Risks Increase As U.S. Escalates Pressure Against Mexico With Regulatory Focus On The Financing Of Fentanyl Trafficking

The evolving U.S.-Mexico geopolitical relationship is now fundamentally burdened by the growing regulatory, enforcement, and real risks tied to cartel activity, drug trafficking and the fentanyl trade, immigration, and a rapidly changing tariff environment. Financial institutions and companies on both sides of the border are now having to address more complicated compliance risk management as U.S. authorities wield new authorities and target Mexican financial institutions. U.S. and Mexican government agencies continue to take legislative, regulatory, and enforcement steps, which will create an uncertain risk terrain and require additional due diligence. The 25 June 2025 orders by the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) to designate three Mexican financial institutions as "primary money laundering" concerns—its first orders under a new law that provides broader powers to FinCEN—signals a new aggressive approach to U.S. government action. These actions are also playing out against the backdrop of Mexico's own measures to bolster its anti-money laundering and countering the financing of terrorism (AML/CFT) and sanctions framework in the face of its upcoming Financial Action Task Force (FATF) mutual evaluation.

This alert builds on prior analysis from K2 Integrity, including a 27 February 2025 alert regarding the designation of international cartels as Foreign Terrorist Organizations (FTOs),¹ a K2 Integrity webinar on Mexico's evolving AML/CFT environment, with a focus on its FATF review and the FTO designations,² and K2 Integrity's synopsis of its webinar on Mexico's evolving AML/CFT environment.³

In its orders on 25 June 2025, FinCEN determined that there are "reasonable grounds" to find that three Mexico-based financial institutions—CIBanco, Intercam, and Vector (Targeted FIs)—are "primary money laundering concerns in connection with illicit opioid trafficking" under the Fentanyl Sanctions Act and the FEND OFF Fentanyl Act, 21 U.S.C. 2313a. The orders further imposed "special measure 6" to prohibit U.S. financial institutions to engage in the transmittal of funds to or from these designated financial institutions, as defined in the orders. Section 2313a orders are civil orders, not criminal prosecutions or any other exercise of criminal or prosecutorial authority—and the orders do not impose any criminal penalties on CIBanco, Intercam, or Vector.⁴

As a general matter, FinCEN identified transactions between the Mexican financial institutions and Mexican and Chinese companies involved in the procurement of Chinese fentanyl precursor chemicals, transactions involving money mules, and the provision of financial services to drug trafficking organizations.⁵ These orders are the first actions by FinCEN pursuant to the Fentanyl Sanctions Act and the FEND Off Fentanyl Act. The action demonstrated the U.S. government's resolve to "us[e] all tools at [its] disposal to counter the threat posed by criminal and terrorist organizations trafficking fentanyl and other narcotics."⁶ U.S. and Mexican financial institutions and companies should take note of the order and consider their risk profile against the backdrop of the potential for additional action by U.S. and Mexican regulators.

Section 2313a grants the Secretary of the Treasury the authority to impose one or more of six special measures upon finding that "reasonable grounds" exist for concluding that any financial institution, transaction, or account outside the United States is of primary money laundering concern in connection with illicit opioid trafficking. Special measures one through five are measures identified in Section 311 of the USA PATRIOT Act, and a sixth special measure is specific to the FEND OFF Fentanyl Act, allowing the Secretary of the Treasury to prohibit or impose conditions upon transmittals of funds by covered U.S. financial institutions if such funds transfers involve designated foreign banks, an identified class of transactions, or specified types of accounts (see 21 U.S.C. 2313(a)(2)). In the case of Targeted FIs, the secretary imposed special measure 6.

Key Compliance Considerations for Financial Institutions⁷ and Companies

• When must a covered financial institution comply?On 9 July 2025, FinCEN issued an order amending all three June 25 orders to extend the effective date for all three orders to 4 September 2025, thus allowing covered U.S. financial institutions extra time to implement the necessary compliance measures. Notably, in its press release on the extension, FinCEN noted that the extension "reflects that the Government of Mexico has taken further steps to address the concerns raised in FinCEN's orders, including by assuming temporary management of the affected institutions to promote regulatory compliance and the prevention of illicit finance."⁸
• Which Mexican institutions are designated by the order?For the purposes of each order, the designated financial institution—Intercam, CIBanco, and Vector—is defined to include the parent financial institution and its subsidiaries, branches, and offices located in Mexico. Any branches, subsidiaries, and offices of the designated financial institution operating outside of Mexico, including any such branches, subsidiaries, and offices located in the United States, are expressly excluded from the definition of the designated entity. Nonetheless, as part of a risk profile review, covered financial institutions may consider whether to review their relationships with U.S. branches, subsidiaries, and offices in order to assess and monitor their compliance programs and to better understand their risk profile and AML/CFT protocols.
• What should covered financial institutions do?In its updated FAQs,⁹ FinCEN states that it expects covered financial institutions to (1) implement procedures to ensure compliance with the terms of the orders and (2) exercise reasonable due diligence to prevent engaging in transmittals of funds involving the Targeted FIs. Covered financial institutions should (1) "cease any and all transmittals of funds, from or to CIBanco, Intercam, or Vector, as defined in the orders; and (2) consider the finding of primary money laundering concern regarding CIBanco, Intercam, and Vector when complying with their other Bank Secrecy Act obligations, including any appliable obligations to establish and maintain anti-money laundering and countering the financing of terrorism (AML/CFT) compliance programs."¹⁰ FinCEN further "recommends that covered financial institutions continue to implement appropriate AML/CFT procedures and systems, including traditional compliance screening to identify customers and determine their involvement in a transmittal of funds involving CIBanco, Intercam, or Vector."¹¹ Accordingly, covered financial institutions can take steps to review their compliance framework and transactions, including by (1) reviewing the order; (2) ensuring that their systems and processes implement the requirements of the order; (3) considering their risk profile based on their customers and geographic risk and whether to apply enhanced due diligence procedures with high-risk institutions or for high-risk activities; and (4) reviewing transactions involving these institutions to consider whether to file suspicious activity reports for those transactions. Financial institutions should also diligently document the actions taken.
• What should non-U.S. financial institutions do? Financial institutions within Mexico or those that face exposure to the Mexican market should consider a range of actions, depending on their risk profile, customers, geographic areas of operation, transmission channels, and business lines so that they better understand their legal and regulatory risks and can take action to mitigate these risks. Depending on the risk profile, these actions might include (1) lookbacks and forensic analysis of transactions during relevant time periods with keywords aligned to typologies identified in the June 25 order or in FinCEN advisories or alerts, with a focused review of high-risk transactions or customers; (2) a review of AML/CFT and sanctions policies and procedures to identify areas for mitigation and improvement to minimize risk exposure; and (3) incorporation of technologies and databases to more effectively identify networks and transactions that create exposure. At root, financial institutions should review their compliance frameworks to undertake greater due diligence and investigations on customers and clients, suppliers, goods, and transactions.
• What typologies should financial institutions focus on in reviewing their compliance programs? In its June 25 orders, FinCEN identified four typologies that linked the Targeted FIs to drug trafficking organizations or to illicit opioid trafficking.¹²,¹³,¹⁴ The relevant periods identified for each financial institution varied by entity but spanned the years 2016 to 2024 across the three financial institutions. The FinCEN orders largely focused only on transactional activities, but did not evaluate or identify deficiencies in the institutions' AML/CFT or sanctions compliance programs. Financial institutions should consider these typologies as part of any due diligence effort in order to understand and mitigate risk exposure:
  • Transactions facilitating payments on behalf of Mexico-based companies for the procurement of precursor chemicals in China;
  • Transactions facilitating funds transfer processing on behalf of China-based companies involved in the procurement of precursor chemicals;
  • Financial services that facilitate transactions through money mules for money laundering; and
  • Providing financial services to drug trafficking organizations.
• What additional U.S. legal risk should financial institutions consider? Financial institutions should also take into account the implications of the February 2025 designations of eight Mexican and other international cartels as FTOs in their review of risk profiles and policies and procedures. These designations—while in some respects duplicative of existing narcotics trafficking designations of the same organizations—introduce potential U.S. criminal liability for knowingly providing "material support or resources"¹⁵ (including financial services) to an FTO on an extraterritorial basis.
• Do businesses operating in or sourcing from Mexico need to consider supply-chain-related risks? Both the FEND OFF Fentanyl Act designations and the FTO designations present risks to businesses operating in or sourcing from Mexico. U.S. businesses—particularly companies seeking to quickly restructure and redirect supply chains to Mexican companies in response to the evolving tariff environment—should undertake appropriate due diligence to mitigate risks associated with dealing with cartels or engaging in activities that could constitute material support for these organizations. In addition, businesses should consider risks associated with supply chains linked to trade between Mexico and China, as this may raise sanctions, AML/CFT, and trade and tariff considerations linked to evolving trade deals with China, Mexico, and other U.S. trading partners.

Governmental Responses

Against the backdrop of the FinCEN orders, the Mexican and U.S. governments have exchanged statements and taken additional steps that presage continued action by both governments—and corresponding risks for financial institutions and businesses operating in Mexico. Most recently, President Trump threatened the imposition on 1 August 2025 of an additional 30 percent tariff against Mexico, stating that "Mexico still has not stopped the Cartels who are trying to turn all of North America into a Narco-Trafficking Playground."¹⁶

In immediate response to the FinCEN orders, the Mexican Ministry of Finance stressed its cooperative relationship with U.S. authorities but emphasized that "no supporting evidence was received" from the U.S. Treasury Department beyond "data on certain electronic transfers" conducted through the financial institutions that are similarly "conducted by the thousands through national financial institutions" to legally established Chinese companies. Interestingly, the Finance Ministry noted that the Mexican FIU found that more than 300 Mexican companies made transactions to these Chinese companies "through ten different national financial institutions."¹⁷

Mexican local media reports that the country's National Banking and Securities Commission (CNBV) further identified AML compliance and other administrative issues as part of a supervisory review of the three financial institutions and imposed 53 fines and other measures exceeding 185 million pesos (9.9 million USD)¹⁸; however, there is some variation in reporting on the overall amount of fines when compared to the data available on the CNBV website.¹⁹In addition, the CNBV also took "temporary managerial intervention" of the three financial institutions in order to "safeguard the rights of the depositors and clients of the institutions, given the implications" that the FinCEN orders "may have on these banks."²⁰,²¹

Cooperation between the two governments appears to be ongoing. In its statement extending the effective dates of the orders, for example, FinCEN indicated further that it "will continue to coordinate closely with the Government of Mexico on these matters and will carefully consider all facts and circumstances in considering any further extensions to the implementation date of the orders."

Although seemingly unrelated, on 15 July 2025, reforms to the Mexican AML Law (LFPIORPI) were published to remediate some of the technical deficiencies of Mexico's AML/CFT regime in light of the upcoming FATF Mutual Evaluation process that Mexico will be subject to in 2026. The FATF process will assess the effectiveness of the Mexican AML/CFT regime. Among the most notable changes, the following are worth mentioning:

• Harmonized and added key definitions, such as beneficial owner (BO), politically exposed persons (PEPs), client and user, business relationship, and risk.
• Investment advisors are now considered financial entities.
• Cash thresholds were updated for reporting transactions by certain designated non-financial businesses and professions (DNFBPs).
• New obligations were included to:
  • Identify and "directly" know your client.
  • Present a suspicious transaction report (STR) within 24 hours in cases of a well-founded suspicion or circumstantial evidence of money laundering or terrorism financing-related activity.
  • Conduct a risk assessment.
  • Provide annual training to staff.
  • Implement automated transaction monitoring.
• Cash payment prohibitions were expanded to real estate and vehicle transactions above a certain limit.

K2 Integrity supports clients at every stage of the regulatory, supervisory, and enforcement lifecycle—from urgent response to regulatory or enforcement orders to long-term regulatory risk management and program enhancement. Our team stands ready to assist financial institutions and other affected organizations in navigating requirements related to these recent developments.

Footnotes

1. K2 Integrity, "Escalation Against Cartels: U.S. Designates International Cartels as Foreign Terrorist Organizations and Specially Designated Global Terrorists," available at https://www.k2integrity.com/en/knowledge/policy-alerts/us-designates-international-cartels-as-foreign-terrorist-organizations/.

2. K2 Integrity, "Webinar: Mexico's Evolving AML/CFT Landscape: FATF Review, FTO Designations," available at https://www.k2integrity.com/en/knowledge/webcasts/mexicos-evolving-aml-cft-environment-fatf-review-and-fto-designations/.

3. K2 Integrity, "Mexico's Evolving AML/CFT Landscape: FATF Review, FTO Designations, and the Future of U.S.-Mexico Relations," available at https://www.k2integrity.com/en/knowledge/expert-insights/2025/mexicos-evolving-aml-cft-landscape-fatf-review-fto-designations-and-the-future-of-u-s-mexico-financial-relations/.

4. Financial Crimes Enforcement Network, "Frequently Asked Questions" (09 July 2025), available at https://www.fincen.gov/sites/default/files/shared/Final-FAQs.pdf.

5. FinCEN Press Release, "Treasury Issues Unprecedented Orders under Powerful New Authority to Counter Fentanyl" (25 June 2025), available at https://www.fincen.gov/news/news-releases/treasury-issues-unprecedented-orders-under-powerful-new-authority-counter.

6. U.S. Department of the Treasury Press Release, "Treasury Issues Historic Orders under Powerful New Authority to Counter Fentanyl" (25 June 2025), available at https://home.treasury.gov/news/press-releases/sb0179.

7. As defined in the BSA 31 USC 5312(a)(2), which, at this time, does not include final rulemakings pending implementation dates.

8. FinCEN Press Release, "Treasury Extends Effective Dates of Orders Issued Under New Authority to Counter Fentanyl" (09 July 2025), available at https://www.fincen.gov/news/news-releases/treasury-extends-effective-dates-orders-issued-under-new-authority-counter.

9. Financial Crimes Enforcement Network, "Frequently Asked Questions."

10. Id.

11. Id.

12. FinCEN, "Imposition of Special Measure Prohibiting Certain Transmittals of Funds Involving CIBanco S.A., Institución De Banca Multiple" (30 June 2025), Section 3B, available at https://www.federalregister.gov/documents/2025/06/30/2025-11993/imposition-of-special-measure-prohibiting-certain-transmittals-of-funds-involving-cibanco-sa.

13. FinCEN, "Imposition of Special Measure Prohibiting Certain Transmittals of Funds Involving Intercam Banco S.A., Institución De Banca Multiple" (30 June 2025), Section 3B available at https://www.federalregister.gov/documents/2025/06/30/2025-11990/imposition-of-special-measure-prohibiting-certain-transmittals-of-funds-involving-intercam-banco-sa.

14. FinCEN, Imposition of Special Measure Prohibiting Certain Transmittals of Funds Involving Vector Casa de Bolsa, S.A. de C.V." (30 June 2025), Section 3B available at https://www.federalregister.gov/documents/2025/06/30/2025-11991/imposition-of-special-measure-prohibiting-certain-transmittals-of-funds-involving-vector-casa-de.

15. "Material support or resources" is broadly defined to include "any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (1 or more individuals who may be or include oneself), and transportation, except medicine or religious materials."

16. NBC News Report, "Trump Says He Will Hit E.U. and Mexico with 30% Tariff" (12 July 2025), available at https://www.nbcnews.com/business/business-news/trump-says-will-hit-eu-mexico-30-tariff-rcna218415.

17. Ministry of Finance of Mexico Press Release, "Nota Informativa Sobre Investigaciones en el Sector Financiero" (25 June 2025), available at https://www.gob.mx/shcp/prensa/nota-informativa-sobre-investigaciones-en-el-sector-financiero.

18. Dinero En Imagen News Report, "CNBV Pone Multa Por Mas de 185mpd a CIBanco, Intercam y Vector, ¿qué encontraron?" (15 July 2025), available at https://www.dineroenimagen.com/economia/cnbv-pone-multa-por-mas-de-185-mdp-cibanco-intercam-y-vector-que-encontraron?utm_source=whatsapp.

19. National Banking and Securities Commission of Mexico, "Buscador de Sanciones" (accessed 18 July 2025), available at https://sanciones.cnbv.gob.mx/.

20. National Banking and Securities Commission of Mexico, "Comunicado Conjunto Junta de Gobierno de la CNBV decretó la intervención gerencial temporal de CI Banco, S.A. e Intercam Banco, S.A." (26 June 2025), available at https://www.gob.mx/cnbv/prensa/comunicado-conjunto-junta-de-gobierno-de-la-cnbv-decreto-la-intervencion-gerencial-temporal-de-ci-banco-s-a-e-intercam-banco-s-a?idiom=es.

21. National Banking and Securities Commission of Mexico, "La Junta de Gobierno de la CNBV decretó la intervención gerencial temporal de Vector Casa de Bolsa, S.A. de C.V." (26 June 2025), available at https://www.gob.mx/cnbv/prensa/la-junta-de-gobierno-de-la-cnbv-decreto-la-intervencion-gerencial-temporal-de-vector-casa-de-bolsa-s-a-de-c-v?idiom=es.

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