We blogged earlier this year about Attorney General Pam Bondi’s February 5, 2025 memorandum focusing the U.S. Department of Justice’s attention squarely on Mexican cartels, and about subsequent steps the Trump Administration has taken to follow through on that prioritization. In the latest such effort, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a Notice of Proposed Rulemaking (NPRM) pursuant to Section 311 of the USA PATRIOT Act, which would prohibit U.S. financial institutions from processing any transactions which involve any of ten specific Mexican casinos (referred to collectively in the NPRM as the “Gambling Establishments”). The casinos in question, spread across four Mexican states, are owned by three separate Mexican companies; however, FinCEN states in the NPRM it “assesses that the Gambling Establishments are ultimately controlled by a criminal group with a longstanding and transactional financial relationship in which the Gambling Establishments facilitate money laundering for the benefit of the Cartel de Sinaloa (Sinaloa Cartel)” – a drug trafficking organization which President Trump designated as a terrorist group on the first day of his second term, and which the Drug Enforcement Administration (DEA), in its 2024 National Drug Threat Assessment, characterized as being one of two cartels “at the heart” of the U.S. synthetic opioid crisis.
In the NPRM, FinCEN declares that “reasonable grounds exist for concluding that transactions involving the Gambling Establishments are of primary money laundering concern” after considering certain relevant factors – that the casinos allegedly make monthly disbursements to the Sinaloa Cartel, as well as additional illicit payments to senior cartel members carefully arranged (in amounts and timing) “to prevent documentable connections” between the casinos; and that the money laundering allegedly facilitated by the casinos benefits the Sinaloa Cartel, which is (as framed in the NPRM) a major driver of the U.S. opioid crisis – thus constituting, in the words of the NPRM “a significant threat to U.S. national security.”
The “meat” of the NPRM is Section 1010.665(b) of the proposed rule, imposing a “special measure” to combat the instant problem. Section (b)(1) would impose a prohibition on covered financial institutions (e.g. banks, securities brokers and dealers, and mutual funds) “opening or maintaining in the United States any correspondent account for or on behalf of a foreign banking institution if such correspondent account is used to process a transaction involving any of the Gambling Establishments.” Section (b)(2) would require that a covered financial institution go beyond basic due diligence when assessing its foreign financial institution clients, as it calls for “apply[ing] special due diligence to its correspondent accounts that is reasonably designed to guard against such accounts being used to process transactions involving the Gambling Establishments[,]” and specifies that such enhanced due diligence must include both sending written notice to foreign financial institution customers that they must not provide the casinos with access to their correspondent accounts and implementing screening mechanisms to identify correspondent account transactions involving the casinos.
FinCEN notes in the NPRM that various alternatives were considered to the blanket prohibition on the opening or maintaining of correspondent accounts, but that “[b]ecause of the nature, extent, and purpose of the obfuscation engaged in” by the casinos, any efforts to require additional information collection – e.g., reporting obligations, beneficial ownership identification, or enhanced know-your-customer (KYC) requirements – would ultimately be inadequate in addressing the paired goals of (a) protecting the U.S. financial system from risk and (b) impacting the Sinaloa Cartel’s ability to profit from its illicit activities.
The press release announcing the NPRM stated that it was being promulgated “in coordination with the Government of Mexico” – importantly for cross-border relations, as implementation of this rule may severely deplete willingness of U.S. financial institutions to do business with Mexico-based financial institutions and businesses in light of the heightened scrutiny required.
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