Introduction
The proposed reform to the Federal Law for the Prevention and Identification of Operations with Illicitly-Obtained Funds (LFPIORPI) and its relationship to terrorism financing, as presented in the Senate, opens a crucial discussion about Mexico’s effectiveness in combating economic crime and the proportionality and feasibility of the proposed measures.
In a context where international pressures, especially from the Group of Action on Money Laundering (GAFI), have increased, it’s understandable that the state seeks to strengthen its regulatory framework to align with global standards. However, this reform’s path is not without risks and contradictions.
Background and Objectives
The reform aims to establish a more robust framework for preventing money laundering and terrorism financing, addressing deficiencies pointed out by the GAFI since 2018. This legitimate and desirable intention has resulted in several legislative modifications that, in general terms, expand the law’s scope, tighten obligations for involved parties, and create new monitoring and sanctioning mechanisms.
Problematic Aspects
Beneficiary Control Definition:
One of the most problematic aspects is the change in the definition of “beneficiary controller.” The new proposal wants to include anyone who receives benefits from an operation, whether directly or indirectly. Moreover, it mixes the concept of beneficiary with that of customer, which are distinct in Mexican legislation. This confusion can lead to legal uncertainty and impose responsibilities on individuals who should not have them, potentially affecting the effectiveness of the system designed to combat illegal money operations.
Customer Identification Obligation:
The obligation to identify customers or users engaged in vulnerable activities poses a significant obstacle for businesses operating through electronic or remote means. In an environment where digital commerce and cross-border transactions are rapidly growing, requiring physical or “direct” identification lacks practical sense and disregards existing provisions in the General Rules that allow electronic identification.
Risk Assessment Obligation:
The proposal increases the number of obligated subjects and legal assumptions leading to money laundering review. Although the proposal establishes this obligation without distinction, the heterogeneity of obligated subjects makes imposing a uniform regulatory burden, at best, disproportionate. An individual renting a single property, thus considered an obligated subject, cannot be equated with a company conducting hundreds of financial operations monthly across multiple jurisdictions.
Additional Concerns
Automatic Monitoring Systems:
The proposal suggests that all individuals or businesses engaging in vulnerable activities use automated systems to monitor their clients’ behavior, similar to banks. However, this doesn’t make sense in many cases because these activities are often one-off or sporadic, with no continuous relationship with clients. Building a “behavioral profile” as banks do is not feasible, and mandating these systems would be costly and ineffective for detecting crimes.
Unequal Treatment of Banks and Vulnerable Activities:
The proposal treats banks and individuals or businesses engaging in “vulnerable” activities similarly, disregarding their distinct operational methods. For instance, it aims to obligate all “high-risk” entities to undergo external audits without clearly defining what constitutes high risk.
Impact on Small Businesses
Small and medium-sized enterprises (SMEs) already comply with numerous rules and procedures that cost them time and money. According to the National Commission for Regulatory Improvement (Conamer), these regulations’ cost in Mexico represents 3.4% of the GDP, more expensive than taxes themselves. Approving this LFPIORPI reform would further complicate and increase the cost of legal operations for many SMEs, potentially leading them to operate informally to avoid paperwork or face penalties from authorities for minor errors while serious criminals laundering money or financing crimes continue undetected.
Normative Omissions
The proposal also includes normative omissions that warrant attention. For example, it introduces the terms “report” and “notice” as reporting obligations without defining their content, scope, or legal consequences. Such ambiguity not only complicates compliance but also opens the door to discretionary interpretations by the supervisory authority.
Conclusion
Mexico must strengthen its anti-money laundering and terrorism financing prevention regime, especially to maintain its international standing and credibility. However, adhering to international standards should not justify excessive and disproportionate regulation. GAFI recommendations, while important, must be interpreted and implemented with an approach acknowledging the diversity of economic actors, technological context, and the country’s legal reality.
The solution lies in designing a flexible, risk-based framework that encourages voluntary and effective compliance rather than imposing a one-size-fits-all regulatory straitjacket. The key is harmonizing international standards with a realistic view of the national economy and a firm commitment to legal certainty, security, and regulatory efficiency principles.
*The author is the Director of Inteligencia Más and a master’s degree holder in Public Policy and Government at the Universidad Panamericana.
