FBI: Drug Cartels Use Bank of America to Launder Money

ByRyan Dahrouge

An affidavit released by the FBI last month reveals one of Mexico’s most violent narcotic-trafficking drug cartels has been laundering money into the U.S. through accounts with Bank of America.

Beginning in or around 2009, members of the infamous Los Zetas cartel had been sneaking drug earnings past federal authorities into Texas and then laundering them through Tremor Enterprises LLC, a horse training and racing business that was run, in part, by José Trevino Morales, a brother of cartel leaders, Miguel Angel Trevino Morales and Omar Trevino Morales.

The Morales brothers in Mexico would purchase Quarter Horses, known for their potential in short sprint racing, through transactions from two accounts established at Bank of America. Once the horses were considered in prime racing condition, they were sold cheaply to José Trevino Morales, at which point he could put the horses up for auction. The resulting profit allowed the Morales brothers to disguise their huge drug earnings as legitimate margins. This scheme hit its peak in September 2010, nearly a year after the Bank of America accounts were opened. Mr. Piloto, one of the horses allegedly bought with cartel money, won the $1 Million first prize at the All American Futurity at Ruidoso Downs, in New Mexico and the winnings were deposited into a Bank of America account owned by Tremor Enterprises LLC. José Trevino then purchased the horse from his brothers for $100,000 and one auction later, the Moraleses could claim a legitimate source for their earnings.

Since December 2009, Bank of America filings reported an estimated dozen transactions between the two accounts, totaling $1.5 Million.

Federal authorities aren’t new to this type of security lapse. Passed in 1970, the Bank Secrecy Act requires banks to report to federal officials suspicious transactions of $10,000 or more; a failure to do so can lead to penalties or prosecution. In 2010, HSBC’s North American unit’s procedures for money-laundering detection were deemed poor and the company was ordered to improve or face steep penalties. Similarly in late 2010, the Wells Fargo-acquired bank, Wachovia, was ordered to pay a $160 million penalty when they failed to detect and investigate the use of their accounts by drug traffickers to launder money into the U.S., including a transfer of $378.4 billion, the equivalent of a third of Mexico’s GDP. Bank of America, it should be noted, is not being charged with any wrongdoing.

Oversight like this allows foreign organizations free range for their finances in the U.S., a notion dangerous when applied to even a legitimate industry. Wells Fargo’s penalty was substantial, but it was a mere 2% of their 2009 profits, a year in which they earned $12.3 billion. Allowing banks to forgo the undoubtedly tedious and expensive task of establishing effective anti-money laundering programs in exchange for a fine when the security lapse comes to the FBI’s attention, possibly in the form of a wealthier cartel member, compromises national security and strengthens networks and industries the Department of Defense has vowed to dismantle. This latest laundering scheme is evidence of a systematic failure by the banking industry to address the problems in their detection programs and it’s coming at the expense of the safety of the Mexican and American public.