Background and Relevance
The Mexican Chamber of Deputies approved the reform to the Federal Law for the Prevention and Identification of Operations with Illicitly-Obtained Funds (LFPIORPI) on Monday, with 297 votes in favor, 37 against, and 87 abstentions. The reform, driven by Senator Javier Corral from the Morena party, aims to address recommendations from the Group of Action Financial (GAFI), which will evaluate Mexico’s progress in preventing money laundering and terrorism financing this year.
Supporters and Concerns
Diputada Iraís Reyes de la Torre from Movimiento Ciudadano acknowledged the necessity of the reform, stating that money laundering occurs not only in tax havens or cash transactions but also when illicit funds are hidden behind shell companies, opaque structures, or complex transactions. However, Movimiento Ciudadano plans to vote in abstention due to concerns about the reform, such as granting the Secretaría de Hacienda y Crédito Público (SHCP) access to sensitive information like public records, biometric data, and tax details without judicial oversight.
“The fight against crime should not justify the creation of a surveillance system without checks and balances,” Reyes de la Torre emphasized.
Priísta Christian Castro Bello also criticized the reform, arguing that it justifies discretion, opacity, and weakens legal rights through the expansion of state surveillance powers and imposing excessive obligations on already regulated sectors.
Key Changes in the Reform
The reform proposes several modifications, including:
- Expanding the concept of beneficiary controller
- Defining Non-Profit Organizations
- Updating the definition of business relationships
- Expanding the list of vulnerable activities and introducing the definition of politically exposed persons
Additionally, the reform establishes:
- A simplified identification regime for public clients
- Training and audits implementation
- Risk monitoring and evaluation
- Hacienda’s cooperation with the National Guard and other institutions
- Protection of compliance officers’ identities
It also promotes:
- Automated risk management systems
- External and internal audits
- Expanded reporting obligations, including those for notaries and brokers
- Incorporation of the Universal Movement Account (UMA)
- Strengthened sanctions
- Recognition of the Financial Intelligence Unit (UIF) as a victim
Context and Impact
This reform comes as the U.S. Department of the Treasury has accused CIBanco, Intercam, and Vector of money laundering. The Mexican Anti-Money Laundering Law reform aims to strengthen the country’s position against financial crimes, aligning with GAFI recommendations. However, concerns about potential overreach and lack of judicial oversight highlight the need for a balanced approach to ensure both effective crime prevention and protection of civil liberties.
Key Questions and Answers
- What is the main goal of the reform? The primary objective of this reform is to address recommendations from GAFI and strengthen Mexico’s position against money laundering and terrorism financing.
- Who is driving the reform? The reform is primarily driven by Senator Javier Corral from the Morena party.
- What are the key changes proposed by the reform? The reform proposes expanding the definition of beneficiary controller, clarifying non-profit organizations, updating business relationship definitions, and incorporating politically exposed persons. It also establishes simplified identification regimes, risk monitoring, and strengthened sanctions.
- What are the concerns surrounding the reform? Critics, including Movimiento Ciudadano, have raised concerns about potential overreach and lack of judicial oversight in granting the SHCP access to sensitive information.
- What is the context of this reform? This reform comes as the U.S. Department of the Treasury has accused CIBanco, Intercam, and Vector of money laundering, highlighting the need for Mexico to strengthen its anti-money laundering measures.
