I myself first learned of the involvement of mainstream banks and brokerage houses in the laundering of illicit drug profits back in the late eighties, when long time radio journalist Mae Brussell exposed the Merrill Lynch Pizza Connection. However several scholarly articles refer to the (now defunct) Chemical Bank being fined for money laundering as far back as 1977.
The now infamous Pizza Connection involved the use, by the Mafia, of Merrill Lynch, EF Hutton and several major banks (Barclays, Chase Manhattan, Chemical Bank, Citibank, American Express, Thomas Cook) to launder millions of dollars of heroin profits. The cash was transferred via a number of pizza restaurants – presumably as a cover for multiple large cash deposits. The only bank to be officially prosecuted and fined was the smaller Bank of Boston.
Drug Money Laundering: 2-5% of Global Financial Transactions
The IMF acknowledges that government enforcement agencies make no effort to quantify the amount of drug money laundering that goes on in banks under their jurisdiction. At different times they have estimated between $1 and $1.5 trillion a year of money laundering by legitimate corporate financial institutions. They estimate about half of this relates to narcotics trafficking – amounting to somewhere between 2-5% of global financial transactions. This relatively small percentage belies its significance in world finance. Drug profits happened to be one of the few reliable sources of hard cash – as they represent genuine production – in an economy in which the vast majority of wealth is debt based. Moreover drug dealers and minor money launderers have no shareholders or board to report to – and are dead keen on transforming their illicit cash into banking assets they can freely spend without government scrutiny.
The Record of Indictments and Civil Fines
Other banks investigated, fined and/or prosecuted in the 1980s include Bank of America, Morgan Stanley, Deutsche Bank and JP Morgan Chase. Unfortunately the saga continues to the present day. Various political and financial analysts, including Michael Rupert, Webster Tarpley and Peter Dale Scott, maintain a scrupulous record of the banks and other companies formally indicted or fined – which the corporate media tends to bury on the last page of the business section.
In 2004 Hanover Trust, Chemical Bank, Crocker National Bank, Irving Trust and Union Bank were all fined for breech of money laundering laws. Except for Union Bank of California, the others have ceased to exist – after being rescued from bankruptcy by other banks who have bought them out. Some analysts see this as poetic justice. The reality is that nothing can kill a stock quicker than a Department of Justice investigation for violating money laundering laws.
More recent prosecutions include American Express, fined $65 million in 2007; Bank of American, fined $75 million in September 2007; and Wachovia, fined $160 million in March 2010. Goldman Sachs and insurance giant AIG have also been indirectly implicated in money laundering, owing to their takeover of smaller financial institutions who have engaged in it.