In Mexico, Around $10B Every Year Come From Money Laundering, Which Was Not Illegal In 16 Out Of 31 States

MEXICO CITY — Three years ago, all Mexican states agreed to strengthen all measures to stop money laundering, as part of the war on drugs and as a strategy to attack the cartels from other fronts -- such as suffocating their ways of funding. However, not even half of the country had actually taken any steps to make it a reality: Out of the 31 Mexican states, only 14 had listed money laundering as a felony.

Furthermore, only five states had gone so far as to create a Unidad de Inteligencia Patrimonial y Económica (Economic Intelligence Unit, or UIPE), and of those, only two were actively operating. The theoretical joint efforts of the country to bust one of the main criminal activities was, for all intents and purposes, a bust.

Enter current President Enrique Peña Nieto, who decided to take action to the issue. By the time his administration took office on Dec. 1, 2012, there was already a bill in the works: the Anti-Laundering Law, which aimed to “contribute to the development of a healthy, transparent and investment-ready economy,” according to its promoters.

The law was approved in July 2013, specifying that each Mexican state could apply it at their own pace -- which resulted in an heterogeneous legal landscape that still favored the illicit practice.

The issue was not an easy one to tackle. According to numbers by the Mexican Finance Ministry, around $10 billion is laundered every year. U.S.-based independent consultancy Stratfor, however, reports the yearly amount to be as much as $39 billion.

The law, which is a compromise from the government of Mexico with the Financial Action Task Force (FATF), makes it illegal to make any transaction more than $40,000 in cash. Businesses are obligated to report such “unusual” financial activity. The problem is that cash is still largely used as a payment method in many legit fields in Mexico.

“Fishing, for example, is still based on cash,” said Angélica Ortíz, consultant in criminal law at a Mexico City firm. “And it does not necessarily mean the money comes from illicit means.”

The fields the government considers targets for money laundering are jewelry, real estate, car and art sales.

According to the Finance Intelligence Unit at the Finance Ministry, in 2013 there were 1.5 million reports of cash transactions, of which 16,000 were “unusual” operations. Out of these, only six reports led to investigations on money laundering.

So what can be done to prevent illicit transactions? Orbelín Pérez, executive director of the Buró de Seguridad y Legalidad Financiera (Financial Security Bureau), said that, first, states need to identify money laundering as illegal. Second, they need to draft state bills outlining their specific processes to track it down, and third, start their own state UIPE.

Pérez turned to the state of the moment, Michoacán, to give an example. “If Michoacán had had a unit, they would at the very least have information on what proprieties the Templarios have,” he said, arguing that those would have been acquired as a way to launder money.

With such information it would be easier to track down and seize the assets, since the purpose is to drag power away from them.

Pérez said that an added problem would be that most assets would be under third party names, and that’s where the UIPE comes in most handy. “Had the unit been already started, the army wouldn’t have had to intervene,” he pointed out.

The federal government has its own UIPE, inaugurated in 2011 with an investment of $18 million, and it was the goal of the 2012 bill that every state had one -- though that is still to be attained.

The states with an already operating UIPE, Guerrero and Zacatecas, have reported an increase of 30 and 20 percent in the seizing of illicit activities. The states of Sonora, Colima and Sinaloa have UIPEs in varied degrees of construction.

The remaining 26 states have yet to start their own fight against money laundering -- but they might not want to delay too much longer. As of Wednesday, money laundering is a federal crime, as approved by the Mexican Senate in unanimity.