Reforms to Mexico's anti-money laundering law earlier this year breathed new hope and marked a key milestone in the fight against organized crime, but lingering challenges could hamper strengthening controls on suspicious financial transactions and closing legal loopholes that have made money laundering easier.
THE new reforms to the federal law on the prevention and identification of illicit proceeds transactions, better known as the “anti-money laundering law”, came into force in July. One of the central pillars of change was the fight against financial support for terrorism. It also expanded activities considered vulnerable to money laundering – such as real estate development, virtual assets (cryptocurrencies), betting houses and the issuance or sale of prepaid cards – as well as which entities must report suspicious transactions.
It also strengthened sanctions and demanded increased reporting requirements, such as identifying “beneficial owner” in all transactions, or persons who have direct or indirect control over the company, even if they are not listed as its owners.
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The reform also aimed to increase institutional coordination at the national level between the Ministry of Finance and Public Credit, the Attorney General's Office, the Ministry of Security and Citizen Protection, and the National Guard.
Several experts consulted by InSight Crime agreed that the reform represented progress toward stronger legislation, although creating new tools to detect money laundering linked to organized crime remained a problem in Mexico.
The stricter screening requirements established by the reform for certain companies will help standardize anti-money laundering mechanisms in the country, Ellis Matteson, head of Latin America at law firm Miller & Chevalier, told InSight Crime.
“Practices such as automated systems for detecting unusual transactions, internal and external audits and specialized training will become more common and help more companies identify problem behavior,” Ellis said.
Legal loopholes persist
Despite this, legal inconsistencies and potential deficiencies in the implementation of these reforms could limit their impact on money laundering.
“The legislation is important but not sufficient,” according to Cecilia Farfán-Méndez, director of the North American Observatory of the Global Initiative against Transnational Organized Crime. The few convictions handed down for money laundering offenses in Mexico underscore this point, as well as the complexity of money laundering investigations.
In addition, the regulations could be unevenly applied, according to Salvador Mejía, partner at Asimetrics, a company specializing in strategic consulting on money laundering prevention. This is because they establish obligations such as implementing risk matrices, which many small and medium-sized businesses may not have the resources to comply with.
Furthermore, some experts have warned that several affected sectors remain outside the scope of the law, such as agricultural sectorsports clubs, the entertainment industry and the chemical industry – which is particularly vulnerable due to its role in the diversion of chemical precursors for the illicit production of fentanyl.
Implementation will not be easy
Another concern of experts lies in the complexity of implementing the reform.
“Even though, on a technical level, the reform improves the government's ability to detect cases of money laundering linked to organized crime, biased implementation could trigger surveillance without clear limits, violate banking secrecy, and weaponize the tools used to detect money laundering,” international conflict expert Diana Paz told InSight Crime.
A clear example is the incorporation of “politically exposed persons” (PEP), which includes any person who has held public office, both in Mexico and abroad, as well as other people meeting certain conditions and characteristics.
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The reform makes it mandatory to identify and monitor the operations of all persons considered politically exposed. Although this definition is necessary and useful, it does not clearly define the individuals within it. This ambiguity creates a legal vacuum that could lead to selective persecution for political purposes.
Additionally, the National Guard – now controlled by the military – is among the government institutions with investigative capabilities for money laundering cases. This could pose the risk of further militarizing civilian administrative roles and could violate individual rights, according to Emiliano Polo, political risk analyst at Control Risks.
The Ministry of Finance and Public Credit will also expand its investigative powers, allowing it to obtain personal, financial and real estate information without judicial authorization, thereby increasing privacy risks, Polo added.
