Visa Cuts Off CIBanco Over US Money Laundering Allegations

Visa has disconnected CIBanco cards from its international transaction platform. This action follows accusations from the US Department of the Treasury, which links the financial institution to money laundering operations for drug cartels. Visa’s decision, announced and ratified within a brief period, underscores the increasing pressure on banking entities to strengthen anti-money laundering controls.

The unilateral disconnection by Visa occurred on Sunday, June 29, at 8:00 p.m., with its ratification and effective time at 2:00 p.m. Mexico time on Monday, June 30. This decision was made before the expiration of the 21-day period that the US Department of the Treasury had granted to US financial institutions to cease transactions with CIBanco. The Mexican financial institution expressed its disagreement with the measure, asserting that the established grace period was not honored.

This action stems from a pattern of transactions identified by the US Treasury, where CIBanco allegedly facilitated the laundering of about US$2.1 million for criminal organizations such as the Beltran Leyva Cartel, the Jalisco New Generation Cartel (CJNG), and the Gulf Cartel between 2021 and 2024, reports El Financiero. The funds, according to the accusations, were used to acquire chemical precursors for fentanyl production. In response to these accusations and subsequent decisions by international bodies, the National Banking and Securities Commission (CNBV) assumed operational control of CIBanco, as well as Intercam and Vector, to safeguard the interests of savers and creditors.

Operational Impact and Financial Valuation

The service interruption directly impacts CIBanco's CICash Multicurrency card, which is used for international transactions. CIBanco informed its clients that funds committed in international purchases may be reimbursed either in the original purchase currency or in national currency. This reimbursement protocol aims to mitigate the operational impact on users affected by the disconnection.

CIBanco's credit rating has also been under review. Standard & Poor's (S&P) concluded its rating contract with CIBanco, withdrawing the long and short-term ratings for CIBanco and Finanmadrid Mexico, which were 'mxCCC+' and 'mxC', respectively. This action follows a previous downgrade to speculative grade, which reflected the US Treasury's accusation of alleged laundering of US$10 million for the Gulf Cartel. The rating was already under “special review” with negative implications, anticipating a potential further downgrade.

The incident with CIBanco, while significant for the entity, has had its systemic impact minimized by financial authorities. Edgar Amador, Minister of Finance, says that CIBanco, Intercam, and Vector, collectively, represent less than one percent of national banking system deposits, classifying them as small-scale banks. The situation emphasizes the necessity of rigorous monitoring and strict enforcement of international compliance regulations to maintain the integrity of the global financial system, says El País.