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Insight: How Colombian drug traffickers used HSBC to launder money

Jan 31 2012 Carrick Mollenkamp and Brett Wolf, Thomson Reuters reporting team

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

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