Visa has suspended international transactions for cards issued by CIBanco, a Mexican commercial bank that offers financial services to individuals and companies, following allegations of money laundering by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury.
CIBanco, with over US $7 billion in assets, confirmed the unilateral decision by Visa, which was announced suddenly on Sunday and took effect on Monday afternoon.
S&P Global Ratings also terminated its contract with CIBanco on Monday and withdrew its ratings data, including the downgrade to “CreditWatch with negative implications” S&P had issued on Friday.
“We believe CIBanco is in a very vulnerable situation given the consequences that may arise from FinCEN’s announcement,” the ratings agency said.
Additionally, Mexican real estate trusts Terrafina and Fibra Inn said they would remove lender CIBanco as their trustee, according to Reuters.
CIBanco was among three Mexican financial institutions that were sanctioned by the U.S. Department of Treasury last Wednesday and accused of laundering millions of dollars for drug cartels. The sanctions issued prohibit certain transactions with U.S. banks.
Visa not only suspended all transactions without prior coordination with CIBanco, but also did so before the 21-day period the Treasury Department typically allows for such actions, according to the magazine Expansión.
Mexican government takes control of 2 Mexican banks facing US sanctions
The suspension specifically affects CIBanco’s international transactions, including those made with the CICash Multicurrency card. CIBanco has stated that client funds are safe and can be reimbursed.
On Thursday, Mexico’s National Banking and Securities Commission (CNBV) decreed a “temporary managerial intervention” at CIBanco after the FinCEN announcement, saying the move was aimed at protecting the bank’s creditors and depositors.
On Friday, Mexico’s Finance Minister Edgar Amador said the interventions at the three financial institutions “provide certainty” to account holders.
CIBanco issued a similar statement to clients:
“Your funds are safe and can be reimbursed through our branch network in the original currency (if available) or in local currency using the method the customer chooses,” it said.
S&P is not so bullish, however. According to the ratings agency, there is a risk that the bank will not be able to access financial transfers with U.S. and domestic institutions, which would limit the sustainability of the business over the next 12 months.
S&P warned that CIBanco’s profitability and capital levels could also be weakened given the contraction in revenue.
CIBanco was originally established in 1983 as Consultoría Internacional (CI), a currency exchange house. It later transformed into a multiple banking institution in 2008.
With reports from Expansión, La Jornada, Infobae, Reuters and Milenio
