By David Lawder and Kylie Madry
(Reuters) -The U.S. Treasury on Wednesday prohibited certain transactions with Mexico-based financial institutions CIBanco, Intercam Banco and Vector Casa de Bolsa as part of its new fentanyl sanctions authorities.
The actions by the Treasury-run Financial Crimes Enforcement Network (FinCEN) to declare the three institutions “as primary money laundering concerns” mark the first actions under the Fentanyl Sanctions Act and the FEND Off Fentanyl Act, the Treasury said in a statement.
Experts said the move, although targeting relatively small institutions, could have significant impact on Mexico’s financial system given the interconnectedness between banks and the close business relationship with the United States.
Although sanctions against individuals and companies for links to Mexican organized crime groups are fairly frequent, measures against financial institutions are far less common.
The sanctions also add another potential obstacle to easing U.S.-Mexico trade tensions over U.S. President Donald Trump’s 25% punitive tariffs on many imports from Mexico, which are aimed at spurring action to halt the flow of fentanyl into the U.S.
Mexico’s Finance Ministry said in a statement that it was notified of the FinCEN investigation and asked the Treasury for evidence of illicit activity links to CIBanco, Intercam and Vector, but received no “conclusive information.”
The FinCEN sanctions do not block property or cut off all global dollar-based activities of the Mexican firms as other Treasury sanctions would, but they do prohibit U.S. transactions with their locations in Mexico, a U.S. Treasury official told reporters. The action will have a similar effect of cutting the institutions out of the U.S. financial system, the official added.
The Treasury said that Commercial banks CIBanco and Intercam have assets of over $7 billion and $4 billion, respectively, making them relatively small by global banking standards.
But the action against Vector, a brokerage firm that manages nearly $11 billion in assets and is one of the top 10 securities brokers in Mexico, “underscores the significance of our actions,” Deputy U.S. Treasury Secretary Michael Faulkender told reporters.
“This is a bold move. Being cut off from the US financial system is a death blow. It’s enormously impactful,” said Vanda Felbab-Brown, senior fellow at the Brookings Institution and a specialist on organized crime.
“These are hardly the biggest banks in Mexico, but they are not small entities. These are medium-level banks,” she said, adding that while significant it was unlikely to “make any kind of dent in the financial flows of Mexican criminal groups.”
LAUNDERING MILLIONS
The Treasury said all three institutions “have collectively played a longstanding and vital role in laundering millions of dollars on behalf of Mexico-based cartels and facilitating payments for the procurement of precursor chemicals needed to produce fentanyl.”
“Vector categorically rejects any accusation that compromises its institutional integrity,” Vector said in a statement. It added that it reiterated its full willingness to collaborate with Mexican and U.S. authorities to clarify the situation.
Intercam said: “We categorically deny any connection between this institution and any illicit practice.”
CIBanco did not immediately respond to a request for comment.
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.
(Reporting by David Lawder in Washington, Kylie Madry in Mexico City and Bhargav Acharya in Toronto; additional reporting by Emily Green and Rafael Escalera Montoto in Mexico City and Laura Gottesdiener in Monterrey, Editing by Caitlin Webber and Sonali Paul)
