Introduction
The recent US Treasury Department’s accusation against three Mexican financial institutions for alleged money laundering irregularities has exposed the incompetence of Mexico’s financial authorities. This article will examine a series of errors made by these authorities, including the complicity of Mexico City’s Mayor Sheinbaum.
First Mistake: Ignoring the Public Allegation
When the public allegation surfaced, the Ministry of Finance (SHCP) remained silent, and Mayor Sheinbaum attempted to dismiss the matter by claiming that the US had not presented any evidence, thus rendering it an unfounded suspicion. However, it soon became clear that the SHCP and the National Banking and Securities Commission (CNBV) had detected irregularities in these three institutions since 2013. Investigations continued from 2017 to 2024 with close collaboration between the Treasury and the Unit for Intelligence and Financial Analysis (UIF) and CNBV. Given these precedents, Mayor Sheinbaum’s claim of being unaware is a lie.
Second Mistake: Disregarding the Bancaria Convention Warning
During the National Banking Convention in May, the Deputy Undersecretary of the Treasury, Scott Rembrandt, met with authorities and bank leaders. He expressed concerns about illegal operations in the Mexican financial system linked to fentanyl trafficking and potential government action. However, the SHCP failed to take this warning seriously.
Third Mistake: Delayed Intervention
Once the news broke, it was inevitable for financial authorities to intervene managerially with the three institutions. Instead, they issued a press release with little substance and unhelpful language that did not protect the clients of these institutions. They repeated this mistake with intervention announcements, failing to mention that public savings are covered by the Deposit Insurance Fund (IPAB) up to 400,000 Udis.
Fourth Mistake: Underestimating the Risk
The Secretary of SHCP stated that these three intermediaries do not pose a systemic risk and that there is no doubt about the financial system’s solidity and solvency. He dismissed the possibility of a bank run, claiming that these banks are insignificant, with their combined assets amounting to only 0.5% of the entire system. However, he overlooks the fact that bank size is irrelevant; public distrust can quickly spread even among smaller institutions. Bank runs are highly contagious, and reputational damage can spread rapidly.
Fifth Mistake: Misjudging the Problem’s Scope
The Mayor, through her narrative, underestimated and failed to grasp the problem’s extent, which transcends financial matters and encroaches on the political aspect of the bilateral relationship.
Conclusion: A Lack of Competent Leadership
Mexico’s financial authorities have proven incapable of managing a crisis, with the Secretary of SHCP unable to react promptly, an inexperienced CNBV President, a UIF head lacking financial system knowledge, and the Bank of Mexico choosing silence. Furthermore, the SHCP’s functionality is compromised by the ongoing vacancy in the Ramo Subsecretary position for nearly four months.
Key Questions and Answers
- What was the issue? The US Treasury Department accused three Mexican financial institutions of money laundering irregularities.
- How did Mexican authorities respond? They initially dismissed the allegations, disregarded warnings, delayed intervention, underestimated risks, and misjudged the problem’s scope.
- Who are the key figures involved? The Secretary of SHCP, an inexperienced CNBV President, a UIF head lacking financial system knowledge, and Mayor Sheinbaum are central to this critique.
- What were the consequences of their actions? Public trust was eroded, and the potential for rapid reputational damage and bank run contagion increased.
