Insight: How Colombian drug traffickers used HSBC to launder money

By Carrick Mollenkamp and Brett Wolf

Tue Jan 1, 2013 1:06am EST

n">(Reuters) - When several Colombian men were indicted in January 2010 on money-laundering charges, the case in Brooklyn federal court drew little attention.

It looked like a bust of another nexus of drug traffickers and money launderers, with mainly small-time operatives paying the price for their crimes.

One of the men was Julio Chaparro, a 48-year-old father of four who owned three factories that made children's clothing in Colombia.

But to U.S. authorities the case was anything but ordinary. Chaparro, prosecutors alleged, helped run a money-laundering ring for drug traffickers that took advantage of lax controls at UK-based international banking group HSBC Holdings Plc. It was one of the most important leads for U.S. investigators pursuing a case against the bank that eventually led to a $1.9 billion settlement on December 11.

Chaparro was "basically putting the orchestra together" and investigators saw "him as a major player in terms of cleaning a lot of money," said James Hayes, special agent in charge of Homeland Security Investigations at U.S. Immigration and Customs Enforcement in New York. Known as ICE, the agency and its task force led the probe.

The Colombian's lawyer, Ephraim Savitt, said Chaparro was a middleman in the operation, but disputed the extent of his client's role, saying he was the "page turner of sheet music for the conductor."

Chaparro, who was arrested in Colombia in 2010 and extradited to the United States in 2011, pleaded guilty to a money-laundering conspiracy count in May and is awaiting sentencing in 2013.

An HSBC spokesman declined comment.

Much about the trail that drug traffickers used to move U.S. dollars - the proceeds from drug sales - through HSBC and other banks remains unclear. By design, the process is layered to evade detection.

But a review of confidential investigative records that originate from two U.S. Attorney office probes and federal court filings in New York and California, as well as interviews with senior law-enforcement officials, shows how investigators tracing the activities of people who allegedly worked with Chaparro were able to expose large-scale money laundering at one of the world's biggest banks.

The federal law-enforcement task force - named after El Dorado, the mythical city of gold in South America - used wire taps, email and computer searches, information from at least one inside source, and old-fashioned surveillance, to piece together the ring's operations.

SMUGGLED ACROSS BORDER

Drug cartels sold narcotics in the United States and routed the cash to Mexico, often using couriers to smuggle it across the border. That cash would then be put into bank accounts at HSBC's Mexico unit, where large deposits could be made without arousing suspicion, according to U.S. Department of Justice documents.

In one filing, U.S. prosecutors said, Chaparro and others allegedly utilized accounts at HSBC Mexico to deposit "drug dollars and then wire those funds to ... businesses located in the United States and elsewhere. The funds were then used to purchase consumer goods, which were exported to South America and resold to generate ‘clean' cash."

In a typical transaction, a middleman in a drug cartel would offer to deliver consumer goods, such as computers or washing machines, to Colombian businesses on favorable terms. Another person in the United States would buy the goods from firms using funds from drug trafficking, and fulfill those orders.

Money launderers exploited the laxness of HSBC in policing shadowy money flows, the Department of Justice said earlier this month. Failures included not conducting due diligence on customers, not adequately monitoring wire transfers or cash shipments and not having enough employees to run anti-money laundering systems. U.S. Assistant Attorney General Lanny Breuer called the lapses "stunning failures of oversight."

The situation was so bad, according to the Department of Justice, that in 2008, the head of HSBC's Mexican operations was told by Mexican regulators that a local drug lord described the bank as "the place to launder money."

The Chaparro probe, led by ICE and the Justice Department, converged over the past two years with two other investigations - led by federal prosecutors and investigators in West Virginia and by the Manhattan district attorney - resulting in this month's settlement with HSBC.

HSBC and its employees avoided criminal indictments, as the bank agreed instead to a deferred-prosecution deal that forces it to strengthen controls and accept a compliance monitor.

Today, Chaparro sits in a federal detention center in Brooklyn, reading the Bible and awaiting sentencing, said Savitt, a former U.S. prosecutor in Brooklyn, who submitted a list of questions to Chaparro for Reuters.

"He is contrite, regretful and ashamed about his crimes," Savitt said. "He wants to serve his time and rejoin his family. He understands that a prison term could prevent that from happening for many years."

Under federal guidelines, he could face 15 to 18 years in prison.

ON CHAPARRO'S TRAIL

The El Dorado federal task force, based in a building on the west side of Manhattan near Chelsea Piers, serves as an umbrella organization for some 250 law-enforcement officials from state, local and federal agencies.

One of the task-force supervisors is Lieutenant Frank DiGregorio, a former New York detective who spent years tracking the so-called Black Market Peso Exchange, which is used to convert dollars to Colombian pesos through trading in goods. DiGregorio along with two younger investigators - Graham Klein and Carmelo Lana - led the HSBC case.

The overall probe began in 2007 when investigators analyzed how courier companies ferried cash through airports in Miami and Houston, a person familiar with the case said. They ultimately tracked that to HSBC's operations in Mexico and then connected it to funds moving through New York.

A tipping point in the investigation came in 2009 when El Dorado agents arrested a man named Fernando Sanclemente. Two sources familiar with the case say Sanclemente was an operative in Chaparro's network.

Sanclemente, who was charged with allegedly conducting financial transactions tied to narcotics trafficking, is free on bail with a $200,000 bond, according to the latest court docket entry, which dates to January 2012. His lawyer, James Neville, declined to discuss the status of the case.

According to a criminal complaint filed against him by Lana, the El Dorado agent, on June 30, 2009, task force agents followed Sanclemente for more than two hours as he drove around Queens in New York to ferry cash from drug sales.

Sanclemente first met with a person for about "30 seconds" on one street corner, and left with a yellow plastic bag. Later that night, he drove to a Dunkin' Donuts near LaGuardia Airport, where a black livery cab pulled up and the driver handed him a black bag.

The El Dorado team followed Sanclemente to Laurel Hollow, New York, some 40 minutes away, where the investigators stopped and searched him, finding about $153,000 in the two bags. At Sanclemente's apartment, investigators said they found ledgers and documents consistent with money laundering.

With the arrest, investigators gained insight into Chaparro's alleged transactions. At one point, investigators set up undercover bank accounts where they were able to get Chaparro's network to wire proceeds that could be traced back to HSBC's Mexico operations, according to people familiar with the situation and a Department of Justice filing in the HSBC case.

Federal agents would ultimately home in on $500 million that had moved from HSBC Mexico to HSBC's operations in the United States, according to the confidential investigative records.

Between October 6, 2008 and April 13, 2009, Chaparro and others conducted money laundering transactions totaling $1.1 million tied to narcotics trafficking, the indictment against Chaparro alleged.

(Reporting By Carrick Mollenkamp and Brett Wolf of the Compliance Complete service of Thomson Reuters Accelus; Additional reporting by Tomas Sarmiento Cordero in Mexico City and Aruna Viswanatha in Washington; Editing by Paritosh Bansal and Martin Howell)

View the original article here

Insight: Once a symbol of new Afghanistan, can policewomen survive?

1 of 13. An Afghan policewoman wears handcuffs during a training session in a classroom at the Afghan National Police Academy in Kabul December 9, 2012.

Credit: Reuters/Omar Sobhani

By Amie Ferris-Rotman

KABUL | Wed Dec 19, 2012 1:10am EST

KABUL (Reuters) - Shortly after Friba joined the Afghan National Police, she gave herself the nickname "dragon" and vowed to bring law and order to her tormented homeland.

Five years later, she is tired of rebuffing the sexual advances of male colleagues, worries the budget for the female force will shrink and fears the government will abandon them.

Women in the police force were held up as a showcase for Afghan-Western efforts to promote rights in the new Afghanistan, born from the optimism that swept the country after the ouster of the Taliban in 2001.

Images of gun-wielding Afghan policewomen have been broadcast across the globe, even inspiring a television program popular with young Afghan women.

But going from the burqa to the olive green uniform has not been easy.

In Reuters interviews with 12 policewomen in districts across the Afghan capital, complaints of sexual harassment, discrimination and bitter frustration were prevalent.

President Hamid Karzai's goal is for 5,000 women to join the Afghan National Police (ANP) by the end of 2014, when most foreign troops will leave the country.

But government neglect, poor recruitment and a lack of interest on the part of authorities and the male-dominated society mean there are only 1,850 female police officers on the beat, or about 1.25 percent of the entire force.

And it looks to get worse.

Friba, who asked that her second name not be used, says it all when she runs a manicured finger across her throat: "Once foreigners leave we won't even be able to go to the market. We'll be back in burqas. The Taliban are coming back and we all know it."

Conditions for women in Afghanistan have improved significantly since the Taliban were ousted. Women have won back basic rights in voting, education and work since Taliban rule, when they were not allowed out of their homes without a male escort and could be publicly stoned to death for adultery.

But problems persist in the deeply conservative Muslim society scarred by decades of conflict. The United Nations said this month that despite progress, there was a dramatic under reporting of cases of violence against women.

Some female lawmakers and rights groups blame Karzai's government for a waning interest in women's rights as it seeks peace talks with the Taliban, accusations his administration deny.

"We have largely failed in our campaign to create a female police force," said a senior Afghan security official who declined to be identified because of the sensitivity of the subject.

"Mullahs are against it, and the women are seen as not up to the job," he added, referring to Muslim preachers.

Almost a third of the members of the female force work in Kabul, performing duties such as conducting security checks on women at the airport and checking biometric data.

"CONSTANTLY HARASSED"

Friba sat in a city police station room decorated with posters of policemen clutching weapons to talk to Reuters.

"I am the dragon and I can defend myself, but most of the girls are constantly harassed," she said.

"Just yesterday my colleague put his hands on one of the girl's breasts. She was embarrassed and giggled while he squeezed them. Then she turned to us and burst into tears."

On the other side of Kabul, detective Lailoma, who also asked that her family name not be used, said several policewomen under her command had been raped by their male colleagues.

Dyed russet hair poking out from her black hijab, part of the female ANP uniform, Lailoma wrung her hands as she complained about male colleagues: "They want it to be like the time of the Taliban. They tell us every day we are bad women and should not be allowed to work here."

Male colleagues also taunt the women, she added, often preventing them from entering the kitchen, meaning they miss out on lunch.

On several occasions, male colleagues interrupted Reuters interviews in what the policewomen said were attempts to intimidate them into silence.

One male officer entered the room without knocking three times to retrieve pencils; another spent 20 minutes dusting off his hat, only to put it back on a shelf. The women switched subjects when the men came in.

Rana, a 31-year-old, heavy-set policewoman with curly hair, said policewomen were expected to perform sexual favors: "We're expected to do them to just stay in the force."

The raping of policewomen by their male counterparts "definitely takes place", said Colonel Sayed Omar Saboor, deputy director for gender and human rights at the Interior Ministry, which oversees the police.

"These men are largely illiterate and see the women as immoral."

Insecurity, opposition to women working out of the home and sexism deter many women from signing up, said Saboor.

But impoverished widows sometimes have no choice. A starting salary is about 10,500 afghanis a month ($210).

DIFFICULT

The Interior Ministry and foreign organizations responsible for training the women police - NATO, the European Union and the United Nations Development Programme (UNDP) - say recruitment poses the main challenge to the force.

"It is just difficult. There is no real history of women in the police force, there is no precedent, even having an open space for women in employment is a challenge," UNDP Associate Administrator Rebeca Grynspan told Reuters.

A recruitment campaign of television adverts and posters has not produced the desired effect in a country where there are huge social and religious divides between the rural and urban populations. Even fewer join the national army, where some 350 women serve amongst 190,000.

"Much of the male leadership don't want to have anything to do with women in the ANP. Commanders want them out of their units," Saboor said, adding that having 2,500 female police officers could be realistic by end-2014.

Of those who join, few have prospects for promotion. They often find themselves in police stations without proper facilities for women, such as toilets or changing rooms which are vital for the many who hide the fact that they work from their families.

The sprawling Interior Ministry has only recently started work on installing toilets for women. "Ten years of this war have passed, and we're only now building them a toilet," Saboor said with a wry laugh.

For First Lieutenant Naderah Keshmiri, whose humble yet stern approach helps her pursue cases of violence against women, life as a policewoman means being undervalued.

"My male subordinates quickly became generals. But not me. Where's my promotion?" she asked in a UNDP-backed Family Response Unit, which she heads.

The UNDP has set up 33 of the units countrywide, which help increase female visibility in the ANP, with plans to more than double them by 2015.

A Western female police trainer, who spoke on condition of anonymity, said policewomen are almost always passed over for promotion by their male commanders.

U.S. lawmakers are hoping to amend a defense bill by year-end to protect the rights of Afghan women during the security transition. They want to reduce physical and cultural barriers to women joining the security forces.

Ethnicity also plays a role: 55 percent of women in the ANP are ethnic Tajik, Afghanistan's second-largest ethnic group. Recruiting from the largest and most conservative ethnic group, the Pashtuns, is difficult.

The Taliban draw most of their support from the Pashtuns, who dominate the south of the country. Pashtun women make up only 15 percent of the force.

Hazaras, a largely Shi'ite minority who suffered enormous losses at the hands of the Taliban, are overrepresented amongst the women, making up 24 percent, according to figures from NATO's training mission in Afghanistan.

But many of the policewomen are wondering whether their force can survive.

Lowering her voice, Friba whispered: "As soon as the foreigners leave, they'll reduce our salaries. This will not happen to the men. Or perhaps they'll kick us out entirely."

(Editing by Michael Georgy and Robert Birsel)

View the original article here