Understanding the Recent Investigations into Mexican Financial Institutions
During a recent program discussing the reasons behind the well-known investigations of three Mexican financial institutions identified by the U.S. Department of Treasury’s FinCEN as having weak controls to prevent money laundering, a Mexican commentator expressed concern: “What’s happening?”
The Trump Administration’s New Approach to Combat Money Laundering and Drug Trafficking
For the first time, there is a U.S. administration actively pursuing, exposing, and penalizing money laundering and drug trafficking through a new anti-terrorism law specifically designed to target drug cartels and their associates where it hurts the most.
Donald Trump designated Mexican cartels as terrorist organizations, an announcement that has been echoed for the past five months. This is just the beginning of investigations into institutions lacking proper due diligence and, consequently, having unreliable anti-money laundering controls.
Stricter Controls in a Technologically Advanced World
In Mexico, it’s crucial to understand that the U.S. has updated its mechanisms for detecting suspicious bank transactions using high-tech artificial intelligence, targeting terrorists and drug traffickers in countries like Mexico. The aim is to block transactions of these criminals.
As a result, U.S. and Mexican governments working together will make things easier; otherwise, the U.S. is more than willing to act alone.
HSBC’s Experience Continues to Guide Anti-Money Laundering Operations
In Washington, it’s now confirmed that the Department of Treasury is conducting further investigations that will likely affect other Mexican financial institutions. The lessons learned from the HSBC investigation 18 years ago remain a valuable guide for identifying “Institutions Suspected of Money Laundering for Narco-Activities” and institutions with weak controls susceptible to being used in money laundering, especially related to fentanyl trafficking.
Refreshing Our Memory: The HSBC Case
In 2012, HSBC admitted to systemic failures in its anti-money laundering programs and compliance with laws criminalizing money laundering from illicit activities. This investigation resulted in a record-breaking $1.92 billion fine, which HSBC had to pay U.S. authorities. The bank acknowledged facilitating the laundering of at least $881 million from drug trafficking and admitted to processing prohibited transactions under existing laws.
These failures allowed Mexican and Colombian cartels, along with other criminals, to move large sums of money through the bank’s systems.
Investigations Then and Now Focus on Similar Issues
In the U.S., it was proven that HSBC’s systems were inadequate for preventing money laundering, particularly through its Mexico operations. This facilitated the money laundering of Mexican and Colombian cartels.
Ultimately, the investigation showed that HSBC processed significant amounts of cash from the Sinaloa and Norte del Valle cartels’ earnings without any controls identifying the origin of millions in cash.
The Norte del Valle Cartel was a powerful Colombian drug trafficking organization.
The main challenge for international banks is that U.S. sanctions, based on U.S. laws, have long-reaching tendrils.
The investigation also revealed that HSBC processed transactions prohibited by U.S. sanction laws. Consequently, the consequences led not only to substantial financial penalties but also to a deferred prosecution agreement and an enforceable corrective action order to modernize its compliance and anti-money laundering controls.
Today, in 2025, the “U.S. Scrutiny” is even greater due to new laws extending the scope of what the U.S. can do and providing new tools for cross-border investigations.
Designating Cartels as International Terrorist Organizations to Curb Money Laundering
The arrival of Donald Trump as U.S. president in 2017 coincided with the hundreds of thousands of American deaths caused by fentanyl trafficking. Joe Biden’s four years (starting in 2021) provided a reprieve for money laundering operations. When Trump returned to the presidency in 2025, Democratic tolerance and inaction ended, leading to new laws, cartel designations as international terrorist organizations, and new investigations into money laundering practices of financial institutions and their role in facilitating financial crimes.
The Department of Treasury in Washington states that over 80 countries, including Mexico, face significant challenges regarding money laundering, narcotráfico, or terrorism financing due to outdated laws and insufficient supervision in anti-money laundering matters.
HSBC: An Example of Problem Correction
Following the 2012 U.S. investigations and sanctions, the London-based parent company of HSBC, known as the HSBC Group, instructed all its subsidiaries to ensure compliance with the group’s anti-money laundering standards.
Why Don’t the U.S. Investigate Their Own Banks?
U.S. laws are strict against money laundering, making it difficult for drug cartels to find a U.S. bank willing to accept large cash deposits without proper justification.
Today, cartels smuggle U.S. dollars across the border into Mexico and seek Mexican banks or exchange houses willing to accept large cash amounts without investigating the funds’ origins.
Exchange houses are directly affected by this issue.
This situation is not new. During the HSBC-MX investigations, it was established that the bank received all physical U.S. dollars obtained, transported them back to HBUS (HSBC’s U.S. representation) in armored vehicles or planes, and deposited them into U.S.-denominated accounts, completing the money laundering cycle.
For two years, from 2007 to 2008, HBMX sent $7 billion in U.S. physical currency to HBUS, more than any other Mexican bank and even larger than one twice the size of HBMX. When Mexican law enforcement and banking regulators learned of these transactions, they warned HBMX and HBUS that such large volumes of U.S. cash were red flags for drug trafficking across the HSBC network.
In 2008, after regulatory warnings, HBMX stopped accepting large U.S. cash deposits. However, for years, HBUS provided an easy route to the U.S. financial system for suspicious cash from its Mexican subsidiary.
OFAC: The Office of Foreign Assets Control
To enforce new laws and mechanisms for identifying money laundering, the Office of Foreign Assets Control (OFAC) of the U.S. Department of Treasury maintains lists of “prohibited” individuals and companies that banks use to develop what’s known as an “OFAC filter.” This filter is essentially a mechanism for identifying and halting prohibited or suspicious transactions.
OFAC programs aim to expose and disable the financial transactions of some of the world’s most dangerous individuals and regimes, including terrorists, individuals involved with weapons of mass destruction, narcotraficantes, and dishonest jurisdictions.
The OFAC filter is crucial for preventing prohibited transactions from contaminating the U.S. financial system and should help avoid contamination of international banking institutions.
Global financial institutions have a special responsibility to respect OFAC restrictions. Evading OFAC safeguards can also facilitate transactions by some of the world’s worst criminal organizations and most notorious offenders.
Do you see the connection?
I believe all of the above addresses the Mexican commentator’s question: “What’s happening?”
All you’ve read so far explains why we must prepare for more scrutiny of financial institutions, because Trump is already setting it up.
