Money-Laundering Woes Push Mexico Government Into Dollar-Transfer Business Benjamin Bain and Alan Katz - Bloomberg
go to original February 14, 2016

Mexico’s government is taking an unusual step to weather a U.S. money-laundering crackdown that threatens to hobble dollar-fueled businesses from Tijuana beauty salons to Cancun hotels: It’s getting into the dollar-transfer business.

The country’s central bank will soon unveil an electronic system designed to ease U.S. dollar transfers between Mexican businesses, said Banco de Mexico spokesman Ricardo Medina. The network will let businesses send U.S. currency to each other through a clearinghouse overseen by the central bank and moving through a bank in the U.S., according to a central bank official familiar with the program, who said the system could be introduced as soon as next month.

The move addresses a growing problem in Mexico: Several foreign banks have cut ties with Mexican counterparts in recent years. Bankers and officials in Mexico fear further barriers to financial flows between their country, Latin America’s second-largest economy, and the U.S., its biggest trading partner. Large swaths of Mexico’s $1.3 trillion economy rely on the dollar, from manufacturers in border zones such as Ciudad Juarez to travel-industry businesses in spots like Puerto Vallarta.

Transferring dollars through the U.S. has become harder, Mexican lenders say, after U.S. regulators and law enforcers cracked down on banks that didn’t flag transfers linked to Mexican drug cartels or other criminals. In recent years, international banks have paid more than $2 billion for lapses including the failure to flag suspicious dollar transactions between the countries. That has led other banks to sever ties pre-emptively - a process euphemistically known as “de-risking.”

The illicit drug trade in the U.S. generates $64 billion a year, according to an estimate by the U.S. Treasury Department, which calls Mexico the primary supplier or transit point for some drugs. But illicit-drug revenues pale in comparison with the $531 billion in legitimate trade between the two countries.

Read the rest at Bloomberg

Related: US Banks Cut Off More Mexican Clients as Regulatory Pressure Rises (The Wall Street Journal)

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