A Lesson In Money Laundering, Mexican Style

Around $1 trillion are laundered every year in Mexico
Around $1 trillion are laundered every year in Mexico
David Santa Cruz

MEXICO CITY - My neighborhood dealer was a low-class guy. We went to the same public school, but he was few years younger than me.

He was never very bright nor did he excel in anything; he spent his afternoons standing outside his house or at the street corner, without bothering anyone, and with no one bothering him. I would even venture to say that he was a peaceful guy but with a low profile, almost a ghost. That is why his dream job was to become a drug dealer. I doubt he had a very extensive knowledge about criminal culture, or even aspired to be a “capo” (mafia or drug cartel kingpin), but his drug business kept growing.

One day, out of nowhere, he bought a scooter, then a motorcycle, and then an old Mustang. One day he had the brilliant idea of opening a laundry shop to justify his new economic status. He reproduced Chicago mob accountant Meyer Landsky’s money laundering scheme.

The principal of money laundering is simple: justifying and/or covering the origin of resources obtained through an illicit activity. The easiest way is to open businesses that work with high operating cash flows but are not very profitable. For instance, a four-star hotel in a working-class neighborhood or a restaurant far away from commercial districts. The owner will always report full capacity and high profits even though the business will regularly be empty. This basic scheme has gotten more sophisticated over time in order to avoid detection.

Today, money laundering is like running a multinational explains Ricardo Sahagún, business director for Latin America at Pitney Bowes Software. This involves people, organizations and institutions in different countries to get the job done. For instance, in Australia, Pitney Bowes worked with the government to uncover a massive scam, using a small grocery store called Little Persia to launder millions of drug money and transfer it to remittance services in Iran.

In his book Los Delitos Económicos en la Actividad Financiera (Economic Crimes in Financial Activity), Antonio Hernández Quintero describes the three phases in the money laundering process. The first phase involves physically placing the money in the financial system through a bank, brokerage, or savings account. The second step is erasing all trails. This is done by transferring the money to other banks, usually those found in tax havens. Finally, the money is reintegrated in the market where it initially came out, generally through the buying and selling of real estate and fake businesses, which will create legal profits.

The HSBC case

One example is the case of HSBC bank, where $290 million of Mexican drug cartel money was laundered in four years, using travelers cheques – in a plot so complicated that it could have been written by the Wachowski brothers. About 30 Russian people and companies were implicated in the operation, whose capital came from Russian banks or accounts in the British Virgin Islands; Also implicated were SK Trading, a Korean trading company, Hokuriku Bank, a Japanese bank and HBUS, an American HSBC subsidiary.

"Occupy HSBC" protests in Manhattan on Feb. 14, 2013 - Photo: Michael Fleshman

The travelers cheques were bought by Russians and used to purchase used cars from the Korean trading company, who deposited them in the Japanese bank, who in turn opened accounts with HBUS. The cheques, which were submitted in large blocks of $500 or $1,000 cheques, were signed and countersigned by a person with an illegible signature. HBUS cleared these bulk travelers cheques for Hokuriku Bank, sometimes clearing up to $500,000 a day, without raising an eyebrow. But then again, the millions in commissions probably helped.

Have you ever tried to cash a cheque? Then you know how complicated it is. Depending on the country, you will asked be to provide ID, a telephone number and/or an address. Usually, the teller who is handling the cheque checks carefully to make sure that the signatures match. When this process is done abroad, things get even more complicated. How then, did hundreds of travelers cheques pass by daily for years without anyone noticing? The answer is obvious: a number of actors in the chain were accomplices by action or omission. The investigation ran by U.S. authorities found emails and evidence that HBUS had detailed records of these irregularities, but did nothing about them.

Money laundering is considered a white-collar crime, and often a victimless crime. But what makes it a dangerous crime are the preceding acts: human trafficking, kidnapping, killings, pimping, theft and scams, terrorism, arms trafficking and bribery, among others.

According to the International Monetary Fund (IMF), the total amount of funds laundered in the world varies between 2% and 5% of the global GDP, because resources from illicit origin can be easily and immediately transferred from one jurisdiction to another. In Mexico, the Ministry of Treasury and Finance (SHCP), calculates around $1 trillion every year are laundered in the country.

Experts claim that no state, company or system can ever be 100% immune to money laundering. “Every time someone creates a fool-proof system, a new type of fool is invented,” says Ricardo Sahagún.

My neighborhood dealer not only had a cheap laundry shop, but he started creating jobs, some in his legal business and some in the illegal one. He began to buy himself and his mom better clothes, fixed his old Mustang and traveled often.

One day, my neighborhood dealer closed down his laundry shop, fixed his mom’s house and disappeared without leaving any trace; it is possible that he had gone up on the criminal ladder or that he had just been “disappeared” or killed.

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Ecological Angst In India, A Mining Dumpsite As Neighbor

Local villagers in western India have been forced to live with a mining waste site on the edge of town. What happens when you wake up one day and the giant mound of industrial waste has imploded?

The mining dumpsite is situated just outside of the Badi village in the coastal state of Gujarat

Sukanya Shantha

BADI — Last week, when the men and women from the Bharwad community in this small village in western India stepped out for their daily work to herd livestock, they were greeted with a strange sight.

The 20-meter-high small hill that had formed at the open-cast mining dumpsite had suddenly sunk. Unsure of the reason behind the sudden caving-in, they immediately informed other villagers. In no time, word had traveled far, even drawing the attention of environment specialists and activists from outside town.

This mining dumpsite situated less than 500 meters outside of the Badi village in the coastal state of Gujarat has been a matter of serious concern ever since the Gujarat Power Corporation Limited began lignite mining work here in early 2017. The power plant is run by the Power Gujarat State Electricity Corporation Limited, which was previously known as the Bhavnagar Energy Company Ltd.

Vasudev Gohil, a 43-year-old resident of Badi village says that though the dumping site is technically situated outside the village, locals must pass the area on a daily basis.

"We are constantly on tenterhooks and looking for danger signs," he says. Indeed, their state of alert is how the sudden change in the shape of the dumpsite was noticed in the first place.

Can you trust environmental officials?

For someone visiting the place for the first time, the changes may not stand out. "But we have lived all our lives here, we know every little detail of this village. And when a 150-meter-long stretch cave-in by over 25-30 feet, the change can't be overlooked," Gohil adds.

This is not the first time that the dumpsite has worried local residents. Last November, a large part of the flattened part of the dumpsite had developed deep cracks and several flat areas had suddenly got elevated. While the officials had attributed this significant elevation to the high pressure of water in the upper strata of soil in the region, environment experts had pointed to seismic activities. The change is evident even today, nearly a year since it happened.

It could have sunk because of the rain.

After the recent incident, when the villagers raised an alarm and sent a written complaint to the regional Gujarat Pollution Control Board, an official visit to the site was arranged, along with the district administration and the mining department.

The regional pollution board officer Bhavnagar, A.G. Oza, insists the changes "aren't worrisome" and attributes it to the weather.

"The area received heavy rain this time. It is possible that the soil could have sunk in because of the rain," he tells The Wire. The Board, he says, along with the mining department, is now trying to assess if the caving-in had any impact on the ground surface.

"We visited the site as soon as a complaint was made. Samples have already been sent to the laboratory and we will have a clear idea only once the reports are made available," Oza adds.

Women from the Surkha village have to travel several kilometers to find potable water

Sukanya Shantha/The Wire

A questionable claim

That the dumpsite had sunk in was noticeable for at least three days between October 1 and 3, but Rohit Prajapati of an environmental watchdog group Paryavaran Suraksha Samiti, noted that it was not the first time.

"This is the third time in four years that something so strange is happening. It is a disaster in the making and the authorities ought to examine the root cause of the problem," Prajapati says, adding that the department has repeatedly failed to properly address the issue.

He also contests the GPCB's claim that excess rain could lead to something so drastic. "Then why was similar impact not seen on other dumping sites in the region? One cannot arrive at conclusions for geological changes without a deeper study of them," he says. "It can have deadly implications."

Living in pollution

The villagers have also accused the GPCB of overlooking their complaint of water pollution which has rendered a large part of the land, most importantly, the gauchar or grazing land, useless.

"In the absence of a wall or a barrier, the pollutant has freely mixed with the water bodies here and has slowly started polluting both our soil and water," complains 23- year-old Nikul Kantharia.

He says ever since the mining project took off in the region, he, like most other villagers has been forced to take his livestock farther away to graze. "Nothing grows on the grazing land anymore and the grass closer to the dumpsite makes our cattle ill," Kantharia claims.

The mining work should have been stopped long ago

Prajapati and Bharat Jambucha, a well-known environmental activist and proponent of organic farming from the region, both point to blatant violations of environmental laws in the execution of mining work, with at least 12 violations cited by local officials. "But nothing happened after that. Mining work has continued without any hassles," Jambucha says. Among some glaring violations include the absence of a boundary wall around the dumping site and proper disposal of mining effluents.

The mining work has also continued without a most basic requirement – effluent treatment plant and sewage treatment plant at the mining site, Prajapati points out. "The mining work should have been stopped long ago. And the company should have been levied a heavy fine. But no such thing happened," he adds.

In some villages, the groundwater level has depleted over the past few years and villagers attribute it to the mining project. Women from Surkha village travel several kilometers outside for potable water. "This is new. Until five years ago, we had some water in the village and did not have to lug water every day," says Shilaben Kantharia.

The mine has affected the landscape around the villages

Sukanya Shantha/The Wire

Resisting lignite mining

The lignite mining project has a long history of resistance. Agricultural land, along with grazing land were acquired from the cluster of 12 adjoining villages in the coastal Ghogha taluka between 1994 and 1997. The locals estimate that villagers here lost anything between 40-100% of their land to the project. "We were paid a standard Rs 40,000 per bigha," Narendra, a local photographer, says.

The money, Narendra says, felt decent in 1994 but for those who had been dependent on this land, the years to come proved very challenging. "Several villagers have now taken a small patch of land in the neighboring villages on lease and are cultivating cotton and groundnut there," Narendra says.

They were dependent on others' land for work.

Bharat Jambucha says things get further complicated for the communities which were historically landless. "Most families belonging to the Dalit or other marginalized populations in the region never owned any land. They were dependent on others' land for work. Once villagers lost their land to the project, the landless were pushed out of the village," he adds. His organization, Prakrutik Kheti Juth, has been at the forefront, fighting for the rights of the villages affected in the lignite mining project.

In 2017, when the mining project finally took off, villagers from across 12 villages protested. The demonstration was disrupted after police used force and beat many protesters. More than 350 of them were booked for rioting.

The villagers, however, did not give up. Protests and hunger strikes have continued from time to time. A few villagers even sent a letter to the President of India threatening that they would commit suicide if the government did not return their land.

"We let them have our land for over 20 years," says Gohil.

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