Countries/Jurisdictions of Primary Concern - Mexico
Mexico remains a major transit country for cocaine and heroin and source country for heroin, marijuana, and methamphetamine destined for the United States. Proceeds of 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, tax-evasion, influence peddling, 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 financial transfers to Mexico. The smuggling of bulk U.S. currency into Mexico and the repatriation of the funds into the United States via couriers or armored vehicles remain commonly employed money laundering techniques. Additionally, the proceeds of Mexican drug trafficking organizations are laundered using variations of trade-based methods, particularly after Mexico placed restrictions in 2010 on amounts of 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 in Mexico of a sophisticated financial sector and a large cash-based informal sector complicates money laundering countermeasures. According to Global Financial Integrity, Mexico had more than $77 billion in illicit financial outflows in 2013 due primarily to abusive trade misinvoicing.
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, money exchangers, 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, prepaid card services, and traveler’s checks services
Number of STRs received and time frame: 113,550: January 2015 - October 2015
Number of CTRs received and time frame: 5,200,000: January 2015 - October 2015
STR covered entities: Banks, mutual savings companies, insurance companies, securities brokers, retirement and investment funds, financial leasing and factoring entities, money exchangers, 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, prepaid card services, and traveler’s checks services
money laundering criminal Prosecutions/convictions:
Prosecutions: Not available
Convictions: 14: September 2014 - June 2015
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 of 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:
The Secretariat of Credit and Public Debt (SHCP), equivalent to the U.S. Department of Treasury, passed a new regulation in December 2014 allowing Mexican banks to share information with international banks, including U.S. banks. Prior to this rule, Mexican banks could not share any customer or related information with foreign banks because of strict provisions of Mexico’s privacy laws. The new regulation will allow Mexican banks to answer questions from international banks regarding the nature, purpose, and origin of financial transactions. SHCP also changed the regulations governing casas de cambio, or foreign exchange houses, requiring individuals to present identification regardless of the amount of currency exchanged.
Also in 2014, in an effort to boost economic growth, the SHCP 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 United States out of the Mexican banking system. Modifications in 2014 loosen the restrictions on dollar deposits for border and tourist-area businesses that 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. Very few Mexican financial institutions have taken advantage of these new regulations. It is unclear whether this is due to the additional reporting requirements attached to the 2014 regulatory changes, or to a lack of interest in receiving larger U.S. dollar deposits. U.S. dollars are widely used to conduct day-to-day transactions on the Mexican side of the border area.
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 condensing 32 codes into one federal code. Implementation of the new code is a major task and will continue beyond 2016.
According to documents produced in Mexico’s Attorney General’s Office (PGR), during 2013 – 2014 the amount of laundered money seized in Mexico was only $13 million. Considering that both Mexican and U.S. estimates for the amount of money laundered annually in Mexico is in the tens of billions of dollars, the low seizure rate is noteworthy.
The Government of Mexico should address the low money laundering seizure rate. Particular scrutiny should be placed on businesses involved in laundering drug money or other financial crimes and their relationship in financing political campaigns at the local, state and federal levels. Drug cartels have begun using front businesses to buy public debt in states with unusually high deficits, such as Coahuila and Chiapas, further exerting control over the political process. Corruption is an enabler of money laundering and its predicate offenses.