With these duties in mind, choosing a bank or brokerage is one of the most important decisions a CFO can make on behalf of his company. Normally, it is a relatively straightforward effort: negotiate the lowest costs, best currency conversion rates, highest returns on investments, and insure the bank has the ability to rapidly and seamlessly transfer funds between countries. But such is not the case when it comes to banking in Mexico.
A group of Banco Monex’ clients, both individuals and small business owners, found out this the hard way when Monex’ employees systematically drained their accounts in 2018 and the fraud only discovered after the Ponzi scheme ran dry of new funds and a customer brought it to Monex’ attention. The fraud itself was inexcusable and shocking, illustrative of pathetically lax security and audit procedures. Even worse was Monex’ handling of the fraud and restitution which became a nightmare for many.
Monex initially refused to fully reimburse many of the larger account holders, and indeed had to be sued before they made many victims any offers of restitution. And even then those offers were often substantially than 100% of their losses. As a CFO that has responsibility for funds held in Mexico, it is essential to understand that Mexico has a dysfunctional regulatory system, and a judicial system that is hopelessly ineffective. Indeed, according to the country’s former head of CONDUCEF, Mexico’s consumer protection agency, Monex is effectively unregulated. With no regulatory muscle and a judicial system that can take 5+ years to navigate, combined with the absence of additional damages above the actual funds lost, banks and brokerages like Monex have little or no incentive to pay back the money they, through their employees, have stolen or embezzled.
Mario di Costanzo, former president of the National Commission for the Protection and Defense of Users of Financial Services (CONDUCEF), explained in an article for Milenio that because Monex is an “international broker” that offered its services in Mexico, it is not regulated and it cannot be supervised and regulated either by CONDUCEF or by the National Banking and Securities Commission (CNBV). Whether or not true, the fact that a former official of a regulatory agency believes this bank is unregulated is disturbing.
The municipality of San Miguel de Allende, where most of the fraud victims resided, reported that it is aware of the issue and that they have maintained communication with those affected to guide them, said the director of Economic Development, attorney Francisco Garay. “It’s a legal issue and we do not have a way to intervene . . . “
At the conclusion of the Milenio article entitled “Monex Case: Mexican Authorities, Hands Are Tied,” a former banker offered this advice, “MONEX has responsibility. And, those who continue as clients of Monex in Mexico should understand they are dealing with an institution whose systems and lack of systems allowed this type of fraud. If they do not hold responsible the shareholders of Monex for 40 million dollars, as an ex-banker I suggest to all those who have an account that they get their money fast. It is not a reliable institution in Mexico.”
As a CFO, ask yourself whether it is prudent to put your company’s funds with Monex, an institution that has a long history of fraud, money laundering, and corruption. By way of example, see the links below from a 3-part investigative report by the online Magazine, Sin Embargo, and other links at this website.
Original Spanish Articles From “Sin Embargo”
La Republica De Las Drogas Primera Parte: Monex, ligado al lavado de dinero en Wachovia, al caso Yarrington, a Zhenli Ye Gon y… al PRI
La Republica De Las Drogas Segunda Parte: Los expedientes que vinculan a Monex con lavado de dinero del crimen organizado internacional
La Republica De Las Drogas Tercera Parte: Monex, la fundación de un imperio; la fiesta de los fraudes y la larga historia criminal
English Translation Of Articles From “Sin Embargo”
The Republic of Drugs Part 1: Monex, linked to the money laundering in Wachovia, to the Yarrington case, to Zhenli Ye Gon and … to the PRI
The Republic of Drugs Part 2: The files that link Monex to the money laundering of international organized crime
The Republic of Drugs Part 3: Monex, the foundation of an empire; the party of frauds and the long criminal history