international efforts against money

laundering and how it means to you

by cheryl miller, broker of baja realty and investment, cips, abr, nar

The current Ley de Lavado de Dinero (Money Laundering Law) in Mexico, actually has a long history in Mexico and the world, although, we are now feeling its affects since the passage of the most current legislation passed on Oct. 17, 2012 and enforced in full since September 2013. As with any law, a lag in enforcement was required for the government to set up its systems and procedures.

But, Mexico is not alone. And its international history goes back at least 18 years through treaties and agreements made in the United Nations and other international organizations. 

Globally, it is estimated that 2% of the world’s GPN is involved in money laundering. The estimate for the world’s GPN in 2013 is $ 71,830 billion in 2012 U.S. dollars. As you can see, 2% of this amount is significant.  It is further estimated that 3.6% of the world’s GPN is involved in organized crime money. 

In 1988, the United Nations created the UNOCD or the United Nations Office on Drugs and Crime during the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.  In 1997 the Global Program Against Money Laundering (GPML) Mandate was established. The world’s resolve was further strengthened in 3 additional conventions; the International Conference for the Suppression of the Financing of Terrorism (1999), UN Convention against Transnational Organized Crime (2000) and the UN Convention against Corruption (2003).  FATF or the Financial Action Task Force was established and all member nations were encouraged to follow the international standards embodied in the task forces 40 recommendations on Money Laundering and their 9 recommendations on Terrorist Financing passed as a resolution in 2005 and again in 2006. 

There are now 36 member States of the United Nations cooperating in these measures.  Mexico is one of them.

The purpose of the law is to stop the flow of hidden money for not only drug related crimes, but those of terrorism, corruption and tax evasion.  Participating members doing business with non-participating nations must still practice the guidelines set forth in these agreements and conventions, so its affect is more far reaching than just the member nations. 

In Mexico, the drug cartels are widely recognized and their wealth unaffected, flowing over national and international borders freely. But there is also money from corruption escaping the coffers of various municipalities and states, untaxed and unaccounted for. In addition, in Mexico, before the Reform of the Hacienda Law and the Money Laundering Act, only 18% of the country reports their income with only 2% of the country actually paying taxes. Although many of the transactions involved in income producing funds are legitimate, money laundering or hiding will be difficult to accomplish for those involved in illicit trade with the guideline set forth in these international and national laws.   It is in Mexico’s best interest to initiate and cooperate with these international conventions. 

As many as fifty-two activities fall under the umbrella of transnational crime, from arms smuggling to human trafficking to environmental crime. These crimes undermine states' abilities to provide citizens with basic services, fuel violent conflicts, and subject people to intolerable suffering. The international Money Laundering Laws outline 49 of these vulnerable activities used to hide and launder money from some of these activities too.   

Mexico requires all financial institutions, persons or companies making income in vulnerable activities, Clients of financial institutions and persons involved in real estate and other vulnerable activities to report all transactions with huge stiff fines attached for non-reporting or erroneous reporting. The minimum fine is $4,051,500.00 pesos. And since multiple persons or entities must report the same transaction, a built in “litmus test” has been installed. 

The list of vulnerable activities is long.  Included, but not complete, is real estate sales and rentals, gambling, banking of all kinds, construction, sale of art and jewels, sales of cars and boats, money exchange, all transactions by Notarios and Corredores, donations, machinery, arms and precious metals.

The law in Mexico is being enforced by the Secretaria de Hacienda y Credito Publico (SHCP) with the Procuraduria General de la Republica (like the Federal Attorney General) under a Special Unit in Financial Analysis.  

​99% of all real estate transactions will fall within the minimum guidelines to report. Whether these international efforts actually curb drug, terrorist or corruption funds from flowing is yet to be seen, however, the world’s nations, including Mexico, have stepped up their efforts to do so. 
About the Author> Cheryl Miller, Broker of Baja Realty and Investment, CIPS, ABR, NAR. www.forsaleinbaja.com, info@forsaleinabaj.com, 011-521-624-122-2690.  Located on Hidalgo Street in downtown Cabo San Lucas, tourist
district.