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As government regulators crack down on the financing of terrorists and drug traffickers, many big banks are abandoning the business of transferring money from the United States to other countries, moves that are expected to reverse years of declines in the cost of immigrants sending money home to their families.

While Mexico may be most affected — nearly half of the $51.1 billion in remittances sent from the United States in 2012 ended up in that country — the banks’ broad retreat over the last year is affecting other countries in Latin America and parts of Africa as well. The banks are being held accountable not only for the customers who directly use their money transfer services but also for their role in collecting remittances from money transmitting companies and wiring them abroad.

“This is transforming the business and may increase the costs of international money transfers,” said Manuel Orozco, a senior fellow at the Inter-American Dialogue, a research group in Washington.

JPMorgan Chase and Bank of America have scrapped low-cost services that allowed Mexican immigrants to send money to their families across the border. The Spanish bank BBVA is reportedly exploring the sale of its unit that wires money to Mexico and across Latin America. And in perhaps the deepest retrenchment by a bank, Citigroup’s Banamex USA unit has now closed many of its branches in Texas, California and Arizona that catered to Mexicans living in the United States and stopped most remittances to Mexico as it faces a federal investigation related to money laundering controls.

Regulators say the banking system was being exploited by terrorists and drug lords seeking to launder money. While they have not banned banks from engaging in higher-risk businesses like money transfers to certain countries, they acknowledge that banks must now invest significantly more to monitor the money moving through their systems or face substantial penalties.

But the government’s efforts to root out illicit activity have effectively put the banks into a law enforcement role, industry experts say. And the result is undercutting another public policy goal — helping immigrants, who are primarily low income, move into mainstream banking. Even with the current relatively low remittance fees, the costs can still add up. Some Latin American immigrants say they regularly send three remittances a week to pay for last-minute school supplies or rent.

Manuel Santiago, a 48-year-old Mexican living in Queens, said he sometimes pays $4 to send as little as $20 at a time to his son and daughter in Mexico. “I am supporting my family and things come up irregularly,” he said.

The pendulum has swung so far, participants in the industry say, that regulators are pushing banks out of some activities considered beneficial to the broader economy.

“The money transfer business has become the whipping boy of regulators who want to show how tough they are,” said Paul S. Dwyer Jr., chief executive of Viamericas, a money transfer company based in Maryland with a large focus on Mexico.

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Shut out by many large banks, more of Mr. Dwyer’s customers are turning to large retailers in Mexico to pick up money sent from the United States, and some of those retailers charge money transfer companies as much as double the banks’ fees, he said. Mr. Dwyer’s company is recouping the additional costs by increasing the difference — or the spread — between what customers pay in dollars and what their family members receive in Mexican pesos.

A World Bank report on remittances found that the costs had been steadily falling over the last five years. But industry experts are expecting that trend to reverse.

A spokesman for Western Union, one of the largest remittance players, said the company was among those capturing business from the banks.

While immigrants say they have not noticed broad price increases from companies like Western Union, industry experts say higher costs are inevitable with fewer banks acting as middlemen for money transmitters.

“If you are the only game in town, you may be able to charge a premium,” said Daniel Ayala, head of global remittance services at Wells Fargo, adding that the bank has not passed increased regulatory costs to customers, leading to a decline in profits.

Many banks had considered remittances an attractive business because they generated steady fees and required little capital. In some cases, remittances could satisfy Community Reinvestment Act requirements to serve a certain percentage of low-income customers.

But the regulatory pressures and increased costs of compliance have started to outweigh the potential profits.

JPMorgan stopped its Rapid Cash program in November, partly because the bank grew concerned about some of the risks, a spokeswoman said. As part of its program, JPMorgan had teamed up with the large Mexican bank Banorte. Many people picking up remittances in Mexico sent from Chase branches in the United States were not customers of Banorte, making it more difficult to monitor them.

Last year, Bank of America canceled its SafeSend product, regarded as one of the least expensive ways for immigrants to send money to Mexico. A spokeswoman said the bank canceled the product because of “limited demand” and would not elaborate. A BBVA spokesman declined to comment on the possible sale of its Bancomer Transfer Services unit.

Some banks still make certain wire transfers to Mexico, but the costs of such services can be five times as high as a typical remittance, making it prohibitive for many immigrants.

Even if banks invested in new software to screen for worrisome transactions, they would still have to manually investigate many suspicious activities and report them to regulators. Banks fear that a single mistake could lead to costly penalties like the $1.9 billion settlement that the British bank HSBC agreed to pay over money laundering issues in 2012. HSBC has stopped paying out remittances at its Mexican branches.

And the heightened diligence can slow, or even stop, vital payments.

Domingo Garcia, a 36-year-old limousine driver in Los Angeles, said he grew frustrated with Wells Fargo when one of his family’s remittances totaling roughly $1,500 failed to clear. In the same week, he said, family members had tried to send another large remittance. His mother needed the money to pay for her chemotherapy treatment in Mexico. “The hospital was saying it would not give her the medicine until they were paid,” Mr. Garcia said.

Wells Fargo declined to comment on a specific customer’s transaction, but said there could be a number of causes for delays, including efforts to screen for fraud and the bank’s limits on the amount of transfers allowed each month. While the bank remains committed to Mexico, it has slowed the expansion of its money transfer network to other high-risk countries.

Citigroup’s Banamex USA, which has been ensnared in a criminal investigation related to money laundering, is an example of how compliance problems at an obscure affiliate can have serious consequences for a global bank like Citigroup. The New York parent has removed many of the veteran managers at Banamex USA and installed a “cleanup team” of executives to improve its compliance systems, according to a person briefed on the matter.

Citigroup inherited the small California bank when it acquired Banamex, Mexico’s second-largest bank after BBVA Bancomer, in 2001. Because Banamex USA was overseen by executives at Banamex’s headquarters in Mexico, it did not come under the same compliance systems as Citigroup’s units in the United States, this person said. It also wired cash on behalf of money transfer companies in the United States to Banamex accounts in Mexico, people in the remittance industry say.

In reality, it may be nearly impossible to fully monitor money flowing through some parts of the world. Regulators worry, in particular, about remittances to Somalia, a haven for terrorist groups with no formal banking system. Banks in the United States have had to wire money to banks in Dubai. Much of the money is then moved into Somalia through a network of traders.

One of the few banks willing to take that risk is Merchants Bank of California. But in the face of scrutiny from regulators, the bank has told some money transfer companies in cities with large Somali enclaves like Minneapolis that it may no longer be able to provide them with banking services.

Merchants Bank’s exit could be a big blow to Somalia, where remittances are a major source of income for a country that has suffered from recent famine, according to the antipoverty group Oxfam.

“We’re looking for alternatives,” said Abdulaziz Sugule, president of the Olympic Financial Group, a money transfer company in Minneapolis that Merchants Bank may drop, “but it’s going to be tough.”

Jessica Silver-Greenberg and Elisabeth Malkin contributed reporting.