U.S. Warns Mexican Banks Over Cartel Money Laundering Ties

Mexico City, Mexico — Senior executives from Mexico’s banking sector received an unexpected visitor during their annual convention at a luxury Pacific coast resort in May. A high-ranking official from the U.S. Department of Treasury had flown in to deliver a stern warning: the Trump administration would no longer tolerate business as usual with banks suspected of collaborating with drug cartels, recently designated by the U.S. as terrorist organizations.

Unilateral Sanctions Shake Mexican Financial System

The Treasury official gathered representatives from Mexican financial institutions in a private meeting and stated that the U.S. would not hesitate to cut off access to its financial system for any Mexican bank found laundering cartel money, according to sources familiar with the discussion who requested anonymity.

The investigations now rattling Mexico’s banking system reflect the aggressive approach adopted by the Trump administration under a new legal mechanism that could deal a lethal blow. The measure seeks to isolate foreign banks suspected of illicit activity from the U.S. financial system without a hearing, judicial review, or right to appeal.

U.S. officials argue the tool is necessary to combat cartels responsible for trafficking fentanyl, which has fueled an epidemic causing hundreds of thousands of deaths in the U.S. However, it also aligns with President Trump’s unconventional tactics, including civil rights investigations targeting elite U.S. universities, tariff threats against nations with unfavorable tax policies, and pressuring law firms to provide pro bono services to conservatives.

Mexico’s Response and Escalating Tensions

The U.S. also notified Mexican counterparts of its intent to act against three financial entities, prompting Mexico to launch its own audit in April. By June, President Claudia Sheinbaum was briefed on the situation and requested Washington delay measures to buy time, sources said. But U.S. authorities believed they could proceed without destabilizing Mexico’s economy.

Instead of a joint announcement, the Treasury unilaterally sanctioned two banks and a brokerage firm last week: CIBanco, Intercam, and Vector Casa de Bolsa. All three deny wrongdoing, while Sheinbaum insists Washington has not provided sufficient evidence to justify such drastic actions.

The message was clear, according to Mauricio Basila, a lawyer and former Mexican banking regulator official: “If you don’t listen to me, look at what can happen—this is just a small sample. They could vanish from the map.”

A "Nuclear Option" with Far-Reaching Consequences

The measures marked the first application of the Fend Off Fentanyl Act’s provisions against banks. The Treasury’s Financial Crimes Enforcement Network (FinCEN) designated the firms as “primary money laundering concerns,” blocking all transfers between U.S. and Mexican financial institutions.

Kevin Carr, a financial policy expert and former U.S. Treasury diplomat in Mexico, called it “the nuclear option—a complete cessation of activities. It’s a death sentence.” Some former investigators, however, questioned the severity given the publicly available evidence. Kim Donovan, a former FinCEN official under Trump and Biden, noted, “Based on the published orders, I’m accustomed to seeing stronger proof.”

The unilateral move risks straining U.S.-Mexico relations, despite Sheinbaum’s efforts to cooperate with Trump on deportations and migrant deterrence. This week, Mexican lawmakers approved bills to strengthen anti-money laundering and crime-fighting capabilities.

Fallout for Mexico’s Financial Sector

Mexican authorities found administrative violations at the sanctioned firms but no evidence of money laundering. The banking regulator imposed fines totaling 134 million pesos ($7.1 million) on the same day as the U.S. announcement, with details to be released later this month.

The sanctions caused chaos in trading rooms and executive offices. As U.S. institutions severed ties, local financial firms isolated the sanctioned entities, rapidly reducing exposure. Clients withdrew deposits, and transfers were frozen, according to a banking regulator letter reviewed by Bloomberg News. The regulator deemed the reaction excessive since local transactions were not prohibited.

The broader concern centers on CIBanco’s role as trustee for most of Mexico’s financial issuances, including private equity certificates and real estate investment trusts. Billions in local securities are affected, potentially requiring CIBanco’s sale or a complex reassignment of trusts. The deadline to comply is July 21, 21 days after FinCEN’s order was published in the U.S. Federal Register.

U.S. Secretary of State Marco Rubio discussed transnational crime with Mexican Foreign Minister Juan Ramón de la Fuente this week, with a State Department spokesperson calling bilateral relations “excellent.” The Treasury declined to comment, and Mexico’s presidency did not respond to requests.

Ilan Katz, a Mexico City financial crimes attorney, warned other Mexican banks remain at risk: “The world’s largest criminal organizations operate in Mexico. It’s impossible to imagine other banks aren’t exposed. This is like a drop of poison in a pool—we don’t know who will swallow the contaminated water.”