Asad Ismi: Drugs and Corruption in North and South America

[This is the section of the CAPA report written by the author. For footnotes and/or the complete report email aismi@sprint.ca.]

It has become clear over the past year that drug-related corruption has penetrated the highest levels of civilian and military authority in Latin America, including Presidents, ex-Presidents, Generals, Ministers and legislators. Successive drug scandals in Colombia, Peru, Bolivia and Mexico during 1995 revealed the growing illegitimacy of state power in the hemisphere and the ineffectiveness of drug control measures taken to date. The Clinton Administration had already admitted the failure of the U.S. "War on Drugs" in Latin America (critiqued in previous CAPA reports) in 1993 and promised to spend more money on treatment and demand reduction in the United States. Yet Washington's funding for military interdiction and crop eradication in the Andean region continues at about the same levels as before. This encourages institutional corruption and has facilitated the spread of the drug trade to Venezuela, Brazil and Ecuador. The role of North American banks in money laundering also makes narcocorruption a continental problem. Ultimately though, such corruption and the drug trade itself is one symptom of the destruction of legitimate economies by more than a decade of neoliberal restructuring.

In one of Latin America's most significant drug scandals so far, President Ernesto Samper of Colombia is, at the moment , under intense pressure to resign following charges by his former campaign treasurer, Santiago Medina, that Samper " ordered the collection" of $5.8 million from the Cali cartel for his 1994 election bid. Similar charges have been made by Samper's former campaign chief, Fernando Botero Zea who resigned as Defense Minister in August 1995 and was jailed for accepting and using drug money during the campaign. The President has been "formally charged" with using "more than $3 million" in drug money for his campaign, fraud and obstruction of justice. Samper is to be judged by a Congressional Truth Commission but the president of this body is himself being investigated for dealings with narcotraffickers and many of its other members are suspected of maintaining similar links. Nine additional members of Congress belonging to the Liberal Party have also been linked to the drug trade.

Colombia's problems with drug trafficking were best highlighted by the escape of top Cali cartel drug baron, Jose Santa Cruz Londono, on 11 January 1996, from a maximum security prison in Bogota in broad daylight. The government had "no explanation" for this remarkable event but Alfonso Valdivieso, the Prosecutor General, attributed the escape to "corruption in the prison system". He stated: " Corruption has triumphed and the capacity of the government to assure society that these people would pay for their crimes has failed". On 5 March, Colombian police found Santa Cruz near Medillin and killed him. The "outlandish proportions" of narcocorruption in Colombia have led Jose Toft, a former United States Drug Enforcement Agency (DEA) representative in Bogota, to remark: "I cannot think of a single political or judicial institution that has not been penetrated by narcotraffickers..."

By mid-December 1995, Carlos Salinas, the former Mexican President, who led Mexico in signing NAFTA with the United States and Canada was being sought by Washington for his alleged involvement in drug trafficking. According to NBC news, U.S. federal agents have linked Salinas to $500 million in drug money distributed in 90 bank accounts in nine countries. Mexican opposition members accused President Zedillo of being slow to investigate corruption during the Salinas administration. Paulina Castanon, the wife of Raul Salinas, (the ex-President's brother who is in jail for the murder of PRI Secretary General Jose Ruiz Massieu) was arrested in Switzerland in November for allegedly laundering drug money when she tried to withdraw $84 million out of a bank account opened by Raul under a false name. As a mid-level government functionary during his brother's administration, Raul managed to collect 20 properties on declared monthly earnings of $8640.

The Andean militaries' widespread corruption and involvement in the drug trade has been mentioned in previous CAPA reports. This has increasingly penetrated senior levels. In Peru, General Manuel Ortiz Lucero, the operations chief of the army's anti-drug team, was revealed to be a narcotrafficker by the diary of a Lima cartel leader who was captured in February 1995. In November, Brigadier-Generals David Jaime Sobrevilla and Carlos Perez Silva and nine other officers were arrested on corruption and drug trafficking charges (stemming from information supplied by imprisoned drug boss Abelardo Cachique Rivera). All belonged to units fighting against Sendero Luminoso in Junin Department. The officers were charged with guarding secret airstrips and collecting $2500 to $3000 for every landing and take-off of Cachique's light planes loaded with one to two tonnes of cocaine paste (PBC). There are more than 200 illegal airstrips for cocaine flights in Peru, (as of 1995), only three of which have been closed. The military receives payments from drug traffickers to use these landing areas and blocks drug enforcement efforts. There have been many cases of military personnel shooting at helicopters transporting U.S. DEA agents and Peruvian anti-drug police.

"All elements of the [Bolivian] military are involved in drug trafficking to some extent," according to the DEA and Bolivia's biggest drug scandal to date broke in October 1995 with the removal of four senior officers of the FECLN (the anti-drug police) for conspiring to allow a plane containing four tonnes of cocaine to fly from La Paz to Lima. The officers included Colonel Fernando Tarifa, the FECLN deputy commander. The cocaine was stored in a warehouse at La Paz's El Alto airport for eight months. On 3 November, FECLN headquarters was occupied by security agents who disarmed its members and the government announced plans to reorganize the force. However, General Simon Sejas Torroyo, the FECLN commander, has not been removed. Meanwhile, in Congress, opposition deputies demanded that Guillermo Bedregal, the Congressional chairman, resign and face an inquiry concerning his alleged business relationship with Luis Amado Pacheco (aka "Barbachoca"), the reputed head of the "La Paz cartel" which shipped the four tonnes of cocaine. Bedregal is alleged to have sold an apartment to Barbachoca in early 1995 according to a FECLN report.

As revealed most vividly by the Salinas case, institutional drug-linked corruption has become particularly prevalent in Mexico as well. The U.S. crackdown in South Florida in the mid-1980s, following its emergence as the main entry point for Andean cocaine, has simply moved these commercial operations to Mexico which by 1990 accounted for 70% of the cocaine coming into the United States. Annual Mexican drug sales to the U.S. are an estimated $100 billion and there are about 200 narcotrafficking organizations in Mexico. The lucrative drug trade has according to one observer, "...bought off whole sectors of the federal and state governments, the police, the judiciary and the military". Thousands of federal judicial police and Justice Ministry officials have been dismissed for cooperating with drug traffickers. Ten police agents did try to capture two smugglers ( in late 1991) who had 800 pounds of cocaine on a small plane in a remote area of Veracruz state. Seven of the policemen were shot dead by a Mexican army force guarding the airstrip for the smugglers.

Aside from former President Carlos Salinas, prominent Mexican officials linked to narcotrafficking include Juan Alvarez de Castillo (Federal Attorney General under Salinas), Manuel Bartlett (Secretary of the Interior in the De la Madrid government of 1986-1992), Arevalo Gardoqui (former Secretary of Defense) and Enrique Alvarez del Castillo (another former Federal Attorney General). Also, drug cartel-PRI collaboration and infighting is suspected in the murders of the party's presidential candidate Luis Donaldo Colosio and PRI Secretary General Jose Ruiz Massieu in 1994. The latter's brother, former Deputy (Federal) Attorney General, Mario Ruiz Massieu, amassed $10 million in six months (in a Houston bank account) while leading Mexico's "war on drugs" in 1994. Mario was also in charge of investigating Jose's murder until he resigned in November and fled to the United States where he was arrested. Mexico wants to extradite the former anti-narcotics chief for "narcotrafficking, abuse of authority, bribery and obstruction of justice".

Narcocorruption is not limited to Latin America. As Cesar Gaviria Trujillo, the former President of Colombia and current Secretary General of the OAS put it, "if Colombians are the big fish of the drug trade then Americans are the whale". While still President, Gaviria called on Washington to stop money laundering activities inside its borders and devote more resources to lowering domestic drug consumption. American money laundering is a key issue because 91% of the $197 billion spent on cocaine in the U.S., stays there. The extent of money laundering in the United States can be gauged from the fact that "practically" every dollar in circulation there contains "microscopic traces" of cocaine, signifying its use in a drug deal. Most laundering is done through the commercial banking system and U.S. banks wash an estimated $100 billion of drug money every year. Those identified as such conduits include the Bank of Boston, Republic National Bank of New York, Landmark First National Bank, Great American Bank, People's Liberty Bank and Trust Co. of Kentucky and Riggs National Bank of Washington.

In 1993, two directors at the American Express Bank International (AEBI) in Beverly Hills, California, wired drug money for Juan Garcia Abrego--the Mexican cocaine baron arrested and extradited to the United States in January 1996 -- from the First City Texas Bank in McAllen, Texas, to accounts in Banker's Trust of New York (in Manhattan). AEBI then invested the money in London, Switzerland, Mexico and Houston. In addition, Manufacturers Hanover, Chase Manhattan Bank, Chemical Bank and Irving Trust have admitted not reporting money transfers to the government (the Bank Secrecy Act of 1970 requires that all transactions over $10,000 be reported) and the Bank of America has been fined $4.75 million for not revealing transfers of more than $12 billion. The Treasury Department has penalized 25 banks for failure to report and in April 1990, hundreds of accounts in 173 banks were frozen by court order. The accounts were suspected of hiding almost $400 million in Colombian drug profits.

Florida banks have been particularly prominent in laundering drug money. Sixty to seventy of them accept such deposits and the state banking system reports cash surpluses of $6 to $8 billion every year--more than twice the amount in any other state. Investment houses such as Merill, Lynch and EF Hutton have also handled millions of dollars in drug money (putting it in the New York bullion market) and Deak Perera (a major foreign exhange and bullion dealer ) was accused by a Presidential Commission on Organized Crime in 1984 of laundering hundreds of millions of dollars for Colombian drug traffickers. The charges led to the collapse of the company.

In September 1989, it also was revealed that Canadian banks have been laundering drug money on an enormous scale. Notorious in this regard is the Bank of Nova Scotia (BNS) which has laundered a $100 million in drug money through its Miami and Caribbean branches. The money was sent to BNS' Bahamas and Cayman Islands branches from Miami and then wired to its New York office where the funds could be withdrawn by the original depositors. In 1981 and 1983, U.S. authorities subpoenaed records of the Bahamas and Cayman Islands BNS branches in connection with two investigations of drug trafficking. The bank gave up the documents after being fined $1.8 million for delaying their release and a Scotiabank official acknowledged (in 1984) that "...money launderers had access to our bank in the Caribbean...". BNS asked no questions about large cash deposits, ignored normal banking practices and hid its depositors' identity by keeping minimal records. Also, BNS employees in the Caribbean were given thousands of dollars in "tips" by their clients for their "understanding".

Similarly, $726,000 in drug profits has been deposited in the Royal Bank of Canada and in 1989 the DEA identified Swiss Bank Corporation (Canada) as " a repository of $14 million in drug money". Sales of narcotics generate approximately $10 billion a year in Canada and most of this is washed through "Canadian banks and other legitimate businesses". Toronto, Montreal and Vancouver are included in the DEA's list of the 18 most prominent money laundering centres in the world.

Narcocorruption in North America is widespread amongst public officials as well. Sixty policemen in Miami have been identified as corrupt and 80 lawmen and public officials in Georgia have been charged with serious offenses such as accepting bribes. A Georgia state Senator promised to protect drug smugglers if they contributed to his campaign for the governorship. U.S. Customs agents suspected of taking bribes to allow cocaine through a Mexican border crossing have been indicted. Two-thirds of the cocaine coming into the U.S. does so at official entry points along the Mexican frontier. In Miami, three FBI agents and one from Customs were charged with stealing $200,000 from drug dealers in 1994 and a former senior Justice Department official and two former prosecuters were indicted in June 1995 on charges of helping Colombian drug barons in a criminal conspiracy. Kendall Coffey, the U.S. attorney for Southern Florida stated that the [latter] case showed "the degree to which cocaine profits have corrupted the legal system". When the FBI tried to prosecute World Finance Corporation (an international lending company) for laundering drug money, the Bureau was reportedly informed by an Internal Revenue Service (IRS) agent that "WFC was a legitimate company: if it dealt in drug money so much the better; narcotics money that stayed in the U.S. was good for the economy".

Money laundering is a crime in both the United States and Canada but official measures to curb this practice have accomplished little. Bank reporting requirements in Canada are voluntary and launderers can circumvent the U.S. Bank Secrecy Act by depositing amounts smaller than $10,000, opening phony accounts and bribing bank officials. The problem has become so severe that Washington does not deal with money laundering cases unless there is at least $5 million involved.

Drug-related corruption, then, is clearly a continental problem and must be dealt with accordingly. What appears to be emerging in both North and South America is an extremely lucrative multinational enterprise served by politicians, police and military officers and bankers and lawyers amongst others. Punitive attempts to stop drug trafficking have only accelerated the growth of this enterprise and the laundering of vast amounts of drug money has fully integrated the narcobusiness into many national economies across the American continent. Given this situation, it is time to consider the claims made by prominent commentators across the political spectrum that decriminalization of cocaine may represent one viable method of drastically reducing the economic power of its traders. Anthony Lewis recently pointed out in the New York Times, that "... prohibition is not the solution. It is the problem. As in the noble experiment with alcohol, prohibition creates a criminal market for the outlawed product and corrupts the law."

The conservative magazine, National Review , has also opposed drug prohibition, and its founder William F. Buckley states in the 12 February issue: "...the cost of the drug war is many times more painful...than would be the licensing of drugs combined with intensive education.... We have seen a substantial reduction in the use of tobacco over the last 30 years and this is not because tobacco became illegal but because a sentient community began in substantial numbers to apprehend the high cost of tobacco to human health...". The British financial magazine, The Economist , has proposed decriminalization as well and pointed out the hypocrisy of the recent U.S. decision to decertify Colombia: "... the iron law of the market is that demand breeds supply. The other countries blacklisted with Colombia--Nigeria, Syria, Iran, Afghanistan and Myanmar --may feel like decertifying the United States".

There is considerable support for decriminalization in Latin America also. Colombia made personal drug consumption legal in May 1994 and the President of Bolivia, Gonzalo Sanchez de Losada has openly supported decriminalization. As he put it, " the antidrug fight is the politician's tomb--prohibition has achieved nothing but making vices extremely profitable for traffickers". In September 1994, the Bolivian government announced that it would launch a world campaign to legalize the coca leaf. Internationally, in Italy, Russia and Poland, personal drug use is no longer a crime and marijuana can be legally sold in coffeehouses in Holland.

Decriminalization combined with expanded education and treatment programs may do much to reduce the drug problem. Traffickers would be denied the enormous profits that they can use to corrupt entire administrations and addiction can be dealt with as a health issue. This approach should be combined with the removal of World Bank --IMF imposed Structural Adjustment Programs (SAPs) in Latin America which have encouraged drug trafficking and money laundering by debilitating legal economies. In Peru, for instance, the implementation of SAPs has put four million people in extreme poverty, almost halved real wages and cut those with "adequate employment" to 15% of the workforce. Consequently, there has been a forced migration of "impoverished peasants and urban unemployed " into coca growing "as an alternative to starvation". In 1991, in exchange for $100 million from the United States, Peru put in place the IMF " structural adjustment " clause opening its markets to U.S. corn. As a result, by 1995, corn cultivation had fallen tenfold and coca production had grown by 50%.

SAP rules also make money laundering easier by reducing regulations on banking and capital movement. In Bolivia, the Central Bank's disclosure requirements were " loosened" and new laws were passed disallowing "official enquiries into the origins of wealth brought into the country". Such changes ease the entry of drug money into the financial system.

Like the Drug War, SAPs are punitive and both have helped create a drug empire whose corrupting capacities are almost limitless. To continue on this path is to court continental disaster. A more realistic approach would focus on the needs of peasants in the South and the reasons for addiction in the North. Healthy economies able to get fair prices for legitimate crops are less likely to supply drugs, and the reduction of demand requires examining the socioeconomic structures of Northern societies to find the source(s) of the despair that drives so many to drugs. To examine these issues, a conference involving participants from Latin and North America needs to be held to discuss the topics of decriminalization and neoliberalism. Peasants, addicts, officials, bankers, doctors, lawyers and law enforcement and military personnel amongst others should be invited to this venue to exchange views and offer a broad perspective on the problem. The aim of such discussion would be to construct a new understanding that goes beyond polemics and adversarial measures and finally begins to deal with drugs as everyone's problem.

Recommendations:

1. That Canada withdraw support from structural adjustment programs as a member of the World Bank and the IMF.
2. That Canada consider the decriminalization of cocaine.
3. That Canada call a conference of OAS members and other Latin American states to discuss SAPs, drug trafficking, money laundering and decriminalization.


	DRUGS AND CORRUPTION IN NORTH AND SOUTH AMERICA

[This is the section of the CAPA report written by the author. For footnotes and/or the complete report email aismi@sprint.ca.] It has become clear over the past year that drug-related corruption has penetrated the highest levels of civilian and military authority in Latin America, including Presidents, ex-Presidents, Generals, Ministers and legislators. Successive drug scandals in Colombia, Peru, Bolivia and Mexico during 1995 revealed the growing illegitimacy of state power in the hemisphere and the ineffectiveness of drug control measures taken to date. The Clinton Administration had already admitted the failure of the U.S. "War on Drugs" in Latin America (critiqued in previous CAPA reports) in 1993 and promised to spend more money on treatment and demand reduction in the United States. Yet Washington's funding for military interdiction and crop eradication in the Andean region continues at about the same levels as before. This encourages institutional corruption and has facilitated the spread of the drug trade to Venezuela, Brazil and Ecuador. The role of North American banks in money laundering also makes narcocorruption a continental problem. Ultimately though, such corruption and the drug trade itself is one symptom of the destruction of legitimate economies by more than a decade of neoliberal restructuring. In one of Latin America's most significant drug scandals so far, President Ernesto Samper of Colombia is, at the moment , under intense pressure to resign following charges by his former campaign treasurer, Santiago Medina, that Samper " ordered the collection" of $5.8 million from the Cali cartel for his 1994 election bid. Similar charges have been made by Samper's former campaign chief, Fernando Botero Zea who resigned as Defense Minister in August 1995 and was jailed for accepting and using drug money during the campaign. The President has been "formally charged" with using "more than $3 million" in drug money for his campaign, fraud and obstruction of justice. Samper is to be judged by a Congressional Truth Commission but the president of this body is himself being investigated for dealings with narcotraffickers and many of its other members are suspected of maintaining similar links. Nine additional members of Congress belonging to the Liberal Party have also been linked to the drug trade. Colombia's problems with drug trafficking were best highlighted by the escape of top Cali cartel drug baron, Jose Santa Cruz Londono, on 11 January 1996, from a maximum security prison in Bogota in broad daylight. The government had "no explanation" for this remarkable event but Alfonso Valdivieso, the Prosecutor General, attributed the escape to "corruption in the prison system". He stated: " Corruption has triumphed and the capacity of the government to assure society that these people would pay for their crimes has failed". On 5 March, Colombian police found Santa Cruz near Medillin and killed him. The "outlandish proportions" of narcocorruption in Colombia have led Jose Toft, a former United States Drug Enforcement Agency (DEA) representative in Bogota, to remark: "I cannot think of a single political or judicial institution that has not been penetrated by narcotraffickers..." By mid-December 1995, Carlos Salinas, the former Mexican President, who led Mexico in signing NAFTA with the United States and Canada was being sought by Washington for his alleged involvement in drug trafficking. According to NBC news, U.S. federal agents have linked Salinas to $500 million in drug money distributed in 90 bank accounts in nine countries. Mexican opposition members accused President Zedillo of being slow to investigate corruption during the Salinas administration. Paulina Castanon, the wife of Raul Salinas, (the ex-President's brother who is in jail for the murder of PRI Secretary General Jose Ruiz Massieu) was arrested in Switzerland in November for allegedly laundering drug money when she tried to withdraw $84 million out of a bank account opened by Raul under a false name. As a mid-level government functionary during his brother's administration, Raul managed to collect 20 properties on declared monthly earnings of $8640. The Andean militaries' widespread corruption and involvement in the drug trade has been mentioned in previous CAPA reports. This has increasingly penetrated senior levels. In Peru, General Manuel Ortiz Lucero, the operations chief of the army's anti-drug team, was revealed to be a narcotrafficker by the diary of a Lima cartel leader who was captured in February 1995. In November, Brigadier-Generals David Jaime Sobrevilla and Carlos Perez Silva and nine other officers were arrested on corruption and drug trafficking charges (stemming from information supplied by imprisoned drug boss Abelardo Cachique Rivera). All belonged to units fighting against Sendero Luminoso in Junin Department. The officers were charged with guarding secret airstrips and collecting $2500 to $3000 for every landing and take-off of Cachique's light planes loaded with one to two tonnes of cocaine paste (PBC). There are more than 200 illegal airstrips for cocaine flights in Peru, (as of 1995), only three of which have been closed. The military receives payments from drug traffickers to use these landing areas and blocks drug enforcement efforts. There have been many cases of military personnel shooting at helicopters transporting U.S. DEA agents and Peruvian anti-drug police. "All elements of the [Bolivian] military are involved in drug trafficking to some extent," according to the DEA and Bolivia's biggest drug scandal to date broke in October 1995 with the removal of four senior officers of the FECLN (the anti-drug police) for conspiring to allow a plane containing four tonnes of cocaine to fly from La Paz to Lima. The officers included Colonel Fernando Tarifa, the FECLN deputy commander. The cocaine was stored in a warehouse at La Paz's El Alto airport for eight months. On 3 November, FECLN headquarters was occupied by security agents who disarmed its members and the government announced plans to reorganize the force. However, General Simon Sejas Torroyo, the FECLN commander, has not been removed. Meanwhile, in Congress, opposition deputies demanded that Guillermo Bedregal, the Congressional chairman, resign and face an inquiry concerning his alleged business relationship with Luis Amado Pacheco (aka "Barbachoca"), the reputed head of the "La Paz cartel" which shipped the four tonnes of cocaine. Bedregal is alleged to have sold an apartment to Barbachoca in early 1995 according to a FECLN report. As revealed most vividly by the Salinas case, institutional drug-linked corruption has become particularly prevalent in Mexico as well. The U.S. crackdown in South Florida in the mid-1980s, following its emergence as the main entry point for Andean cocaine, has simply moved these commercial operations to Mexico which by 1990 accounted for 70% of the cocaine coming into the United States. Annual Mexican drug sales to the U.S. are an estimated $100 billion and there are about 200 narcotrafficking organizations in Mexico. The lucrative drug trade has according to one observer, "...bought off whole sectors of the federal and state governments, the police, the judiciary and the military". Thousands of federal judicial police and Justice Ministry officials have been dismissed for cooperating with drug traffickers. Ten police agents did try to capture two smugglers ( in late 1991) who had 800 pounds of cocaine on a small plane in a remote area of Veracruz state. Seven of the policemen were shot dead by a Mexican army force guarding the airstrip for the smugglers. Aside from former President Carlos Salinas, prominent Mexican officials linked to narcotrafficking include Juan Alvarez de Castillo (Federal Attorney General under Salinas), Manuel Bartlett (Secretary of the Interior in the De la Madrid government of 1986-1992), Arevalo Gardoqui (former Secretary of Defense) and Enrique Alvarez del Castillo (another former Federal Attorney General). Also, drug cartel-PRI collaboration and infighting is suspected in the murders of the party's presidential candidate Luis Donaldo Colosio and PRI Secretary General Jose Ruiz Massieu in 1994. The latter's brother, former Deputy (Federal) Attorney General, Mario Ruiz Massieu, amassed $10 million in six months (in a Houston bank account) while leading Mexico's "war on drugs" in 1994. Mario was also in charge of investigating Jose's murder until he resigned in November and fled to the United States where he was arrested. Mexico wants to extradite the former anti-narcotics chief for "narcotrafficking, abuse of authority, bribery and obstruction of justice". Narcocorruption is not limited to Latin America. As Cesar Gaviria Trujillo, the former President of Colombia and current Secretary General of the OAS put it, "if Colombians are the big fish of the drug trade then Americans are the whale". While still President, Gaviria called on Washington to stop money laundering activities inside its borders and devote more resources to lowering domestic drug consumption. American money laundering is a key issue because 91% of the $197 billion spent on cocaine in the U.S., stays there. The extent of money laundering in the United States can be gauged from the fact that "practically" every dollar in circulation there contains "microscopic traces" of cocaine, signifying its use in a drug deal. Most laundering is done through the commercial banking system and U.S. banks wash an estimated $100 billion of drug money every year. Those identified as such conduits include the Bank of Boston, Republic National Bank of New York, Landmark First National Bank, Great American Bank, People's Liberty Bank and Trust Co. of Kentucky and Riggs National Bank of Washington. In 1993, two directors at the American Express Bank International (AEBI) in Beverly Hills, California, wired drug money for Juan Garcia Abrego--the Mexican cocaine baron arrested and extradited to the United States in January 1996 -- from the First City Texas Bank in McAllen, Texas, to accounts in Banker's Trust of New York (in Manhattan). AEBI then invested the money in London, Switzerland, Mexico and Houston. In addition, Manufacturers Hanover, Chase Manhattan Bank, Chemical Bank and Irving Trust have admitted not reporting money transfers to the government (the Bank Secrecy Act of 1970 requires that all transactions over $10,000 be reported) and the Bank of America has been fined $4.75 million for not revealing transfers of more than $12 billion. The Treasury Department has penalized 25 banks for failure to report and in April 1990, hundreds of accounts in 173 banks were frozen by court order. The accounts were suspected of hiding almost $400 million in Colombian drug profits. Florida banks have been particularly prominent in laundering drug money. Sixty to seventy of them accept such deposits and the state banking system reports cash surpluses of $6 to $8 billion every year--more than twice the amount in any other state. Investment houses such as Merill, Lynch and EF Hutton have also handled millions of dollars in drug money (putting it in the New York bullion market) and Deak Perera (a major foreign exhange and bullion dealer ) was accused by a Presidential Commission on Organized Crime in 1984 of laundering hundreds of millions of dollars for Colombian drug traffickers. The charges led to the collapse of the company. In September 1989, it also was revealed that Canadian banks have been laundering drug money on an enormous scale. Notorious in this regard is the Bank of Nova Scotia (BNS) which has laundered a $100 million in drug money through its Miami and Caribbean branches. The money was sent to BNS' Bahamas and Cayman Islands branches from Miami and then wired to its New York office where the funds could be withdrawn by the original depositors. In 1981 and 1983, U.S. authorities subpoenaed records of the Bahamas and Cayman Islands BNS branches in connection with two investigations of drug trafficking. The bank gave up the documents after being fined $1.8 million for delaying their release and a Scotiabank official acknowledged (in 1984) that "...money launderers had access to our bank in the Caribbean...". BNS asked no questions about large cash deposits, ignored normal banking practices and hid its depositors' identity by keeping minimal records. Also, BNS employees in the Caribbean were given thousands of dollars in "tips" by their clients for their "understanding". Similarly, $726,000 in drug profits has been deposited in the Royal Bank of Canada and in 1989 the DEA identified Swiss Bank Corporation (Canada) as " a repository of $14 million in drug money". Sales of narcotics generate approximately $10 billion a year in Canada and most of this is washed through "Canadian banks and other legitimate businesses". Toronto, Montreal and Vancouver are included in the DEA's list of the 18 most prominent money laundering centres in the world. Narcocorruption in North America is widespread amongst public officials as well. Sixty policemen in Miami have been identified as corrupt and 80 lawmen and public officials in Georgia have been charged with serious offenses such as accepting bribes. A Georgia state Senator promised to protect drug smugglers if they contributed to his campaign for the governorship. U.S. Customs agents suspected of taking bribes to allow cocaine through a Mexican border crossing have been indicted. Two-thirds of the cocaine coming into the U.S. does so at official entry points along the Mexican frontier. In Miami, three FBI agents and one from Customs were charged with stealing $200,000 from drug dealers in 1994 and a former senior Justice Department official and two former prosecuters were indicted in June 1995 on charges of helping Colombian drug barons in a criminal conspiracy. Kendall Coffey, the U.S. attorney for Southern Florida stated that the [latter] case showed "the degree to which cocaine profits have corrupted the legal system". When the FBI tried to prosecute World Finance Corporation (an international lending company) for laundering drug money, the Bureau was reportedly informed by an Internal Revenue Service (IRS) agent that "WFC was a legitimate company: if it dealt in drug money so much the better; narcotics money that stayed in the U.S. was good for the economy". Money laundering is a crime in both the United States and Canada but official measures to curb this practice have accomplished little. Bank reporting requirements in Canada are voluntary and launderers can circumvent the U.S. Bank Secrecy Act by depositing amounts smaller than $10,000, opening phony accounts and bribing bank officials. The problem has become so severe that Washington does not deal with money laundering cases unless there is at least $5 million involved. Drug-related corruption, then, is clearly a continental problem and must be dealt with accordingly. What appears to be emerging in both North and South America is an extremely lucrative multinational enterprise served by politicians, police and military officers and bankers and lawyers amongst others. Punitive attempts to stop drug trafficking have only accelerated the growth of this enterprise and the laundering of vast amounts of drug money has fully integrated the narcobusiness into many national economies across the American continent. Given this situation, it is time to consider the claims made by prominent commentators across the political spectrum that decriminalization of cocaine may represent one viable method of drastically reducing the economic power of its traders. Anthony Lewis recently pointed out in the New York Times, that "... prohibition is not the solution. It is the problem. As in the noble experiment with alcohol, prohibition creates a criminal market for the outlawed product and corrupts the law." The conservative magazine, National Review , has also opposed drug prohibition, and its founder William F. Buckley states in the 12 February issue: "...the cost of the drug war is many times more painful...than would be the licensing of drugs combined with intensive education.... We have seen a substantial reduction in the use of tobacco over the last 30 years and this is not because tobacco became illegal but because a sentient community began in substantial numbers to apprehend the high cost of tobacco to human health...". The British financial magazine, The Economist , has proposed decriminalization as well and pointed out the hypocrisy of the recent U.S. decision to decertify Colombia: "... the iron law of the market is that demand breeds supply. The other countries blacklisted with Colombia--Nigeria, Syria, Iran, Afghanistan and Myanmar --may feel like decertifying the United States". There is considerable support for decriminalization in Latin America also. Colombia made personal drug consumption legal in May 1994 and the President of Bolivia, Gonzalo Sanchez de Losada has openly supported decriminalization. As he put it, " the antidrug fight is the politician's tomb--prohibition has achieved nothing but making vices extremely profitable for traffickers". In September 1994, the Bolivian government announced that it would launch a world campaign to legalize the coca leaf. Internationally, in Italy, Russia and Poland, personal drug use is no longer a crime and marijuana can be legally sold in coffeehouses in Holland. Decriminalization combined with expanded education and treatment programs may do much to reduce the drug problem. Traffickers would be denied the enormous profits that they can use to corrupt entire administrations and addiction can be dealt with as a health issue. This approach should be combined with the removal of World Bank --IMF imposed Structural Adjustment Programs (SAPs) in Latin America which have encouraged drug trafficking and money laundering by debilitating legal economies. In Peru, for instance, the implementation of SAPs has put four million people in extreme poverty, almost halved real wages and cut those with "adequate employment" to 15% of the workforce. Consequently, there has been a forced migration of "impoverished peasants and urban unemployed " into coca growing "as an alternative to starvation". In 1991, in exchange for $100 million from the United States, Peru put in place the IMF " structural adjustment " clause opening its markets to U.S. corn. As a result, by 1995, corn cultivation had fallen tenfold and coca production had grown by 50%. SAP rules also make money laundering easier by reducing regulations on banking and capital movement. In Bolivia, the Central Bank's disclosure requirements were " loosened" and new laws were passed disallowing "official enquiries into the origins of wealth brought into the country". Such changes ease the entry of drug money into the financial system. Like the Drug War, SAPs are punitive and both have helped create a drug empire whose corrupting capacities are almost limitless. To continue on this path is to court continental disaster. A more realistic approach would focus on the needs of peasants in the South and the reasons for addiction in the North. Healthy economies able to get fair prices for legitimate crops are less likely to supply drugs, and the reduction of demand requires examining the socioeconomic structures of Northern societies to find the source(s) of the despair that drives so many to drugs. To examine these issues, a conference involving participants from Latin and North America needs to be held to discuss the topics of decriminalization and neoliberalism. Peasants, addicts, officials, bankers, doctors, lawyers and law enforcement and military personnel amongst others should be invited to this venue to exchange views and offer a broad perspective on the problem. The aim of such discussion would be to construct a new understanding that goes beyond polemics and adversarial measures and finally begins to deal with drugs as everyone's problem. Recommendations: 1. That Canada withdraw support from structural adjustment programs as a member of the World Bank and the IMF. 2. That Canada consider the decriminalization of cocaine. 3. That Canada call a conference of OAS members and other Latin American states to discuss SAPs, drug trafficking, money laundering and decriminalization.

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