FinCEN Prohibits Fund Transfers Involving Three Mexico-Based Financial Institutions Under FEND Off Fentanyl Act

On June 25, 2025, the US Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN") issued three orders (the "rders") pursuant to 21 U.S.C. § 2313a, a recently enacted authority under the FEND Off Fentanyl Act (the "Fentanyl Act"), designating three Mexico-based financial institutions as "primary money laundering concerns" in connection with illicit opioid trafficking.¹ The institutions, which include two banks, CIBanco, S.A., Institución de Banca Múltiple ("CIBanco") and Intercam Banco, S.A., Institución de Banca Múltiple ("Intercam"), and one brokerage firm, Vector Casa de Bolsa, S.A. de C.V. ("Vector") (collectively, the "Designated Entities"), are alleged to have facilitated significant financial transactions on behalf of Mexico-based cartels engaged in fentanyl production and distribution.² The Orders mandate that any covered financial institution ("Covered Institution") as defined under the Bank Secrecy Act ("BSA"),³ including, but not limited to, banks, broker-dealers, money services businesses and mutual funds, must reject transactions involving the Designated Entities.⁴ Investment advisers are not currently subject to the Orders, but will be on Jan. 1, 2026.

The Orders mark the first use of Section 2313a since it was enacted in 2024, reflecting an escalation in the federal government's efforts to, in the words of Treasury Secretary Scott Bessent, use "all tools at [its] disposal to counter the threat posed by criminal and terrorist organizations trafficking fentanyl and other narcotics."⁵ The special measures in the Fentanyl Act have similarities to special measures under Section 311 under the USA PATRIOT Act but have additional features.⁶

The Orders are effective Sept. 4, 2025 and have no expiration date.⁷ This Alert provides an overview of the Orders, including background information, a summary of findings, and an analysis of compliance obligations and considerations. Additionally, it outlines potential penalties and highlights recent developments, offering guidance on preparatory actions for compliance in leading up to the effective date.

Background

Since President Trump's return to office in January 2025, the executive branch has prioritized disrupting international narcotics trafficking, with a focus on fentanyl and other synthetic opioids. Early in 2025, President Trump signed an Executive Order that established a framework for designating certain drug cartels as Foreign Terrorist Organizations or Specially Designated Global Terrorists.⁸ Under these authorities, the Departments of State and Treasury designated eight organizations, some of which FinCEN alleges dealt with the Designated Entities, including the Sinaloa Cartel, the Jalisco New Generation Cartel ("CJNG") and the Gulf Cartel.⁹

Separately, Congress passed the Fentanyl Act in 2024. The Fentanyl Act included 21 U.S.C. § 2313a, which empowers the Secretary of the Treasury to impose targeted obligations or restrictions on US financial institutions where it determines, "upon reasonable grounds," that a foreign financial institution, transaction or account is of "primary money laundering concern" in connection with illicit opioid trafficking.¹⁰ Upon such a determination, the statute allows the Secretary to require US financial institutions to comply with one or more "special measures."¹¹ The special measures available under § 2313a include those also authorized under Section 311 of the USA PATRIOT Act, as well as the ability to prohibit or impose conditions on the transfer of funds to or from the designated party.¹²

Unlike Section 311, which broadly addresses money laundering threats and requires special measures via rulemaking with a notice-and-comment period, § 2313a targets opioid-related trafficking and allows FinCEN to swiftly impose special measures by order, without notice and comment.¹³

Summary of the Orders

Scope

The Orders target the Mexico-based operations of the Designated Entities, prohibiting transactions to and from these entities, including their branches, subsidiaries and offices within Mexico.¹⁴ The Orders prohibit "transmittals of funds from or to" the Designated Entities "or from or to any account or convertible virtual currency address administered by or on behalf of" the Designated Entities.¹⁵ The Orders do not affect the Designated Entities branches and offices outside of Mexico, including those in the United States. They also do not apply to any other affiliates, regardless of their location, or their parent holding companies.¹⁶ However, Covered Institutions should be careful of reputational or money laundering risks when doing business with these entities outside of Mexico.

Findings

The Orders assert that the Designated Entities have each played a "longstanding" and vital role in facilitating money laundering activities of Mexico-based cartels involved in illicit opioid trafficking, including laundering funds for cartels engaged in fentanyl production and distribution.¹⁷ As a result, FinCEN designated the Designated Entities as being of "primary money laundering concern" due to their provision of financial services that aid illicit opioid trafficking by Mexico-based drug trafficking organizations.¹⁸

• CIBanco. FinCEN designated CIBanco for its role in facilitating financial transactions on behalf of multiple Mexico-based cartels, including CJNG, the Gulf Cartel and the Beltrán-Leyva Organization.¹⁹ CIBanco is alleged to have processed payments tied to the procurement of precursor chemicals from China used in fentanyl synthesis.²⁰ In one instance, a CIBanco employee knowingly facilitated the creation of an account to launder $10 million on behalf of a Gulf Cartel member.²¹
• Intercam. FinCEN designated Intercam due to its involvement in facilitating transactions linked to illicit opioid trafficking.²² FinCEN highlighted a series of meetings in late 2022 between Intercam executives and CJNG representatives, concerning the transfer of funds from China to Mexico to support cartel operations.²³ From 2021 to 2024, a Chinese company associated with precursor chemical shipments reportedly received more than $1.5 million via Intercam from Mexican counterparties.²⁴
• Vector. FinCEN designated Vector, a Mexico-based brokerage firm, as a conduit for laundering drug proceeds and financing chemical procurement by major cartels, including the Sinaloa and Gulf Cartels.²⁵ The Vector Order indicated that between 2013 and 2021, a Sinaloa Cartel operative used Vector to transfer approximately $2 million from the United States to Mexico.²⁶ Between 2018 and 2023, Vector facilitated more than $1 million in payments to Chinese companies known to be involved in the precursor chemical trade.²⁷ FinCEN noted in its Order that these activities reflect material weaknesses in Vector's anti-money laundering/countering the financing of terrorism ("AML/CFT") compliance program.²⁸

Compliance Obligations and Consideration

Requirements for Covered Institutions

FinCEN has issued a series of FAQs to assist with compliance. By the effective date of Sept. 4, 2025, Covered Institutions are expected to:

• Cease engaging in fund transfers to or from the Designated Entities, including any transaction through an account or convertible virtual currency address held by or on behalf of such entities.²⁹ Covered Institutions must reject any prohibited fund transmittal. Notably, the Orders do not require the blocking or freezing of assets.³⁰
• Consider FinCEN's designation of the Designated Entities as institutions of primary money laundering concern in connection with broader BSA obligations, including the requirement to establish and maintain an effective AML/CFT compliance program.³¹

Preparatory Steps for Compliance

FinCEN expects Covered Institutions to implement appropriate measures to comply with the Orders, including conducting reasonable due diligence to prevent direct or indirect transactions involving the Designated Entities.³² Steps Covered Institutions can take to comply with the Orders include:

• Implementing customer screening and transaction monitoring systems capable of identifying and rejecting transactions involving the Designated Entities.
• Training relevant personnel, including those in customer-facing, operations and compliance roles, to ensure they are aware of the restrictions and able to identify and address prohibited transactions.
• Reviewing client relationships, agreements and transaction flows to assess potential exposure to the Designated Entities. Covered Institutions should also evaluate contractual rights and obligations, including the ability to reject or delay fund transfers under existing agreements.
• Assessing the impact on trust-related transactions, including situations in which a Designated Entity acts solely as trustee.

• Following the issuance of the Orders, the Ministry of Finance and Public Credit announced that it was temporarily transferring the trusts managed by CIBanco and Intercam to Mexican development banking entities to continue their operation under the National Banking and Securities Commission's supervision.³³ Covered Institutions should consider whether transitioning the trustee to alternative financial institutions may be appropriate, particularly in the context of evolving regulatory guidance.

Importantly, the Orders do not contain an exception for future or contingent payment obligations under agreements entered into before their issuance. Any transfer of funds to or from a Designated Entity on or after September 4, 2025 is prohibited. While the Orders contain no exemptions for specific transactions, FinCEN retains the authority to grant specific exceptions or authorizations on a case-by-case basis.

Compliance Questions Raised

The Orders do not, by themselves, impose new suspicious activity reporting ("SAR") obligations when a Covered Institution rejects a prohibited fund transmittal.³⁴ FinCEN has advised that, consistent with existing BSA obligations, Covered Institutions should assess whether transactions involving a Designated Entity warrant the filing of a SAR based on the facts and circumstances.³⁵ In cases where a SAR is filed, Covered Institutions should include relevant customer and transactional information, such as names, identification numbers, contact details, and a detailed description of the activity, and use the applicable identifier in Field 2 of the SAR form: "CIBanco2313a FIN 2025," "Intercam2313a FIN 2025" or "Vector2313a FIN 2025."³⁶

Although the Orders do not restrict correspondent accounts and therefore do not require standard USA PATRIOT Act Section 311-style notices to foreign correspondent account holders, Covered Institutions should be mindful of elevated risk. Furthermore, the compliance implications of the Orders may extend beyond Covered Institutions currently covered by the BSA. By explicitly linking the Designated Entities to Mexican drug trafficking organizations designated as foreign-terrorist organization ("FTO"), FinCEN's actions may expose counterparties to legal and reputational risks. These include increased scrutiny for potential involvement in money laundering or narcotics trafficking, and potential exposure under US counterterrorism laws, including the material support statute, which prohibits knowingly providing "material support or resources" to an FTO.³⁷ For example, a company engaged in business with a Designated Entity could come under scrutiny for indirectly facilitating the activities of a designated cartel by transacting through a Covered Institution. Companies should therefore reevaluate their compliance programs and strengthen due diligence controls to identify potential exposure to high-risk counterparties. In particular, firms should closely monitor FinCEN advisories, such as the June 2024 guidance addressing fentanyl precursor chemicals and manufacturing equipment and reassess their indirect risk exposure where foreign banks maintain correspondent relationships with the Designated Entities.³⁸

Penalties

Violations of an Order can lead to civil and criminal liability for a Covered Institution, as well as its directors, officers, and employees. If a Covered Institution violates an Order, FinCEN may impose a civil money penalty of at least two times the amount of the transaction but not exceeding $1,776,364 (adjusted for inflation).³⁹ If a Covered Institution willfully violates the Orders, it may be subject to a criminal fine of at least two times the amount of the transaction but not exceeding $1,000,000.⁴⁰

Prospective Future Developments

The legal and political situation remains dynamic. Mexican President Claudia Sheinbaum has challenged the allegations behind FinCEN's designations, asserting that the Treasury Department has failed to provide any evidence of money laundering, despite the Mexican government's repeated requests. Sheinbaum noted that Mexican investigations into CIBanco, Intercam Banco and Vector revealed no wrongdoing and emphasized that the Designated Entities conduct legitimate transactions with established Chinese companies in Mexico.⁴¹ Meanwhile, in response to the Orders, Mexico's banking regulator, the Comisión Nacional Bancaria y de Valores ("CNBV"), has intervened in CIBanco and Intercam to safeguard the rights of savers and customers, placing management decisions under the CNBV's direct supervision.⁴² Additionally, as these Orders mark Treasury's inaugural use of its authority under the Fentanyl Act, it may face legal or political challenges from the Designated Entities or the Mexican Government.

Conclusion

Treasury's designation of the Designated Entities as primary money laundering concerns highlights its priority to combat drug trafficking, especially involving illicit opioids. The government is expected to continue leveraging these authorities to address drug trafficking and related threats. In today's shifting legal and political landscape, Covered Institutions must establish up-to-date compliance frameworks and carefully monitor transactions and relationships with potentially sanctioned entities to effectively meet BSA obligations. Schulte Roth & Zabel advises clients to implement robust due diligence and compliance strategies to mitigate exposure to regulatory penalties and reputational risks.

Footnotes

1 FinCEN announced the Orders on June 25, and they were published in the Federal Register on June 30. See FinCEN, Imposition of Special Measure Prohibiting Certain Transmittals of Funds Involving CIBanco S.A., Institución de Banca Múltiple, 90 Fed. Reg. 27770 (June 30, 2025), available here (hereinafter, "CIBanco Order"); FinCEN, Imposition of Special Measure Prohibiting Certain Transmittals of Funds Involving Intercam Banco S.A., Institución de Banca Múltiple, 90 Fed. Reg. 27777 (June 30, 2025), available here (hereinafter, "Intercam Order"); FinCEN, Imposition of Special Measure Prohibiting Certain Transmittals of Funds Involving Vector Casa de Bolsa, S.A. de C.V., 90 Fed. Reg. 27764 (June 30, 2025), available here (hereinafter, "Vector Order") (collectively, the "Orders"). See also Treasury Press Release, Treasury Issues Historic Orders under Powerful New Authority to Counter Fentanyl (June 25, 2025), available here (hereinafter, "Treasury Press Release").