Wachovia Facing Drug Money Laundering Investigation

Submitted by SadInAmerica on Mon, 04/28/2008 - 5:28pm.

Wachovia is being investigated by federal prosecutors as part of a larger probe of alleged laundering of drug money, according to a published media report.

The report, in Saturday's Wall Street Journal, cited people familiar with the matter.

It said Wachovia is talking to the Justice Department about reforming its compliance system and faces a possible deferred-prosecution deal that would give the government significant oversight of the bank. A Wachovia representative said the company is cooperating with the investigation, the report added.

The probe is related to the alleged laundering of drug revenue by Mexican and Colombian money-transfer companies, the report said. Wachovia is one of several large banks that officials have investigated because of relationships with such companies, according to the report. Wachovia and "some other" U.S. banks cut off their ties to Mexican foreign-exchange companies in December and January following inquiries in the government's investigation, the report added.

The probe comes on top of other recent problems for Charlotte, N.C.-based Wachovia. On Friday, the bank agreed to pay as much as $143.9 million in restitution and penalties to end an investigation into telemarketers who allegedly used their relationships with Wachovia to steal money from individuals. Wachovia has also suffered from the fallout of the subprime-mortgage meltdown. Its 2006 purchase of Golden West Financial gave it significant mortgage exposure, and it recently had to raise $8 billion in capital to bolster its financial position.

Wachovia shares finished Friday up $1.43 at $28.81.

TheStreet Staff - April 28, 2008 - posted at www.thestreet.com

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Submitted by SadInAmerica on Mon, 04/28/2008 - 5:28pm.