The clamor to crack down on laundering drug money was loud in 2010 when Wachovia National Bank was found to have let $110 million from Mexico be sent through its accounts. It grew two years later when HSBC Holdings PLC agreed to pay $1.9 billion to settle violations that included letting hundreds of millions of dollars from drug cartels flow through one of the world’s largest banks.
Now there is growing sentiment along the U.S.-Mexico border that vigilance has gone overboard and is hurting law-abiding businesses. American banks, wary of the potential for massive penalties, have closed Mexican accounts or saddled customers with new restrictions.
The challenge is particularly acute for Mexican companies whose customers pay dollars. In Mexico, banks refuse to take their greenbacks even after the government lifted 4-year-old caps on cash deposits of the U.S. currency in September.
Roberto Castro, chief executive of one of the largest Mexican pharmacy chains on the U.S. border, compares the approach to chemotherapy.
“You kill the bad cells but you also kill the good cells,” said Castro, whose father founded Farmacias Modernas de Tijuana SA, known as Farmacias Roma, in 1964. “They need to be more targeted in their strategies to combat money laundering.”
Sens. Jeff Flake and John McCain, both Arizona Republicans, called for hearings in February, saying security concerns should be balanced against the need for access to banks in border communities. California’s Imperial Valley Press editorialized that border banking may become “a niche operation, where choices become very limited.”
U.S. regulators are warning banks against being indiscriminate. Two Treasury Department agencies urged them in November to avoid closing accounts of entire categories of customers and recommended a case-by-case review.
“We do not tell banks how to conduct their business,” Comptroller of the Currency Thomas Curry told bankers at a conference on Monday. “We certainly do not direct them to provide services to some customers and not to others.”
In Mexico, businesses cheered when President Enrique Pena Nieto scrapped $14,000 monthly caps on dollar deposits in Mexican banks, saying the anti-money laundering measure hurt law-abiding companies. Relief turned to dismay when businesses learned banks didn’t want their greenbacks anyway.
Mexican Sen. Marco Antonio Blasquez said bank executives told him they worry a surge in dollar deposits would alarm U.S. regulators and banks with whom they partner.
“The Mexican banking system is scared,” Blasquez told about 200 business owners at Tijuana Chamber of Commerce offices in January.
Mexicans like Hugo Torres, whose storied Rosarito Beach Hotel is popular with Americans, have had to be creative. In 2013, Bank of America closed his account in San Diego after 25 years without explanation. He scatters dollars among Mexican banks in small amounts.
“We have something like 10 banks,” he said. “This has gone overboard.”
Major U.S. banks won’t say how many accounts they closed on the border. JPMorgan Chase & Co. says its U.S. branches shut fewer than 5,000 business accounts of companies based outside the country with up to $20 million in annual sales since 2013 but wouldn’t say how many were based in Mexico.
Business chambers say they fielded many complaints in the last two years. “I hear about it all the time, but it’s all anecdotal,” said Richard Dayoub, president of the Greater El Paso Chamber of Commerce.
The Mexican Banks Association, the country’s main industry group, didn’t respond to requests for comment.
Roma found a workaround, but Castro says it sacrificed millions of dollars a year. The family-owned company, which doesn’t disclose revenue or profits, does 21 percent of sales in dollars, largely in cash. American retirees who live on Mexico’s beachfront and Southern Californians come for medications that Castro says are priced 40 percent lower than U.S. pharmacies.
Roma no longer pays suppliers and employees in dollars, as it did when it opened its first store in the Mexican city bordering San Diego, but landlords still insist on payment in U.S. currency.
“Being from Tijuana, you grow up thinking in dollars,” Castro says. “I speak in dollars. If you ask how much something weighs, I answer in pounds. If you ask about the weather, I answer in Fahrenheit. We have the American chip.”
When Mexico limited dollar deposits, Roma was among a cadre of large companies that was able to negotiate exemptions. But it came with a price.
Roma’s pact with HSBC’s Mexican unit deeply cut into profits because the bank dictated less favorable exchange rates on dollar-paying customers, Castro said. Roma also had to limit individual dollar sales to $250, upgrade computer systems and train employees on reporting requirements.
HSBC ended exemptions for Roma and other Mexican companies in December 2012, when it got hit with the $1.9 billion money-laundering fine in the U.S.
Roma suddenly had nowhere to put its dollars. Its U.S. bank, which Castro asked not be named to preserve its relationship, agreed to take them but only for a few months. Armored truck companies charging 5 percent commission shuttled loads of hundreds of thousands of dollars to San Diego, startling U.S. border inspectors.
Roma found another Mexican bank, Grupo Financiero Banorte SA, to accept unlimited dollar deposits under similar terms it negotiated with HSBC. The agreement crimps profits, but Roma feels it has no choice.
Last year, Roma’s U.S. bank limited deposits to $20,000 a month, a pittance for a chain of 52 stores. For Castro’s father, also Roberto, it’s as if the U.S. currency is poison.
“Who wouldn’t want dollars? But it seems like they are being treated like drugs,” he said.
Trending News on PVDN
- Popocatépetl Volcano Exhibits Increased Activity; Yellow Phase 3 Alert Continues PUERTO VALLARTA (PVDN) - In the past 24 hours, heightened activity was recorded from Mexico's Popocatépetl volcano, with an alarming 315 exhalations detected, accompanied by water vapor, other volcanic gases, and ash, according to the Scientific Advisory Committee (CCA) of the National Civil Protection System (SINAPROC). Monitoring systems in place around the active stratovolcano also…
- ‘Kingdoms of Mexico’ Distinction Launches to Boost Tourist Destinations With European Influences Puerto Vallarta (PVDN) - Miguel Torruco Marqués, the head of the Ministry of Tourism (Sectur), introduced the new 'Kingdoms of Mexico' distinction, a major initiative designed to enhance the appeal of Mexico's tourist communities on an international level. The announcement came during a presentation attended by the governors of Tlaxcala, Lorena Cuéllar Cisneros; Baja California,…
- Puerto Vallarta Set to Celebrate 105th Anniversary as Municipality and 55th as a City with Grand Festivities PUERTO VALLARTA - The coastal paradise of Puerto Vallarta is poised to celebrate two landmark anniversaries: the 105th anniversary of its recognition as a municipality and the 55th anniversary of its elevation to city status, with a grand commemoration on May 31, 2023. The celebrations have been meticulously planned by the municipal government led by…
- Popocatépetl Volcano Resumes Activity; Authorities Maintain Alert Status PUERTO VALLARTA (PVDN) - After a period of relative calm last week, Mexico's Popocatépetl volcano resumed minor activity on Friday night and through Saturday night, as reported by the National Civil Protection Coordination (CNPC). This comes following significant explosions last weekend that put nearby communities on high alert. The resumed activity was characterized by minor…
- Two More Puerto Vallarta Beaches Are Awarded Blue Flags Puerto Vallarta (PVDN) - In the upcoming 2023-2024 season, Puerto Vallarta is set to host six beaches awarded with the Blue Flag accreditation, an esteemed international recognition for high environmental and quality standards. The Blue Flag committee has reconfirmed the status for four previously certified beaches while conferring this prestigious title to two new beaches…
- LGBTIQ+ Community Member Disappears At Puerto Vallarta Pride PUERTO VALLARTA - A member of the local LGBTIQ+ community has gone missing under mysterious circumstances, inciting deep concern within the community and calls for immediate action from local authorities. Rubén Michel Castro Guizar, 32, a deaf individual, was last seen on the night of Thursday, May 25th, attending the Vallarta Pride march. His disappearance…
- Shocking Case of Animal Abuse in Mexico: Man Throws Dog into Boiling Fry Oil PUERTO VALLARTA (PVDN) - A disturbing incident of animal abuse has sent shockwaves throughout Mexico, as a man allegedly threw a dog into a pot of boiling oil, resulting in the animal's tragic death. Authorities have detained the suspect for the assault on the dog and have issued an additional arrest warrant on charges of…
- SEAPAL Vallarta Launches New Vallarta II Tank to Reinforce Drinking Water Supply PUERTO VALLARTA (PVDN) - SEAPAL Vallarta, the local water management authority, announced the successful integration and activation of the new Vallarta II Tank to its drinking water distribution system on Tuesday, May 30. This strategic addition is expected to enhance the availability of water in Vallarta homes, a pressing issue in the wake of the…
- Trans Fats Ban in Mexico Will Prohibit the Sale of Cookies, Chips, Pizzas, and More in September Puerto Vallarta (PVDN) - The Chamber of Deputies in Mexico has taken a critical step in the battle against heart disease, approving a decree that reforms the General Health Law to restrict the use of trans fats and oils. The move is predicted to save more than 13,000 lives per year, with these substances currently…
- Mothers Searching For Their Missing Children Uncover Presumed Clandesant Grave in Puerto Vallarta PUERTO VALLARTA (PVDN) - A team of mothers seeking their missing children made a chilling discovery on the outskirts of Puerto Vallarta Saturday afternoon: a skeleton, fragments of bones, and several indications pointing towards a potential site of illegal body disposal. The area of discovery, located near the road to Viejo el Veladero, close to…