NOGALES — Even as the attention at the federal level to border banking issues continues to increase, local businesspeople say they are not waiting for the government to come up with a solution.
Over the past few years, stepped-up enforcement of regulations meant to curtail money laundering have led some major banks to close thousands of accounts along the border, mostly of Mexican nationals or companies involved in cross-border business.
Nogales has also seen two large banks, Bank of America and Banamex USA, a Citigroup subsidiary, leave town.
“We will never bring back the large banks in the way they were. They’ll never have a presence the way it was,” said Jaime Chamberlain, owner J-C Distributing Inc. “You can complain for only so long, but you have to find an answer.”
That answer is to engage with smaller regional banks that had stayed out of a market once dominated by the major banks, he said.
“Unlike in other border states, we never had a strong regional banking system take an interest in Southern Arizona,” Chamberlain said. “That’s why not many other states where this happened have really made a big stink about it.”
The Nogales-based Fresh Produce Association of the Americas and the Greater Nogales Santa Cruz County Port Authority have reached out to several banks, including KS StateBank, Alliance Bank of Arizona and Bank of the West, and invited them to visit and meet with local entrepreneurs and businesspeople.
Members of the produce industry voiced their frustration with the current banking climate during a recent meeting with Bank of the West executives.
Produce distributors that had been in the business for decades found themselves losing their accounts, said Berta Ferriz, operations manager at Malena Produce, Inc.
All their growers are Mexican nationals who had their accounts closed down for no apparent reason, she said. Once they could no longer deposit their growers’ payment in the U.S., they had to start sending money to Mexico.
The banks then turned around and said they could no longer keep them as customers, either.
“They said, ‘You wire money to all of these Mexican accounts.’ Well, yeah, they’re our growers, they’re our customers, we’ve been doing that for years,” she said.
Although it was recently overtaken by Texas as the No. 1 entry point for fresh produce from Mexico by value, Nogales still lays claim to the highest volume and $2.5 billion in produce crossing through a U.S. port of entry.
“There’s money to be made here but they don’t want your business,” Ferriz said.
Navigating regulations
Heavy fines levied by the Treasury Department over money laundering made many banks gun shy over dealing with cross-border business, officials said, and anti-money laundering compliance programs mean time and money.
“Every month we’re looking into how many foreign accounts did we open, who referred them. And we keep our eye on every one of them,” said David Esquivel with 1st Bank Yuma.
The regional bank opened a branch in Nogales last year and has started working with members of the produce industry dropped by the larger banks.
“The big banks don’t want to have the monitoring headache. We’re going to have the headache and we’re going to have the cost,” he said. “But this is a great opportunity to grow deposits, and as long as we do everything we’re supposed to do, we’ll be fine.”
Knowing your customer is key, not only for compliance with regulations but understanding community needs, and 1st Bank Yuma’s willingness to do business is welcomed, Ferriz said.
“You go to the bank that is listening, that’s hearing you out,” she said. “We wish there were more banks that would take that position.”
As far as government efforts to improve the situation, Nogales officials praised U.S. Sens. John McCain and Jeff Flake, who have been actively involved since 2014 in trying to get answers from the banks and from regulators.
The senators have asked for an explanation on branch and account closures from the heads of major banks and pushed for the Department of the Treasury and the Senate to get involved. In February, the Government Accountability Office agreed to look into banking regulation enforcement along the border.
Earlier this month, the Treasury Department Office of the Comptroller of the Currency said it would evaluate the need for new guidance on anti-money laundering regulations to address border banking.
“It’s encouraging that the administration has acknowledged that it can better balance efforts to combat money laundering with the economic needs of Arizona communities, many of which rely on cross-border commerce,” Flake said in a statement.
But even if things go back to normal and the big banks return to Nogales, distributors said they shouldn’t expect businesspeople to drop their regional bankers and welcome them with open arms.
“They had fantastic experiences for decades upon decades, but once they felt a little heat in the kitchen, from whomever it may have been, they bailed on us,” he said. “That’s the bottom line.”
