On 1 March 2018, the bill for the Financial Technology Institutions Law (the “Law”) was passed before Congress, with 265 votes in favour, nine abstentions and 61 against. The bill has been sent to the president for publication.
Back in December 2017, the bill had been unanimously approved by the Senate, with 102 votes in favour, sending it to Congress for analysis. The bill did not undergo amendments of any kind in Congress. According to the Constitution of the United Mexican States, the president has 30 days to return the bill with further amendments in the event amendments are required and an additional 10 days to enact and publish it. The Law seeks to build a regulatory framework aimed at the development of innovative financial services, increasing the level of competition and financial inclusion, as well as placing Mexico at the forefront of the industry.
Types of institutions regulated in the Law
The Law recognises two types of financial technology institutions (FTI) and an innovative model:
- Crowdfunding Institutions. Crowdfunding Institutions connect people so that investors can fund investment seekers through mobile applications, interfaces, websites or any other means of electronic or digital communications.
- Electronic Payment Institutions. Electronic Payment Institutions offer services of issuance, management, accountability and transfer of electronic payments. The funds recorded in an electronic transaction accounting ledger and kept by an Electronic Payment Institution will be considered as electronic payment funds.
- Innovative Model. The Law provides for the possibility of operating on a temporary basis under an Innovative Model–meaning the institutions that provide financial services through technological tools or means with different characteristics to the ones available in the market. A temporary authorisation will be granted to this type of FTI, in compliance with the Law.
The Law considers virtual assets to be account units electronically recorded and used between the public as a payment method for all types of legal transactions and which transfer can only be implemented through electronic means.
Banco de México will determine, through general provisions, the virtual assets that FTIs will be able to use.
From the initial date of this Law, financial authorities will have the following deadlines to issue the following regulations:
- Ministry of Finance and Public Credit (known for its acronym in Spanish as “SHCP”)
- Six months: General provisions to establish procedures and methods to prevent and detect acts, omissions and operations that finance terrorism.
- 12 months: General provisions to establish additional criteria and conditions to grant the temporary authorisation for the operation of Innovative Models.
- National Baking and Securities Commission (known by its acronym in Spanish “CNBV”)
- Six months: General provisions to establish the rules related to FTI accounting and business continuity plan.
- 12 months: General provisions related to information accessibility on FTI operations, the use of equipment and technological means, the hiring of services with third parties, and the operation of Innovative Models and self-correction programs by FTIs.
- 24 months: General provisions related to the requirements on capital requirements and establishing certain bases for data and information exchange.
- National Commission for the Protection and Defense of Financial Services Users (known by its acronym in Spanish as “CONDUSEF”)
- 12 months: General provisions related to the FTI information regarding activities that must be reported to the financial authorities.
- 12 months: General provisions to establish additional criteria and conditions to grant the temporary authorization for the operation of Innovative Models.
- National Commission of the Retirement Savings System and the National Insurance Commission (known by their acronym in Spanish as “CONSAR” and “CNSF” respectively.)
- 12 months: General provisions to establish additional criteria and conditions to grant the temporary authorization for the operation of Innovative Models, as well as self-correction programs by FTIs.
- 24 months: General provisions to establish the basis for the exchange of the data and information that may be shared.
- Bank of Mexico (known by its acronym in Spanish as “Banxico”)
- Six months: General provisions relating to the operations carried out by Electronic Payment Institutions, as well as activities linked to payment systems, and limits for the resources that may be maintained on behalf of their clients or which a costumer may use.
- 12 months: General provisions regarding the virtual assets with which FTIs may operate, as well as the operations that may be carried out with said assets, the information related to their activities that shall be reported to the financial authorities, the additional criteria and conditions for the granting of the temporary authorisation for the operation of Innovative Models, as well as regulation for the self-correction programs.
- 24 months: General provisions to establish the rules for the exchange of the data and information that may be shared.
- CNBV and Banxico jointly
- Two months: General provisions regarding the data security of Electronic Payment Institutions as well as the third-party services that they will be able to hire, and the equipment and technological means that they may use to carry out their operations.
- 12 months: Collaboration agreement that will establish the form and terms for supervising FTI compliance, as well as the enforcement procedures that may be adopted by the corresponding authorities in exercise of their attributions.
The Law also provides for the formation of a Committee of Financial Technology Institutions, which will be composed of six proprietary members, with two representatives from each of the following authorities: the SHCP, the CNBV, and Banxico; each one of them designated by the respective heads of said financial authorities.
The Interinstitutional Committee and the CNBV will be responsible, among other matters, for discretionally granting the necessary authorisations in accordance with the Law, so that FTIs operate correctly within Mexico.
The persons who are currently carrying out the activities regulated by the Law referred to in section I herein, will have up to 12 months from its initial date, to request authorization from the CNBV.
Said persons may continue to carry out such activities until the CNBV approves or denies their request, but while they do not receive the corresponding authorization, they must publish on their website that the authorization to carry out said activity is in process and therefore is not an activity supervised by the authorities.
The CNBV will automatically deny authorization if the respective persons fail to comply with this obligation.
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