for multinationals that supply big-ticket goods (cars, electronics, appliances, etc), at the lowest cost and highest profit possible to the United States. This is legitimate trade under NAFTA and good business for all involved — the US, Mexican and Canadian economies.

So the fact that Mexico has now become an international center for money laundering is, for the US, for the multinational corporations making money via NAFTA, and for the US banking industry, a big fly in very sticky ointment.

Ironically, this disreputable boost to the Mexican financial system also translates into greater returns for the US banking industry (or perhaps more appropriately, the US/Mexican banking industry), so we have a double bind: dirty high-net value accounts entering the US financial system via US-controlled banks is also good business for all concerned.

Not legal, but good.

US Bankers would argue, of course, that the money wired from their Mexican accounts into banks on US soil is, for all practical purposes, indistinguishable from the revenue flowing in from legitimate businesses and customers.

And they have a point:  by the time dirty money travels from Mexico’s casa de cambios, wire remitting outfits no larger than your neighborhood 7-Eleven, into, say, a Wachovia account in Mexico City, it’s only one keyboard stroke short of coming up blemish-free in a correspondent account held by a Wachovia branch in the USA. Or in another, even more removed account anywhere in the world. And we’re talking about billions.

Crime pays.

The question in this case is — for what?

For US banks and bank managers, Hamas and Hezbollah funds moving through their Mexican branches represents profit, the bottomline, and if the owners of suspect accounts have already succeeded in moving the money through Mexico’s  ‘legal’ wire remitters, who have succeeded in moving it one step further, into their ‘legal accounts’ with a US-based bank like Wachovia, why should bank managers and executives worry when that same money then shows up in a correspondent Wachovia account in LA, Miami, or Arizona?

There is a familiar irony at work here: terrorist or drug money laundered by US financial institutions brings to mind the  the kind of reversal we see in Afghanistan, where Taliban and al-Qaeda fighters use weapons supplied by the US to the mujahideen, the US-funded Afghan insurgents who eventually pushed the Russians out of Afghanistan. Now those same weapons are being used against US and NATO troops.

NAFTA allowed US and other foreign banks to move into Mexico and initiate large-scale bank mergers and acquisitions. And now these US banks are stymied, whether they admit it or not, by the blind-eyed banking practices that make their Mexican subsidiaries so attractive to global criminals.

The economic danger, of course, is that corruption on such a massive scale will eventually put a number of US banks behind the Treasury/DOJ eight ball. It may take a while, but it will happen.

The danger to national security lies in the possibility that terrorist monies flowing through Mexican subsidiaries of US banks can be used to buy weapons, to finance attacks on US soil, to fund ‘sleeper cells’ in the US, or, if transferred to accounts in Indonesia or elsewhere, this money may finance terrorist operations we cannot yet imagine.

The US Department of State has issued warnings about the freewheeling trade in small arms currently underway in Central and South America — Hugo Chavez has purchased enough small arms (to the tune of 1 billion so far) to outfit every Venezuelan soldier dozens of times over.

We know Chavez is reselling or trading arms to the FARC, to Mexican cartels, and to leftist groups, insurgents, and criminals across Central and South America.

The Department of Justice and the Department of Treasury have also acknowledged problems in the ‘free banking zone’ — the post-NAFTA merger of US and Mexican Banks, but the response of the US government has been lukewarm to date.

These are hard economic times, and the trade benefits NAFTA offers Mexico, the US, and Canada are critical to an economy reeling from a serious recession.

But at what cost?

How much profit, how big a boost to the US economy will outweigh the consequences if the ultimate payoff for the US is the criminal necrosis of the US banking system, or the possibility that it may be our own banks, US institutions, that end up financing terrorist attacks on US soil?



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.