Some banks pulling back from doing business on border
Posted Dec 1, 2014, 5:19 pm
Alicia Canales Cronkite News
NOGALES – A Chase branch outside of Mayor Arturo Garino’s office has consolidated with the bank’s other branch in this border city. Bank of America recently sold its two branches here to Washington Federal as part of a larger deal involving 23 locations in Arizona and Nevada.
But while U.S. Sen. John McCain is raising red flags about major banks closing branches along the U.S.-Mexico border, Garino said he and his staff haven’t heard of any flight from this city.
“It might be a little premature to find out exactly, but every time you hear something affecting a region when it comes to economics, there’s always a concern,” he said. “So let’s see what happens.”
In late September, McCain wrote letters accusing Bank of America, Wells Fargo, Chase and Citigroup of scaling back services and closing branches in communities along the U.S.-Mexico border, as well as placing some restrictions on cross-border transactions. In a news release, McCain said the moves were creating “higher transaction costs and substantial difficulties.”
McCain’s letters asked the banks to answer questions such as how many border-area branches had closed and the reasons for closing them.
“We cannot deprive our citizens just because they live along with border with the same accessibility to capital and financing that other citizens do,” McCain told Cronkite News recently at a book-signing event.
Julie Tarallo, McCain’s deputy press secretary, said all the banks have responded, but she declined to release those responses.
“In the responses the banks attributed their closures to the general economic decline in the area as well as regulatory and compliance burdens,” Tarallo said in an email. “The Permanent Subcommittee on Investigations, of which Sen. McCain is ranking member, is currently following up with some of the banks to get more information on the closures.”
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Representatives of each bank declined to comment and referred a reporter to McCain’s office.
The Bank of America sale to Washington Federal also included branches in Yuma, Douglas and Bisbee.
Douglas Mayor Danny Ortega said Chase has closed its branch there, meaning those with accounts have to travel an hour to Sierra Vista to visit the closest branch.
“By losing these two big banks, it just sends a bad message when we’re looking for investors,” he said. “I think it erodes the confidence of the people in the community.”
Garino, Nogales’ mayor, said he’s had to drive 45 miles to Green Valley for banking services after Bank of America closed here. But he said that people will find a way to bank whether it’s in Nogales, Tucson or another city.
“This is just an inconvenience of not having it right by the border,” Garino said. “If you were to lose all the banks in Nogales, naturally it would hurt one way or another, but that’s not going to happen.”
Garino said it’s too early to tell what the economic impact could be if banks were to scale back further. He said those in the produce industry or working in maquiladora factories would be most affected because those workers on both sides of the border have accounts in the U.S.
Bruce Bracker, chairman of the Greater Nogales Santa Cruz County Port Authority, said he’s concerned for businesses seeking loans. He said changes by banks can sever relationships between business owners and loan officers.
“If it’s a cyclical business, they’re looking at its low point of the season, they could be, ‘Why are we giving this guy money?’” he said. “They don’t understand the cycle.”
Meanwhile, Bracker said he’s left to wonder why things have changed.
“The banks didn’t all of a sudden one day decide, ‘We don’t want to do business on the border because it’s too risky,’” he said. “They’ve been doing business on the border for years. Obviously something else is going on where it’s becoming cost-prohibitive for them to do business on the border.”
http://www.tucsonsentinel.com/local/...siness-border/
Border Businesses Lose Bank Accounts Amid Money-Laundering Fears
January 04, 2015 7:46 AM ET
Jude Joffe-Block
In the border town of Nogales, Mexico, the lunch crowd is settling in at La Roca restaurant. Its live music and traditional cuisine have made it a landmark for 43 years.
The prices are listed in dollars, and many of the diners come in from Arizona. The ownership is American, and so was the restaurant's bank account and credit card until a couple of months ago.
Some U.S. banks are closing the accounts of certain customers along the Mexican side of the border. It's part of an effort to stay in line with U.S. anti-money-laundering regulations, but it's taking a toll on legitimate border business.
A few months ago, La Roca's owner, Alicia Martin, got a call from Chase Bank. The bank said it was closing some foreign business accounts, including the account for Martin's restaurant.
"And I was like, 'What? What are you talking about? You know, why?' " Martin recalls. "And she says, 'Well, because we can't monitor you.'
"I said, 'I have been with you for over 40 years, and you can't monitor me?' " Martin says. "And she said, 'Well don't take it personally ... because there have been some people that have been with us for 70 years, and we're closing their accounts as well.' "
"I feel like we are being punished for somebody else's deeds."
- Alicia Martin, restaurant owner
Chase spokeswoman Mary Jane Rogers confirmed the bank made a business decision to close fewer than 5,000 small foreign business accounts as it seeks to comply with anti-money-laundering regulations.
Regulators have cited the bank in the past for not having adequate anti-money-laundering controls. In fact, that's one reason Chase had to pay billions in fines in recent years.
Martin thought about moving her account to another U.S. bank, but she heard others might soon follow Chase's lead.
"What happens to those of us who do business transparently, and it's honest business?" she says. "I don't know, I feel like we're being punished for somebody else's deeds."
The Southwest border is seen as a high-risk area for money-laundering because of drug- and human-smuggling organizations. Paul Hickman, president and CEO of the Arizona Bankers Association, says banks are trying to do the right thing.
"They don't want to help facilitate illegal conduct," Hickman says. "And if they find a concentration of high-risk accounts, they're going to scrutinize those, and they're going to decide, all right, what kind of resources do we have to police this?"
And he says if banks don't have the resources to properly monitor certain accounts, they will not want to "put society at risk by continuing to potentially facilitate this kind of trade."
A woman uses a cash machine at an HSBC bank office in Mexico City. The multi-national bank was heavily penalized several years ago for permitting huge transfers of drug cartel money between Mexico and the U.S.
Lately, the federal government has been tightening banking regulations, especially on anti-money-laundering laws in particular.
"Most of the major banks are either facing enforcement actions, or there have been enforcement actions," says Dennis Lormel, who used to run the FBI's financial crimes program and now consults on anti-money-laundering issues.
HSBC came under fire a few years ago for failing to stop a Mexican drug cartel from laundering millions of dollars through its banks. But as banks and regulators try to prevent that kind of crime, it's not always obvious which client accounts should be closed.
"What has been going on in the border area of the United States actually has been a point of contention between the government and the private sector for at least six months, maybe even longer," says John Byrne, the executive vice president of the Association of Certified Anti-Money Laundering Specialists.
Byrne says the regulatory environment has been changing lately, so banks fear they could be slapped with fines or forced to make expensive reforms if they make even small mistakes monitoring a risky customer. For that reason, banks sometimes decide it is a better business decision to close certain accounts rather than take on the risk.
Regulators and law enforcement also say it's counterproductive for banks to close too many accounts, since it sends transactions underground.
In recent months, some banks began closing the accounts of check cashers, currency exchange dealers, money transmitters and other types of money service businesses. These types of businesses have a reputation for being vulnerable to money-laundering.
The U.S. Department of the Treasury's Financial Crimes Enforcement Network released a a statement in November urging banks to consider these businesses on a case-by-case basis.
"Refusing financial services to an entire segment of the industry can lead to an overall reduction in financial sector transparency that is critical to making the sector resistant to the efforts of illicit actors," the statement said.
"This is a very complex subject," Lormel says. "There's no easy answer, there's no easy fix. And unfortunately some very honest and innocent people are getting caught up losing their banking relationships."
Cattle broker Juan Carlos Ochoa says he is another one of the honest, innocent people who lost his bank account. Ochoa is a dual citizen who imports cattle into Douglas, Ariz. He runs this feedlot on the Mexican side of the border.
"The capacity is 5,000 heads of cattle," Ochoa says in his native Spanish. "And we are full."
"I can't be without a bank account because every day I have to buy and sell cattle. Every day."
- Juan Carlos Ochoa, cattle importer
Ochoa says business is good, except for the stress of where to keep his money. After Chase closed his account, he moved to Wells Fargo. Then Wells Fargo closed his account too, without offering an explanation.
Lori Brown, a spokesperson for Wells Fargo, wrote in an email that the bank evaluates all of its relationships for risk and return.
Ochoa needs a U.S. account, so American buyers can easily wire him his payments.
"I can't be without a bank account because every day I have to buy and sell cattle," Ochoa says. "Every day."
But at the same time, a number of major banks have been closing branches on the Arizona border. There's only one bank left in Douglas that hasn't yet rejected Ochoa.
"The day there are no more banks left I don't know what I am going to do," he says.
Ochoa says the irony is this trend could force some border businesses to use cash. And that makes transactions less transparent and more vulnerable to money laundering.
http://www.npr.org/2015/01/04/374582...undering-fears
