Countries/Jurisdictions of Primary Concern - Mexico
Mexico is a major drug producing and transit country. Proceeds from the illicit drug trade leaving the United States are the principal source of funds laundered through the Mexican financial system. Other significant sources of laundered funds include corruption, kidnapping, extortion, intellectual property rights violations, human trafficking, and trafficking in firearms. Sophisticated and well-organized drug trafficking organizations based in Mexico take advantage of the extensive U.S.-Mexico border, the large flow of legitimate remittances, Mexico’s proximity to Central American countries, and the high volume of legal commerce to conceal illicit transfers to Mexico. The smuggling of bulk shipments of U.S. currency into Mexico and the repatriation of the funds into the United States via couriers or armored vehicles remains a commonly employed money laundering technique. Additionally, the proceeds of Mexican drug trafficking organizations are laundered using variations on trade-based methods, particularly after Mexico put restrictions on U.S. dollar deposits. For example, checks and wires from so-called “funnel accounts” are used by Mexico-based money “brokers” to acquire goods which are exchanged for pesos in Mexico, or to sell dollars to Mexican businesses. The combination of a sophisticated financial sector and a large cash-based informal sector complicates money laundering countermeasures.
In 2010, the Government of Mexico implemented regulations limiting the amount of U.S. cash accepted for deposit. These measures substantially reduced the amount of money repatriated back to the United States via the formal financial system. Subsequently, in June 2014, Mexico revised the U.S. dollar restrictions. The impact of the revision is to be determined.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: YES
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, mutual savings companies, insurance companies, securities brokers, retirement and investment funds, financial leasing and factoring entities, casas de cambio, centros cambiarios (unlicensed foreign exchange centers), savings and loan institutions, money remitters, SOFOMES (multiple purpose corporate entity), SOFOLES (limited purpose corporate entity), general deposit warehouses, casinos, notaries, lawyers, accountants, jewelers, realtors, non-profit organizations (NPOs), armored car transport companies, armoring services, construction companies, art dealers and appraisers, credit card system operators, pre-paid card services, and traveler’s checks services
Number of STRs received and time frame: 86,293: January 2014 - September 2014
Number of CTRs received and time frame: 5,000,000: January 2014 - September 2014
STR covered entities: Banks, mutual savings companies, insurance companies, securities brokers, retirement and investment funds, financial leasing and factoring entities, casas de cambio, centros cambiarios (unlicensed foreign exchange centers), savings and loan institutions, money remitters, SOFOMES, SOFOLES, general deposit warehouses, casinos, notaries, lawyers, accountants, jewelers, realtors, NPOs, armored car transport companies, armoring services, construction companies, art dealers and appraisers, credit card system operators, pre-paid card services, and traveler’s checks services
money laundering criminal Prosecutions/convictions:
Prosecutions: Not available
Convictions: 15 in 2013
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Mexico is a member of both the FATF and the Financial Action Task Force in Latin America (GAFILAT), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/countries/j-m/mexico/
Enforcement and implementation issues and comments:
In 2014, in an effort to boost economic growth, the Secretariat of Credit and Public Debt decided to revisit the 2010 regulation placing limits on the amount of U.S. dollar cash deposits that could be made into banks in border areas. The original intent of the 2010 regulation was to keep illicit cash proceeds smuggled from the U.S. out of the Mexican banking system. The regulations stated banks could not accept more than $4,000 per month from individual account holders or more than $14,000 from business entities operating in the U.S. border region or defined tourist areas. The 2014 modifications allow border- and tourist-area businesses to exceed the $14,000 per month U.S. dollar cash deposit limit provided they have been operating for at least three years; provide additional information to financial institutions justifying the need to conduct transactions in U.S. currency; and provide three years of financial statements and tax returns. The limit on individual account holders remains unchanged. The additional information required, which can be shared with U.S. banks, could enhance the ability of the UIF, Mexico’s financial intelligence unit, to monitor U.S. currency transactions as more U.S. dollars will enter the banking system instead of being diverted to less-regulated, non-bank financial institutions.
On March 5, 2014, the government enacted article 421 of the new National Code of Criminal Procedures that covers liability for legal persons. Mexico is converting from 32 codes to one federal code. Implementation of the new code is a large task and will be ongoing through 2016.
The October 2012 Federal Law on the Prevention and Identification of Illicit Financial Operations greatly expands the number of financial and designated non-financial entities required to submit reporting on financial transactions and apply KYC programs. The law also requires cash intensive businesses to apply restrictions to cash transactions and bans the use of cash for transactions over set amounts. The law is facing a barrage of legal challenges from businesses now confronted with additional legal and compliance obligations. The legal challenges, over 300 cases, may reach Mexico’s Supreme Court, but the regulations and reporting requirements included within the law likely will be upheld, according to local experts.
In Mexico, the UIF, the National Banking and Securities Commission, and the Attorney General’s Office are the main agencies involved in regulating and combating money laundering. In January 2014, the head of the UIF disseminated a resolution outlining its power to order reporting entities to freeze the assets of designated persons and entities, namely those involved in money laundering, terrorism, or terrorist financing. These rules establish the mechanism contemplated in the Federal Law for the Prevention and Identification of Transactions with Illicit Proceeds, passed in 2013.
In 2014, a major trade-based money laundering case involving the Los Angeles garment district once again demonstrated that Mexican-based drug cartels are using both legitimate businesses and front companies to provide value transfer via the export of goods to Mexico in a variation of the black market peso exchange. The fraud also saves the conspirators from paying taxes on the imports because they are exempt from customs duties under the North American Free Trade Act.
Corruption is the enabler of money laundering and its predicate offenses. Corruption is endemic at all levels of Mexican society and government. The Government of Mexico should combat corruption.