The money trail

The good news for Vector, CIBanco, and Intercam is that the U.S. Treasury Department granted a 45-day extension to implement corrective measures for their risky activities. The bad news is that the management intervention by the National Banking and Securities Commission will not cease. Quite the opposite.

The extension of the deadline is a credit to Mexican tax authorities, who quickly overcame the initial blunders and embarked on a path of containment and collaboration with the common enemy: the drug cartels.

The risk of a bank run quickly dissipated, and now the day-to-day operations of financial institutions are subject to strict scrutiny. Likewise, external reporting on their financial statements. The targeted trio was audited by KPMG.

CIBanco's fiduciary department is a complete mess, and government intervention could culminate in another major operation: the transfer of those funds to Nafin.

From initial reactions, to ostracism. Although the Monterrey brokerage firm has been more exposed, media-wise, banking institutions are currently facing a reputational crisis… and a host of complaints for practices that harm their clients' interests.

Unsecured self-loans, triangulation with front companies, and double accounting… These allegations expose a systemic, sophisticated, and silent fraud involving other financial intermediaries, such as Sacbepayment and FINSUS, but also some of the Big Seven.

Isolated incidents or a surgical theft? The most compelling evidence points to a structure where shareholders lent each other hundreds or billions of pesos without collateral, without accounting reports, and with no intention of repaying them. And to the intermediation of front companies, vehicles for simulating foreign exchange transactions and concealing self-loans.

Bad checks, bridging accounts, and allied banks that, knowing the true source of the funds—that the real owners didn't exist and that the company was a front—executed transfers to cover liabilities generated by shareholders through foreign exchange transactions, all with a legitimate appearance.

Bank secrecy requires the names of those involved and account numbers to be kept confidential in the examples documented by the complainants, who were affected by these networks that operated with CIBanco, Intercam, and FINUS Financiera Sustentable, among others.

At the center of the scheme, they allege, is Direct Marketing Electronic Services. At CIBanco, they explain, a special area—called the International Dynamic Portfolio—operated to maintain parallel accounting and conceal unrecorded transactions, which was operated with the knowledge of several executives.

This modus operandi is not new. The owners of CIBanco were previously controllers of IXE Banco, a beneficiary of the Fobaproa bailout.

Today, history repeats itself under a different facade, but with the same logic. The operation represents a systemic risk for both national and international savers. While the funds are dispersed through companies in Spain and offshore structures, the authorities have failed to act.