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|Issued:||June 21, 2010|
|Subject:||Newly Released Mexican Regulations Imposing Restrictions on Mexican Banks for Transactions in U.S. Currency|
The Financial Crimes Enforcement Network (FinCEN) is advising U.S. financial institutions of a recent change in Mexican financial regulations applying to Mexican banks that could affect the operations of U.S. financial institutions. On June 15, 2010 the Mexican finance ministry, Secretaría de Hacienda y Crédito Público de México (SHCP), announced new anti-money laundering (AML) regulations that will restrict the amounts of physical cash (banknotes and coins) denominated in U.S. dollars that Mexican banks may receive.1 The Mexican regulation will still allow certain transactions up to relatively low value thresholds, as described in more detail below. The regulations do not restrict non-cash transactions denominated in U.S. currency (e.g., wire transfers, ACH payments, credit card transactions, traveler's checks, etc.). These new Mexican regulations are intended to mitigate risks of laundering proceeds of crime tied to narcotics trafficking and organized crime. The regulations state that the restrictions on U.S. currency transactions by banks with individuals will go into effect four business days after official publication on June 16, 2010. The restrictions on U.S. currency transactions by banks with legal entities and trusts will go into effect ninety (90) calendar days after official publication (on or about September 14, 2010).2
This Advisory is issued to assist financial institutions in understanding how the U.S financial system may be affected by the changes in the Mexican regulations, to help U.S. financial institutions anticipate possible impacts on their businesses, including the risk profiles of certain classes of transactions and customers, and how various AML and counter-terrorist financing safeguards consistent with Bank Secrecy Act (BSA) regulations may be utilized to mitigate possible changes or increases in risks.
The United States and Mexico maintain strong commercial and cultural ties, particularly evident around our shared border. There are many legitimate reasons that U.S. currency enters the Mexican economy, including in connection with border trade, tourism, and remittances.3 Nonetheless, a significant portion of the U.S. currency in Mexico is derived from illegal activity, specifically the sale of narcotics in the United States, some of the proceeds of which are smuggled as bulk cash into Mexico.4 Within Mexico, much of the U.S. currency, regardless of source, is intermediated through multiple transactions and ultimately make its way into the global financial system and repatriated back to the United States (in a process similar to that in most countries with respect to the processing of non-local currency).
FinCEN and U.S. financial regulators have previously taken steps aimed at raising awareness of the risks involved in the bulk shipment of cash between the United States and Mexico. In 2006, FinCEN issued guidance on the potential misuse of relationships with U.S. financial institutions by certain Mexican financial institutions, including Mexican casas de cambio, and the money laundering threat involving the smuggling of bulk U.S. currency into Mexico.5 More recently, on April 29, 2010, the Federal Financial Institutions Examination Council (FFIEC) released the revised Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual,6 which included a new section providing guidance to banks on managing the risks associated with receiving bulk shipments of currency and implementing effective monitoring and reporting systems addressed to those risks. Although the FFIEC BSA/AML Examination Manual is issued by the Federal banking regulators regarding AML requirements applicable to banks, it contains guidance that may be of interest to all financial institutions covered by the BSA.
Summary of New Mexican Regulation
The SHCP has issued the new regulations, in consultation with the Mexican financial supervisor, the Comisión Nacional Bancaria y de Valores, pursuant to Article 1157 of the Mexican Law of Credit Institutions, to be included among other AML requirements for banks issued pursuant to article 115. (See Annexes for a copy of the new regulations as issued, and an unofficial translation into English.) The regulations provide that Mexican banks shall be prohibited from receiving U.S. currency for transactions involving currency exchange, and for receipt of payment for services, or transfers or remittances of funds, subject to the following conditions:8
The change in Mexican regulations could have a significant impact on the operations of U.S. financial institutions, both directly with respect to the nature of activity and relationships with Mexican customers and financial institutions, and indirectly with respect to possible changes in activity both within the United States and through intermediary countries. Financial institutions are advised that some changes in transaction activity should be expected in advance of the effective date of the Mexican regulations. In addition, U.S. financial institutions should be aware that some Mexican banks have already implemented restrictions on accepting foreign currency. The end of this Advisory includes examples of possible changes in activity. These examples are by no means certain nor exclusive, but rather are illustrative and are being shared through this Advisory for the purpose of aiding U.S. financial institutions in developing assessments based upon their unique customer and business profiles.
Financial institutions should consider the possible impact of the restrictions when reviewing financial activity and monitoring transactions. The changes to the Mexican regulations could lead some customers to seek new relationships with U.S. financial institutions. Financial institutions are reminded of their requirement to have a Customer Identification Program, as applicable, as well as an AML Program to detect suspicious activity. Financial institutions that receive or offer services in connection with bulk cash shipments should have policies and procedures that mitigate the risks of those services.
While the transactional activity that U.S. financial institutions may experience as a result of the new Mexican restrictions may not be indicative of criminal activity, U.S. financial institutions should consider this activity in conjunction with other information, including transaction volumes and source of funds, when determining whether to file a suspicious activity report (SAR).9 Financial institutions' requirements to report suspicious activity are significant, because SARs continue to be one of the most valuable sources of data for law enforcement and regulatory agencies in their investigation and prosecution of criminal activity.
Suspicious Activity Reporting
To assist FinCEN and law enforcement with efforts to better assess the impact of the changes in the Mexican regulations, particularly with respect to possible attempts by criminals to divert or alter their methods of laundering the proceeds of crime, we request that: (a) if a financial institution has determined that a transaction is suspicious and thus has an obligation to file a SAR with FinCEN; and (b) if the facts and circumstances of the transaction lead the financial institution to suspect that the transaction is being entered into as a result of the Mexican currency restrictions, then the financial institution should include the specific term "MX Restriction" within the narrative portion of the SAR filing and highlight the exact dollar amount(s) associated with the suspicious activity. We further request the Suspect/Subject Information Section in the SAR filing include all information available for each party suspected of engaging in this activity (including the individual or company name, address, phone number, and any other identifying information). With respect to currency shipments from Mexico that are deemed suspicious, include information on the common carrier, courier, or shipper of the currency, and information on the point of exportation of the currency from Mexico and the point of importation in the United States, if known.
FinCEN will continue to analyze U.S. currency flows between Mexico and the United States to better understand legitimate, as distinct from possible criminal, activity, and to aid in the detection, deterrence, investigation and prosecution of criminal activity. Future updates to this Advisory may be published as more specific information as to the effects of the new Mexican regulations become available.
Examples of Potential Activity
The new restrictions implemented by Mexico may have both direct and indirect effects on transactions occurring in the United States. Financial institutions may find the following examples of possible effects helpful in assessing risks and in ongoing monitoring of financial transactions.
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For questions regarding this Advisory, contact FinCEN's Regulatory Helpline at (800)949-2732.
Unofficial Translation http://www.fincen.gov/news_room/rp/files/06-2010-0238-eng-final.pdf
The original Mexican regulations referenced in this advisory may be found at: http://dof.gob.mx/nota_detalle.php?codigo=5146921&fecha=16/06/2010