Banks: The Real Beneficiaries of the ‘War on Drugs’

“Smoke & Mirrors..”

 By Deej Sullivan

It is generally agreed that the 50 year old War on Drugs has failed. Miserably. Rates of drug use and addiction have risen throughout the Western world despite the best efforts of successive Governments to stem the flow; with their never-ending and ever-worsening deterrents and propaganda. It is now easier than ever to get hold of any one of a staggering array of illicit and illegal drugs. Yet despite this; Governments are still spending billions every year enforcing arcane prohibition laws.

Mexican drug moneyThe question is – Why? If ‘The War’ is so clearly being lost, and the spending of all of this money is in vain, then why continue spending it. Surely there must be another way? Well, as it turns out, there is, and those in charge are well aware of it. Everywhere less severe drug laws have been brought into force, drug use and related problems have diminished. From Portugal to The Netherlands, and even the greatest instigator of all of this, The USA:  regulation, legalisation and decriminalisation have worked – and the savings to their police forces etc (not to mention the money raised from taxes) have been enormous.

So, again, we have to ask … Why? Who is really benefitting here? It manifestly isn’t the general public. The most obvious group to benefit, financially, from the continued prohibition of drugs (and by extension, the war on drugs) are the very people we are supposedly fighting. The cartels and organised crime gangs. Their wealth and power, particularly in South America, has grown exponentially over the years to the point where entire countries have been torn apart by violence.  Both between the cartels – and against them. They are obviously the greatest beneficiaries of the illegal drug trade. Yes? But if we think about it – where does all that illegally earned money actually  go? You can’t just deposit countless millions of dollars into a bank account without questions being asked; banks are supposed to guard against that sort of thing with their anti money-laundering regulations. And yet that money still finds its way into the banking system and is used to fund all manner of illegal activity. From narcotics distribution to terrorism. All of which leaves us with an uncomfortable dilemma;  either the banks are so incompetent that they can’t even stop cartels from laundering their ill-gotten gains: Or, more worryingly, they are implicit in the laundering. They knowingly turn the other way whilst drug lords funnel money through their banks. All  the while aware that the money is being used to cause untold suffering and misery to innocent people worldwide.

Recent examples seem to place the blame very much with the banks themselves and the people who run them. The British bank HSBC were last year fined $1.9 billion (£1.2 billion) by US authorities for failing to stop drug money from being laundered through their banks in Mexico. This is clearly a huge amount of money and is, in fact, the largest ever fine of its kind. It was hailed by many as a victory against the cartels and a sign that the authorities were doing their job well. Of course it was very embarrassing for HSBC themselves, who issued a series of grovelling apologies and promised never to do it again. But really, what is $1.9bn to a bank whose official profits for 2011 were $21.9bn and who were said to have laundered at least $15bn? Pocket change essentially; a mere token gesture to appease the public. And what of the people in charge of ‘The Worlds Local Bank’? Did they face criminal charges? Of course not. The US Government decided in their wisdom that to prosecute would have undermined confidence in the banking system and the economy as a whole; and as such was not worth the risk.  In other words, the bankers were ‘too big to jail’. But maybe this slap on the wrist will have taught them a lesson, maybe they’ll think twice before breaking the law on such a huge scale again? Well, no. It has recently emerged that despite ‘the largest fine in history’, HSBC have been at it again. According to reports’; Argentina has alleged that the bank used ‘fake receipts’ to facilitate money laundering and tax evasion, and launder another £50 million. It is not clear whether this money came from drug cartels; however, what is clear, is that despite their claims that the allegations are ‘of great concern’, and that ‘we (HSBC) accept responsibility for our past mistakes’, they have not changed their ways. Shockingly enough, fining a bank a percentage of the money laundered rather than taking all the money back and indicting those responsible for the crimes they have committed is not a particularly effective deterrent. Especially when said bank can effectively pass the costs onto their customers in the form of higher banking fees.

HSCB fined for failing to stop drug money.This is not an isolated incident, and nor is it just a problem with British banks. Back in April 2006 the Mexican military seized 5.7 tonnes of cocaine valued at $100 million from aboard a DC-9 jet which had just landed in Ciudad Del Carmen; a fairly routine operation in a country which has become the main point of entry for drugs being smuggled into the US. But what they found in the paper trail behind the purchase of the plane was far more important. It turned out that the plane had been bought using funds laundered through Wachovia Bank;  at the time one of the biggest banks in the United States.

An investigation led by the Drug Enforcement Agency (DEA) eventually found that between 2004 and 2007 billions of dollars worth of wire transfers, travellers’ cheques and bulk cash shipments had been funnelled through Mexican currency exchanges into Wachovia accounts. On March 12th 2010 the US Justice Department charged Wachovia (but not any individual) with the largest ever violation of the Bank Secrecy Act. However the case never came to court because Wells Fargo (who bought Wachovia in 2008 for $12.7bn, having just received $25bn in bailout money) agreed to pay the authorities $160m in forfeiture; $110m of which represented ‘proceeds of illegal narcotics sales’. As soon as the years deferred prosecution expired, the bank were in the clear. How much money had they actually laundered to receive this most pathetic of punishments? $378.4 billion – equal to one third of Mexico’s entire GDP.

Once again no one was held accountable; for allowing brutal and murderous cartels to fund their activities. This may have been acceptable if, it was even remotely conceivable, that Wachovia didn’t know what was going on. But it is not. The story of Martin Woods proves this. Mr Woods joined Wachovia in 2005 as a money laundering reporting officer. During the 2006 Lebanon war he filed reports that Wachovia accounts were being used by Hezbollah and was promptly reprimanded by his superiors for trying to freeze the accounts. Later in 2006; he reported suspicious transactions involving deposits of travellers’ cheques in Mexico. Again, he was told to stop asking questions and blocking accounts by a senior manager in Miami. Wachovia had been explicitly shown what was going on by one of their own employees, a man who they had actually employed to stop money laundering, and had deliberately ignored him and tried to suppress him. In August 2008 they went one step further and fired Martin Woods for exposing the bank to potential regulatory jeopardy and large fines. He sued and, happily, won. His words on the subject, particularly in the wake of the new allegations against HSBC, sum the situation up perfectly – “All the law enforcement people wanted to see this come to trial. But no-one goes to Jail. In fact, everyone involved has either been promoted or gone to a better job at other banks. What kind of message does this give to the cartels and launderers? What does the settlement do to fight the cartels? Nothing… Where’s the risk? There is none. There is only an upside.”

Stephen Green, Chairman HSBCAll of this makes a mockery of drug laws which condemn innocent people for possessing even tiny amounts of a drug; and brings me back to my original question. Why? Why continue to fight this so-called ‘war on drugs’ if you aren’t even going to punish those who make all the violence and bloodshed possible? It is well known that the banking sector has huge influence over the Government; so maybe that goes some way to explaining it. Stephen Green, (or Baron Green of Hurstpierpoint, to give him his full title) chairman of HSBC during the worst years of their money laundering; is now the Minister of State for Trade and Investment and is advising the Government on banking. He was also chairman of the British Bankers Association when the banks were manipulating the key borrowing rates and is a member of the cabinet committee on banking reform. Something of a conflict of interests. No? How can we hope to end the culture of greed and corruption, that is so prevalent within banking per se, when one of the key perpetrators of this corruption, instead of being brought to justice, is given a cushy Government job advising the chancellor?

So once again prohibition is at the heart of a global problem. It is helping to breed the kind of rampant greed that led to the recession we are all (apart from the bankers) having to pay for. That isn’t to say that prohibition caused the recession; in fact there are many who claim that without illegally laundered drug money; many more banks would have gone under than eventually did and the recession would have been far worse. However, it does help perpetuate the dishonesty that almost brought the world economy to its knees and in doing so involves bankers in some of the most appalling crimes. The drug war in Mexico led to over 47,500 documented ‘organised crime related homicides’ between December 1, 2006 and September 30, 2011 (and that’s just Mexico, other South American drug producing countries have even higher murder rates). These murders are for the most part being committed using weapons paid for with money knowingly laundered by our banks. This is unacceptable, especially knowing that those people in the banking industry with blood on their hands will never be brought to justice. Whereas those persons caught with any amount of Cannabis (or any other drug) face a criminal record and possible jail time as a result of a victimless ‘crime’. This feeling that the banks are above the law is bound to lead to more and more corruption. A dangerous precedent has been set.

The only way to stop all of this madness is surely to end the insane prohibition of drugs once and for all. A legally regulated and taxed system would take away any need for  violence, bloodshed and dishonesty and replace it with a policy that actually puts the welfare of people first. The current system does nothing to protect those who are the most vulnerable and instead makes criminals of them and perpetuates a cycle of violence. A cycle which has already claimed the lives of millions worldwide. It is high time the Governments of the world realise that without regulation – there is no control. Unfortunately, whilst prohibition remains so profitable to the bankers and the bankers continue to be so powerful ; and seemingly free from the laws that are such a blight on the rest of us; it seems unlikely that this change will come.

 This is why we must stand up and speak out! Speak out against not only prohibition, but the systems that allow those who are arguably among the most responsible to continually get away with their crimes. The change will not come from the politicians themselves. We must unite to educate the public about the dangers of prohibition and to show the Government that we will not be lied to or taken for fools any longer. The time for change has come; but it will not, and cannot, happen without a monumental effort from everybody involved.

I know I’m willing to make that effort. Are you?

War on drugs, weapons of Mexican drug cartel

Weapons of a Mexican drug cartel

Deej is an admin for the Devon Cannabis Club, part of the United Kingdom Cannabis Social Clubs.

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  1. Drug money only needs to be laundered because drugs are illegal so when drugs are legal there’ll be no need to launder the money.Some banks turn a blind eye to it for the same reason that a lot of UK drug dealers use Vodafone.Some mobile phone companies supply the Cops with all the information they ask for but Vodafone have been known to say “customer confidentiality”.

  2. “We’ve listened to the concerns of Canadians,” Nicholson told reporters. “We will not be proceeding with Bill C-30 … including the warrantless mandatory disclosure of basic subscriber information, or the requirement for telecommunications service providers to build intercept capabilities within their systems”.

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