Search

 

Cablegate: Visiting Fincen Director Discusses Anti-Money

VZCZCXRO0252
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1097/01 1021718
ZNR UUUUU ZZH
P 111718Z APR 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 1402
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RUEAHLA/DEPT OF HOMELAND SECURITY
RHEHNSC/NSC WASHINGTON DC
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RHMFIUU/CDR USNORTHCOM
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 05 MEXICO 001097

SIPDIS

SENSITIVE
SIPDIS

STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, S/CT FINANCE
STATE FOR EB/ESC MCMANUS AND IZZO
FINCEN FOR CARA BROADHEAD
TREASURY FOR IA (ANNA JEWEL, LUYEN TRAN)
TREASURY FOR TFFC (RACHEL FEDEWA)
DOJ AFMLS FOR ROBERT STAPLETON
DHS/PLCY/OIA
CBP/OIA AC MULLEN
ICE/OIA M VANACORE
NSC FOR RICHARD MILES, DAN FISK
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (ANDREA RAFFO)

E.O. 12958: N/A
TAGS: EFIN ETRD KTFN PTER MX
SUBJECT: VISITING FINCEN DIRECTOR DISCUSSES ANTI-MONEY
LAUNDERING COOPERATION WITH MEXICAN OFFICIALS

1. (U) This is a joint message from Embassy Mexico City and
FinCEN.

2. (SBU) Summary: Financial Crimes Enforcement Network
(FinCEN) Director James H. Freis, Jr. visited Mexico City
19-23 February to meet with senior Mexican officials and
address a joint FinCEN-FIU strategic analysis training
seminar for Central American FIUs conducted 18-21 February.
Specifically, Director Freis met with Finance Secretary
Agustin Carstens; Luis Urrutia, Director of the Financial
Intelligence Unit (FIU); Guillermo Babatz, President the
National Banking and Securities Commission (CNBV); and Jose
Quijano, Director General of Financial System Analysis at the
Bank of Mexico (BOM). The meetings concentrated on FinCEN,s
Southwest Border Report and collaboration with the FIU on
money laundering issues. Throughout the meetings, Government
of Mexico (GOM) officials communicated a strong resolve to
form a deeper collaboration with their counterparts in the
United States and increase their efforts to fight money
laundering and bulk cash smuggling. Of particular note,
Secretary Carstens endorsed a joint FIU-FinCEN analytical

SIPDIS
study to examine mechanisms of money flows between our
countries. End Summary.

--------------------------
Finance Secretary Carstens
--------------------------

3. (SBU) Discussions with Finance Secretary Carstens centered
on FinCEN's December 2007 Southwest Border: Analysis of
Currency Flow Issues Report (Southwest Border Report) and
planned future collaboration between FinCEN and the FIU to
examine the issue further. The Southwest Border Report
examines processes related to cross-border movement of
currency between the United States and Mexico, and how
various factors affect trends in currency repatriated from
Mexico. Data analyzed for this report suggest a large
imbalance between the amount of U.S. currency that travels to
Mexico, and the amount of U.S. currency returned from Mexico
through traditional banking channels. FinCEN's analysis of
Currency Transaction Reports, CTRs, and other data indicate
that approximately USD 9-10 billion of cash returned to the
United States in 2006 remains unexplained by available
estimates of legitimate activity. See paragraph 23 for
distribution details.

4. (SBU) Director Freis provided a copy of the Southwest
Border Report and discussed future collaboration with the FIU
to examine the issue further. Secretary Carstens expressed
his appreciation for sharing the report with the Government
of Mexico (GOM), and gave his approval for the FIU and FinCEN
to begin work on a combined cash flow study. In discussing
whether any product between FinCEN and the FIU should be made
public, Carstens opined that the FIU has been extremely
effective while keeping a low profile, and voiced concern
that increased visibility and public attention might lead to
increased security concerns for the FIU.

5. (SBU) In subsequent discussion between FinCEN and the FIU,
the GOM proposed that FinCEN and the FIU analyze the whole
cycle of currency flows that derive from sales of illicit
drugs in the United States. The FIU will contribute with all
of the information it has contained within its databases and
data obtained from the Bank of Mexico (BOM). The GOM
anticipates that FinCEN will reciprocate in sharing similar
data as well as data obtained from the Federal Reserve.
Director Freis and FIU Director Luis Urrutia have maintained
an open dialogue on plans for the combined study and will

MEXICO 00001097 002 OF 005


meet in Washington on April 14 to further discuss the way
ahead.

------------------------------------------
National Banking and Securities Commission
------------------------------------------

6. (SBU) Guillermo Babatz, President of the National Banking
and Securities Commission (CNBV), also discussed money
laundering and bulk cash smuggling issues with FinCEN.
Babatz told Director Freis this issue is a top priority for
President Calderon and, accordingly, important for the
relevant GOM agencies. Various agencies are beefing up their
efforts to combat money laundering and bulk cash smuggling by
increasing personnel and training opportunities. Moreover,
there is a push to improve coordination among counterpart
agencies. Babatz remarked that CNBV's relations with the
Attorney General's Office have improved due to better
communication.

7. (SBU) Regarding bank clients that buy large quantities of
U.S. dollars, Babatz remarked that it is often a challenge to
discern legitimate transactions from illegitimate ones.
According to Babatz, the CNBV would like to conduct a study
to get a better handle on which companies/sectors buy cash at
a bulk discount for a legitimate purpose. Developing such
profiles will help Mexico single out illicit activities.

8. (SBU) Separately, Babatz expressed his concern regarding
U.S. banks associating a high level of risk with casas de
cambio (regulated money exchange houses or "CC") accounts
since the Casa de Cambio Puebla case. (Note: Puebla used its
correspondent accounts with Wachovia and Harris Bank to
launder money on behalf of Mexican cartels. End Note.)
According to Babatz, U.S. banks are closing their
correspondent CC accounts -- which is basically putting the
casas de cambio out of business. He remarked that he would
be surprised if there were any CCs left by the end of the
year due to consolidations/mergers and business closures.
Babatz is concerned that CC cash flows will shift to less
regulated institutions such as centros cambiarios (unlicensed
money exchange houses).

9. (SBU) Babatz requested the United States and Mexico
discuss and coordinate actions that could have repercussions
for Mexico's financial system. Babatz expressed his concern
over the potential press reaction to any further actions, and
the possibility that negative press on CCs will create a
domino effect and potentially cause problems for Mexican
banks. He does not want future law enforcement and
regulatory actions to affect confidence in the Mexican
financial system by creating the impression that the Mexican
financial system is a "complete mess." Babatz told FinCEN
and Econoff that he understands cooperation among U.S. and
Mexican law enforcement agencies has improved, and suggested
this may "help the problem take care of itself."

---------------------------
Financial Intelligence Unit
---------------------------

10. (SBU) Freis and his team met with the head of Mexico's
Financial Intelligence Unit, Luis Urrutia, and the FIU's
strategic analysis staff to discuss FIU operations and future
collaboration.

11. (SBU) FIU Operations: The FIU is in the process of
modernizing its IT capabilities. Although the FIU originally

MEXICO 00001097 003 OF 005


planned to implement the UN's anti-money laundering platform
(goAML), Director Urrutia is now exploring additional
options, including the possible creation of a Mexican system.
Urrutia will make a final decision once he visits the
Canadian, Spanish, and French FIUs to review their systems.

12. (SBU) Data Quality: The FIU will also revise its
suspicious activity report (SAR) form to include more fields
to capture additional information from reporting entities.
In terms of providing feedback to reporting entities, the FIU
will begin to send feedback about SAR quality on a quarterly
basis. According to Urrutia, the FIU has a feedback system
in place and is currently in the testing process.

13. (SBU) In 2004, centros cambiarios were mandated to report
to the SAT, the Mexican tax authority; however, the FIU has
yet to receive quality reporting from these institutions.
The FIU is hopeful that the SAT has worked through its IT
issues to permit effective reporting and expects to receive
new test reports from this sector in May 2008.

14. (SBU) FIU officials said that the GOM intended to release
a national strategy to combat money laundering in March. The
strategy would identify money laundering risks and
vulnerabilities. In addition, the FIU will undertake risk
assessments of identified vulnerable sectors. Urrutia
indicated that identifying who will be the regulator of new
reporting entities will be a challenge for the GOM in the
near future. (Comment: The concerns noted in paragraphs
12-14 will be addressed in part by the USD 1 million training
package that the USG is providing GOM anti-money laundering
entities. Specifically, the USG will address issues
associated with prudential (Basel norms) risk-based
assessments of money services businesses through hands-on
seminars. These workshops will provide background to
establish monitoring guidelines for the SAT. Moreover, in
the training planned for the FIU, Treasury experts will
review the planned changes to the 13 different reporting
formats for SAR and CTR financial industry reporting to
attempt to help standardize the information for inclusion in
FIU databases that will be analyzed by data mining software
for sophisticated link analysis. This information is planned
to be used in conjunction with the APIS (Advance Passenger
Information System) information now received by SAT's General
Customs Office. End Comment.)

-----------------------------
Central American FIU Training
-----------------------------

15. (U) Freis and Urrutia provided closing remarks to a joint
FinCEN-FIU strategic analysis training seminar for Central
American FIUs. The training was conducted 18-21 February and
marked the first joint training initiative between FinCEN and
the FIU. Focused on enhancing Central American FIUs
understanding of strategic analysis concepts, the training
was attended by representatives of the following FIUs:
Guatemala, Honduras, Belize, El Salvador, Panama, Colombia,
Canada, Mexico and the United States.

--------------
Bank of Mexico
--------------

16. (SBU) Freis and Urrutia also met with the Bank of
Mexico's Director General of Financial System Analysis, Jose
Quijano Leon, and Patricia Torres of the Attorney General's
Office to discuss information the BOM receives from Mexican

MEXICO 00001097 004 OF 005


financial institutions and how the FIU and FinCEN might use
this information to inform a joint money flow study.

17. (SBU) Quijano explained that the BOM was not involved in
anti-money laundering efforts except for those that related
to the safety and soundness of the Mexican financial system.
As the regulator of foreign exchange transactions, the
Finance Secretariat asked the BOM to examine transactions to
see if new regulation would need to be created. According to
Quijano, the GOM wanted to know how many dollars the banks
were buying on an aggregated basis from companies and
individuals. The BOM began collecting this information in
2006.

18. (SBU) The BOM routinely sends questionnaires to all
reporting institutions, such as banks, casas de cambio,
broker dealers, large companies that conduct business in the
USD 1 million range, and companies conducting business in
U.S. currency in the USD 3,000-1 million range. The
questionnaire collects the following information, which is
reported on a quarterly basis: transactions with financial
intermediaries; cash deposits; foreign exchange cash
transactions; and the buying and selling of used U.S.
dollars. Institutions also must report on a monthly basis
the amount of dollars repatriated back to the U.S. by
denomination. Quijano noted that the BOM does not receive
information on every transaction, only aggregate amounts. He
also noted the BOM requires casas de cambio to classify
transactions -- i.e. if the casa does transactions on behalf
of centros cambiarios. Quijano acknowledged that this
reporting has not been very precise.

19. (SBU) Quijano explained that the BOM views itself as the
collector of these data and a conduit between institutions
providing this information and other GOM agencies. Through a
memorandum of understanding, the BOM can share these data
with other GOM authorities. Quijano advised that the BOM has
received and processed information for 2007. Quijano stated
that it would be good to compare Mexico's data with similar
USG information to determine whether new regulation is
needed.

20. (SBU) Quijano estimated that most of the exportation of
U.S. dollars has a legal or legitimate basis, such as large
retail institutions on the borders. These institutions
receive U.S. cash and deposit it into the bank. The bank
will then export the cash immediately. In addition, Quijano
raised the theory that entities are buying dollars at a
discount and paying suppliers abroad.

21. (SBU) According to Quijano, the GOM is investigating the
appropriate level of control for U.S. cash transactions. One
proposal is to lower the current reporting threshold from USD
3,000 to USD 2,000. Banks have proposed enacting a ceiling
based on the risk of a client. For instance, if the
transaction is USD 500 or above, the bank would need to file
a report and exercise more controls.

22. (SBU) Freis shared with Quijano FinCEN's Southwest Border
Report and discussed the joint cash flow study between FinCEN
and the FIU. Freis expressed the desire for the United
States and Mexico to educate the public about legitimate
flows between our borders, while focusing on finding the
illegitimate. Quijano expressed his support for the project
but stipulated that a legal basis must be arranged with the
Finance Secretariat about sharing its reports between the FIU
and FinCEN. Furthermore, Quijano stated that the sensitivity
of its information will need to be discussed with the

MEXICO 00001097 005 OF 005


Secretary of Finance and BOM's Governor before any

SIPDIS
information could be disclosed to the public. Quijano also
conveyed his concerns about a publicly released report and
the potential impact it would have on consumer confidence in
the Mexican financial system.

23. (U) FinCEN's Southwest Border Report is currently
available for distribution in a Law Enforcement Sensitive
version. Authorized persons may contact Ann Martin
(ann.martin@fincen.gov) or Joanna Kobliska
(joanna.kobliska@fincen.gov) at FinCEN's Office of Law
Enforcement Support to obtain a copy.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
BASSETT

© Scoop Media

 
 
 
 
 
World Headlines

 

Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>

ALSO:

Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>

ALSO:

Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>

ALSO:

 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC