Financial Crime World

Mexico Introduces Tougher Bank Governance and AML/KYC Regulations

Mexico has strengthened its banking regulations to improve corporate governance, anti-money laundering (AML) and know-your-customer (KYC) measures, and depositor protection. The new rules aim to enhance the stability and security of the financial system.

Independent Directors and Officers

Under the new regulations, independent directors and officers must be appointed by shareholders’ meetings. They must have no professional, familial or commercial relationship with stakeholders, shareholders, or directors of the bank. Additionally,

  • Independent directors and officers must have at least five years’ experience in high-level positions that require financial and administrative knowledge.
  • The CEO, officers in the two levels under the CEO, and the CEO themselves must reside in Mexico.

Remuneration Requirements

Banks must establish a remuneration system that is consistent with effective risk management. The system must consider the risks faced by the bank, its internal units, and employees, and award specific remuneration mechanisms tailored to each risk profile. This includes:

  • A flexible remuneration structure that allows for reduction or suspension of extraordinary compensations when the bank faces losses or risks materialize.
  • A focus on aligning compensation with the bank’s overall performance and risk-taking appetite.

AML/KYC Requirements

Mexico has implemented AML and CFT requirements to prevent and detect operations related to money laundering, and identify clients or users in accordance with the AML Rules. Banks must establish measures and procedures to comply with these rules, including:

  • KYC policies
  • Corporate governance obligations
  • Book and record-keeping rules
  • Reporting requirements

Depositor Protection

The Bank Savings Protection Law regulates the depositor protection regime in Mexico, which is administered by the Institution for the Protection of Bank Savings (IPAB). The regime covers bank liabilities up to 400,000 investment units (UDIs) per person’s receivable covered assets per bank. Operations not covered by the depositor protection regime include obligations payable to national or foreign financial entities.

The new regulations aim to enhance the stability and security of the Mexican financial system, improve corporate governance, and prevent money laundering and terrorist financing. Banks must comply with these regulations to ensure their continued operation in Mexico.