Financial Crime World

Corporate Compliance: A Growing Concern in Mexico

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Mexico’s business landscape has been marred by numerous cases of corporate risk management failures, resulting in hefty fines and reputational damage for companies involved. In recent years, the country’s regulatory bodies have taken a stern approach to enforcing compliance with laws and regulations.

Fines and Penalties

  • The National Institute for Access to Information (INAI) has imposed fines totaling approximately US$19 million on companies for data protection violations over the past five years.
  • The Federal Economic Competition Commission has levied fines worth around US$224 million on companies for antitrust violations since 2014.

Notable Cases

Gas Express Nieto

  • A local natural gas company that paid approximately US$4 million in settlement of criminal charges for failing to follow regulatory safety obligations.
  • The company’s negligence led to an explosion near a children’s hospital in Mexico City, resulting in the deaths of five people and injuring over 70 others.

HSBC Mexico

  • Agreed to pay nearly US$30 million to the Mexican National Banking and Securities Commission for compliance failures related to money laundering.
  • Subsequently launched an internal project to improve its compliance department.

Government Obligations

According to the Organic Law of Federal Public Administration, all government agencies and government entities must conduct their business in accordance with established policies. Specific areas regulated include:

Public Safety

Crime Prevention

Environmental Protection

Trade

Industry

Transportation

Communication

Anti-Corruption

Public Health

Population Centers

The new General Law of Administrative Responsibilities has replaced the previous law, which primarily targeted government officials. State-owned enterprises, such as Petróleos Mexicanos, also have obligations on risk management and compliance, including:

  • Establishing policies in areas like environmental, health, and safety compliance, employment practices, and third-party contracting.

Digital Transformation

As Mexico continues to undergo digital transformation, the key statutory and regulatory differences between public sector and private sector risk and compliance management obligations are becoming increasingly important. While public sector entities are subject to more stringent regulations, private sector companies have more freedom in their activities as long as they are not prohibited by law.

Recent Developments

In June 2017, the Ministry of Public Administration published its Model Program for Corporate Integrity, providing guidance on corporate compliance programs and integrity policies. This development is expected to have a significant impact on the way companies operate in Mexico, as it sets new standards for corporate governance and risk management.

Conclusion

As the business landscape continues to evolve, it is clear that corporate compliance will remain a top priority for companies operating in Mexico. With increasingly stringent regulations and enforcement actions, it is crucial for businesses to implement effective risk management strategies to avoid reputational damage and financial penalties.