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From the Los Angeles Times

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Airlines urged to ease up on baggage fees

A Louisiana senator has proposed legislation that would allow airline passengers to check one bag for free on each flight. Separately, a passenger rights group has challenged the nation's airlines to temporarily waive baggage fees until Dec. 31.

by Hugo Martín, Los Angeles Times

November 27, 2011

With the busy holiday travel season in full swing, federal lawmakers, passenger rights advocates and airlines are squaring off over one of the thorniest issues in flying today: baggage fees.

The bottom line is that you will probably get no reprieve from the fees any time soon.

A Louisiana senator proposed legislation last week that would allow airline passengers to check one bag for free on each flight.

Sen. Mary Landrieu (D-La.) said the bill is meant to protect passengers from excessive fees. The legislation would also guarantee that passengers can bring carry-on bags at no extra charge and get access to water and bathrooms on flights.

"Passengers have been nickeled-and-dimed for far too long, and something has to be done about it,'' she said in a statement.

Secretary of Homeland Security Janet Napolitano recently suggested that airlines let passengers check one bag for free to reduce the number of carry-on bags packed into overhead bins. She said carry-on bags slow the screening process and increase the screening cost nationwide by $260 million a year.

More than 72% of air travelers said that the growing volume of carry-on bags is one of their top frustrations, in a recent survey by the U.S. Travel Assn.

But the industry group that represents the nation's airlines opposes Landrieu's bill.

"Obviously we don't think it's appropriate for the government to regulate what services a private industry should offer to customers and at what price … especially since aviation was de-regulated in 1978," said Steve Lott, a spokesman for the Air Transport Assn.

Landrieu's bill has been sent to the Senate Commerce, Science and Transportation Committee for a hearing.

Meanwhile, a passenger rights group has sought at least a temporary break from baggage fees.

The Washington-based Assn. for Airline Passenger Rights issued a challenge last week, urging the nation's airlines to temporarily waive baggage fees from Nov. 23 until Dec. 31.

Brandon M. Macsata, executive director of the group, said he hoped the airlines would waive the fees as a goodwill gesture toward passengers. After all, he said, a holiday break from baggage fees would not bankrupt the airlines.

But no airline responded to the challenge. "We haven't even been acknowledged by the airlines," Macsata said. "I expect that they probably see too many dollar signs during the holidays."

Southwest is sued over drink coupons

Southwest Airlines has no fee to check passengers' first two bags but charges $5 for an alcoholic drink. The exception is when the airline hands out drink coupons.

An Illinois man who said the airline rewarded him with at least 45 drink coupons for buying premium-priced Business Select tickets is suing the airline, saying Southwest now refuses to honor the coupons.

Such drink coupons were previously printed without expiration dates, but Southwest changed its policy Aug. 1, 2010, saying the coupons given to Business Select passengers may be used only on the day of travel printed on them.

The plaintiff, Adam Levitt, said the policy change amounts to a breach of contract and makes his coupons worthless. He is asking for compensatory and punitive damages, to be determined at trial.

"Southwest decided that it would make more money — improve its bottom line — by choosing not to honor the coupons that consumers had already paid and bargained for," said the complaint filed in federal court in Chicago.

The lawsuit seeks class-action status for Southwest customers in the U.S. with unredeemed drink coupons.

The airline declined to comment on the lawsuit, but Southwest spokeswoman Whitney Eichinger said the airline changed the policy on drink coupons because some passengers were making photocopies of the coupons to get free multiple drinks.

"We made the decision to post an expiration date on the coupon to prevent the unauthorized copying of the coupons," Eichinger said.

http://www.latimes.com/business/la-fi-travel-briefcase-20111128,0,6797496,print.story

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International banks have aided Mexican drug gangs

Despite strict rules, some banks have failed to 'know their customer' or ask about the source of large amounts of cash, allowing billions in dirty money from Mexico to be laundered.

by Tracy Wilkinson and Ken Ellingwood, Los Angeles Times

November 27, 2011

Reporting from Mexico City

Money launderers for ruthless Mexican drug gangs have long had a formidable ally: international banks.

Despite strict rules set by international regulatory bodies that require banks to "know their customer," make inquiries about the source of large deposits of cash and report suspicious activity, they have failed to do so in a number of high-profile cases and instead have allowed billions in dirty money to be laundered.

And those who want to stop cartels from easily moving their money express concern that banks that are caught get off with a slap on the wrist.

Banking powerhouse Wachovia Corp. last year agreed to pay $160 million in forfeitures and fines after U.S. federal prosecutors accused it of "willfully" overlooking the suspicious character of more than $420 billion in transactions between the bank and Mexican currency-exchange houses — much of it probably drug money, investigators say.

Federal prosecutors said Wachovia failed to detect and report numerous operations that should have raised red flags, and continued to work with the exchange houses long after other banks stopped doing so because of the "high risk" that it was a money-laundering operation.

Wachovia was moving money on behalf of the exchange houses through wire transfers, traveler's checks, even large hauls of bulk cash, investigators said. Some of the money was eventually traced to the purchase of small airplanes used to smuggle cocaine from South America to Mexico, they said.

"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," U.S. Atty. Jeffrey H. Sloman said in announcing the case last year, hailed at the time by authorities as one of the most significant in stopping dirty money from contaminating the U.S. financial system.

Wachovia paid the $160 million in what is called a deferred-prosecution agreement; no one went to prison, and the fines represented a tiny fraction of the money the bank had filtered. In court documents cited by the U.S. Drug Enforcement Administration, Wachovia acknowledged serious lapses.

In a similar case, another banking giant, HSBC Bank, is being monitored by U.S. regulators after a probe last year focused on bulk cash that the bank's U.S. branch received from Mexican exchange houses, money suspected to be drug proceeds.

One of the regulators, the U.S. Office of the Comptroller of the Currency, said HSBC had "critical deficiencies" in its 2006-2009 reporting of suspicious activities and its monitoring of bulk-cash transfers.

The OCC issued a cease-and-desist order against HSBC, noting, "The bank's compliance program and its implementation are ineffective, and accompanied by aggravating factors, such as highly suspicious activity creating a significant potential for unreported money-laundering or terrorist financing."

After U.S. federal prosecutors issued grand jury subpoenas, some believed that regulators might try to use the HSBC case to set an example and prosecute individual bankers. Instead, HSBC agreed to strengthen its compliance program and has said it is cooperating with investigators, without acknowledging wrongdoing, part of a so-called consent order.

Bryan Hubbard, a spokesman for the OCC, said last month that "OCC examiners continue to monitor actions by the bank to correct deficiencies and comply with that [consent] order."

In Mexico, authorities say they have taken steps to control and monitor money-laundering. Banking regulations in force since 1997 require reporting and canceling of suspicious accounts, and additional measures last year that put limits on dollar deposits in banks further tightened the restrictions.

"We have been able to establish a system of prevention that is quite robust," Jose Alberto Balbuena, head of the Finance Ministry's Financial Intelligence Unit, said in an interview. "We have a much clearer picture today of what dollars are entering the financial system, where they came from, where they are."

The restrictions have also forced traffickers and their launderers to channel more money into other sectors, such as real estate and commerce, avoiding banks altogether. Mexican and U.S. officials are looking to plug those gaps.

Complicity by banks has a deep history that still resonates in Mexico.

Raul Salinas de Gortari, brother of former President Carlos Salinas de Gortari, used a maze of accounts in New York-based Citibank and other U.S. banks to secretly transfer millions of dollars to Switzerland in the 1980s and '90s, when he was employed as a middle-ranking bureaucrat.

U.S. congressional investigators alleged that Raul Salinas' wife personally carried check after check to the bank, where Citibank executives asked no questions — despite rampant rumors that linked Salinas to drug lords, and even when Salinas was held on charges that he masterminded the assassination of a top politician. The Salinases claimed that they were victims of a political persecution, the Justice Department and Switzerland investigated, and there were calls for reform of banking secrecy laws.

No criminal charges of money-laundering or illicit enrichment were filed against Salinas. He is a free and wealthy man today. In 2008, Switzerland, which had frozen his bank accounts, returned most of the money.

http://www.latimes.com/news/nationworld/world/la-fg-mexico-money-laundering-banks-20111128,0,4967883,print.story

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