Casablanca, an Epic Money Laundering Story

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Casablanca, an Epic Money Laundering Story

Without bankers knowing it, for three years there was a time bomb ticking in a nondescript storefront export-import business 15 miles south of Los Angeles, in a city called Santa Fe Springs. The massive operation, whose underlying investigation was by the U.S. Customs Service, lasted 30 months. Operation Casablanca is the largest money laundering case ever – three banks and 28 bankers have been indicted for money laundering. At least 40 other banks and businesses have, for the moment dodged the criminal bullet, but face millions of dollars in loss through civil penalty and forfeitures. 1 As if taking their cue from Claude Rains at the end of Casablanca to “round up the usual suspects,” U.S. Customs Service agents on May 18 rounded up 28 bankers, and more than 130 other persons charged with money laundering and drug trafficking in the largest criminal money laundering case ever filed.

These bankers were ensnared in a long undercover sting that succeeded even in its last phase, when six of them were arrested after being lured by the temptation of a big party with wine, women, and song to the aptly-named Casablanca Casino, near Las Vegas.

Three Mexican banks (Bancomer, Banca Serfin and Banco Confia) were also indicted for money laundering. If convicted, they will join Banque Leu, Banco de Occidente, National Mortgage Bank of Greece, and Bank of Credit and Commerce International as the only foreign-chartered banks ever convicted of laundering in the U.S.

The U.S. government has quietly begun carrying out the threat it made on the day it announced the sensational series of legal actions against 14 Mexican, Venezuelan, and Spanish banks in Operation Casablanca. Buried in the civil docket of the federal district court in Los Angeles is a case, filed without fanfare on May 20 by the U.S. against Bancomer, S.A., seeking a staggering $21,509,262 in civil damages under the money laundering law. This is the fourth blow that Mexico’s second largest bank has suffered at the hands of the U.S. government since May 18, 1998, when Casablanca was announced. No other institution has ever faced such an array of simultaneous actions. (Note: The U.S. Attorney’s Office in Los Angeles has since decided to dismiss the $21.5 million civil money laundering penalty lawsuit.) When they announced the Casablanca cases, the Justice and Treasury Departments said that civil penalty lawsuits would be filed against the 14 banks whose employees were indicted, including the three indicted banks. The civil lawsuits are based on a potent but little-used provision of the money laundering law (Title 18, USC Sec. 1956(b)). There are reports that, although it issued a press release saying it would do so, the U.S. is having second thoughts about filing civil penalty lawsuits under the money laundering law against the 11 banks that were not indicted, but whose employees were accused of money laundering (Title 18, USC Sec. 1956(b)). The broader discovery rules in civil cases, perceived weaknesses in the cases against the institutions, and reaction to the diplomatic furor that Casablanca caused in Mexico, are said to be factors.

Now in the discovery phase of the criminal cases, the government has begun revealing the evidence it will use to attorneys for the accused institutions and individuals. Included are about 3,000 hours of videotaped meetings with the defendants, and mounds of paperwork.

It was not only banks and bankers who had funds seized by the U.S. government in Operation Casablanca. The most surprising name among the businesses whose funds were seized in the massive money laundering case is Price Waterhouse. The giant international accounting and consulting firm suffered the seizure of $545,000 on the day Casablanca exploded into public view.
A sworn affidavit by Customs Service Special Agent Anne Littleton, filed in support of an application for a court order to seize a Price Waterhouse account at Bank of Boston International in New York, says the firm received $545,000 that originated from drug trafficking.

The affidavit says that on two occasions the Price Waterhouse office in Colombia issued 48 checks on its account at Banco de Credito in Colombia, to pay an unnamed Colombian peso broker for the subsequent wire transfer of the comparable amount in U.S. dollars in four transactions to its New York account. Almost all the 48 checks were consecutively numbered. The fallout from Operation Casablanca reaches into many fields of policy and endeavor in the public and private sectors. Banking and government policy, diplomatic relations, enforcement procedures, regulations, bank ratings, and other areas are touched by this undercover operation that left its mark in 18 countries. Here are questions raised by Casablanca fallout:

● Will the proposed money laundering legislation pending in the U.S. Congress be affected, or now be assured of passage, by the findings of the Casablanca cases?

● Will the banks that are indicted for money laundering be affected in their ratings by services such as those of Standard and Poor? News dispatches reveal that the rating firms, including S&P, are monitoring the legal situation involving the banks.

● Will the cease-and-desist actions initiated by the U.S. Federal Reserve Board result in the termination of the license to operate in the U.S. of any of the six banks to whom they were directed? It is not unheard of for the Fed to dispatch a bank for gross deficiencies or legal violations.

And, on November 1, the Venezuelan ambassador to the United States, Pedro Luis Echeverria, announced in an interview with undercover agents involved in Operation Casablanca. “We’ve gathered all the information. and now we can state that the undercover agents of the U.S. government broke Venezuelan laws and will be prosecuted accordingly.,” Operation Casablanca resulted in the arrest of more than 100 suspects, including five Venezuelans.

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