As Mexican President Claudia Sheinbaum denounces the proposed remittance tax and calls for protests in this country, she conveniently fails to mention that the United States government has for two decades subsidized the money transfers through a Federal Reserve program called “Directo a Mexico.” Remittances are the largest single source of foreign income for Mexico and last year migrants in the U.S. sent a historic $62.5 billion to family back home. Under the One Big Beautiful Bill Act, recently passed by the House and pending Senate approval, remittances from noncitizens in the U.S. will be taxed 3.5%, igniting fury among Mexican government officials, especially Sheinbaum who threatened to “mobilize” a fight against the tax. Mexico’s president has publicly called on fellow Mexicans in the United States to send senators letters, electronic mail and social media posts expressing their disagreement with the additional assessment.

The U.S. is the top source of remittances worldwide and the money sent by migrants to help support family back home has long provided Latin America—especially Mexico—a critical economic lifeline. President Trump recently proposed a 5% tax on remittances and House Republicans reduced it to 3.5%. Omitted from mainstream media coverage, mostly critical of the proposed tax, is the “Directo a Mexico” program run by the Federal Reserve, the government agency that serves as the nation’s central bank. It was launched 20 years ago and uses government resources to subsidize and help illegal immigrants transfer cash to Mexico. Back in 2006 Judicial Watch obtained Federal Reserve marketing materials created for the program, which was designed to facilitate the transfer of funds from immigrant workers in the U.S.—regardless of legal status—to relatives in Mexico. The marketing materials, from the Retail Payments Office of the Federal Reserve in Atlanta, Georgia, were prepared by the government for presentations to financial institutions in California in November 2006.

The “Directo a Mexico” marketing materials were targeted to banks, credit unions and other financial institutions in the U.S. and include information on payment channels and benefits to Mexican recipients. The marketing materials also detail the number of Mexican migrants in the United States—at the time 9,328,405—with no distinction between those here illegally. A separate list identifies Mexican banks receiving “Directo a Mexico” transfers by branches (8,578) and total bank accounts (41,313,157). After viewing all the records, Judicial Watch determined that the taxpayer-subsidized program seems designed to facilitate the transfer of wealth by illegal immigrants outside the United States, undermining our nation’s immigration laws and creating a potential national security nightmare. At the very least Judicial Watch called on the Federal Reserve to limit the program to legal residents and American citizens, which has not occurred.

In its first year, 2005, remittances sent through “Directo a Mexico” topped $20 billion and the Federal Reserve reported “double-digit percentage growth” in the next several years. Over a decade later Judicial Watch reported that most of the $33.48 billion in remittances to Mexico at the time flowed through “Directo a Mexico” amid a growing immigration crisis in the U.S. Remittances are transferred through the Federal Reserve’s own automated clearinghouse linked directly to Mexico’s central bank (Banco de Mexico). When the program was created Federal Reserve officials acknowledged that most of the Mexican nationals who send money back home are illegal immigrants so a Mexican-issued identification is the only requirement to use the government banking service. In fact, the government’s colorful brochure promoting “Directo a Mexico” has a frequently asked question section that says: “If I return to Mexico or am deported, will I lose the money in my bank account?” The answer is “No. The money still belongs to you and can easily be accessed at an ATM in Mexico using your debit card.” Decorated with American and Mexican flags, the Federal Reserve’s two-page brochure also offers to help immigrants who do not have bank accounts open one and assures the best foreign exchange rate and low transfer fees. It is not clear if the proposed remittance tax will impact money transfers sent via “Directo a Mexico.”

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