Recent Developments

The law was published by the Ministry of Finance on October 17, 2012, and will come into effect on July 17, 2013. The law is intended to enhance coordination between the various responsible government authorities and to provide clear guidelines for those parties in the financial and other relevant sectors engaged in “vulnerable activities”, i.e., those most likely to be acting as unknowing (or even knowing) facilitators for money laundering activities.

Implications

Money laundering fosters crime by allowing criminals to hide and legitimize their profits from illegal activities. The International Monetary Fund estimates that the global amount laundered in one year represents from 2% to 5% of the world’s GDP.  Money laundering promotes corruption, distorts financial markets, undermines real economic activity by generating a virtual capitalism, worsens social ills, and threatens the integrity of financial institutions.

Money laundering is a socioeconomic problem that has to be resolved with the participation of various sectors of society and the economy. The Mexican government needs to intensify and strengthen the institutions responsible for ensuring the security and tranquility of the Mexican people, while strengthening and integrating the legal, financial, compliance and enforcement structures necessary to attain these objectives.

The only partially regulated context within which the Mexican economy and the financial system have operated for many years has provided fertile ground for organized crime to channel funds derived from illegal sources into the national economy and, ultimately, into the Mexican financial system.

Although in Mexico there are laws aimed at preventing the use of funds derived from illegal sources and laws punishing the performers of the activities aimed to secure those illegal funds, there has always been the need to incorporate laws able to directly prevent and tackle the so-called “money laundering” industry by primarily focusing on the types of activities typically performed and on their facilitators.

What the law says

On October 17, 2012, the Law was published in the Mexican Official Gazette and will become effective on July 17, 2013.

For getting to know the purposes of the Law, and the definitions that shall apply please click here.

Actions to consider

Taking the foregoing into account, the Law under analysis lays down a number of measures and procedures to prevent and detect acts or transactions involving funds from illegal sources, chief among which, the identification and prevention of certain activities, known as “vulnerable activities”.  To this end, persons are now required to identify and report acts or transactions linked with activities that may be vulnerable to use by organized crime for its money laundering processes.

A such, the Law imposes the obligation to report transactions carried out for the sale or lease of goods or services or donations and the receipt of payments in cash in amounts equal to or greater to a number of thresholds. 

The Law also restricts the use of cash in certain transactions associated with high-value assets, to prevent organized crime from placing a high volume of cash from its criminal activity in the formal economy, as well as limiting, to the extent possible, the performance of money laundering activities protected by the anonymity that cash transactions provide.

The Law empowers the Ministry of Finance and Public Credit (Hacienda) to oversee and enforce this regime and to follow up on the information received from other agencies in Mexico and abroad. For these purposes, the Law establishes better mechanisms for coordination between Hacienda and the competent authorities. The Law seeks to regulate the coordination between Hacienda and the police and enforcement agencies responsible for coordinating the prevention, investigation and prosecution of crimes, utilizing certain mechanisms to ensure the proper handling of information without compromising criminal investigations. The information collected by Hacienda through application of the Law may be of great use to different kinds of authorities, such as (a) the Public Prosecutor (“Ministerio Público”), and (b) the agencies responsible for fighting corruption.

Conclusion

Cash transactions resulting from drug trafficking or serious crimes are illegal acts of concern nationally and internationally, and should be investigated, prosecuted and penalized accordingly. The global nature of “money laundering activities” needs to be stressed.

Therefore, it is considered that the proper organization of competent institutions, the proper operation thereof, and an efficient model of information access and sharing are the guiding approaches of this Law to provide the Mexican State with the tools to develop appropriate intelligence to identify signs and persons linked to criminal activities.

With this in mind, the use of funds derived from illegal sources would be significantly reduced as the result of the increased difficulty for criminal activities to take place without running a high risk of being detected and prevented.