On October 17, 2012, Mexico passed the Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita (the "Anti-Money Laundering Law" or "AMLL"). The AMLL represents a major sea change in the way in which cash transactions (even intra-company) are handled in Mexico.
The AMLL and its accompanying regulations impose stringent duties on a broad array of Mexican companies or foreign companies transacting business in Mexico. Companies that effectuate certain cash transactions, engage in real estate ventures, or serve as financial institutions (among others) in Mexico may now be required to meet new identity verification, information gathering, and reporting requirements.
The AMLL’s stated objective is to protect Mexico’s economy and financial system from transactions that potentially involve illegal funds. The AMLL tasks the Secretaría de Hacienda y Crédito Público (the Ministry of Finance) and Mexico’s Attorney General with promulgating and enforcing regulations to assist in the identification, investigation, and prosecution of transactions involving illegal funds. Possible sanctions for failure to comply include:
- Fines up to 100 percent of a transaction’s underlying value;
- Revocation of permits; and
- Potential prison terms of up to 10 years.
Under the AMLL, activities designated by the regulation as "vulnerable" may trigger:
- Identity verification requirements;
- Information gathering requirements;
- Reporting requirements; and
- In some cases, an outright ban.
The exact breadth of subsequent enforcement measures by the Ministry of Finance and Attorney General remains to be seen. What is certain is that a wide range of companies must undertake affirmative and immediate steps to ensure compliance with Mexico’s new anti-money laundering regulatory framework. As part of a comprehensive legal strategy, affected companies must consider:
- Establishing procedures to prevent and detect transactions potentially impacted;
- Ensuring that reporting and documentation requirements are met;
- Retaining and safeguarding information related to certain activities;
- Facilitating state inspections; and
- Submitting regular reports on transactions falling into the AMLL’s "vulnerable" category.
Additionally, some entities must appoint a representative empowered to certify compliance before the Ministry of Finance.
Examples of some of the activities and reporting requirements that may be impacted include:
Click here to view table.