Fentanyl, Mexican Cartels, and Bank Accounts: An Explosive Mix
The U.S. Treasury has flexed its financial muscle, targeting three mid-sized Mexican institutions—CIBanco, Intercam and Vector Casa de Bolsa—based on “reasonable suspicion” of facilitating fentanyl and cartel linked money laundering. No court ruling, but as permitted by U.S. law, an accusation backed by apparent evidence of money transfers to organized crime in Mexico and China. The punishment for the three entities is no access to U.S. finance within 21 days, and thus an effective end to these companies as they currently stand.
These banks hold under 2% of Mexico’s financial assets and far less than 1% of total deposits. The suspicious amounts are tiny compared to the massive U.S.-Mexico trade (e.g., $170 million vs. $840 billion in Mexico’s annual trade) and negligible against cartel flows of up to $39 billion annually. Still, this was enough to trigger automatic removal from U.S. systems—destroying operations with an executive stroke.
The government was forced to intervene the three entities almost immediately given the bank run the measures provoked. Finance Minister Edgar Amador insisted this was pre-emptive, protecting depositors and the system’s integrity. And so far he has been proven right. The broader system remains remarkably stable: no interruptions, steady exchange rate, ample overall liquidity, and stable interest rates. Mexico’s financial system has so far proven quite resilient in the face of a major crisis.
Mexico’s financial-intelligence unit said it found transactions with the same legally-established Chinese companies implicated by FinCEN by more than 300 Mexican companies through 10 Mexican financial institutions, adding that Mexico does $139 billion in annual trade with China to put this in context. The mention of other institutions provoked some concern that other banks are involved and vulnerable to similar measures, even if this has not shown up in liquidity pressures in the system, and may have been mostly poor communication by the authorities.
On the political front, President Sheinbaum demanded proof, noting U.S. authorities provided nothing conclusive to date. But in the end she had little option to accept this measure as a cost of dealing with the hegemonic U.S., disproportionate and unreasonable as it may seem.
Mexican banks are likely going to have revamp or tighten KYC and AML procedures, especially when it comes to FX transactions, and for sure increase the spreads to customers pay for all this. With small profits at stake in FX, it makes little sense to risk your bank’s solvency for added market share in a highly competitive business. The common practice of paying the lion’s share of compensation to FX brokers in commissions rather than salary is likely to come under scrutiny when the FX house is a regulated bank, as this can lead to misalignment of incentives between the banks and the employees.
Small and mid-sized Chinese companies operating in Mexico are also going to face problems. It will not be as easy for them to get financing in Mexico, nor have their FX business executed. This may drive up costs for hundreds of thousands of Mexican companies and consumers that reply on Chinese goods to be competitive.
For the understaffed and often underqualified CNBV, UIF, IPAB and Finance Ministry this will likely prove a big headache. It is going to have to deal with managing the intervened banks, absorbing a lot of time and expertise that it does not have. It is going to have to supervise much more closely the existing banks, to try and avoid any kind of recurrence. With attention diverted to these matters, this is likely going to delay the go-ahead for new bank licenses, and any other approvals the authorities need to give banks.
Meanwhile US intermediaries are going to be even more cautious when dealing with Mexican institutions, while Mexican banks are going to keep more liquidity on hand. All this will impact credit in the economy.
So while there is no financial crisis per se, the impact of FinCEN’s measures is likely going to be long-lasting.
Big Data, Bigger Brother: The Law That Sees It All
Commonly referred to as the “Spy Law,” a newly approved package of legal reforms has sparked controversy in Mexico over fears it could significantly expand government surveillance. Officially titled the General Law of the National Public Security System and the Law of the National System of Intelligence and Investigation in Public Security, the legislation grants the Ministry of Security and Citizen Protection (SSPC), the National Guard, and the National Intelligence Center (CNI) broad authority to access both public and private databases without a court order.
Digital rights advocates, including R3D and Article 19, warn that this level of access—with no judicial oversight—opens the door to mass surveillance and creates serious risks for privacy and civil liberties. Critics argue that the reforms lack strong accountability mechanisms and could establish a powerful surveillance infrastructure without democratic checks.
Federal officials have pushed back against the criticism. Security Secretary Omar García Harfuch has denied that the law is about spying. “This has nothing to do with espionage—it’s about making us more useful to citizens and to prosecutors,” he said. He urged the public to read the legislation directly, insisting, “There’s not a single line that violates privacy—not even slightly.”
In addition to database access, the reforms grant new powers to carry out undercover operations, intercept private communications with judicial approval, geolocate individuals in real time, and monitor online activity and social media using simulated profiles.
Supporters of the law argue that these tools are essential for effectively combating organized crime. Still, the consolidation of the National Guard as a permanent, militarized security force with sweeping surveillance powers marks a significant shift in Mexico’s security strategy.
Grupo Salinas vs. SAT: Season 15, Same Plot Twist
Grupo Salinas, led by billionaire Ricardo Salinas Pliego, is facing mounting legal and financial pressures as it increasingly becomes a target of the new government. The conglomerate is currently embroiled in 32 lawsuits totaling 74 billion pesos (about US$4.3 billion), the majority of which stem from its longstanding disputes with Mexico’s Tax Administration Service (SAT).
According to Federal Tax Prosecutor Grisel Galeano, Grupo Salinas is “fully aware of the weakness of its legal arguments” and has used procedural delays for more than 15 years to stall unfavorable rulings. The SAT accuses the company of engaging in “double, abusive, and illegal” billing practices. In response, Grupo Salinas has claimed the government is attempting to impose “double taxation.” President Claudia Sheinbaum has criticized the judiciary for ties certain ministers allegedly have with Salinas, and who she claims facilitate these delays, reinforcing calls for judicial reform.
Depending on your point of view, this legal battle highlights broader concerns about 1) government targeting successful companies to pursue political goals, or just unfairly and illegally extracting money from them to boost tax collection or 2) corporate tax compliance in Mexico and the institutional challenges in holding powerful business groups accountable. The eventual rulings could thus have far-reaching consequences for both fiscal policy and the rule of law. With Morena now taking control of most of the judiciary, and the judiciary having in effect received in public instructions from the President to pursue Grupo Salinas, many analysts wonder if the net may be closing in on the controversial billionaire. Not a few smile at the irony he may become a poster-boy for upholding the rule of law in Mexico.
Justice Lenia Batres Guadarrama stated that the newly restructured Supreme Court will be obligated to resolve tax-related cases within six months starting in September. Batres confirmed the Court would begin reviewing cases involving Grupo Elektra—part of Salinas Pliego’s holdings. According to Batres, four of the cases currently before the Court involve 40 billion pesos, and 15 active cases together represent a total of 47 billion pesos.
Contact:
Laura Camacho
Executive Director Miranda Public Affairs
laura.camacho@miranda-partners.com
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