Background on the Situation
Following the recent designation of drug cartels as terrorist organizations by the U.S. government, financial institutions face an even greater challenge in monitoring and detecting operations linked to illicit activities. Alyssa Iyer, AML (Anti-Money Laundering) Prevention Director at Lynx Tech, a firm specializing in fraud and financial crime detection, warns of this increased pressure.
U.S. Government’s Stance
Under the Trump administration, Mexican banks must carefully examine alerts issued by the U.S. government regarding illegal activities now directly associated with designated terrorist organizations, according to Iyer.
“If you receive these alerts and don’t adjust your rules or models to detect them, you’re falling behind,” Iyer explains. “This administration is sending clear signals about illegal activities now linked to terrorist-designated organizations.”
Consequences of Noncompliance
Iyer also points out that heightened scrutiny from the U.S. could lead to substantial penalties, as seen in recent sanctions imposed on Vector Casa de Bolsa, Intercam, and CIBanco by the Financial Crimes Enforcement Network (FinCEN) under the U.S. Treasury Department.
FinCEN ordered financial institutions under its jurisdiction to cease fund transfers to or from the mentioned institutions, as well as any virtual currency convertible accounts or addresses managed by or on behalf of these entities.
Leveraging Technology for Compliance
Iyer emphasizes that technology can be a crucial ally in integrating models and rules for detecting specific warning signals, similar to Know Your Customer (KYC) processes and transaction monitoring.
“It’s essential to apply these controls to all operations, including payments, to mitigate real risks while reducing false positives,” she advises.
Financial institutions must continually assess all clients to identify if risks have changed or if business ownership has been altered, which could indicate criminal control, Iyer warns.
Role of Advanced Technology
According to a report by Spetsen, a legal firm specializing in anti-money laundering, institutions may defend themselves by proving they have robust, advanced PLD/FT (Prevention of Money Laundering and Terrorism Financing) systems aligned with Global Anti-Money Laundering Group (GAFI) standards and Mexican and U.S. regulations.
AI as a Solution
The report further highlights that institutions must demonstrate full operational capacity of these systems without negligence or intent, and report any suspicious operations to relevant authorities like Mexico’s Financial Intelligence Unit (UIF) or the U.S. FinCEN.
In this context, AI can play a significant role by facilitating early anomaly detection within large transaction volumes, enhancing complex pattern analysis, and increasing risk model precision.
“Some operations will inevitably slip through, and certain organizations might suddenly alter their behavior. For instance, a small rural business starting frequent transfers to China is a major red flag. Institutions must continuously monitor such behaviors to escalate cases when necessary, demonstrating thorough risk evaluation to regulators,” Iyer concludes.
