Currently, there are 29 commercial banks and 71 foreign financial representative offices operating in Mexico, as well as 86 insurance companies, 166 credit unions and 25 money exchange houses. Commercial banks, foreign exchange companies and general commercial establishments are allowed to offer money exchange services. Although the underground economy is estimated to account for 20-40 percent of Mexico's gross domestic product, the informal economy is considered to be much less significant with regard to money laundering than the narcotics-driven segments of the economy.
Beginning in 2005, permits were issued for casinos to operate in Mexico. Gambling is also legally allowed through national lotteries, horse races and sport pools. Casinos, offshore banks, lawyers, accountants, couriers and brokers are currently not subject to anti-money laundering (AML) reporting requirements.
In 2005, Mexico established three strategic financial zones: two in San Luis Potosi and one in Chiapas. These zones, similar to free trade zones, allow tax exemptions for inputs to exports that are imported or produced locally. Additional strategic financial zones are planned to be established in the states of Queretaro, Quintana Roo and Lazaro Cardenas. The Mexican Customs agency certifies companies operating in these zones under the authority provided by Article 135 of the Customs Law. There is no indication that these zones are being used in trade-based money laundering or terrorist financing.
Since 2000, Mexicans have received more than $100 billion in remittances. Approximately $23.1 billion in remittances were received in 2006 alone. Many U.S. banks have partnered with their Mexican counterparts to develop systems to simplify and expedite the transfer of money, including wider acceptance by U.S. banks of the "matricula consular." The matricula consular is an identification card issued by Mexican consular offices to Mexican citizens residing in the United States that has been criticized as insecure. In some cases, the sender or the recipient can simply provide the matricula consular as identification and pay a flat fee to receive a remittance; neither is required to open a bank account in the United States or Mexico. Although these systems have been designed to make the transfer of money faster and less expensive for the customers, the rapid movement of such vast sums of money by persons of questionable identity leaves the systems open to potential money laundering and exploitation by organized crime groups. As a result of the increased availability of these electronic transfers, the U.S. embassy estimates that electronic transfers accounted for 90 percent of remittances to Mexico in 2006.
According to U.S. law enforcement officials, Mexico remains one of the most challenging money laundering jurisdictions for the United States, especially with regard to the investigation of money laundering activities involving the cross-border smuggling of bulk currency derived from drug transactions. Sophisticated and well-organized drug trafficking organizations based in Mexico are able to take full advantage of the extensive United States-Mexico border and the large flow of licit remittances. In addition, the combination of a sophisticated financial sector and weak regulatory controls facilitates the concealment and movement of drug proceeds. U.S. officials estimate that since 2003, as much as $22 billion may have been repatriated to Mexico from the U.S. by drug trafficking organizations. In April 2006, the U.S. Department of Treasury issued a warning to the U.S. financial sector on the potential use of certain Mexican financial institutions, including Mexican casas de cambio, to facilitate bulk cash smuggling. Corruption is also a concern: in recent years, various Mexican officials have come under investigation for alleged money laundering activities.
In 2006, U.S. authorities observed a significant increase in the number of complex money laundering investigations by the Financial Crimes Unit of the Office of the Deputy Attorney General Against Organized Crimes (SIEDO), including cases coordinated with U.S. officials. As a result of the cooperation of Mexican Customs, SIEDO and various U.S. agencies, Mexico seized over $25 million in 2006. As of November, SIEDO had initiated 142 criminal investigations into money laundering cases in 2006, 77 of which were brought to trial. The U.S. Treasury Department's Office of Foreign Asset Control (OFAC) announced in June 2006 the designation of the Amezcua Contreras Organization as a Tier I target involved in significant narcotics trafficking under the Foreign Narcotics Kingpin Designation Act. In July and September 2006, OFAC also announced designations of 45 Tier II targets associated with the previously-designated Arrellano Felix and Arriola Marquez drug trafficking organizations. The designations are a result of cooperation among OFAC, other U.S. government entities and SIEDO. They allow U.S. and Mexican authorities to seek the freezing of assets of Mexican drug cartels, hindering their ability to take advantage of the U.S. and Mexican financial systems.
The Government of Mexico (GOM) continues its efforts to create and implement an anti-money laundering program that meet such international standards as those of the Financial Action Task Force (FATF), which Mexico joined in June 2000. Money laundering related to all serious crimes was criminalized in 1996 under Article 400 bis of the Federal Penal Code and is punishable by imprisonment of from five to fifteen years and a fine. Penalties are increased when a government official in charge of the prevention, investigation or prosecution of money laundering commits the offense.
In 1997, the GOM established a financial intelligence unit under the Ministry of the Treasury, which became known as the Unidad de Inteligencia Financiera (UIF) in 2004 with the consolidation of all the Treasury offices responsible for investigating financial crimes into the UIF. The UIF is responsible for receiving, analyzing and disseminating financial reports from a wide range of obligated entities. The UIF also reviews all crimes linked to Mexico's financial system and examines the financial activities of public officials. The UIF's personnel number approximately 70 and are comprised mostly of forensic accountants, lawyers and analysts. Its director reports to the Minister of Finance.
Regulations have been implemented for banks and other financial institutions (mutual savings companies, insurance companies, financial advisers, stock markets, credit institutions, exchange houses and money remittance businesses) to know and identify customers and maintain records of transactions. These entities must report to the UIF any suspicious transactions, transactions over $10,000, and transactions involving employees of financial institutions who engage in unusual activity. Financial institutions with a reporting obligation also require occasional customers performing transactions equivalent to or exceeding $3,000 in value to be identified, so that the transactions can be aggregated daily to prevent circumvention of the requirements to file cash transaction reports (CTRs) and suspicious transaction reports (STRs). Financial institutions also have implemented programs for screening new employees and verifying the character and qualifications of their board members and high-ranking officers. Real estate brokerages, attorney, notaries, accountants and dealers in precious metals and stones are required under a November 2005 provision of the tax law to report all transactions exceeding $10,000 to the UIF, via the Tax Administration Service (SAT). As of 2006, nonprofit organizations are also subject to reporting requirements on donations greater than $10,000. In 2005, the UIF received over 4 million CTRs and approximately 57,700 STRs from obligated entities; corresponding data for 2006 is not available.
In December 2000, Mexico amended its Customs Law to reduce the threshold for reporting inbound cross-border transportation of currency or monetary instruments from $20,000 to $10,000. At the same time, it established a requirement for the reporting of outbound cross-border transportation of currency or monetary instruments of $10,000 or more. These reports are also received by the UIF and cover a wider range of monetary instruments (e.g. bank drafts) than those required by the United States.
Following the analysis of CTRs, STRs and reports on the cross-border movements of currency, the UIF sends reports that are deemed to require further investigation, and have been approved by Treasury's legal counsel, to the Office of the Attorney General (PGR). As of October, the UIF had sent 45 cases to the PGR in 2006. The PGR's special financial crimes unit is part of SIEDO, which works closely with the UIF in carrying out money laundering investigations. In addition to working with SIEDO, UIF personnel have initiated working-level relationships with other federal law enforcement entities, including the Federal Investigative Agency (AFI) and the Federal Preventive Police (PFP), in order to support the investigations of criminal activities with ties to money laundering. In 2006, the UIF signed memoranda of understanding (MOUs) with the Economy Secretariat and the immigration authorities that allows the UIF access to their databases. The UIF has also signed agreements with the National Banking Commission (CNBV) and the National Commission of Insurance and Finance (CNSF) to coordinate methods to prevent money laundering and terrorist financing, and is currently finalizing similar negotiations with the Treasury and the National Savings Commission (CNSAR).
Since undergoing its second mutual evaluation by the FATF in 2003, the GOM has been subject to monitoring by FATF and has submitted several reports on the progress made since its evaluation. The evaluation team found in 2003 that the GOM had made progress since the first mutual evaluation by removing specific exemptions to customer identification obligations, implementing on-line reporting forms and a new automated transmission process for reporting transactions to the UIF, reducing the delay in reporting transactions overall, and developing an overall anti-money laundering strategy. However, the FATF evaluation team also identified a number of deficiencies in the system. These deficiencies include the lack of a separate criminal offense of terrorist financing, and strict bank and trust secrecy, which are considered impediments to investigations and prosecutions. As a result of these deficiencies, the GOM must update the FATF on its progress, which it did at the June and October 2005 and February 2006 plenary meetings of the FATF.
While Mexico has not yet criminalized terrorist financing, it has made improvements to its bank secrecy laws. Amendments to the Banking Law approved in April and December 2005 now allow specific government entities, such as the PGR and the state attorneys general, to receive records directly from banks and credit institutions without prior approval from the CNBV. Financial institutions must respond to these requests within three days.
In November 2003, the Senate passed a bill amending the Federal Penal Code that would link terrorist financing to money laundering. However, the lower house failed to act on this bill. In 2005, the draft legislation was re-submitted as two separate draft laws: one to criminalize the financing of terrorism and one to address outstanding international cooperation issues. If passed, this legislation would bring Mexico into compliance with international standards. The proposed amendments would also create two new crimes: conspiracy to launder assets and international terrorism (when committed in Mexico to inflict damage on a foreign state). The draft legislation is still under consideration in the Senate.
While Mexico does not have a specific offense criminalizing the financing of terrorism, money laundering associated with terrorism is punishable under the existing Penal Code. The GOM has responded positively to U.S. Government efforts to identify and block terrorist-related funds. It continues to monitor suspicious financial transactions, although no assets related to terrorism have been frozen to date.
Although the United States and Mexico both have forfeiture laws and provisions for seizing assets abroad derived from criminal activity, U.S. requests of Mexico for the seizure, forfeiture and repatriation of criminal assets have not often met with success. Mexican authorities have difficulties forfeiting assets seized in Mexico if these assets are not clearly linked to narcotics. Although Mexican officials have made significant progress in modernizing their approach to asset seizure, actual asset forfeiture remains a challenge.
Mexico has developed a broad network of bilateral agreements and regularly meets in bilateral law enforcement working groups with the United States. The U.S.-Mexico Mutual Legal Assistance Treaty entered into force in 1991. Mexico and the United States also implement other bilateral treaties and agreements for cooperation in law enforcement issues, including the Financial Information Exchange Agreement (FIEA) and the Memorandum of Understanding (MOU) for the exchange of information on the cross-border movement of currency and monetary instruments. In addition to its membership in the FATF, Mexico participates in the Caribbean Financial Action Task Force as a cooperating and supporting nation. In 2006, Mexico also became a member of the South American Financial Action Task Force (GAFISUD), after previously participating in GAFISUD as an observer member. The UIF is a member of the Egmont Group, and Mexico participates in the OAS/CICAD Experts Group to Control Money Laundering. The GOM is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, the UN International Convention for the Suppression of the Financing of Terrorism and the Inter-American Convention Against Terrorism. The UIF has signed memoranda of understanding for the exchange of information with 22 other financial intelligence units, including the U.S. financial intelligence unit, FinCEN.
To create a more effective AML regime, Mexico should fully implement and improve its mechanisms for asset forfeiture and money laundering cooperation with the United States and increase efforts to control the bulk smuggling of currency across its borders. The GOM should also closely monitor remittance systems for possible exploitation by criminal or terrorist groups. Mexico should enact its proposed legislation to criminalize the financing and support of terrorists and terrorist organizations. Despite a strengthened regulatory framework, improved cooperation among law enforcement authorities and a strong public campaign against corruption, Mexico continues to face challenges in prosecuting and convicting money launderers, and should continue to focus its efforts on improving its ability to combat money laundering, terrorist financing and other financial crimes.
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|Title Annotation:||Country Reports|
|Publication:||International Narcotics Control Strategy Report|
|Date:||Jan 1, 2007|