US Finance Ban Takes Effect After Already Crippling Mexico Firms

An unprecedented order by the US Treasury to cut off three Mexican financial firms for allegedly helping drug cartels launder funds takes effect Monday. But its impact has already swept through the country’s banking industry.

The three designated firms — CIBanco SA, Intercam Banco SA and Vector Casa de Bolsa SA — have been broken up and sold for parts. Their clients have decamped with their business — a big chunk of which was foreign exchange — to other banks or brokerages.

And beyond those firms, the banking system at large is on high alert: Lenders have purged ...