This Advisory is of special interest to banks at which Mexican institutions maintain correspondent accounts. However, the Advisory is being distributed to all banks.
Mexican bank drafts have long been used to facilitate trade and commercewithin the United States/Mexican border region. These drafts areissued in U.S. dollars by Mexican banks and are payable from correspondentaccounts held at U.S. banks. The promise of payment by a U.S. bank makesthem easy to sell or deposit.
Correspondent banking relationships are a vital part of the bankingsystem, both domestically and internationally. However, like other aspects ofthe system, they are vulnerable to manipulation and misuse by money launderers.In this case, Mexican bank drafts have provided excellent tools forthe facilitation of money laundering activities.
Banks and other financial institutions should give enhanced scrutiny todeposits or the presentation for collection of U.S. dollar-denominated bankchecks or other drafts drawn by Mexican banks on their dollar accounts inU.S. banks. Enhanced scrutiny should also be given to the presentation forcollection at U.S. banks by Mexican currency exchange and other businessesof multiple third party checks or drafts endorsed to the order of thebusiness presenting the checks for payment.
A crucial part of the money laundering cycle is the re-entry into the United States of funds derived from criminal activity; the smuggling of those funds out of the country is intended to "launder" them for re-entry with anapparently foreign origin. Cross-border commerce between the United States and Mexico provides an especially attractive cover for attempts to reintegrate criminally-derived funds into the U.S. economy.
Two techniques for recycling funds along the border have been identifiedby law enforcement officials.
Mexican Bank Drafts
A crucial part of the money One technique is the use of smuggled currency in Mexico to purchase a"Mexican bank draft," that is, a dollar-denominated draft drawn by theMexican bank to the order of the bank draft's purchaser, on that own bank'sdollar account with a correspondent bank in the United States. The draftis then carried into the United States and negotiated, or perhaps endorsedto a third party who negotiates the draft at the United States correspondentinstitution. It may also be endorsed to a third party in Colombia, Panama, orelsewhere, as part of a more complicated scheme to purchase goods forconversion ultimately to laundered funds; in any event the draft ultimatelyfinds its way back to the U.S. banks on which it's drawn.
Factored Third Party Checks