- Conduct an institutional risk assessment to determine the risks associated with the bank’s customer base, including the business profiles and geographic locations of the bank’s customers. Where there are heightened risks (e.g., a customer is located in region associated with a designated cartel), the bank should consider additional diligence and monitoring steps.
- Review their Know Your Customer (“KYC”) policies and procedures to ensure that they are sufficient to uncover potential connections between their customers and designated cartels, and where appropriate, conducting additional KYC and enhanced due diligence.
- Review their transaction monitoring policies and procedures to ensure that they are sufficient to detect suspicious patterns that suggest illegal activity connected to drug trafficking and potentially designated drug cartels, especially where transactions occur within areas known to be connected to drug trafficking activity.
- Review their internal whistleblower policies to ensure that they encourage employees to report issues to the bank, and not make reports directly to U.S. authorities, which is now a more attractive option given the potential for increased monetary awards.
- Review representations made to U.S. banking partners concerning the bank’s Anti-Money Laundering (“AML”) risks and adequacy of its AML program, particularly with respect to customers that may be associated with designated cartels. This includes ensuring that U.S. institutions are made aware of any change in their business model that directly impacts the Mexican institution’s use of its U.S. services. U.S. law enforcement has used alleged misrepresentations to charge non-U.S. banks with bank fraud.
- Monitor closely all U.S. regulatory, policy, enforcement developments related to the designation of Mexican cartels as foreign terrorist organizations.
This Client Alert has been prepared in collaboration with Leo Tsao and his team at Paul Hastings LLP, Washington, D.C. Mr. Tsao is a former senior U.S. federal prosecutor who led the U.S. Department of Justice’s Bank Integrity Unit, which prosecutes non-U.S. banks and financial institutions for money laundering, evasion of U.S. sanctions, and fraud.
This Client Alert is for general information only. It should not be relied upon as legal advice as facts and circumstances may vary. If you have any questions concerning this Client Alert, please contact our Compliance, Anti-corruption and Investigations team: