Scott Dalton/Bloomberg Markets

One Thing Gangs Smuggling Latin Migrants Over the Border Can't Do Without: Big U.S. Banks


Dionisio Diaz takes a seat inside the Evangelical Christian Assembly Church at an office park in Doraville, an Atlanta suburb. It’s been another six-day week working for a landscaping crew, mowing lawns and pruning shrubs. The 37-year-old undocumented immigrant from Guatemala clutches a Bible and joins dozens of worshipers belting out a hymn in Spanish.

As the Saturday evening service in late October ends, Diaz, wearing a black suit, rises to greet the pastor.

“My dream is to be up there, spreading the Gospel, just like you,” Diaz says, a smile widening across his face. “I’ve been blessed by God to get here.”

Diaz has also been helped on his journey to the U.S. by more earthly powers: He hired a gang of human smugglers, or coyotes, who got him across the U.S. border to a stash house in Mesa, Arizona, and then on to Georgia, Bloomberg Markets magazine will report in its February issue. Diaz paid for part of the trip using one of America’s biggest banks, Wells Fargo & Co.

It’s a story repeated over and over as waves of illegal immigrants stream into the U.S. from Latin America. Gangs reap $10 billion a year from about 3 million illegal border crossings from Mexico, according to the United Nations Office of Drugs and Crime.

Major banks, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo, have been used as financial conduits for the smuggling industry, according to evidence in a federal criminal case against a gang of 15 human smugglers and warrants from prosecutors in Arizona, Maryland and Texas.

‘Big Business’

“Human smuggling is a big business,” says Stephen Adaway, chief of the U.S. Homeland Security Investigations unit for human smuggling in Washington. “And they couldn’t operate on the scale they do without the banks.”

Over a dinner of rice and fish at the Rincon Latino restaurant in Doraville, Dionisio Diaz describes how banks were crucial in making the 4,100-mile (6,600-kilometer) journey to Georgia from Sibinal, a village in western Guatemala.

A wiry man, Diaz clasps his hands as he speaks in low, measured tones. Just before dawn one December 2012 day, Dionisio and his nephew, Danilo, 22, crossed Guatemala’s border with Mexico on foot and traveled by bus to the northern Mexican town of Altar. There, they met their coyote, Rafael, at 2 a.m. in the darkened main square.

Sonoran Desert

For a fee of $1,400, Rafael arranged for them to be led on a grueling, three-day trek across the Sonoran Desert to Arizona. The two men say they were held captive in a one-story stucco house screened by a 10-foot-high wall in Mesa run by smugglers.

They slept on bare, filthy floors for a week, squeezed in among 40 other people in two rooms -- until Federico, Dionisio’s older brother, who was already living in Doraville, deposited $5,200 into the gang’s Wells Fargo accounts. Two men then put Dionisio, Danilo and 11 other undocumented immigrants into a van and drove them to Atlanta.

“We weren’t going anywhere until the money showed up in the bank,” Dionisio says.

Although there’s no evidence that banks have knowingly colluded with human smugglers, the institutions have fallen short on their responsibility to detect and report suspicious cash deposits and withdrawals -- including money that flows through their accounts into the hands of gangs, federal investigators and bank compliance officers say.

‘Ordinary Suspicion’

“The regulators and the bankers are not doing a very good job of policing their accounts,” says former Arizona Attorney General Terry Goddard, who led probes of human smugglers while in office from 2003 to 2010. “There’s a level of ordinary suspicion that banks and regulators are failing to employ.”

The 1970 Bank Secrecy Act and the 2001 Patriot Act require banks to monitor transactions for activity that may be tied to money laundering and other crimes, including human smuggling. Banks must appoint a compliance officer, identify crimes its customers are at risk of committing and develop policies to detect and stop such transactions.

Banks must report suspected criminal activity to the Financial Crimes Enforcement Network, an agency of the U.S. Treasury Department. FinCEN forwards the suspicious activity reports to law enforcement for investigation.

Smugglers have been outwitting banks and regulators for years. In January 2006, prosecutors issued subpoenas ordering JPMorgan and Wells Fargo to look for accounts suspected of being used by coyotes.

Flagged Hundreds

The subpoenas directed the banks’ own investigators to look for patterns common to smugglers, such as large cash deposits in one state that are withdrawn almost immediately in the Southwest. The banks flagged hundreds of accounts for prosecutors to investigate, according to an affidavit by a federal agent. The banks weren’t accused of any wrongdoing.

Phoenix police targeted the same transaction patterns and seized hundreds of accounts at Bank of America, JPMorgan and Wells Fargo from 2006 to 2008. Since March 2013, Arizona prosecutors have gotten court-ordered seizure warrants to shut down 325 additional accounts suspected of belonging to smugglers at Bank of America and Wells Fargo.

And from June to September 2014 -- in what agents called Operation Coyote -- the Department of Homeland Security seized $950,000 in 504 accounts at undisclosed banks in Arizona, Maryland and Texas.

There’s nothing illegal per se about making a cash deposit at a bank; people do it all the time. But in failing to stop human smugglers from using their institutions, banks enable the illicit and often violent trade to continue, says Tom Welch, who heads the financial crimes unit at Homeland Security’s Arizona office.

‘We’re Losing’

“Way more money is going through than we’re definitely comfortable with,” Welch says. “We’re losing the battle.”

Prosecutors and federal agents began pressuring banks to crack down on smugglers in 2013, with mixed results, says Arizona attorney general spokeswoman Stephanie Grisham.

In 2014, Bank of America required all cash depositors in the U.S. to show identification. JPMorgan began accepting cash deposits into accounts only from the person named on the account and official co-signers. Wells Fargo took none of those steps, Grisham says.

“Wells Fargo didn’t respond,” she says.

Bank of America spokesman Lawrence Grayson and JPMorgan spokeswoman Patricia Wexler declined to comment for this story.

Wells Fargo continuously monitors accounts and reports suspicious activity to authorities, says spokeswoman Richele Messick. The bank complies with all laws and regulations, she says.

Obama Order

Although immigration has topped the political agenda in the U.S., neither the White House nor Congress has targeted the role banks play in financing smuggling. On Nov. 20, President Barack Obama issued an executive order to protect from deportation undocumented immigrants whose children are U.S. citizens or who arrived before 2010 as minors.

Republican lawmakers balked, describing the plan as amnesty and calling for more deportations instead.

The Atlanta suburbs of Doraville and neighboring Chamblee and Norcross -- home to 5,000 Guatemalans -- offer a window into the connection between immigration, human smuggling and banks.

Dionisio’s older brother, Federico, has lived in Doraville for 13 years. When he made the journey to the U.S. from Sibinal, he had to carry cash to pay the coyotes. That made immigrants easy prey for robbers -- one reason the smugglers began using banks.

‘Without Anything’

“So many people were left without anything in the desert,” Federico says.

Smugglers increased their use of banks after former Arizona Attorney General Goddard cracked down on Western Union Co., the world’s biggest money-transfer company. In 2010, the Meridian, Colorado–based company agreed to pay $94 million to settle civil and criminal investigations by Goddard’s office.

Western Union denied guilt while acknowledging that employees had allowed human smugglers to use its services from 2003 to 2007. It agreed to hire more investigators and tell authorities about all wire transfers exceeding $500 to and from the U.S. Southwest.

“Since then, we have seen a significant shift to banks,” says Arizona attorney general spokeswoman Grisham.

“We have very cooperative relationships with law enforcement,” says Western Union Chief Compliance Officer Barry Koch. “We have very sophisticated mechanisms to detect and prevent and report this type of activity when we see it.”

Low Priority

Even the industry’s own investigators say banks can and should do more to shut down the smugglers’ monetary pipelines. Big banks ask their investigators to focus first on stopping suspected terrorist financing, tax evasion and drug-smuggling transactions. Lower on the list is detecting accounts that finance human smuggling.

“I wasn’t able to make human smuggling a priority,” says Holly Ray, who was an anti-money-laundering investigator and compliance officer at JPMorgan in San Antonio, Texas, from 2011 until August 2014. Smugglers prefer Bank of America, JPMorgan and Wells Fargo because they need banks with branches across the country to receive payments, says Homeland Security’s Welch.

The gangs use a simple scheme called funnel accounts. Smugglers open accounts in their own names or those of trusted colleagues and instruct the U.S.-based friends and relatives of people seeking to migrate to deposit payments into those accounts.

Withdraw Money

The smugglers then withdraw the money from bank branches, often near the Mexican border. The Arizona attorney general’s office says it documented $360 million of funds used for human smuggling that moved through Arizona-based funnel accounts from 2008 to 2013.

It’s this bank conduit that helped Dionisio Diaz get out of Sibinal, a town of 20,000 people 190 miles west of Guatemala City. Generations of people have left Sibinal, and all of Guatemala, to escape poverty, civil war, hurricanes and earthquakes.

Federico was the first sibling to venture to the U.S., and Dionisio joined him in Doraville in 2005. He worked with a landscaping crew and used Western Union to send about $500 a month, about a third of his wages, back to his wife and kids in Guatemala for clothes, school fees and food.

Missing his family, Dionisio returned to Sibinal three years later. The town, which is flanked by the lush foothills of the 13,317-foot-high Tacana Volcano, consists of unpainted concrete homes, rutted streets and a rambling market where women in traditional Mayan dresses hawk fruit and vegetables. Arable land is scarce, and malnourished children are everywhere.

Head North

Dionisio found sporadic work in Sibinal, clearing what little farmland there was for $10 a day -- as much as he now earns in an hour doing landscaping work in Doraville. By mid-2012, he decided the only way he could provide for his four children, now aged 5 to 16, was to head north again.

“I have a third-grade education,” Dionisio says. “You just can’t make enough money to give your children a decent life.”

In December 2012, Dionisio called a man he knew only as Rafael, a coyote a relative had used a few years earlier. The trip to Georgia would cost $3,800 a person, the smuggler told Dionisio. Three people -- Federico, Dionisio’s brother-in-law and a friend -- agreed to lend him the money, without interest. Dionisio would pay them back after he started working in Georgia.

‘Say Goodbye’

On Dec. 12, 2012, Dionisio hugged and kissed his family one last time.

“You have to say goodbye knowing you may never come back,” he says.

At 4 a.m., Dionisio and Danilo, a stocky man with curly black hair, headed toward a stretch of Guatemala’s 541-mile-long border with Mexico, traversing the hilly, jungle-covered terrain. They crossed into Mexico without incident.

They then took two buses north. In the dark of night later that week, they arrived in Altar, a dusty town of adobe homes and dirt roads in Mexico’s Sonora state.

“There is nothing in this town but smuggling, and it’s a criminal, sinful business,” says Altar’s only Catholic priest, the Rev. Prisciliano Peraza. “Everyone has to pay, and banks are critical,” he says, standing beside seven white crosses erected in the desert to honor would-be immigrants who have died en route to Arizona since the mid-1990s.

A Shelter

The Sonoran Desert spreads before him, broken only by the dark silhouette of the Baboquivari Mountains in Arizona, 80 miles away. Peraza drives his aging pickup to a shelter for migrants that he’s run for nine years. Inside, 25 men are waiting for a free lunch. All are headed north. A sign on the wall says 30,084 people have passed through the shelter.

Dionisio and Danilo Diaz met their coyote, Rafael, in Altar. He took them to a rooming house and gave them camouflage pants, hoodies, backpacks, painkillers and a bottle of glucose. He also provided two empty plastic gallon jugs for water, painted black to avoid glimmering in the sun and tipping off border patrol agents, and improvised slippers made of carpet, to be worn over their shoes so no tracks are left in the desert sand.

Rafael called Federico Diaz and told him to wire $1,400 from Doraville to Altar for Dionisio and Danilo to start the journey. Danilo is the son of Dionisio and Federico’s sister, Norma, who lives in Guatemala. Federico says he wired the money, the first of three smuggling payments, using Western Union.

Crossed Border

Once Rafael got the cash, in Mexican pesos, a guide named Noe took Dionisio, Danilo and six other men into the Sonoran Desert by van to La Linea, as the U.S. border is known. The group joined a dozen more people there.

They made it into Arizona near Sasabe and Nogales without being caught. The Sonoran Desert, which extends 110,000 square miles (285,000 square kilometers) in Mexico and the U.S., is one of the hottest in North America and fraught with danger. Dionisio twice dodged rattlesnakes, coiled up and ready to strike, and by the third day, his water had run out.

The guide stopped at a muddy watering hole used by cattle.

“We got on our bellies and drank,” Dionisio says.

On the fourth day, they passed through Arivaca to get to the house in Mesa. There, Dionisio and his nephew say, the smugglers locked them inside with 40 other undocumented immigrants and confiscated their shoes so they couldn’t run away.

The overseer of the house, Heiler Barrionuevo, ordered Dionisio and Danilo to sleep on the cold floor, Danilo says. They ate the same meal twice a day -- greasy plates of rice and brown beans with a stale tortilla -- and drank watered-down powdered juice. There were two bathrooms.

‘He’d Yell’

Barrionuevo, 22, a man with dark, matted hair dressed in jeans and a T-shirt, sat near the door, glaring.

“He’d yell at me whenever I asked him when we could leave,” Danilo says. “He said if I didn’t shut up, I’d be sent to another house, where they beat those who misbehaved.”

The smugglers told Dionisio and his nephew that they wouldn’t be released until someone put $5,200, the second smuggling-fee installment, into Wells Fargo accounts. About 1,850 miles away, in Doraville, Federico’s mobile phone rang. A male voice ordered him to go to a Wells Fargo branch.

“I went to the bank and deposited the cash,” Federico says. “It was the only way they would bring my brother.”

After the gang withdrew the money, the men in Mesa crammed Dionisio and Danilo and 11 others into a Dodge Caravan minivan headed to Doraville.

Criminal Cases

The group that smuggled Dionisio and Danilo was run by Joel Mazariegos, an undocumented dairy-farm worker in Fonda, New York, according to evidence in federal criminal cases against members of the gang.

On Jan. 9, 2013, the day after the two men arrived in Doraville, Homeland Security Investigations agents searched the house in Mesa where Dionisio and his nephew had been held. Inside, they found a spiral notebook listing the names of 42 smuggled people, including Dionisio and Danilo; their destinations; contact phone numbers; and shorthand references to payments to accounts at Wells Fargo, Bank of America and JPMorgan, according to the ledger, which federal agents described in detail in affidavits filed in U.S. District Court in Phoenix.

The gang leader, Mazariegos, used a Bank of America account to collect his earnings from the smuggling ring, according to an affidavit by Homeland Security Investigations agent George Long. Mazariegos pleaded guilty to human-smuggling and money-laundering conspiracy charges and was sentenced to five years in prison in March 2014.

Drug Cartels

Now serving time, he has appealed the sentence; the outcome is pending.

Part of the fees smuggling gangs collect go to Mexican drug cartels, says Matt Allen, who heads Homeland Security Investigations’ unit in Arizona. His office, part of the investigative arm of the Department of Homeland Security, led the probe that broke up the Mazariegos gang.

Coyotes use the same routes that cartels use to ferry drugs to the U.S., and they have to pay the drug lords for safe passage, Allen says.

“They charge a toll for everyone who goes through their territories,” he says of the cartels. Homeland Security Investigations has documented at least $21 million in such fees that smugglers based in Central America paid to drug cartels, Allen says.

Previous Case

Two of the U.S.-based banks that human smugglers favor have a history of being used in drug cartel rackets. Wachovia Corp., which Wells Fargo had bought, admitted in court in 2010 that it hadn’t done enough to spot drug-trafficking money among the $378.4 billion it handled for Mexican currency exchange houses from 2004 to 2007.

The Justice Department charged the bank with violating the Bank Secrecy Act, and Wachovia paid $160 million in fines and penalties and promised to revamp its detection systems. A year later, the government dropped the charges.

Federal agents also caught people who work for Mexican cartels depositing cash in Bank of America accounts in Atlanta, Chicago and Brownsville, Texas, from 2002 to 2009, according to court records. Bank of America wasn’t accused of wrongdoing.

On Jan. 8, 2013, under the cover of night, the smugglers’ minivan carrying Dionisio and Danilo Diaz from Mesa pulled over on Interstate 20 near Six Flags Over Georgia, an amusement park in Austell, outside Atlanta. Federico Diaz handed the driver $1,000, the third and final smuggling-fee installment.

Hugged Him

Dionisio and Danilo got out and hugged him, giddy with relief.

“I thanked God that we were there, finally, after such a hard, hard time,” Dionisio says.

Dionisio and Danilo say they feel at home in Doraville. One Sunday afternoon in late October, Danilo sprints down a soccer field in a park 2 miles from home. He plays forward for one of five teams comprising men from Guatemala who face off every weekend. His uncle, Federico, is his team’s coach.

Dionisio says he uses Western Union to wire about $600 to his wife every month. He’s already settled his debt with his brother and the others who had loaned him the money to be smuggled to the U.S. He says he eventually wants to return to Sibinal to be with his children.

“My dream is to put them through college in Guatemala,” Dionisio says.

Pleaded Guilty

Barrionuevo, the overseer at the Mesa house, was one of the 15 people in the Mazariegos gang who were charged with felonies. He pleaded guilty to conspiracy to transport and harbor illegal aliens and was sentenced to 42 months in prison in October 2013.

Like ringleader Mazariegos, Barrionuevo has appealed his sentence. Thirteen others also pleaded guilty and all have been sentenced. Charges were dropped against one defendant.

And that was just one gang.

“For every one weed we take out, a hundred grow back in its place,” says Homeland Security’s Welch. Human smuggling is a big business.

What coyotes see is a vast opportunity to make money transporting immigrants seeking a better life in the U.S. The cycle continues: The people flow north, and the money flows south -- mostly through large U.S. banks.

“It’s a necessity for the coyotes to get the money back and get paid,” says Guillermo Ramirez, who spent almost six years as a law enforcement liaison at Bank of America’s global financial crimes compliance division in Boston. “They do need the banks.”

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