Western banks, Immune, Enjoy Biggest Slice Of Drug Money Profits

There was a Guardian piece over the weekend about Western banks ‘reaping billions from Colombian cocaine trade’ which is well worth a look. It highlights a practise we really hear very little about from the mainstream media – Western banks profiteering from drug money. Writers on the subject are almost exclusively confined to the libertarian conspiracy-minded fringe, and so it’s been one we in the West have been able to ignore.

The vast profits made from drug production and trafficking are overwhelmingly reaped in rich “consuming” countries ”“ principally across Europe and in the US ”“ rather than war-torn “producing” nations such as Colombia and Mexico, new research has revealed. And its authors claim that financial regulators in the west are reluctant to go after western banks in pursuit of the massive amount of drug money being laundered through their systems.

The most far-reaching and detailed analysis to date of the drug economy in any country ”“ in this case, Colombia ”“ shows that 2.6% of the total street value of cocaine produced remains within the country, while a staggering 97.4% of profits are reaped by criminal syndicates, and laundered by banks, in first-world consuming countries.

The other big drug-producing areas of the world might be expected not to have substantially different splits of the profits with Western banking giants – and indeed that seems to be the case in Afghanistan. A 2009 report by the United Nations Office on Drugs and Crime (UNODC) noted:

Of the $65 billion turnover of the global market for opiates, only 5-10% ($3-5 billion) is estimated to be laundered by informal banking systems. The rest is laundered through legal trade activities and the banking system.

The annual turnover of Columbian cocaine is in the order of $300 billion, according to the new study cited by the Guardian – and of that, only $7.8bn stays in the country.

Obviously, Western banks must be making massive – I mean bailout-sized – profits from drug-money laundering. The Guardian piece notes:

The mechanisms of laundering drug money were highlighted in the Observer last year after a rare settlement in Miami between US federal authorities and the Wachovia bank, which admitted to transferring $110m of drug money into the US, but failing to properly monitor a staggering $376bn brought into the bank through small exchange houses in Mexico over four years. (Wachovia has since been taken over by Wells Fargo, which has co-operated with the investigation.)

But no one went to jail, and the bank is now in the clear.

That 2009 UNODC World Drug Report essentially said that many banks only survived the financial crash because of drug money.

“Interbank loans were funded by money that originated from drug trade and other illegal activities”, and there were “signs that some banks were rescued in that way”. “At a time of major bank failures, money doesn’t smell, bankers seem to believe”

One of the authors of the new study in the Guardian report put it bluntly:

Gaviria said: “We know that authorities in the US and UK know far more than they act upon. The authorities realise things about certain people they think are moving money for the drug trade ”“ but the DEA [US Drugs Enforcement Administration] only acts on a fraction of what it knows.”

“It’s taboo to go after the big banks,” added Mejía. “It’s political suicide in this economic climate, because the amounts of money recycled are so high.”

Worth remembering next time you read about the Taliban’s paltry estimated take of only $125 million annually – about 10-15% of it’s income – or about how the Afghan elite enriched themselves from an opium trade war the US picked the winners for.

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Steve Hynd

Most recently I was Editor in Chief of The Agonist from Feb 2012 to Feb 2013. My blogging began at Newshoggers and I’ve had the immense pleasure of working with some great writers there and around the web ever since, including at Crooks & Liars. I'm a late 40′s, Scottish ex-pat, now married to a wonderful Texan, with Honours in Philosophy from Univ. of Stirling, UK 1986. I worked most of life in business insurance industry (fire, accident, liability) including 12 years as a broker/underwriter/correspondent at Lloyd’s of London. Being from the other side of the pond, my political interests tend to focus on how US foreign policy affects the rest of the planet. Other interests include early and dark-ages British history, literature and cognitive philosophy/science.

5 CommentsLeave a comment

  • On May 2nd we released a 35 minute video called “MK Occupy Minnesota: Drugs & The DRE Program at Peavey Plaza” which went on to get 100,000 views from that Wednesday afternoon to Saturday.

    It showed police voluntarily taking people off to participate in a program which supposedly showed the fuzz how to identify signs of intoxicants, and the participants said they were given marijuana, cash for purchasing drugs etc. It was all denied by the authorities and the media blew it off until an officer in Hutchinson MN said that he had seen another officer handing out pot. They also gave marijuana in exchange for promising to snitch on the Occupy movement.

    Alternet also reported that the Cleveland Five patsies were given booze and Adderall by the FBI informant who took over their lives, intoxicated and isolated them, got them talking shit etc., to entrap them.

    I was on a shortwave/internet radio program on Saturday, the Global Freedom Report, and the host phone call cut off immediately after he asked me if there were national patterns similar to DRE going on. Earlier I also made the rounds appearing on, naturally, Russia Today and Alex Jones Infowars Nightly News (for 50 minutes lol).

    I can confirm that the Minnesota Bureau of Criminal Apprehension told me they do not have access to the wire transfer system at the Federal Reserve Bank of Minneapolis. Many legislators told me when I worked at the Capitol that they don’t want to take on the war on drugs, and basically open a huge fight with law enforcement. A Mn Dept of Transportation (MnDOT) staffer also told me that the FAA aircraft registration system, from the beginning, had been set up to obfuscate the ownership of small aircraft (so that essentially shell companies can own planes). The entire system has still been paper based since then, but i think is finally being rendered electronic.

    More recent stuff on the Mexican angle:


  • Ed Vulliamy spent a few days at our ranch while doing research for his book Amexica.

    I pointed out that at the time, there was only $800 billion dollars of currency in circulation.

    With the drug business estimated at between $500 billion and a trillion a year, all presumably in cash…

    It doesn’t take a genius to figure out that the money must be put back into circulation through “legitimate” channels to be of use.

    For the record, this is documented in his book.

    I did inhale.

  • in dollars not including drugs in other currencies? Aren’t you conflating ALL drug transactions in dollar equivalents? Or is this really just the dollar amount of drug transactions excluding Euros, Pesos, etc?

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