At the Feb. 4 hearing in the Arizona Senate, Sabrina Hallman, president of Nogales-based Sierra Seed Co., said she has to change banks every 18 months because banks do not want to deal with the Mexican side of her business.

However, growers in Mexico must be invoiced in Mexico due to tax requirements, just as U.S. companies have to do north of the border, she said.

“We’re not money laundering,” Hallman said. “We’re moving money across the border every single day so my growers can get their seeds and their goods and pay their taxes as they’re responsible for, that produce gets back across this border, that my seed gets paid for, and we all get to each fresh fruits and vegetables year round across the country.

“I’m just dancing every single day,” she said, noting she has tried banking with U.S. and Mexican banks, as well as with the Bank of Portugal.

“If we continue to operate in a manner that says border is bad, we are just going to shoot ourselves in the foot economically,” Hallman said.

Bruce Bracker, chairman of the Greater Nogales Santa Cruz County Port Authority, told the committee members “the big banks are abandoning our communities.”

Rather than deal with higher standards for monitoring and compliance, banks are closing accounts with local businesses, he said.

“They will provide services only – and I stress only – if you are a big business doing business with a big bank,” Bracker said, calling the practice “discriminatory under the lending practices of the United States.”

The nightmare scenario for banks came in 2012 when HSBC was fined $1.9 billion for allegedly allowing Mexican and Colombian drug cartels to launder $881 million from 2006 to 2010, made possible by the bank’s “blatant failure to implement anti-money laundering controls,” according to a press release from the U.S. Department of Justice.

At the state Senate hearing, Duane Froeschle, president of Western Alliance Bank, said the banking industry has a “strong commitment” to comply with anti-money laundering regulations.

However, “know-your-customer” requirements have evolved into “know-your-customer’s-customer,” he said, which raises the banks’ costs.

Since the Great Recession began, federal regulators have “intensified” their monitoring of banks and compliance costs likely will continue to rise, he said, noting regulators often both fine and issue cease-and desist orders that limit a bank’s ability to grow.

Froeschle noted federal regulators are “a little bit farther from the street, and have a little bit less attention perhaps to the unintended consequences that fall out of the very real need to enforce AML (anti-money laundering).”