White Collar: Wells Fargo Seeks Settlement in Wachovia Money Laundering Investigation

Wells Fargo is in negotiations to resolve a money laundering investigation by the U.S. Attorney in Miami into Wachovia Bank. The investigation involves Wachovia's former ties to Mexican money exchanges and whether Wachovia violated U.S. federal money laundering statutes in its relationships with these exchanges.

The money exchanges are known as "casas de cambio." The exchanges facilitate the efforts of Mexican immigrants in the United States to send money earned in the U.S. back to Mexico. However, American authorities believe that drug traffickers also use the exchanges to launder drug proceeds and transfer cash back to Mexico.

The federal prosecutors believe that Wachovia failed to exercise sufficient care and oversight in processing transfers for the exchanges. Thus, the bank failed to ensure that it was not facilitating the transfer of proceeds of unlawful activity, in particular drug sales.

The investigation became public in April 2008 as part of a series of disclosures that forced Wachovia to oust its former CEO, Ken Thompson. Wells Fargo purchased Wachovia in the fall of 2008. By the time of the acquisition Wachovia had ceased doing business with the exchanges. All of the alleged illegal conduct took place before Wells Fargo acquired Wachovia.

Wells Fargo disclosed the negotiation to settle the matter in its annual report. If the parties reach a settlement, it is likely that the bank will enter into a deferred prosecution agreement. As par of the agreement, it will have to pay a penalty and institute a money laundering compliance program.

For more about the possible settlement, please see the Charlotteobserver.com, "Wells in Talks over Wachovia Money-Laundering Probe," March 14, 2010, http://www.charlotteobserver.com/2010/03/15/1316010/wells-in-talks-over-wachovia-money.html.