Mexico passes anti-money laundering law

Mexico, following Financial Action Task Force (FATF) and European Union directives on money laundering, issued its anti-money laundering law on Oct. 17, 2012, which came into full force on July 17, 2013. (The official name of the law is Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita.) The law applies to Mexican businesses and individuals and foreigners who operate subsidiaries, offices or branches in Mexico.

Mexican President Felipe Calderon proposed the law in 2010 as part of his offensive against drug gangs, but fraud examiners should know how it could also affect their cases. 

“The purpose of this law is to protect the financial system and the national economy, establishing rules and procedures to prevent and detect transactions or operations that involve illegal proceeds,” the legislation states. (See an overview of the law in English.)  

TO WHOM DOES IT APPLY?

The new law, which doesn’t target specific industries or business lines, lists 15 vulnerable activities of individuals and/or companies, including gambling games, construction services and auction or marketing of works of art, among others.

Depending on the size of their operations, the vulnerable activities are subject to compliance with the law, reporting monthly to the Secretaría de Hacienda y Crédito Público, (SHCP) — the Secretariat of Finance and Public Credit — and cash-handling restrictions.

See the summary table below. Peso amounts in the table are established according to the prevailing minimum wage in Mexico City – MW, $67.29 per day (US$5.14), as of press time. (Mexico uses the dollar sign for its peso.) The exchange rate is $13.08 in pesos to US$1, as of press time. [Image no longer available. —Ed.]

Obviously, if the operations and/or transactions don’t exceed the amounts shown, individuals and companies don’t have to comply with the law. However, individuals and/or companies must present notices if they’re involved in these activities for six months and if the amounts equal or exceed the pesos in the chart.

This implies that individuals and companies should monitor customer transactions within these vulnerable activities and establish alerts so they know when the cumulative sums approach the limits.

SPECIFIC COMPLIANCE RULES

For amounts that are equal to or greater than what the law indicates, individuals and companies engaged in the vulnerable activities must:

1. Identify and verify their customers. They must request official identification so their identities can be verified and make photocopies of the IDs for records and/or files.
2. Request the name of the true beneficial owner — who really owns the resources. Often companies perform vulnerable activities mentioned in the table, but they could be done through their representatives and not necessarily the owners.
3. Maintain documentation that supports customers and their operations and/or transactions for at least five years. This includes customer information that’s on record (identification, customer profile, etc.) and the backup of operations and/or transactions that they perform (invoices, bills, notes, notices submitted to the authority, etc.) coming from the company.
4. Designate a representative to the SHCP. The person representing the company before the authority shall use its personal fiscal data, such as: RFC (Federal Taxpayers Registry) and FIEL (Advanced Electronic Signature) to register and then present the operations report or notices. Also, the representative must have at least power of attorney for a company’s acts of administration. If a company doesn’t update and carry these regulations, the board of directors will be responsible (or the sole director in the case of an individual).
5. Electronically submit notices on the 17th of month through the SHCP portal.
6. Develop a policy within 90 days of being registered in the SHCP portal that indicates how, who and when it should identify its clients based on their operations and amount of transactions specified by law.
7. Keep customer records for companies and individuals, updated yearly, containing their operations and transactions. 

SPECIFICS ON NOTICES

The electronic notices must include:

• Information about the vulnerable activity, such as complete name or business name, address, nationality, telephone, email, date of birth or incorporation, data partners and shareholders, etc.
• Information about the customer or user, such as complete name or business name, date of birth or incorporation, nationality, address, telephone, email, data from the document (such as a voter card or passport) that was used to identify, etc.
• General description of the vulnerable activities. 

The SHCP gives the alternate option that companies and persons can submit their notices on vulnerable activities via “collegial bodies” — newly organized groups that can represent their interests. The law requires these grouped bodies consist of companies or persons that carry out similar tasks. In addition to the standard reporting responsibilities, they also have to supply updated member registries, description of procedures and other data. Every collegial body must use its fiscal data to register and submit notices.

Of course, compliance with the law doesn’t infer guilt. But if companies can’t explain their methods then they can become targets for investigations. While the SHCP is in charge of administering the law, the Specialized Unit in Financial Analysis of the Attorney General’s Office is in charge of accounting, financial analysis and investigations.

Penalties vary according to circumstances. The monetary fines ranging from 200 MW (equivalent to $13,458 Mexican pesos) up to revocation or cancellation of licenses and permits or even jail sentences.

THE LAW’S PROMISE AND THE REALITY

Before the new law, many of Mexico’s anti-money laundering cases could have potentially gone to court, but the government didn’t prosecute because of increases in number and diversity of these cases, and it didn’t receive enough information in financial sector reports sent to authorities, among other reasons. (See “Deficiencias estructurales impiden que se condene el lavado de dinero,” by Israel Rodriguez, July 23, 2012, LaJornada.) 

Mexico already had anti-money laundering mechanisms in 2004, but the FATF’s 40 recommendations in 2008 gave an impetus to strengthen controls. (See “México no cumple con GAFI por vacío legal,” by Leonor Flores, Feb. 16, 2012, El Economista.) 

In March 2012, the Chamber of Deputies (Mexico’s lower house of the Congress of the Union) announced in a report that the nation in that year lost US$10 billion from illegal activities. The SHCP report said that 41 percent of money laundering is related to illicit drugs, 33 percent for human trafficking and 20 percent for piracy. 

PREVENTATIVE SHIELD

The new anti-money laundering law is comprehensive, but Mexico faces significant challenges. The authorities must take time to analyze how vulnerable activities operate and then regulate them without creating meaningless paperwork or missing potential money laundering alerts.

Companies and persons involved in the vulnerable activities must realize that the law is a preventative shield — not a nuisance — that will protect their bottom lines and images.    

Both the regulators and those regulated must realize that they should make the law work for the development of the country and protection of its people — and other global citizens. Minimizing the risk of money laundering requires the commitment of all.  

Mónica Ramírez Chimal, ACFE Associate Member, is partner director of her own consultant firm, ASSERTO RSC, in Mexico City and author of the book “Don’t let them wash, Nor dry!” — a guide for protecting companies from the risk of money laundering.  

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