Mexico Banks Push New Illicit Finance Rules In Wake Of US Orders

Mexico's banking lobby is recommending its members go beyond current regulations to fight illicit financing after the US cracked down on some banks in the country for allegedly aiding drug traffickers.Mexican lenders should commit to an 11-point plan aimed at "closing the gap" between US and Mexican regulations while also implementing stricter controls on international transfers, remittances and big cash withdrawals, Emilio Romano, the head of the Asociacion de Bancos de Mexico, or ABM, said at a press conference on Wednesday.

The initiative also sets a deadline for the end of 2025 to enroll an initial group of banks in a real-time information exchange platform to prevent money laundering and illicit financial activities that would be operational by the end of July next year."This puts us at the forefront, not only in Mexico, but internationally," Romano said.Mexican banks went on high alert after the US Treasury's Financial Crimes Enforcement Network said in June that it would cut off three local firms from the US financial system for allegedly helping fentanyl traffickers launder funds. The unprecedented orders, based on a new power granted under last year's Fend Off Fentanyl Act, crippled the designated firms before even taking effect this month. The move has led other Mexican lenders to purge clients and increase controls in an effort to avoid becoming the next US target.

The move against the Mexican banks was part of a broader US administration strategy for the "total elimination of cartels" that has included deadly military strikes on alleged drug-trafficking boats. The Trump administration launched its largest strikes yet this week, destroying four boats in the eastern Pacific and killing 14 people in an attack that has risked raising tensions with Mexico, a key trading partner.The ABM will propose to Mexican authorities that they put the lobby's recommendations into law and apply them to other financial entities, such as non-bank financial institutions, in order to create a level playing field, Romano said.

The recommendations include limiting international transfers by legal entities to account holders, with the same limitation applied to individuals by June 2027.

"This is very important because a bank account has to go through a selection process," Romano said. "This is what we call 'know your customer,' and the registration process is very regulated. And this regulation allows us to ensure that those who send or receive international transfers are perfectly identified, each and every one."For transfers paid in cash to individuals, the lobbying group recommended that users must show identification, including one biometric data point, while payments should be limited to $350 per remittance and no more than $900 per month per recipient. Cash deposits and withdrawals above 140,000 Mexican pesos (around $7,600) should also face tighter controls by July next year, the ABM said.

The organization will begin to distribute reports to banks on specific money laundering "typologies" they should be watching out for in order to alert authorities of suspicious transactions.

Source: Bloomberg Europe