International Efforts to Combat Guatemalan Money Laundering Schemes Nets High-Profile Arrest and Guilty Plea

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Arrest is Culmination of Elaborate FBI Sting Targeting Banker Who Allegedly Catered to Drug Dealers

On November 12, 2019, the U.S. Attorney for the Southern District of Florida announced two key money-laundering developments concerning high-profile Guatemalans: the arrest of Alvaro Estuardo Cobar Bustamante, the director of a national Guatemalan bank, and the unsealing of a case against and guilty plea of Manuel Antonio Baldizon Mendez, a former presidential candidate in Guatemala who cooperated in the FBI and DEA sting operation against Cobar.

The government’s press release, coupled with its charging documents discussed below, underscore Guatemala’s strategic importance to drug traffickers and, by extension, money launderers. These developments likewise emphasize: (1) the increasing degree of international coordination often required to root out and prosecute both crimes; and (2) the United States’ willingness to prosecute alleged bad actors abusing the financial system, of which we have blogged about here.

Guatemala’s Strategic Importance to Central and South American Drug Trafficking Organizations

Since at least as early as 2013, the FBI and DEA have conducted extensive and numerous investigations into Drug Trafficking Organizations (“DTOs”) in Guatemala. Both agencies have emphasized the strategic importance of Guatemala for large-scale DTOs because it is a key transportation hub in the cocaine trafficking pipeline that begins in Colombia and moves through Central America and Mexico before branching off into various locations in the United States. Colombian and Mexican DTOs, seeking to avoid detection from U.S. law enforcement, often buy and sell multi-ton quantities of cocaine in Guatemala which, in turn, creates a plethora of opportunities for Guatemalan DTOs to serve as intermediaries receiving and re-selling cocaine.

To capitalize on this opportunity, however, Guatemalan traffickers rely on the complicity of public officials and members of the country’s business community. For example, in the affidavit accompanying the criminal complaint against Cobar, FBI Special Agent Paul J. West detailed how DTOs purportedly conspire with elected officials who control the appointment of law enforcement in certain strategic areas to select only those law enforcement that will turn a blind eye to drug trafficking. In addition, DTOs often support electoral campaigns to ensure the election of “friendly” officials who will not interfere with – and, in certain cases, will help facilitate – ongoing smuggling operations.

Guatemalan drug traffickers likewise rely on the business community to further their criminal enterprises. Although money laundering can be effected through unsophisticated means, the most successful DTOs, according to Special Agent West’s affidavit, enlist either legitimate or seemingly legitimate businesses to “reap the profits of their unlawful endeavors and to keep their criminal activities going.” As alleged in this affidavit, “[b]anks, in particular, are prized targets” of drug trafficking organizations.

The Cobar Case

Cobar’s arrest on charges that he conspired to commit money laundering in his capacity as the director of Banco de Credito, S.A. is the culmination of an FBI sting operation after multiple cooperating witnesses – prosecuted for narcotics trafficking – informed the agency that Cobar was assisting them launder their drug proceeds.

In the affidavit accompanying the criminal complaint against Cobar, discussed above, Special Agent West described the roles of four cooperating witnesses in building a case against Cobar. One such cooperating witness alleged that once Cobar realized that the witness was a drug trafficker, Cobar informed him that Cobar could “buy and sell U.S. currency, set up credit cards with large prepaid limits, issue bank checks that did not name [the informant], and move money through ‘mirror transactions’ between Guatemala, Panama, Colombia, and Mexico.” These “mirror transactions” would entail currency being delivered to an individual in one country and currency of an equal value being issued to an individual in another country.

Another cooperating witness asserted that Cobar notified him in 2017 that Cobar “had the ability to receive large amounts of cash and place it into the banking system in a way that avoided certain banking ‘control,’ regulations and reporting requirements, as well as store large amounts of cash.” At the FBI’s direction, this informant recorded conversations with Cobar which purportedly captured Cobar agreeing to secretly move cash from Guatemala to the U.S. By the conclusion of the sting operation, the FBI and DEA secured multiple recordings of Cobar that purportedly capture him conspiring to launder money.

The Baldizon Case

Prior to the government unsealing its case against Baldizon, he pled guilty to money laundering and was sentenced to over four years in prison. See United States v. Baldizon Mendez, 18-cr-20758-MGC-1, Dkt. No. 33 (S.D. Fla. May 1, 2019). Media reports indicate that his case remained sealed until November 12, 2019 because he was one of the four cooperating witnesses in the sting operation against Cobar.

Baldizon ultimately pled guilty and agreed in a factual proffer that he solicited money he knew to be the proceeds of drug trafficking in his capacity as a campaign supporter and later as a 2015 presidential candidate. After receiving this money, he engaged in a series of financial transactions to hide its source. For example, in 2014 and 2015, Baldizon was provided money from drug traffickers but, instead of using this money to fund his campaign directly, he used it to purchase an $800,000 Miami condominium and then personally donated an equal amount of money to his campaign.

Baldizon drew the attention of U.S. law enforcement when he tried to enter the country via Miami and requested asylum after being detained by Homeland Security. Federal authorities arrested him after an Interpol alert was triggered arising from an arrest warrant in Guatemala.

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