Reform of Mexico's Anti-Money Laundering Law: New measures to combat transactions with funds of illicit origin

The reform to the LFPIORPI includes relevant changes with the objective of strengthening the legal framework to prevent operations with illicit proceeds, including:

• New concepts: Definitions of “Politically Exposed Person”, “”Responsible Compliance Representative”, and “Risk” are added. Likewise, “Controlling Beneficiary” is redefined.
• Change in reporting thresholds: The following thresholds are modified: (1) the issue or commercialization of service or credit cards, prepaid cards, and instruments for storing monetary value; (2) public notaries and brokers (for certain transactions); and (3) virtual assets. 
• Addition of catalogue of Vulnerable Activities: The list of Vulnerable Activities is expanded to include real estate developments. Likewise, in the case of trading of virtual assets, it is stablished that transactions carried out from foreign jurisdictions involving Mexican citizens are also covered. 
• Identification and conservation record policy: Directly identifying Customers, obtaining information and documents to identify the Controlling Beneficiary (in cases where this is known), registering and updating the details for those who carry out vulnerable activities. Also, the conservation period for documentation is extended to 10 years from the date of the transaction.
• Automatized systems implementation requirement: It is introduced the obligation to implement automatized systems that enable the monitoring of activities and operations for those who carry out vulnerable activities. This means that companies could face similar automatization control requirements like the financial system. 
• Internal or external audit: The obligation to have annual reviews by an internal or external auditor to assess compliance of legal obligations has been established. These audits will be regulated by the general rules eventually issued for this purpose. 
• Risk-based approach: Obligation to have a methodology for identifying, analyzing, understanding, and mitigating risks, including those related with customers who carry out transactions.
• Responsible Compliance Officer: It is established that the Compliance Officer must receive annual trainings to comply with anti-money laundering legal obligations.
• Controlling Beneficiary: Obligation for commercial entities to register the information necessary to identify the individual or group of individuals considered to be Controlling Beneficiaries on the electronic system of the Ministry of Economy. 
• Sanctions: The reform establishes that the Ministry of Treasury and Public Credit (by its acronym in spanish - SHCP) will abstain from sanctioning an offender, on a one-time occasion, for all violations, as long as the offender complies voluntarily and prior to the commencement of the authority’s verification powers and expressly recognizes the infraction. In the case that the offender has already utilized this benefit, the authority  may reduce their fines up to 50% under the same conditions.

The transitional provisions stipulate that this reform will enter into force on the day after its publication in the DOF, except in cases provided for in specific provisions. Therefore, SHCP after consulting with the Tax Administration Service (by its acronym in spanish - SAT), must establish the deadlines for the entry into force of the new obligations through general rules of the LFPIORPI.

For more information or advisory services on this topic, Hogan Lovells’ team is available to provide support in any aspect related to its implementation. 

Authored by Federico De Noriega O., Guillermo Larrea, Juan Quinzanos, Jose C. Altamirano, Ximena Ortega, and Dulce S. Vega.