Mexico was swept by a wave of violence following the recent killing of Nemesio Oseguera Cervantes, a.k.a. "El Mencho," the leader of a major drug cartel, by the nation's armed forces with intelligence support from the United States. Historically, the death of a cartel boss triggers two events: an immediate spasm of revenge against the government, followed by bloody internal struggles as factions move to fill a power vacuum. Both are already happening.
This is just the latest development in an accelerating and highly visible campaign by the Trump Administration to take on narcotics and the risk they pose to American national security.
Cartel-related headlines are usually violent: killings, bombings, kidnappings, retaliations and violence on domestic populations caught in the middle of decades of strife. But further from those headlines, a focus on following the money by the U.S. Treasury Department and other three-letter agencies is gaining momentum, drawing on lessons learned post 9/11. Because, at the end of the day, it is all about the money.
The first shots in this new financial war south of the U.S. border were heard in February of last year, when the U.S. State Department named eight organizations as FTOs (Foreign Terrorist Organizations) and subsequently designated fentanyl as a WMD (Weapon of Mass Destruction). With these moves, the risk shifted from transnational narcotics to a direct, quantifiable threat to national security, unlocking vast national authorities and capabilities. In practice, the designation of these groups also means that any bank, payment company or corporation that moves value or provides services to these groups opens itself to criminal and nearly unlimited civil litigation.
In this environment, a wrong move could be existential for a financial institution, its leadership and its board of directors. Mistakenly moving $500MM for the Sinaloa cartel carries far heavier risk now than it might have even a few years ago.
The risk isn’t hypothetical. We know now, after billions in fines and drawn out public legal cases, that even sophisticated financial institutions like HSBC and TD Bank are vulnerable to cartels, both directly and through insiders in a position to bypass controls. Missteps by both cost shareholders mightily, not to mention decades of stunted growth plans that can never be fully recovered.
In the eyes of the law and the American public who are losing their family and friends to fentanyl, defending a bank for failure to act is a tough defense for even the most influential law firm. Last June, the U.S. Treasury Department flexed its muscles on this very point, naming three financial institutions in Mexico with the Patriot Act 311 provision, which is essentially a killshot, blacklisting any U.S. bank from working with them. All three entities have ceased operations.
Unlike 9/11 where al Qaeda largely operated from the mountains of Pakistan and Afghanistan, this threat is both next door and interwoven across our hemisphere through trade, payments and private wealth. It is also operational within the United States itself, with cartels operating in nearly every state in the country.
The threat is also complex, ranging from the cartels themselves to elaborate Chinese money laundering operations, sometimes manned by international students facilitating the movement of precursor chemicals and proceeds of crime at scale across North America. For example, late last year FinCEN, the U.S. Financial Intelligence Unit, issued an advisory highlighting some $312 billion of suspicious transactions reported by financial institutions between January 2020 and December 2024 were tied to Chinese money laundering and connected to cartels.
What’s often overlooked here, is that the reporting institutions that participated in this analysis accounted for under five percent of all reporting institutions in the United States. Meaning, the amount of money being laundered directly through the United States by cartels and their affiliates is almost certainly much higher than reported.
This, in light of everything else, should be alarming to American and foreign banks, warranting greater investment in advanced data and techniques to bolster and accelerate risk intelligence operations. In risk management terms, ensuring you are in front of cartel-related risk is now a ‘no-brainer’.
It also happens to be the right thing to do in ensuring the integrity of the international financial system. For over a year, the cartels have been in the Administration’s crosshairs; arguably more than anything else. This focus, which understandably polls well too, has only escalated with an increasingly bold campaign including the daring capture of Nicolas Maduro and the most recent killing of Mencho on the streets of Tapalpa, a scene that looked closer to Kandahar than a family vacation to the Mexican Pacific coast.
The financial sector is no longer adjacent to this fight — it is on the front lines of it. In this environment, compliance is not a cost center; it is a core pillar of institutional resilience. Banks that fail to adapt to this new reality risk more than fines, they risk losing their license to operate. The mandate is clear: identify the money, stop the flow, or be prepared to answer for the consequences.
