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Investment in Mexico’s Growth Comes with Compliance Risks, Say Consultants
By Colby Adams
printIt seems incongruous: even as Mexico's problems with drug trafficking, money laundering and violence have worsened in unprecedented ways, the Latin American economy's ability to attract foreign investors has grown. Mexico's gross domestic product grew by over seven percent in the second quarter of the year despite poor risk rankings from several credit rating agencies. The positive economic news was coupled with the addition of 720,000 new jobs between January and December, according to statistics disclosed in October by Mexico's finance ministry. But while Mexico may be a growth market for U.S. and other companies, it is one that comes...
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Attempts to smuggle cash from Texas into Mexico have spiked following the country's decision last year to partially lift a cap on U.S. dollar deposits, according to federal investigators.
The recent joint effort between the U.S. and Mexico in the arrest of Sinaloa Cartel head Joaquin "El Chapo" Guzman can be seen as a sign of renewed cooperation between investigators in both countries after a yearlong lull.
U.S. investigators are asking some of the nation's largest banks to tighten their policies on accepting cash deposits in an effort to choke off the financial channels of human smugglers.
In internal reviews and an ongoing criminal and regulatory investigation, Citigroup employees and Mexican officials have privately voiced concerns that drug traffickers may have infiltrated Banamex's anti-money laundering department, say sources.
When imagining how dirty money is moved around the country, "think of FedEx," says Joseph Burke, chief of the National Bulk Cash Smuggling Center in Vermont. The center is tasked with tracing the sometimes elaborate path of drug proceeds from point-of-sale to the bank teller's window.
Armed resistance by militia groups to Mexico's violent drug cartels will complicate the efforts of bankers charged with following anti-money laundering laws, whatever their sympathies, say industry consultants.
Money launderers working on behalf of Mexican cartels have moved southward after a deferred prosecution agreement between Western Union and Arizona gave investigators unprecedented access to remittance data in Northern Mexico, according to Vince Piano.
Plans to attract foreign capital and expertise to Mexico's oil sector could give organized crime groups and corrupt officials an opportunity to layer and integrate dirty money, say industry analysts.
In the wake of regulatory crackdowns and multiple criminal probes, financial institutions operating in Mexico are spending millions of dollars to upgrade their anti-money laundering programs, say bank staff.
Mexican cartel members are exploiting mirror accounts in the United States and Mexico to launder money and evade U.S. dollar deposit restrictions, financial regulators said Thursday.
State prosecutors along the U.S.-Mexico border are studying whether drug traffickers are acting as subagents for Mexican banks that front payments on behalf of American money services businesses.
Exemptions for Mexican hotels and other businesses from Mexico's limits on U.S. dollar deposits can be readily exploited by narco-traffickers and money launderers, say compliance professionals.
Mexican drug traffickers are likely laundering some of their profits in the country's casinos and nightclubs, as well as in campaign funds for political candidates, according to a leaked U.S. diplomatic communiqué.
Despite reports that 30 percent of Mexico's currency is derived from illicit funds, many compliance officers are just now waking up to the reality of the country's extensive money laundering problems, according to an AML consultant who works with MSBs.
Of the up to $39 billion in illegal funds smuggled from the United States into Mexico every year, approximately half ends up in Mexican financial institutions, according to a former official in the U.S. Treasury and Justice Departments.
Mexico's Ministry of Finance is planning to issue new regulations on mortgage and property finance companies in an effort to curtail money laundering through property loans, a Mexican daily newspaper reported Monday.
Only a month after their adoption, new rules limiting U.S. dollar deposits into Mexican financial institutions have pushed money laundering activity into the United States, federal regulators said Tuesday.
Mexico President Felipe Calderon introduced a bevy of measures Thursday designed to crimp the flow of illicit drug proceeds from entering the country's financial system, including by limiting cash transactions on purchasing aircraft, vehicles, and real estate.
Revisions to Mexico's anti-money laundering strategy promised earlier this month must account for regulatory-gaps in trade-based money laundering, the continuing problem of casas de cambio and the use of U.S. dollars in Mexico, say ex-law enforcement officials and compliance professionals.
New rules restricting U.S. dollar deposits at Mexican banks could end up pushing billions in illicit cash through U.S. and Latin American financial institutions, say compliance professionals.