Mexican Banks Say US Regulatory Clampdown Has Damaged Legitimate Activity Jude Webber and Gina Chon - FT.com
go to original July 1, 2015

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A protester outside HSBC in Mexico City, after the bank made huge provisions for new anti-money laundering rules in 2012. (Alfredo Estrella/AFP/GettyImages)

Before the 2008 financial crisis, Mexican banks had a big problem: too many dollars. Tourism and businesses in the northern border areas near the US, as well as remittances, brought greenbacks flowing into Mexico. This left Mexico awash with dollars — a massive $14bn in surplus US bank­notes — which had to be returned to the US Federal Reserve.

As one senior Mexican banker recalls, this so-called bulk cash business required “a lot of aeroplanes” to fly the cash back to the US.

But the bigger problem was that Mexico, home to some of the world’s deadliest drug cartels, was earning more dollars through illicit means than legal ones. According to the banker, who asked not to be named, trade, tourism and remittances brought in between $4bn and $8bn a year — leaving as much as $10bn unaccounted for that was being laundered through Mexican banks every year.

Now Mexican banks have hit a hurdle of a different kind: a US crackdown on money laundering has made them too toxic for many global banks, which have eliminated or reined in services in Mexico. That means some financial institutions south of the Rio Grande are struggling to find banks that will provide them with the crucial service of converting pesos into US dollars for processing payments, known as dollar clearing.

Read the rest at FT.com

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