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Mexico’s Fight Against Money Laundering and Terrorist Financing

Mexico has made significant strides in combating money laundering (ML) and terrorist financing (TF), but there are still areas that need improvement.

Criminalization Provisions

According to a recent report, Mexico’s ML criminalization provisions are generally broad, but there are some technical deficiencies that could impact implementation. The Mexican law allows for the prosecution of individuals who commit both the predicate offense and the ML offense, also known as self-laundering. However, criminal liability for ML or TF currently does not extend to legal persons, although proposed legislation aims to address this issue.

Preventive Measures in the Financial Sector

The report highlights the importance of preventive measures in the financial sector, noting that various financial sector laws establish the principal AML/CTF preventive obligations for financial institutions. These obligations include:

  • Customer due diligence (CDD)
  • Record-keeping
  • Large and suspicious transaction reporting
  • Internal controls
  • Compliance management arrangements
  • Training

Vulnerabilities in the System

However, there are some vulnerabilities in the system. For example, Mexico has not yet issued implementing AML/CTF regulations for recently deregulated Specialized Financial Institutions (SOFOMES). Unregulated SOFOMES are non-deposit taking financial institutions that are not members of a regulated financial group, making them a significant vulnerability.

Additionally, some sectors, such as foreign exchange centers and money remitters, have less advanced implementation of regulatory requirements. The authorities estimate that a large proportion of these entities have registered with the SAT (the designated AML/CTF supervisor), but a significant number has not done so.

Addressing Vulnerabilities

To address these vulnerabilities, Mexico is expected to issue new regulations by the end of 2008. The report commends the authorities for implementing risk-based provisions for CDD and suspicious transaction reporting, which will help improve the effectiveness of AML/CTF measures in Mexico.

Key Findings

  • Mexico’s ML criminalization provisions are generally broad, but there are some technical deficiencies that could impact implementation.
  • Criminal liability for ML or TF currently does not extend to legal persons, although proposed legislation aims to address this issue.
  • The financial sector laws establish the principal AML/CTF preventive obligations for financial institutions.
  • There are vulnerabilities in the system, including the lack of implementing AML/CTF regulations for recently deregulated SOFOMES and less advanced implementation of regulatory requirements in some sectors.
  • Mexico is expected to issue new regulations by the end of 2008 to address these vulnerabilities.

Recommendations

  • Strengthen ML criminalization provisions to ensure they are effective in combating money laundering.
  • Extend criminal liability for ML or TF to legal persons.
  • Issue implementing AML/CTF regulations for recently deregulated SOFOMES and other vulnerable sectors.
  • Improve the implementation of regulatory requirements in all sectors, particularly foreign exchange centers and money remitters.

Conclusion

Mexico has made significant progress in combating money laundering and terrorist financing, but there are still areas that need improvement. Addressing these vulnerabilities will require continued efforts to strengthen AML/CTF measures and ensure their effective implementation across all sectors of the financial system.