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Mexican Financial Institutions Face Risks from DNFBPs and UBOs
Mexico City, Mexico - A recent report by the Ministry of Finance and Public Credit highlights the risks faced by Mexican financial institutions due to a lack of transparency in their legal entity structures. According to the report, commercial banks, investment banks, foreign currency exchanges, and cooperative societies are among the higher-risk financial institutions.
Challenges Posed by UBOs
The report also emphasizes the challenges posed by the use of nominee directors or shareholders by third-party individuals or companies to conceal the identities of Ultimate Beneficial Owners (UBOs). This tactic allows them to maintain control over an entity while obscuring the beneficial ownership of assets and transactions.
Addressing these Challenges
To address these challenges, Mexico’s tax authority has launched a new registry for UBOs, requiring legal entities, trusts, and other legal vehicles registered in Mexico to provide information about their beneficial owners. However, more needs to be done to ensure that compliance measures are being implemented effectively.
Source of Funds Considerations
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Financial institutions and DNFBPs must also consider source of funds (SOF) and source of wealth (SOW) implications when conducting due diligence procedures. SOF assessments seek to identify how a customer accumulated their wealth, while SOW information provides an understanding of how and for what purpose an account is funded.
- Mexican financial institutions are required to engage independent third-parties to conduct SOF reviews as part of the licensing process.
- However, they face challenges in comprehensively evaluating medium to high-risk clients due to limited manpower.
- DNFBPs, such as real estate companies, must also pay attention to implementing a tailored customer risk and overall risk-based assessment to determine when a comprehensive SOF and SOW exercise is required.
FTI Consulting’s Expertise
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FTI Consulting’s Risk and Investigations practice in Mexico provides accurate and definitive insight into the registered owners of legal entities. Our team can provide companies with tailored on-site searches at the municipalities where companies have been constituted, ensuring clients have a clear understanding of the structure of relevant legal entities.
- In addition to regulatory and compliance assessments, we can also provide insights into the verification of source of funds for financial and non-financial institutions, both for licensing and operational purposes.
- Our unique team of multilingual professionals provides a multidisciplinary approach to critical investigations, combining functional expertise with a deep understanding of compliance policies and investigative processes.
Conclusion
In conclusion, Mexican financial institutions and companies that engage in activities considered DNFBPs must take extra measures to ensure compliance with regulations and mitigate risks associated with UBOs. FTI Consulting’s expert team is well-equipped to provide guidance and support in these areas, helping clients navigate the complex landscape of anti-money laundering requirements.