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Mexico’s New Anti-Money Laundering Law

Author: Guest Author

MonicaThe author of this post, Mónica Ramírez Chimal, is founder and partner of her own consulting firm, ASSERTO RSC in Mexico City. She is also author of the book: Don´t let them wash, Nor dry! A guide that helps companies protect themselves from money laundering risk. She has been a speaker in several forums and is regularly interviewed by the media in relation to the publication of her book. Mónica is a Public Accountant and has a masters degree in International Management, both from ITAM.

Mexico passed two important anti-money laundering (AML) milestones in 2013. On July 17, the Federal Law on the Prevention and Identification of Operations with Illicit Resources came into force. On September 1, the Regulations for that law took effect. These new rules regulate, for the first time, fifteen activities that are vulnerable to money laundering but are not covered by the AML rules applicable to financial institutions. The regulation of these activities, described in detail here, is consistent with international standards such as the Financial Action Task Force and the European Union Directives.

Donations. Mexico has long lacked a law that would prevent money laundering from these practices. We have lived through scandals as a result. For example, the corrupt practices of Walmart included paying bribes to Mexican authorities through “donations”. Under the new law, nonprofit organizations, churches, political parties and other such entities must report to the tax authorities on a monthly basis any donations received worth more than approximately $200,000 Mexican pesos. Reporting is also required if the cumulative sum of donations over 6 months equals that amount.

Construction/Property Development. Another activity now regulated by AML rules is construction. A case that exemplifies how construction businesses can be used to launder money is that of the former Governor of Tamaulipas State, Tomás Yarrington. Mr. Yarrington is currently a fugitive accused of allowing large-scale drug transit to the U.S. through Tamaulipas in exchange for bribes paid to a Mexican construction company. The payments to the construction company, reportedly controlled by an associate of Mr. Yarrington, were ascribed to its operations and the company used those funds to purchase properties. Mr. Yarrington also used public funds and bank loans in U.S. accounts to buy a private jet, houses, land, condos and vehicles. The new law captures these activities by regulating construction services, property development, and the sale or purchase of goods on behalf of clients. Any such services worth approximately $500,000 Mexican pesos must be reported. Similarly, the sale of new or used vehicles, boats or aircraft worth approximately $400,000 Mexican pesos must be reported and the use of cash for such sales is capped at approximately $200,000 Mexican pesos – if a transaction is generated with a price higher than that amount, the difference should be paid by bank transfer or check.

Professional Services. The new law also regulates independent professional services that represent clients and public faith. Such professional services include managing bank accounts, making contributions and changes to corporate capital, and forming, splitting or merging legal entities. Also regulated are persons granted powers of attorney for administrative acts, the purchase of shares and/or partnership interests, etc. This serves to make consultants, accountants, lawyers and notaries the new “gatekeepers” that cooperate with the authorities in their reporting efforts for activities that exceed the amounts indicated. In addition, if such professionals have knowledge of any operation that is linked to money laundering and / or illegal activities, they must report it within 24 hours after learning of it. On this point the law specifies that such reports do not violate client confidentiality, but for many that remains a controversial issue.

In addition to reporting, the companies and individuals that are subject to the law must appoint a representative to the tax authority and identify their clients. Records of such information must be protected for a period of 5 years.

Faced with the first round of notice deadlines and the large amount of work that many companies must do to comply, some have sought amparo, or relief, from the law. So far, no judge has found in their favor. Penalties for non-compliance vary based on the circumstances, but range from monetary penalties to revocation of licenses, permits and / or imprisonment.

Even though the new law is just premiering, it is worth noting that it still fails to address politically-exposes persons, or require a risk-based approach, among other concepts. If Mexico is willing to strengthen its law in these ways, it would minimize money laundering and change Mexico’s image worldwide.

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2014 FCPAméricas, LLC

Post authored by Guest

Categories: Anti-Money Laundering, Charitable Donations, English, FCPA, Mexico

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One Response to “Mexico’s New Anti-Money Laundering Law”

  1. Noemi Says:

    Thank you for that very interesting article. My question how much transparency is there around the rationale for the reporting thresholds. For instance, on what basis was the MXN200000 threshold for donation, selected? What’s the “science” behind?

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