Financial Crime World

Mexico’s Struggle Against Money Laundering: A Growing Threat

A recently released Mexican government report has highlighted the country’s ongoing struggle to combat money laundering, a problem that has been exacerbated by a lack of political will and an overemphasis on militarized responses to crime.

High Risk of Illicit Financial Flows

According to the classified report, which is set to be submitted to the Financial Action Task Force (FATF), Mexico faces a “HIGH” risk of illicit financial flows. The report estimates that the drug trade, tax fraud, and other criminal activities generate at least $58.5 billion annually.

Ineffective Investigations and Prosecutions

Despite significant progress made since Mexico’s last FATF evaluation in 2008, authorities are identifying more suspected cases of financial crimes each year, but investigations and prosecutions rarely reach successful conclusions. A recent report by Mexico’s Government Accountability Office (Auditoría Superior de la Federación – ASF) found that:

  • Less than 5% of all cases filed in 2016 were resolved by the end of the year
  • More than half were rejected based on determinations that they had not been properly filed

Failures of Special Police Unit

The special unit of the federal police tasked with preventing and combating money laundering has also failed to take proactive measures. Instead, it launches investigations only in response to tips submitted by authorities and citizens. The report found that:

  • Over three-quarters of the 386 investigations launched in 2016 did not lead to the successful identification of criminal structures

Resource Allocation Decisions

Experts say that Mexico’s ineffectiveness in fighting money laundering is likely due to resource allocation decisions, with significant funding dedicated to militarizing the fight against crime, but little put toward improving the capacity of authorities to mount complex investigations. The UIF and special police unit have both had their budgets slashed in recent years.

Expert Insights

Channing May, a policy analyst for Global Financial Integrity (GFI), said: “We have to go after the money… Any business, regardless of goods or services, they have to have money in order to function.”

Consequences of Inaction

Mexico’s failure to successfully investigate and prosecute money laundering represents a risk not only for the financial sector but also for public security. The country’s ongoing struggle against money laundering is creating space for criminal organizations to thrive, further exacerbating the problem.

Recommendations

Experts agree that governments should place greater emphasis on going after the money, rather than just focusing on dismantling criminal organizations. To effectively combat money laundering, Mexico needs to:

  • Improve the capacity of authorities to mount complex investigations
  • Enhance international cooperation and information sharing
  • Strengthen regulations and enforcement mechanisms
  • Increase funding for anti-money laundering efforts