US sanctions Mexican banks for allegedly laundering money for drug cartels

Australia Broadcast Center

3 days ago

The US Treasury has slapped three Mexican financial institutions with sanctions, accusing them of laundering millions of dollars for cartels that are furthering the distribution of fentanyl into the US.
It is a move, under the Trump administration's new fentanyl sanctions authority, that officials say will block certain money transfers between the sanctioned banks and US banks.
The banks, CIBanco and Intercam Banco, as well as brokerage Vector Casa de Bolsa, "have collectively played a longstanding and vital role in laundering millions of dollars on behalf of Mexico-based cartels" US deputy Treasury secretary Michael Faulkender told reporters on Wednesday, local time.
He added the financial institutions were "facilitating payments for the procurement of precursor chemicals needed to produce fentanyl" and would now be "effectively cut off" from doing business with US financial institutions.
While the sanctions do not block property or cut off all global US dollar-based activities, as other Treasury sanctions have, they do prohibit US transactions with their locations in Mexico, a US Treasury official noted.
Although US sanctions against individuals and companies for links to Mexican organised crime groups are fairly frequent, measures against financial institutions are far less common.
The Mexican Finance Ministry said in a statement it was notified of the investigation and asked the US Treasury for evidence of illicit activity links to CIBanco, Intercam and Vector, but it received no "conclusive information".
Vector categorically rejected "any accusation that compromises its institutional integrity", it said in a statement.
It added that it reiterated its full willingness to collaborate with Mexican and US authorities to clarify the situation.
Intercam similarly "categorically" denied "any connection between this institution and any illicit practice".
CIBanco did not immediately respond to a Reuters request for comment.
Experts said the move, although targeting relatively small institutions, could have significant impact on Mexico's financial system given the interconnectedness with the United States.
Luis Manuel Perez de Acha, a tax lawyer and money laundering expert in Mexico City, said the accusations were a "bombshell".
"The entire financial system passes through the United States, so they are practically left without operations," he said.
Vanda Felbab-Brown, a senior fellow at the Brookings Institution and a specialist on organised crime, said the sanctions were "enormously impactful".
"This is a bold move. Being cut off from the US financial system is a death blow," she told Reuters.
"These are hardly the biggest banks in Mexico, but they are not small entities."
"These are medium-level banks," Ms Felbab-Brown said.
However, she said the sanctions were unlikely to "make any kind of dent in the financial flows of Mexican criminal groups".
According to the Treasury orders, CIBanco helped facilitate money laundering for a number of cartels, including the Jalisco New Generation, Beltran Leyva and Gulf.
Officials said the bank "facilitated procurement" of chemicals used to make fentanyl from China by processing over $US2.1 million in payments for the materials.
Vector was accused of facilitating money laundering for the Sinaloa and Gulf cartels, including $US1 million in payments for fentanyl chemicals.
The Treasury officials also said the Sinaloa Cartel used Vector to send bribes to former Mexican security secretary Genaro García Luna, who in October was sentenced to more than 38 years in prison by a New York court for the charges.
They estimated that transactions exceeded $US40 million.
The Trump administration has announced it is cracking down on Mexican cartels and fentanyl trafficking despite movement of the drug along the US border and overdoses within the country declining.
AP/Reuters