I don't know about Black Hotels, but Black Goldmines no worries

 Panoramic view of the Comarsa Mine, La Libertad region, Peru 

(click to enlarge)

Felix Salmon today waxes lyrical about the new John Le Carré novel and excerpts a bit about what Le Carré calls "Black Hotels", a way of laundering money. Salmon asks whether such a money laundering scheme is possible and offers up the novel snippet as context:

‘Would somebody mind telling me what a black hotel is?’ Matlock demanded of the air in front of him. ‘I happen to take my holidays in Madeira. There never seemed anything very black about my hotel.’

Fired by a need to protect the subdued Hector, Luke appointed himself the somebody who would tell Matlock what a black hotel was:

‘You buy a bit of prime land, usually on the sea, Billy. You pay cash for it, you build a five-star luxury-hotel resort. Maybe several. For cash. And throw in fifty or so holiday bungalows if you’ve got the space. You bring in the best furniture, cutlery, china, linen. From then on your hotels and bungalows are full up. Except that nobody ever stays in them, you see. If a travel agent calls: sorry, we’re fully booked. Every month a security van rolls up at the bank and unloads all the cash that’s been taken in room rentals, bungalow rentals, the restaurants, the casinos, the nightclubs and bars. After a couple of years, your resorts are in perfect shape to be sold with a brilliant trading record.’

No response beyond a raising of Matlock’s avuncular smile to maximum strength.

‘It’s not only resorts either, actually. It can be one of those strangely white holiday villages — you must have seen them, trickling down Turkish valleys to the sea — it can be, well, scores of villas, obviously, it can be pretty well anything that’s lettable. Car hire too, provided you can fudge the paperwork.’

Well Felix (and others), this humble scribe isn't so sure about 'Black Hotels' but is more confident of the existence of 'Black Goldmines' such as the one photographed above, the Comarsa mine in Peru owned by the notorious Peruvian narcotrafficking family, the Sanchez-Paredes (who, thanks to their corrupt ties with the APRA party, never seem to get thrown in jail). Here's how the laundering works (well, part of it at least):

1) Produce your cocaine
2) Transport your cocaine across the porous Amazon jungle border between Peru and Brazil
3) Exchange your cocaine at an agreed rate for gold produced by Brazil's "Garimpeiros" the informal gold miners there.
4) Smuggle the gold back into Peru and take it to your mine
5) Add the Brazilian gold to the production pile from the supposedly working mine.
6) Declare all the gold, the Peruvian and the Brazilian product, as "Made In Peru" and run it through the company books.
7) Et Voila! Washed, rinsed, tumble-dried and ironed with a touch of starch in the collar.

For more details, Google "Sanchez-Paredes", "Gold", "Cocaine", "Trafficking".

Gold, best choice for Colombian narcomoney laundering

You invested in junior mining in Antioquia, Colombia? You may be surprised to find
out exactly what kind of business activity you're sponsoring...

Colombia's 'El Tiempo' magazine got access to the sworn statements that ex-leader of the Colombian far-right wing paramilitary Salvatore Mancuso (now safely under arrest in the USA) made to a judge in one of his hearings last week, and it sure makes for interesting reading. Here we go with a translation of the first part of the El Tiempo report:

Before a Federal court in Washington, the extradited paramilitary chief Salvatore Mancuso has revealed how the narcotrafficking business launders its cash via the sale of hundreds of ounces of gold that go through the Colombian Republican Bank without ever being suspected.

As he explained in several different audiences that began in January 2009, the metal is bought in Panama and a group of mafia money launderer bring it into Colombia to melt it down and then hand it over, in portions, to a group of local mayors and public officials.

These then take the gold to the bank, report it as locally produced and earn millionaire sums in state royalties.

Mancuso said that some money launderers keep up to 70% of the royalties that the government pays and the rest is stolen by the mayors.

He has already given the names of the municipalities that are involved in this business and in which the AUC (his paramilitary group) received the juicest profits: Ayapel, Buenavista, Montelibano, Planeta Rica (Córdoba) and others, located in the rich Bajo Cauca of Antioquia state.

Just two of these towns (Buenavista and Planeta Rica) received more than COP2700 million (U$1.46m) in royalties in the period during which Mancuso admits having been involved in the deals between launderers and town mayors.

This laundering technique was not known the the US authorities. Because of this, this week the US government sent its director of the Office of Control of Foreign Activities (OFAC) Adam Szubin to Colombia to look for ways that will establish amongst the local authorities what percentage of the 1.57m ounces of gold that Colombia produces might come from this fictitious mining.

CONTINUES HERE

Yeah, good question; who ARE the real drug lords?

I'm jumping on the reco-bandwagon for this one. After getting highly recommended by at least two good minds, this author would also like as many eyeballs as possible to read this excellent report on the role of big banks in drugs, written by Michael Smith of Bloomberg. Wells Fargo, Wachovia, BofA, HSBC, Amex, Western Union...darnit Veronica, they're all chowing down at this trough of slush money. Here's an excerpt:

“It’s the banks laundering money for the cartels that finances the tragedy,” says Martin Woods, director of Wachovia’s anti-money-laundering unit in London from 2006 to 2009. Woods says he quit the bank in disgust after executives ignored his documentation that drug dealers were funneling money through Wachovia’s branch network.

“If you don’t see the correlation between the money laundering by banks and the 22,000 people killed in Mexico, you’re missing the point,” Woods says.

Cleansing Dirty Cash

Wachovia is just one of the U.S. and European banks that have been used for drug money laundering. For the past two decades, Latin American drug traffickers have gone to U.S. banks to cleanse their dirty cash, says Paul Campo, head of the U.S. Drug Enforcement Administration’s financial crimes unit.

Here's the link again, just to make sure you use it. Now use it.

Venezuela's parallel rate and drug money laundering

Check out the Devil's Excrement on this esp the comments section on his latest post, as MO scooped the world last night by hearing of frozen parallel dollar accounts. What happened after that was a guy living in Florida, one Rama K. Vyalasu, was indicted on charges of money laundering that have clear connections to the Venezuelan parallel market as well as wire transfers inside the USA (read the indictment here).

One of the consequences of all this action is that the normal parallel market has been virtually closed down all day, with the ask shooting to VEF7 on the uncertainty (bid staying around 6...big big spread). It remains to be seen whether Venezuela gets a normal parallel market tomorrow or whether there will be further moves by US authorities against the presumed drug money laundering ring.

By the way, great scoop, MO. I read you last night after finishing some writing here and thought it interesting, then promptly forgot about it today. Good stuff, kudos to you, and blogs showing the way yet again.

Major drug lord arrested in Peru

He goes by the name of Luis Valdez, he's 70 years old, he's (surprise surprise) mayor of a small town in the Amazon basin province of Ucuyali, close to the border with Brazil. And for some unknown reason, he's just been arrested on money laundering charges by the Peruvian authorities. It might be a sign of the times, or it might be the fact that Valdez has just been ordered to pay $1.5m in damages to the family of the investigative reporter he murdered in 2004, but I wrote "for some unknown reason" because the fact....plain fact....that Valdez has been a major Peru drugs baron (perhaps THE major drugs baron) for decades with a slick logistics operation that combines with the Colombian and Mexicans and finishes up the noses of people in New York City; this isn't some big surprise suddenly uncovered by some sleuth or other.

Bad news Luis...that's not the back of a chair. Those are bars

His modus operandi is quite simple. Under the cover of the transport boats owned by his timber and wood processing companies, he floats large consignments of cocaine down the Amazon. he's actually been caught red-handed a couple of times, too. For example, as far back as 1981 four metric tonnes of cocaine was discovered on one of his craft, but everso everso strangely when it was time for police to file charges they said they'd made a mistake and the 4 tonnes of white powder ws in fact wheat flour mixed with fuel oil. Hey.....anyone can make a mistake, right? Then in 2001 another 560kg of cocaine was found on board one of his boats destined for Guatemala. And then suddenly it was unfound, as the evidence disappeared and charges were quietly dropped. And as another surprise surprise, there are plenty of other reports like those two examples to choose from.

So suddenly this major drugrunner has been arrested and this time it's under full media glow. He was shipped out to Lima today and will appear before the beak tomorrow (most probably). Watch this space to find out if he suddenly gets the benefit of another legal loophole. Meanwhile, this is just another layer of bad news for the New York banking and analyst scene, as simple supply and demand says they'll be paying more for their weekend recreationals.....all on top of a bear market and a recession, too. When it rains it pours, eh?