Not many experts in Mexico are willing or brave enough to discuss the country’s recently amendedanti-money laundering laws, designed to hamper the drug cartels from trying to legitimize their ill-gotten gains
The foot-dragging reticence is more understandable when you realize that it's about more than just hard feelings or toes stepped upon. Mexico is the largest transit area for illegal narcotics in the world. Northwards flow the tons of drug shipments into the United States, and southwards return bundles of cash and stacks of guns. This illicit trade which has grown and developed into a booming and highly profitable illicit industry is now annually worth well in excess of $40 billion - and counting.
Yet the days of chucking cash around like confetti to buy luxury goods and haciendas, and using so-called safe houses to stack from basement to rafters piles of high denomination banknotes, are numbered.
The new, more carefully tailored laws, which were designed to detect and curb transactions of illegal proceeds or the financing of terrorism, have some very strict parameters and curbs.
Banned transactions, in national or international currencies, include the sale of real estate or property valued at more than 520,000 pesos ($40,000). Boats, cars or planes over 200,000 pesos are on the list, which also includes anything from jewellery, precious metals, gems, watches to artwork.
Insurance and retail services, credit cards, pre-paid cards or a travellers' checks, when not offered by financial institutions, also fall under this category.
Implementing the law
Those who are charged with identifying what is termed the performance of vulnerable acts have to follow a clear set of obligations. These include: To identify clients or users, to retain documentation related to vulnerable activity for five years from the done deed, and to file relevant data to the finance ministry.
Alberto Elias Beltran has been appointed by the finance ministry to implement these laws. And he points out that they're specifically designed to cover the spectrum of money laundering, illegal funds, drug trafficking, arms trafficking and people trafficking. He explains that the aim is to better detect the operations and financial structures of organized crime to be able to squeeze and impact them.
He concedes that by the very nature of the beast, there isn't a methodology to determine just how much money is being laundered in a region, let alone a country. But the number of denunciations to the Attorney General's Office, arrests, convictions jail sentences and seizures of illegal funds by the state, are a reasonable benchmark to start with.
Mexico's drug cartels have been creative with their illicit trade in the past
Omar Fayad, President of the Mexican Senate's Justice Commission, says the new law does make life easier for law enforcement officials.
"If you watch how the money moves, you can do a lot of things, that's the reason Mexico's Congress approved this anti-money laundering legislation. If you can hit the drug cartels' economic power, then certainly their field of action is affected. But I think that they have the capacity to adapt to these new circumstances. That's why it's so important to modify legislation not just once. The government must be dynamic and willing to modify the legislation constantly. It's the first step combined with others to follow, in order to fight against the drug cartels in Mexico. But the cartels are like viruses. They have the ability to change and transform fast."
Tightening the loopholes
Ramon Garcia Gibson is the CEO of Garcia Gibson Consulting - a Mexican firm specializing in the prevention of money laundering and financing of terrorism. He says the new law tightens loopholes: "It establishes measures and procedures to prevent and detect operations involving resources of illicit origin. And definitely with this law, it's going to make life more difficult for organized crime because Mexican authorities will have information about transactions, which limits the use of cash from their illegal activities."
Accountant Jose Raul Alvarez Flores of ASI Contadores says estimates of how much money slips through the net annually add up to the equivalent of $10 billion. That also includes individuals and companies who avoid paying taxes, but the majority of the gigantic overall swindle boils down to the common denominator of organized crime.
It's not just the drug capo who's slammed down 3 million pesos or considerably more on the table to buy a house outright. This new law filters down as far as buying a quality watch or splashing out on jewellery. And the sanction of not complying, reporting and playing the game by the new rules is: "Go to jail, go directly to jail."
More cohesion
The new law also draws the relevant entities together into a tighter and more cohesive team spearheaded by the finance ministry, combined with the Attorney General's Office and with the closer cooperation of the banking industry.
As Ramon Garcia Gibson says, "it establishes a proper coordination between authorities responsible for preventing but also prosecuting money laundering."
All of this sounds like a good idea and appears to be making life more difficult for the drug cartels. But the cartels themselves count amongst their ranks specialists in finance, logistics, forward planning and business.
The days of focusing on cash transactions may be over as the cartels look for new options
One example is the notorious Arellano Felix drug cartel. Five of the seven brothers who ran it are under lock and key and two have been shot dead. Since the arrest of her brother Eduardo in 2008, Enedina, one of their four sisters and a university trained accountant, has taken over the illicit enterprise with her son Luis Fernando.
Accordingly, the focus is much more strictly applied to prudent business practice, financing and various sophisticated methods of money laundering to generate bigger profits.
Not surprisingly, the new methods do not focus exclusively on antiquated cold, hard cash. And the wanton first option of violence has also been refined and adapted. The new-found expertise is going to be considerably more difficult to disrupt and dislodge.
Michael Hearns an Anti Money Laundering specialist with over 27 years of AML experience can also be found at:www.launderingmoney.com and on twitter at :http://twitter.com/#!/LaunderingMoneyas well as his blog at:http://moneylaunderingworld.blogspot.com
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