The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has proposed a groundbreaking measure to sever the financial connections of ten Mexican casinos with the US banking system. This action comes amid allegations of the casinos serving as money-laundering channels for the notorious Sinaloa cartel, posing what FinCEN describes as a “significant threat” to US national security.
In a notice of proposed rulemaking (NPRM) released in mid-November, FinCEN invoked Section 311 of the USA PATRIOT Act, categorizing transactions involving these Mexico-based gambling establishments as primarily concerning for money laundering. Should this rule be finalized, it would effectively forbid US financial institutions from processing any payments linked to these casinos, even those routed indirectly through foreign correspondent banks.
The casinos in question, located across four Mexican states, are officially owned by three distinct companies. However, FinCEN asserts they are ultimately under the control of a singular criminal organization with deep-rooted ties to the Sinaloa cartel. Investigators claim these venues have been channeling both gambling earnings and seemingly legitimate business revenues back to cartel operations, using regular and meticulously structured payments.
According to the NPRM, the casinos reportedly make monthly disbursements to Sinaloa-connected entities and conduct additional off-book transactions to senior cartel figures, carefully timing and varying amounts to elude straightforward audits. This activity is directly associated by Treasury to the synthetic-opioid trade, which US officials hold responsible for tens of thousands of overdose deaths each year.
FinCEN argues that this pattern of activity provides “reasonable grounds” to classify transactions involving these casinos as a primary laundering concern, necessitating action to prevent entrenchment of these financial structures.
Under the proposed rule, US banks, broker-dealers, and mutual funds would be barred from opening or maintaining correspondent accounts for foreign banks if those accounts are used for payments connected to the identified casinos. Additionally, they must enforce enhanced due diligence procedures on all foreign correspondent relationships, with measures “reasonably designed” to avert the use of these accounts for moving casino-related funds.
Two specific obligations stand out: US institutions must formally inform their foreign bank customers that indirect access for the casinos to US dollar clearing via correspondent accounts is prohibited; and they must deploy screening tools and controls to identify and block any correspondent-account traffic that seems to involve the gambling establishments before settlement.
FinCEN reportedly considered less intrusive steps, such as additional reporting, beneficial ownership checks, or bespoke know-your-customer requirements, but determined these insufficient given “the nature, extent, and purpose of the obfuscation” the casinos are alleged to have already engaged in.
The US Treasury emphasizes coordinated action with the Mexican government, noting the political importance of collaboration given the sensitivity of targeting Mexican businesses and potential broader de-risking ramifications. Mexican regulators have already suspended operations at several casinos and initiated local probes into alleged laundering schemes tied to cartel networks. Officials in Mexico City have depicted the joint effort with FinCEN as an endeavor to dismantle high-risk venues while safeguarding legitimate gaming and tourism industries.
Nonetheless, compliance experts caution that the Section 311 measure might deter US banks from engaging with Mexican correspondent banks more broadly. With US institutions now aware of some gambling venues being used to obscure cartel payments, risk committees might opt to reduce exposure to smaller Mexican banks and sectors with significant cash flow, such as gaming, entertainment, and hospitality.
“The directive to US banks is unmistakable,” remarked one cross-border anti-money laundering consultant in a recent note on the NPRM: cash flows from casino-linked operations in high-risk jurisdictions should be viewed as a major red flag, rather than a peripheral issue.
This initiative represents a novel application of Section 311, traditionally utilized since 2001 to brand overseas banks or jurisdictions as primary money-laundering concerns. Targeting a specific category of casino-related transactions introduces a new dimension that compliance specialists believe could be employed in other scenarios if successful.
The NPRM has launched a public-comment phase, inviting feedback from banks, regulators, industry bodies, and civil society organizations on the proposal and potential changes. Once this period concludes, FinCEN may finalize, amend, or retract the rule.
Given the political pressure to demonstrate progress on tackling the synthetic-opioid crisis and cartel finances, many expect the primary elements of the special measure to be implemented, though some technical aspects may evolve.
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