Pubdate: Mon, 09 Jul 2012
Source: Wall Street Journal (US)
Copyright: 2012 Dow Jones & Company, Inc.
Contact:  http://www.wsj.com/
Details: http://www.mapinc.org/media/487
Author: Dan Fitzpatrick

BANK ACCOUNTS FIGURE IN DRUG PROBE

FBI Says Mexican Cartel Funneled Money Through Bank to Horse-Racing Firm

A Mexican cocaine-trafficking cartel used accounts at Bank of America
Corp. o hide money and invest illegal drug-trade proceeds in U.S.
racehorses, the Federal Bureau of Investigation said. The alleged ties
between the violent drug gang known as Los Zetas and the
second-largest U.S. bank by assets were described in a 35-page
affidavit filed in federal court in Texas last month. According to an
FBI agent, a horse-buying and training business created to launder
drug money had accounts at the Charlotte, N.C., bank.

A U.S. citizen who is the brother of a top Zetas leader and allegedly
served as the front man for the drug cartel's horse operation moved
money in and out of one of these Bank of America accounts and a
separate personal Bank of America account, the FBI said in the court
filing.

The FBI agent's sworn statement describes roughly a dozen transactions
since December 2009 in which more than $1.5 million was deposited or
withdrawn from two accounts at the bank.

Bank of America hasn't been accused of any wrongdoing and is
cooperating with authorities in the case, according to people familiar
with the case.

During a roughly two-year period, according to the FBI agent, the
Zetas allegedly funneled about $1 million a month into the purchase of
quarter horses, which specialize in sprinting short distances.

In September 2010, one of the horses alleged to be financed by the
cartel, a long shot named Mr Piloto, won the $1 million first-place
prize in the sport's biggest race, the All American Futurity at
Ruidoso Downs, N.M. After the win, a check from the racetrack for
$899,549.70 was deposited into a Bank of America account held by
Tremor Enterprises LLC, the drug cartel's alleged horse business,
according to the FBI.

Tremor bought Mr Piloto with a $100,000 check drawn on the same Bank
of America account, the FBI said, citing bank records.

A spokesman for the U.S. Attorney for the Western District of Texas
couldn't be reached for comment. A Bank of America spokesman said: "We
have robust anti-money laundering processes and procedures that comply
with regulatory and legal requirements. When we become aware of
suspicious activity conducted through customer accounts, we take
immediate action and report it to the appropriate authorities."

U.S. banks are obligated under the Bank Secrecy Act to report to
federal authorities any suspicious activity or cash transactions of
more than $10,000. Banks also must have elaborate systems designed to
detect criminal activity within their networks. Failure to comply can
lead to penalties or prosecution.

Regulators have been paying closer attention to security lapses at
banks since the Sept. 11, 2001, terrorist attacks.

n 2010, HSBC Holdings PLC's North American unit was ordered to improve
risk management and compliance with money-laundering laws after an
investigation found subpar procedures. The bank agreed to improve
controls and procedures.

Wells Fargo & Co.'s Wachovia Bank unit reached a $160 million
settlement with the Justice Department in 2010 related to allegations
that a failure in bank controls enabled drug traffickers to launder
money by shifting it between Mexican currency-exchange houses and the
bank. Wachovia admitted that it failed to monitor and report the money
laundering.

"You cannot bank blind," said Martin Woods, a former
anti-money-laundering executive at Wachovia and now the owner of
consulting firm Hermes Forensic Solutions Ltd. in London.

The affidavit doesn't indicate where or how the two Bank of America
accounts were opened. Tremor is based in Balch Springs, Tex., and was
allegedly run by Jose Trevino Morales. Last week, he pleaded not
guilty at a court hearing in Austin, Texas, to a federal
money-laundering charge. A judge ordered him to be jailed as a flight
risk.

David Finn, a lawyer representing Mr. Morales, said he doesn't know
why his client opened the Bank of America accounts because the lawyer
hasn't been able to do his own investigation. Mr. Morales is a "family
man" with no criminal history, Mr. Finn added. "This case is more
about my client's brothers than it is about him."

In criminal indictments last month against 14 people tied to the
alleged money-laundering conspiracy, Miguel Angel Trevino Morales and
Oscar Omar Trevino Morales were accused of steering money from drug
trafficking into U.S. racehorses into order to conceal the source of
the cash. The two brothers allegedly are high-ranking Zetas. They
remain at large in Mexico.

The Zetas cartel ships thousands of pounds of cocaine into the U.S.
each year, according to the FBI. It also has a ruthless reputation.
Authorities said earlier this year that the gang dumped 49 headless,
handless bodies in garbage bags along highways in Mexico.

In 2009, President Barack Obama tagged the Zetas as a narcotics
trafficker under the Foreign Narcotics Kingpin Designation Act, which
freezes any U.S. assets and prohibits American citizens from
conducting any transactions with the group. The U.S. Treasury
Department's Office of Foreign Assets Control classified Miguel Angel
Trevino Morales and Oscar Omar Trevino Morales as narcotics
traffickers in 2009 and 2010, prohibiting U.S. citizens from doing any
business with them.

According to the FBI, the Zetas turned to the U.S. horse industry in
2009 as a money-laundering strategy. Many people bid on horses for the
cartel, and ownership was transferred to Jose Trevino Morales, often
at "no or minimal purchase price," the FBI agent said. The maneuver
allowed Mr. Morales to show "large, apparently legitimate profits."

Bank records cited by the FBI show that he opened an account under
Tremor's name at Bank of America in December 2009. Some money in the
account was used for stables, trainer fees, insurance and other
routine horse-related expenses.

The FBI also said Mr. Morales shuffled funds between different
accounts as a "wash to demonstrate personal income from his business."

Mr. Finn, the lawyer representing Mr. Morales, declined to comment on
specific transactions.

"If you are going to launder dirty money, there are much easier ways
to do it than being involved in the quarter horse industry," he said.
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