South American drug cartels pumping billions of dollars through Chinese banks as money-laundering networks uncovered: US prosecutors

PUBLISHED : Friday, 11 September, 2015, 10:30am
UPDATED : Friday, 11 September, 2015, 10:53am
Niall Fraserniall.fraser@scmp.com



According to US prosecutors, billions in drug proceeds went via Hong Kong bank accounts to casinos, Chinese currency exchange houses, export companies and factories. Photo: Bloomberg


Banks in Hong Kong and the mainland are being used to launder the multi-billion-dollar fortune reaped by South America's notorious drug cartels, according to the United States authorities.

Documents just unsealed in a US court reveal that three Colombian nationals have been charged with helping to run a global money laundering network based in Guangzhou, in the southern Chinese province of Guangdong.

READ MORE: How Mexican drug cartels have infiltrated Hong Kong

This brought in at least US$5 billion (HK$39 billion) in Colombian drug proceeds routed from the United States, Mexico, Colombia, Panama, Guatemala and Canada, as well as parts of Africa and Europe.

The banks involved were not identified in the indictment, which was unsealed on Thursday in a federal court in Brooklyn, New York.


Mexican Navy soldiers escort Joaquin Guzman Loera, alias 'El Chapo Guzman', leader of the Sinaloa Cartel, in Mexico City on Feb. 22, 2014. The same cartel has maintained both a corporate and criminal presence in Hong Kong. Photo: Xinhua

The charges come just months after the South China Morning Post revealed that a powerful new drug cartel that was behind a surge in violence engulfing parts of Mexico was targeting Hong Kong's lucrative cocaine market, according to a top official at the Mexican National Chamber of Industry.

The Jalisco New Generation was reaping huge profits selling cocaine at a considerable mark-up in Hong Kong, according to chamber president Rodrigo Alpízar Vallejo.

His comments come amid an increased push by Latin American drug cartels into the Asia-Pacific region in recent years.

READ MORE: Beijing signs landmark pact to stem flow of Macau's dirty casino cash

Investigations by the Post have also found that the Sinaloa cartel - one of the world's biggest, most established syndicates - maintained both a corporate and criminal presence in Hong Kong.

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Chinese national flag flies in front of the China Construction Bank (CCB) Tower at Hong Kong's Central business district in this December 26, 2014 file photo. The Federal Reserve on July 21, 2015 told the CCB to ramp up its anti-money laundering framework, the first enforcement action by the US central bank against one of China's four largest state-owned banks. Photo: Reuters

In addition to trafficking cocaine to the city, the group also ran front companies and bank accounts which it used to launder drug funds, according to official Mexican documents and interviews with law enforcement Postsources.

The Hong Kong authorities were not immediately available for comment.

One of the three men named in yesterday's indictment, Henry Poveda, appeared in court on Thursday; the other two men, Christian Duque-Aristisabal and John Jairo Hincapie-Ramirez, are in custody in Panama and Colombia, respectively, awaiting extradition proceedings.

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All three face a single count of conspiracy to launder money.
A fourth defendant connected to the case, a Hong Kong woman named Luo Yuling, previously pleaded guilty in April to conspiring to launder money.

Luo could face up to 20 years in prison. She was arrested in September 2014 at Newark Liberty International Airport in New Jersey during a layover between Panama City and Hong Kong, according to prosecutors.


Hong Kong has gained infamy in the past for attracting money launderers. Carson Yeung Ka Sing, then president of Birmingham City football club, appeared at the city's District Court in 2013 to defend himself against charges of laundering US$93 million. Photo: Reuters

Assistant US Attorney Amir Toossi told US District Judge Carol Begley Amon that other defendants remain at large. They have not been publicly identified.

According to the indictment, the Guangzhou organisation used Chinese casinos, currency exchange houses, export companies and factories to receive billions of dollars in drug proceeds. The only "Chinese casinos" are in Macau.

The money travelled through accounts in Hong Kong and China and eventually was used to purchase products, often counterfeit consumer goods, that were shipped to Colombia and other countries, prosecutors said.

Poveda’s court-appointed lawyer, Mia Eisner-Grynberg, declined to comment on the case. She and Toossi told Amon they have engaged in preliminary plea discussions.

US authorities have pressed banks in recent years to improve anti-money laundering safeguards. In 2012,HSBC Holdings paid US$1.9 billion to resolve claims it allowed drug cartels in Mexico and Colombia to launder proceeds through its banks.

Jodi Avergun, an attorney at Cadwalader, Wickersham & Taft and a former US Drug Enforcement Administration official, said US authorities might be able to go after the Chinese banks if US-based branches were used in the alleged transactions.

“It really depends on what banks were involved, whether the money movement triggered any alarms,” she said.

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