LatinFinance - January/February 2013 - 32

Money laundering

The turn of the screw
By Ivan Castano

D

ecember 11, 2012 is a date that
HSBC shareholders are unlikely
to forget soon. That day, the bank
agreed to pay a record $1.92 billion to
settle US government fines and forfeitures
for money laundering. It was the largest
US penalty ever imposed on a bank.
It followed a US Senate investigation
which had revealed in July that the bank
had transferred $7 billion from Mexican
drug cartels – as well as more funds from
nations penalized by US sanctions, most
notably Iran – into the US. The result
of the fine has been a scramble by Latin
American banks to strengthen their money
laundering safeguards.
“If LatAm bank controls were not up
to date then, you can bet they are now,”
says Mireya Lozano, a Mexico-City based
consultant and member of the Association
of Certified Anti-Money Laundering
Specialists (ACAMS). “No bank wants
to see itself linked to a laundering
scandal right now, especially one of an
international nature like that which we’ve
seen with HSBC.”
Following the case, the US Department
of Justice and the Department of the
Treasury continue to watch the bank – as
well as its Latin American peers – closely,
according to officials close to the justice
department. Mexican drug cartels are
responsible for the bulk of some $10
billion laundered in Mexico every year
since 2007.
Underscoring the extent of the illicit
trade is a recent Global Financial Integrity
report that found Mexico had lost $872
billion from unlawful financial flows or
capital flight from 1970 to 2010. These
flows stemmed from corruption, bribery
and kickbacks, as well as other criminal
activities and efforts to shelter wealth from
the country’s tax authorities.
The drug cartels’ laundering activities

32 LatinFinance

MoneyLaundering.indd 32

Banks are scrambling to tighten controls as US agencies step up
their efforts against money laundering. The knock-on effects of new
legislation could have a profound impact on the face of Latin banking

Banking controls: in a bind
represent a critical weak point in US efforts
to combat the illicit trade in Mexico, says
Dennis Lormel, former head of terrorist
financing at the US justice department.
“How and where the drug cartels in
Mexico move their money is a big concern
to the US treasury and law enforcement,”
Lormel says.
Following the HSBC scandal, Mexican
cartels are likely to have a tougher time
laundering money through Mexican banks
with strong links to the US or banks in
regions with which Mexico conducts a
lot of trade, notably central America and
Canada.
This leaves South American nations

with lax laundering regulations as the top
targets for drug cartels to do business, says
Lormel. But drug lords are also looking to
shift capital to Russia, the Middle East and
Africa, says Lozano, as they struggle to find
destinations for their funds.

CNBV on the job

South American banks in Argentina,
Panama and Costa Rica are most at risk,
Lozano says. According to the Financial
Action Task Force – which sets antilaundering standards for most of the world
– these jurisdictions have some of the worst
reviews.
In Mexico and Central America, the

January/February 2013

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LatinFinance - January/February 2013

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