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LEGAL UPDATE_AMENDMENTS TO ANTI MONEY LAUNDERING PROVISIONS

Submitted By Firm: Santamarina y Steta

Contact(s): Alejandro Luna, Juan Carlos De La Vega

Author(s):

Mexico City office: Mariano Calderón V., mcalderon@s-s.mx Gustavo Robles, grobles@s-s.mx Phone: (+52 55) 5279-5400 Fax: (+52 55)5280-7614 / 5280-3214 / 5280-7866 Monterrey office: César Cruz A., ccruz@s-s.mx Diego Acosta C., dacosta@s-s.mx Phone: (+52 81) 8133-6000 Fax: (+52 81) 8368-0111

Date Published: 8/25/2014

Article Type: Legal Update

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L E G A L   U P D A T E

August, 2014

AMENDMENTS TO ANTI MONEY LAUNDERING PROVISIONS

 

On July 24, 2014, the Secretariat of Finance and Public Credit and the Financial Intelligence Unit, respectively, published in the Official Gazette of the Federation (“DOF”, for its acronym in Spanish), the following: (I) a certain amendment to the General Rules referred to in the Federal Law for the Prevention and Identification of Transactions with Proceeds of Illegal Origin (the “Rules”), which became effective on the day following its publication; (II) a certain Resolution amending that resolution issuing the official format for registration of those individuals or entities engaged in Vulnerable Activities (the “Resolution for Registration”), which became effective on August 1, 2014; and (III) a certain Resolution amending the resolution issuing the official formats for notices and reports that those individuals or entities engaged in Vulnerable Activities (the “Resolution for Notices and Reports”), which will become effective on September 1, 2014.

 

Those amendments to the Rules, the Resolution for Registration and the Resolution for Notices and Reports are intended to simplify compliance with those obligations deriving from the Federal Law for the Prevention and Identification of Transactions with Proceeds of Illegal Origin (the “Law”), its Regulations and the Rules (collectively referred as “Anti Money Laundering Provisions”), by avoiding unnecessary and burdensome requirements or the normal course of business of those engaged in Vulnerable Activities .

 

A summary of those main modifications to the Rules, the Resolution for Registration and the Resolution for Notices and Reports is described below:

 

I.             Amendments to the Rules.

 

A.        Definitions.

Certain defined terms applicable to the Rules are added or amended in Article 2 of the Rules, being the most relevant the following:

 

1.         A definition of “Financial Institution” was incorporated and such includes banking institutions, bonding warehouses, money exchange institutions, financial institution with multiple purpose, credit unions, popular finance institutions, savings and loans cooperatives, brokerage firms, mutual funds, retirement fund administrators, institutions or mutual insurance companies, bonding companies, and “Financiera Nacional de Desarrollo Agropecuario, Rural, Forestal y Pesquero” (National Financial Institution for Rural, Agricultural, Fishery and Forestry Development). The addition of this defined term is important considering that, as stated below; the Rules have no listed certain Vulnerable Activities conducted by Financial Institutions that shall not be subject to notification or reporting to the Financial Intelligence Unit ("UIF", as per its acronym in Spanish) notice.

 

2.         Although the wording is unfortunate, an exception to the definition of “Beneficiary Controller” has been added, which states that “principals or grantors of powers of attorney will not be considered a Beneficiary Controller when their agents or representatives act on their behalf in the respective act or transaction”.

 

3.         Those services rendered by notary publics and public brokers for the attestation of documents that fall within a Vulnerable Activity in accordance with Article 17, subsection XII of the Law, will not be considered as a “Business Relationship”.

 

B.        Electronic Notifications to those Participants of Vulnerable Activities.

 

Any notices made by the UIF through the Tax Administration Service ("SAT") shall be conducted electronically once the registration process on the Portal for the Prevention of Money Laundering (the “Portal”) has been completed. Similarly, any person conducting Vulnerable Activities is obliged to access the Portal at least the fifteenth and last day of each month or the business day that follows to check for any notices from SAT and UIF made through the Portal. Notwithstanding the foregoing, if that person fails to comply with this obligation in those days indicated above, any outstanding notification will be deemed received on the corresponding business day.[1]

 

Please keep in mind that the Rules stipulate that it is contemplated that if the Portal presents any outage or failure for reasons attributable to SAT or the UIF; thus is not possible to verify any notification conducted by them, the person engaged in the Vulnerable Activities shall be obliged to report to SAT this situation within a period not exceeding three business days following the date on which such impediment occurs, so that any notices may be delivered through any other means contemplated in the Federal Law of Administrative Procedure.

 

In the event that SAT updates the information provided in the Portal based on information obtained through other governmental agencies, such update shall be notified within ten business days of the date on which it is made.

 

Finally, it is specified that the rules pertaining to electronic notifications became effective on July 31, 2014.

 

C.        Customers and User Identification.

 

1.         Identification File.

 

Two new annexes have been incorporated with requirements for the identification files of Customers or Users when such are: (a) Mexican Public Companies, shall provide the information and documents described in Annex 4 Bis shall apply; or (b) Embassies, Consulates, International Organizations recognized by the Mexican Government with residence within Mexican territory, shall provide the information and documents described in Annex 6 Bis.

 

Likewise, it is provided that it is not permitted to maintain an identification file of Customers or Users with fictitious or confidential names.

 

2.         Rendering of Professional Services.

 

Those engaged in a Vulnerable Activity related to providing professional services, will have the option to create the identification file of its Customers or Users with the data required in the Annex of the Rules according the particular characteristics of the Customer or User.

 

3.         Document Attestation Services.

 

Pertaining to services related to the attestation of documents, the obligation to have identification files of Customers and User referred to in the Rules will be considered as complied if the information and documentation needed is maintained within the public files or records used for the Vulnerable Activity, but being obligated to maintain them for a term of no less than five years.

 

4.         Accumulation of Acts or Transactions.

 

In consideration to the obligation imposed on certain persons carrying out Vulnerable Activities, related to establish mechanisms to monitor and accumulate acts or transactions, individually, that their Customers or Users conduct for amounts equal to or exceeding the thresholds specified in Article 17 of the Law, it is clarified that the period of time for which a person performing Vulnerable Activities is required to accumulate acts or transactions are for periods of six months.

 

D.        Non-reportable Vulnerable Activities.

 

A certain list of acts or transactions that, although deemed Vulnerable Activities in terms of the Law, are not subject to notice. Such acts or transactions are described below:

 

1.         With respect to companies part of a Business Group, the following acts or transactions: (i) loans or credits to employees of the companies that are part of the Business Group; (ii) management of resources provided by employees of the companies of the Business Group together with  loans or credits granted with those funds to employees of such companies, provided that the total amount of the transaction has been awarded through Financial Institutions;

 

2.         Loans or credits granted by public trusts held with Financial Institutions, where the Secretariat of Finance and Public Credit acts as trustor and the Bank of Mexico acts as trustee, provided that in such transactions the total amount of the resources has been granted through Financial Institutions;

 

3.         The rendering of professional services for the  construction or development of real estate properties, if: (i) the resources for such services originate, in whole or in part, from development banking institutions or public housing agencies, and (ii) the full price has been paid through Financial Institutions;

 

4.         The commercialization of land vehicles, provided that the companies manufacturing or importing them, commercialize those vehicles through its own distributor, franchisees or authorized dealers, and the full price of the car has been paid with resources of Financial Institutions.

 

5.         The execution of lease agreements between companies of the same Business Group, provided that all the agreed rents have been paid through Financial Institutions or there is no flow of resources.

 

II.             Amendments to the Resolution for Registration.

 

The list of the information that must be provided by those persons engaged in Vulnerable Activities was modified; particularly, that required upon registration in the Portal; therefore, it is advisable to to consult the applicable annex depending on the specific characteristics of the person engaged in Vulnerable Activity. Nevertheless, we deemed appropriate to highlight the following:

 

1.         It is stated that the definition of "Representative" means the person designated by an entity in order to be responsible for compliance of those obligations set forth in the Anti-Money Laundering Provisions. It also stated that after the Representative is appointed to comply, on behalf of his principal, with those obligations , such shall be required to complete his/her appointment by delivering, through the Portal, certain information listed in Annex B of the Resolution for Registration; and

 

2.         Considering that those amendments and additions to the official formats for registration in the Portal are aimed to simplifying the process and the information to be required, it is noted that certain requirements were eliminated, such as the obligation to provide information about Board of Directors or the shareholders information, if applicable.

 

 

 

  1. Amendments to the Resolution for Notices and Reports

 

In accordance with the spirit of amendments to the Rules and the Resolution for Registration, certain changes were added on the Resolution of Notices and Reports intended to simplify the filing of the Notices and Reports required by the Anti-Money Laundering Provisions, for which it will be necessary to consult the corresponding annex, depending on the Vulnerable Activity being carried out. Nevertheless, it is important to mention the following:

 

1.         It is specified that once the information about a Vulnerable Activity has been submitted , SAT will process it and generate an electronic acknowledgment receipt which shall contain the following information: (a) file number; (b) identification data of the person carrying out the Vulnerable Activity; (c) the  Vulnerable Activity subject to Notice or Report; (d) electronic means of transmission; (e) date and time of receipt by SAT; (f) the number of Notices; and (g) the receipt status. It also stated that if errors or omissions are detected in the integrity of the information submitted, an acknowledgment stating that the notice or report have been "rejected" will be issued, to the effect that errors or inconsistencies detected are corrected; and

 

2.         Those engaged in activities deemed Vulnerable Activities or transactions that fall within those exempted from notice, must submit a report in order to inform of such circumstances.

 



[1]           As a general rule, notices are deemed received ​​on the day that you access the Portal. However, light of the ambiguity of the provision, should you fail to consult the Portal as provided in the Rules, notices will be deemed received on the fifteenth or thirtieth day of the month or on the following business day, depending on the date that the UIF has issued the notification. For example, those notices issued within the first fifteen days of the month are deemed to be made, if not consulted before, the fifteenth day or the business day that follows.

 

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