Federal regulators in the United States are reportedly investigation no fewer than two major American banks with regards to their relationships with clients believed to be tied to Mexican drug cartels.
Reuters reported exclusively on Wednesday this week that the US Securities and Exchange Commission is probing both Charles Schwab Corp. and Bank of America’s Merrill Lynch brokerage firm because clients of those entities were linked to Mexican drug cartels.
The SEC, Reuters reported, “is looking into whether the brokerages missed red flags that could indicate attempts to move money illicitly or to feed proceeds from drug trafficking and other crimes into the financial system by failing to know their customers well enough,” according to the newswire’s sources.
Representatives for both the SEC and Merrill Lunch declined to comment, Reuters reported, but an unnamed source claimed that Schwab has already launched an internal investigation of its own.
And while the SEC did not directly assist Reuters in their report, two sources confirmed to the newswire that the investigation has so far led regulators to believe that both Schwab and Merrill accepted “shell company” clients registered to individuals with fake addresses.
According to those sources, the financial companies had failed to properly vet their clientele and in turn took in customers linked to illegal activities, including the Mexican drug trade.
Charles Schwab Corp. founder and chairman Chuck Schwab.
Most of the sources in the Schwab case, one insider told Reuters, “were located near the Mexican border and some were linked to drug money in Mexico.”
If those allegations are accurate, then it would be far from the first time that major American banks were linked to the Mexican drug trade: HSBC paid the US government $1.9 billion last year after it was caught aiding narcotics kings, and in years prior Wachovia Corp., Bank of America and Wells Fargo were all tied to similar allegations.
This time, though, the Department of Justice might not order a hefty settlement if bankers are found to have conspired these deals, but instead prison sentences for the Americans involved. Although no US banks have been held accountable for the last major economic collapse, Attorney General Eric Holder said earlier this month that no company or individual — be it a bank or otherwise — is “too big to jail.”