mexico’s anti-money laundering law: a look...

MEXICO’S ANTI-MONEY LAUNDERING LAW: A LOOK INSIDE Tatiana Escribano, Partner, Corporate and Finance, DLA Piper, Mexico

MEXICO’S ANTI-MONEY LAUNDERING LAW: A LOOK INSIDE

On July 17, 2013 the Mexican Anti-Money Laundering statutebecame effective. It requires financial institutions and non-financial persons to implement and comply with record keepingand reporting obligations with respect to those transactionsdeemed suspect due to their likelihood of involving moneylaundering and organized crime. Suspect transactions includefinancial-related transactions and commercial transactions.


Legal framework.●Mexican Anti-Money Laundering Law (Ley Federal para la

Prevención e Identificación de Operaciones con Recursos deProcedencia Ilícita) (“AMLL”), published on the Federal OfficialGazette on October 17, 2012; effective as of July 17, 2013.

●Regulations of the AMLL, published on August 16, 2013;effective as of September 1st, 2013.

●General Rules of the AMLL, published on August 23, 2013;effective as of September 1st, 2013.

●Resolutions pursuant to which the formats of the notices andreports related to AMLL are published, published on August 30,2013.


The Mexican federal government has long stated that theprevention of money laundering is a fundamental part of thegovernment’s comprehensive strategy against organized crime.The AMLL represents the government's latest effort to join theinternational community’s efforts to combat organized crime byimplementing a legal framework regulating money laundering.

The AMLL identifies the following activities ("SuspectTransactions") as "vulnerable", and therefore suspect andsubject to regulatory scrutiny: (i) all activities carried out byfinancial institutions ("FIs") on behalf of or for the account ofcustomers, and (ii) certain activities carried out by individuals orentities (other than FIs, "NFIs") having monetary valuesexceeding certain thresholds.


FI transactions.Under the new law, a FI is required to (i) implement measuresand processes to prevent and detect acts, transactions orservices which may involve funds derived from illicit sources; (ii)file reports with the Ministry of the Treasury (“SHCP”), disclosingSuspect Transactions relating to its clients as well astransactions carried out by the FI’s directors, attorneys-in-fact,officers and employees that may contravene or infringe theadequate implementation of the AMLL; (iii) provide the SCHPthe information and documentation related to any such SuspectTransactions; and (iv) maintain adequate records concerningSuspect Transactions for a period of ten years.


NFI transactions.The AMLL identifies specific transactions which, when carriedout with the participation of a NFI (which includes advisors) andexceeding specific thresholds, would be deemed SuspectTransactions and therefore required to be (i) identified, and/or(ii) identified and reported to the SCHP.

NFI Suspect Transactions would include those transactions setforth below.

*Please note that the dollar amounts showed in the next tables are for reference purposes only. TheAMLL uses minimum daily wages for the Federal District (“MDW”) as base units. As of this date, theMDW is $67.29 Mexican Pesos (approx. US$5 dollars). The MDW is revised every year. The Peso-Dollar exchange rate considered is this presentation is of $13.1 Mexican Pesos per Dollar.


Commercial Activity Suspect Transactions Triggering Identification

Obligation Suspect Transactions Triggering

Identification and Reporting Obligation

Service card, Credit card or Prepaid card Transactions

Service cards and credit cardsWhen the accumulated monthly expenditure is equal to or

higher than 805 MDW (US$4,134)

Service cards, credit cardsWhen the accumulated monthly

expenditure is equal to, or higher than 1,285 MDW (US$6,600)

Prepaid CardsWhen the accumulated monthly expenditure is equal to or higher than

645 MDW (US$3,313)

Traveler’s Checks Transactions

Regardless of the monetary value. With value equal to, or greater than, 645 MDW

(US$3,313)

Consumer Loans, Guarantees, Credit or Loans

Regardless of the monetary value. With value of, or greater than, 1,605 MDW

(US$8,244)

Construction, Development or Brokerage Services Involving

Real Property

Regardless of the monetary value. With value equal to, or greater than, 8,025 MDW (US$41,221)

Sale of Precious Metals, Precious Stones, Jewelry or

Watches

With value of, or greater than, 805 MDW

(US$4,134)

With value equal to, or greater than, 1,605 MDW (US$8,244)

Auctions or Commercialization of Works

of Art

With values equal to, or greater than, 2,410 MDW (US$12,379)






Sale or Distribution of Motor Vehicles



Transactions Involving Armoring of Vehicles, or

Protection of Real Property



Transactions Involving Secure Transportation and

Cash and Valuables Management Services

Regardless of the monetary value. With value equal to, or greater than, 3,210 MDW (US$16,488)

Independent professional services to:

(a) transfers of real property; (b) administration and management

of stocks or any other asset; (c) management of banking, savings

or stock accounts; (d) collection of capital contributions

or any other assets for the formation, operation or

administration of commercial entities;

(e) formations, spin-offs, mergers, the operation and administration of commercial entities and trusts, and the transfer of commercial entities

Regardless of the monetary value. If the services rendered entail a financial transaction.





Notarial Services

Public Notaries:Transactions Involving (a) Any transmission of, or granting of in rem rights over real property. (b) Any granting of irrevocable powers of attorney for acts of administration or acts of ownership] (c) Incorporation of entities, capital increases or decreases, merger, spin-off, purchase and sale of shares or equity. (d) Trusts indentures or amendments (e) Consumer loans or credit agreements, secured or unsecured, when the creditor is not a Financial Institution

Public Notaries:Transactions Involving (a) With value of, or greater than, 16,000 MDW (US$82,186) (b) Regardless of the monetary value. (c) With value of, or greater than, 8,025 MDW (US$41,221) (d) With value of, or greater than, 8,025 MDW (US$41,221) (e) Regardless of the monetary value.

Commercial Notaries (corredores públicos): Transactions Involving (a) Appraisals of assets valued at or above 8,025 MDW (US$41,221) (b) Incorporation of entities, capital increases or decreases, mergers, spin-offs and transfers of shares or equity. (c) Trusts formations, amendments or transfers (d) Consumer loans or credit agreements, (whether secured or unsecured), if the creditor is not a FI

All activities.





Receipt of donations to Non-Profit Associations and Entities


With value of, or greater than, 3,210 MDW (U$16,488)

Foreign Trade

Customs brokers and attorney’s-in-fact for customs matters shall obtain their clients or users identification when these are importing or exporting certain products (e.g.. vehicles, gambling machines, jewelry, watches, art, bullet proof merchandise, etc.)

All activities

Creation of rights of personal use or enjoyment over real property

With value equal to or greater than, 1,605 MDW (US$8,244)

With value of, or greater than, 3,210 MDW (U$16,488)

The above mentioned thresholds also apply if, a same personduring a period of six months, carries out a series of any suchactivities which individually do not exceed such thresholds but inthe aggregate do.


Identification of the Suspect Transaction.

FIs and NFIs participating in Suspect Transactions are required to:

• Identify and verify the identity of customers and clients;

• If a business relationship is being established, identify and confirm the activity or business of the customer or client;

• Identify the ultimate beneficiary of the transaction or beneficial owner of the customer or client;

• Maintain all documentation related to the Suspect Transaction, including documentation identifying its clients or beneficiaries; for a period of five years (for NFIs) or ten years (for FIs); and

• Cooperate with inspections by the SHCP.


• The General Rules establishes specific requirements that are detailed in several Annexes to such General Rules, depending if the Client or User is a Mexican person, a Mexican entity, a foreign person, a foreign entity, etc.


Notice of Suspect Transactions.As a general rule, NFIs are required to report a SuspectTransaction in which they participate and which are subject to areporting requirement on a monthly basis. The obligation toreport became effective on November 1st, 2013.

As general rule, the notices shall be filed using the NFIs’ currentMexican Tax Identification Number (RFC) and Tax ElectronicSignature (FIEL). The registration process of a NFIs carrying outSuspect Transactions and the forms for the notices to be filed,are detailed in the General Rules and the Resolutions publishedon August 2013 detail the process for registration of a NFI andthe forms for the notices.


• As an exception to the foregoing, the General Rules establishthe notice shall be filed by the NFI within the next followingtwenty-four hours if such NFI has additional information basedon facts or circumstantial evidence that the resources maycome from or are destined to favor organizes crime or illicitsources, provide help or cooperate to carry out any operationwith resources from illicit source considered a crime.


Pursuant to a notice published in the Prevention of Money-Laundering website (https://sppld.sat.gob.mx/pld/index.html), theobligation to file the notices for Suspect Transactions enteredinto as of September 1st, 2013 due originally November 17,2013; was postponed up to January 17, 2013.


Limitations on Cash Payments.The AMLL limits the use of Mexican and foreign currency in cash (coinsand bills), and precious metals (gold, silver and platinum) to settle or pay:

(A) The purchase and sale of real estate property, the creation ortransmission of in rem rights over them, with value equal to or greaterthan 8,025 MDW (US$40,921); or

(B) any of the following activities which threshold is equal to or greaterthan 3,210MDW (US$16,368): (a) the transmission of property orcreation of in rem rights over vehicles (aerial, maritime or land vehicles)whether new or used; (b) the transfer of watches, jewelry, PreciousMetals, Precious Stones and works of art; (c) acquisition of tickets toparticipate in bets, contests or raffles, as well as payments thereof; (d)the armoring services for any vehicle or for real estate property; (e)transfer of property or creation of any right over equity interests orshares; and/or (f) the creation of in personam use rights over any of thegoods referred in section a, b or e before.


Appointment of Representative.

An FI or NFI that participates in a Suspect Transactions isrequired to appoint an individual responsible for compliancepurposes and to register such appointment with the SHCP.Absent such an appointment, the members of the board ofmanagers or the manager of the entity are responsible.


Obtainment of Required Information.

In the event a client or customer of an FI or a NFI refuses toprovide the identification required by the law, the FI or NFI shallrefrain from further participating in, or closing, the transaction inquestion, and shall not have any liability for such withdrawal.


Confidentiality or Privilege.

Neither the reporting of a Suspect Transaction nor the delivery ofinformation and/or documentation by an FI or an NFI may beprecluded by a confidentiality agreement with the client orcustomer. Additionally, the AMLL provides that the disclosure ofinformation to the SHCP does not violate any legal, professional,tax, bank, fiduciary or other privilege.


Sanctions.The AMLL provides for the following sanctions in the event of a breach:

• Monetary sanctions: ranging from 200 MDW up to 65,000MDW (US$1,027 up to US$333,881) in the event of (i) failureto report, (ii) failure to comply with the identification orreporting obligations, (iii) extemporaneous compliance, (iv)deficient reporting, or (v) participating in an operation paid orset off with cash exceeding the Suspect Transactionthresholds.


Sanctions.

• Administrative sanctions: individuals or entities authorized or permitted by a governmental authority to carry out certain activities (e.g. holders of gambling permits, commercial notaries, notaries, customs brokers and attorney’s-in-fact for customs matters) may lose such authorization or permit.


Sanctions.

• Criminal liability: Imprisonment from two to up to eight yearsand a monetary sanction of 2,000 MDW (US$10,273) shall beimposed to anyone who deliberately:

submits false or completely illegible information,documentation, data or images to the party carrying out theSuspect Transaction to be submitted in their reports, or

modifies or alters information documentation, data orimages destined to be incorporated to the reports orincorporated in filed reports.

Tatiana Escribano TamayoPartner

T + (5255) 5002-8104 F + (5255) 5002-8110

M + (52155) 4342-2176 E [email protected]

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