Background on the Anti-Money Laundering Reform
The Federal Law for the Prevention and Identification of Operations with Illicitly-Obtained Resources, known as the Anti-Money Laundering Law (AML), aims to prevent and detect money laundering and terrorism financing by controlling economic activities that could be used to introduce illicit funds into the financial system or formal economy.
Key Figures and Context
Mexico City’s Mayor, Claudia Sheinbaum, has been instrumental in advocating for the institutional strengthening of the Unit of Financial Intelligence (UIF) and has publicly supported the legislative reforms enriching the AML framework, especially under international pressure such as U.S. sanctions.
8 Key Aspects of the AML Reform
- Alignment with GAFI Standards: The reform addresses observations from the Group of Action Financial International (GAFI), aligning Mexico with international best practices.
- Creation of a PEP Registry: The reform mandates monitoring accounts linked to Politically Exposed Persons (PEPs), their relatives, and associates with specific internal policies.
- Identification of the Beneficial Owner: The reform reinforces the obligation to investigate and report on those controlling or benefiting from operations through legal entities, enhancing transparency.
- Automated Risk Detection and Analysis: The reform requires the implementation of automated systems for real-time alerts, periodic risk assessments, and internal audits.
- Lower Thresholds and Digital Transparency: The reform lowers reporting thresholds for cash deposits, prepaid cards, and unifies digital processes with clear response timeframes (10-80 days).
- Enhanced Interinstitutional Coordination: The UIF gains reinforced powers; the FGR and National Guard are obligated to report suspicious cases; Hacienda can request data from INE, Pemex, unions, and political parties.
- Expanded Vulnerable Activities Catalog: New activities such as real estate developments, trusts, cryptocurrency commercialization, and virtual assets are included. Notaries, brokers, and other new obligated subjects must identify ultimate beneficiaries and report suspicious operations, even if they don’t materialize.
- UIF as a Victim: In financial crimes, the UIF can be recognized as a victim, formally participating in legal proceedings to recover assets and bolster persecution.
Criticisms of the Reform
The reform discussion took place following the U.S. Department of Treasury’s identification of CIBanco, Intercam, and Vector as institutions linked to money laundering and narco-trafficking.
Despite the reform occurring in a global context where money laundering has diversified, particularly through digital platforms and virtual assets, it has faced several criticisms.
- Excessive Administrative Burden: Over 50 civil organizations have pointed out that the reform creates excessive administrative loads, potentially threatening their operational capacity and associational freedom.
- Vague PEP Definition: Legislative opposition has warned that the vague definition of PEPs and institutional strengthening could lead to excessive surveillance, possible discretionary abuses, and negative political effects.
- Impact on Small and Medium Enterprises: Coparmex and other organizations caution that the new obligations will require investments in technology, training, and monitoring systems, which could negatively affect small and medium-sized enterprises.
Key Questions and Answers
- What is the purpose of the AML reform? The reform aims to strengthen Mexico’s alignment with international best practices for preventing money laundering and terrorism financing.
- What are the main changes introduced by the reform? The reform includes aligning with GAFI standards, creating a PEP registry, identifying beneficial owners, implementing automated risk detection systems, lowering reporting thresholds, enhancing interinstitutional coordination, expanding vulnerable activities catalog, and recognizing the UIF as a victim.
- What are the criticisms against the reform? Critics argue that the reform imposes excessive administrative burdens, has a vague definition of PEPs, and could negatively impact small and medium enterprises due to increased costs for technology, training, and monitoring systems.
