Newly Released Mexican Regulations Imposing Restrictions on Mexican Banks for Transactions in U.S. Currency
The Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) issued guidance on June 21, 2010 regarding the newly released Mexican Regulations, which are likely to impact financial institutions in the United States. The regulations are an attempt to decrease the significant amount of U.S. currency in Mexican banks that are proceeds of illegal activities, including the sale of narcotics within the U.S. The Mexican Finance Ministry, Secretaria de Hacienda y Credito Publico de Mexico (SHCP), recently published the new anti-money laundering regulations, which will restrict the amount of physical U.S. Currency Mexican Banks may receive. The regulations are expected to go into effect approximately ninety calendar days after official publication, which is expected to be on or about September 14, 2010.
The regulations provide that Mexican Banks shall be prohibited from receiving U.S. currency for transactions involving currency exchange, for receipt of payment for services, or for transfers or remittances of funds. The regulations make a distinction between customers and non-customers. All U.S. currency transactions are prohibited for legal entities and trusts that are non-customers. Individual non-customers may deposit up to $300 of U.S. currency per day and $1,500 per month. For non-Mexican non-customers (e.g. foreign tourists), the daily threshold will not apply, but they will be subject to the $1500 monthly threshold for individual non-customers. Legal entities and trusts classified as customers are generally prohibited from U.S. currency transactions with one exception. The exception involves legal entities or trusts who are customers and conduct most of their business within a tourist area, within twenty miles of a United States border, or within the States of Baja California or South Baja California. The bank may receive an aggregate limit of $7,000 in U.S. Currency per calendar month from the legal entities and trusts meeting the qualifications of this exception. The individual customers have an aggregate limit of $4,000 that can be deposited in a Mexican Bank per calendar month. Finally, the regulations do not restrict non-cash transactions denominated in U.S. Currency such as wire transfers, ACH payments, credit card transactions, and travelers checks.
The change in Mexican regulations is likely to have a significant impact on the operations of U.S. financial institutions. When a financial institution is determining whether to file a suspicious activity report (SAR), they are advised to consider these regulations in conjunction with other information such as transaction volumes and source of funds. FinCEN and law enforcement have stated that if a financial institution determines that a transaction is suspicious and thus has an obligation to file a SAR, and the facts and circumstances of the transaction lead the institution to suspect that the transaction is being entered into as a result of the Mexican currency restrictions, the financial institution is to include the specific term, “MX Restriction” in the narrative portion of the SAR filing. FinCEN and law enforcement further request that the financial institution include all information available for each party suspected in engaging in this activity within the suspect/subject information section of the SAR. This section should also include any available 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 expects changes in transaction activity before the regulations become effective. Some of these predicted changes include the decline of the overall amount of U.S. currency repatriated by Mexican banks to the United States. FinCEN anticipates that individuals and businesses who are no longer able to deposit U.S. currency in Mexican banks may instead look directly to U.S. financial institutions to deposit U.S. currency. The limitations may also lead to increased demands by Mexican persons and non-Mexican persons doing business with Mexico to utilize other types of payment services or products to settle debts. Additionally, the regulations may lead criminals in the United States to attempt to launder U.S. currency within the United States, possibly through trade-based money laundering conducted by transfers of non-cash proceeds to Mexico. Criminals may also use intermediary countries to divert U.S. currency to Mexico. Because of this concern, FinCEN asks financial institutions to consider and monitor significant increases in U.S. currency activities involving countries other than Mexico.
If you have any questions pertaining to the newly released Mexican regulations above or any other anti-money laundering provision, contact Fuerst Ittleman PL at contact@fidjlaw.com.