Magazine article American Banker

Drug-Profit Laundering Scam Uses U.S. Banks, Informant Tells House

Magazine article American Banker

Drug-Profit Laundering Scam Uses U.S. Banks, Informant Tells House

Article excerpt

Banks across the country are unwitting pawns in an increasingly popular scam to launder billions in drug money, a former Colombian currency broker told lawmakers Wednesday.

A money launderer turned government informant said that in two years she laundered several million dollars through accounts at nearly 30 U.S. banks including Chase Manhattan, Marine Midland, NationsBank, and First Union.

"As a money broker in Colombia, I established accounts in U.S. banks where the drug money was deposited," said "Ms. Doe," who testified anonymously before House Banking's general oversight subcommittee.

Peso brokers are running $5 billion to $10 billion annually through U.S. banks, said Alvin C. James, a special agent for the Internal Revenue Service.

Because she has received death threats, Ms. Doe spoke from behind a screen, her voice disguised with sound equipment. She detailed how she engaged in an elaborate form of money laundering called "black market peso exchange."

"I cannot say these banks were aware that I and other money brokers were using their accounts for money laundering, but without their services, we could not have brokered drug profits," said Ms. Doe.

Rep. Carolyn C. Kilpatrick, D-Mich., said she was "outraged" by Ms. Doe's testimony that bank employees did not ask for much identification when she wired drug money from the accounts of associates, and even provided her with the necessary software and routing codes.

"It looks like they are willing partners," Rep. Kilpatrick said.

According to Ms. Doe and government witnesses, peso brokering typically works like this: A money broker in Colombia knows of a drug cartel that has $500,000 from narcotics sales hidden in the United States that it wants to secretly repatriate as pesos.

The broker finds a coffee grower in Colombia who needs $500,000 in farm equipment from a U. …

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