Thursday, December 1, 2011


I am still hoping that American bankers long remember the bitter lessons of Wachovia's compliance malpractice, and the fatal consequences thereof. For a number of years, I watched in amazement, whilst the bank desperately tried to upgrade their unsatisfactory Latin American compliance files, whilst it continued to be the only major US bank who were not using World-Check to vet their clients, and whilst its senior compliance staff remained totally monolingual, notwithstanding the bank's immersion in the Mexican market. What on earth were they thinking ? That Mexico's economy had a multi-billion dollar surplus that needed their bank's services ?

 Can any US bank seriously think that they can adequately control risk when dealing with Mexico's casas de cambio? Many of them are believed to be owned or controlled by criminal organisations. You simply cannot win.

Years ago, I gave a private lecture to the officers of one of the most prominent banks in the Dominican Republic. Afterwards, I asked the bank's owner how it deals with Dominican foreign exchange houses, many of whom are suspected of being conduits for drug money. His answer simple; they don't allow any of them to open accounts at his bank.

I know that the US government has a policy of encouraging banks to engage with NBFIs, but when it comes to Mexico, you are literally playing with fire. Not only will US law enforcement agencies and regulatory agencies investigate, target, and possibly cause your bank to be a party to a Cease & Desist order or indictment, but you could incur the displeasure of cartel leaders themselves, with potentially violent consequences when you terminate their window into the US financial system.

Should US banks decline to open any accounts for Mexican casas de cambio ? Should they close all existing accounts ? Unless the bank has actually sent a officer regularly to the Mexican NBFI location, understands exactly what the company's customers to for a living, and who controls the business, I suggest the answer must now be yes, lest your bank end up as a footnote in a criminal case, gone and forgotten, its branches and clients owned by a bank with a better compliance programme.

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