Mexico Clamping Down On Money Laundering

August 27, 2010 Taxation in Mexico

Felipe Calderon - World Economic Forum Annual Meeting Davos 2009Mexico could soon implement heavy restrictions on the use of cash for large purchases, in an effort to hinder the nation’s overwhelming levels of money laundering.

New laws have been proposed by Felipe Calderon, President of Mexico, to prohibit cash purchases of luxury goods valued in excess of MXN 100 000 (approx. USD 7 700) within the country. The measure is aimed at hampering the use of illicit funds and money laundering through untraceable cash purchases. While announcing the proposal Felipe Calderon explained the reasoning behind the law, saying that limiting the ability of drug traffickers and money smugglers to purchase “large-ticket” items will ruin their ability to easily launder funds. “This illicit money is vital for the criminal. That is what they seek, this money. It is also vital to finance their activities.”

According to the White House Office of National Drug Control Policy, Mexican drug cartels source nearly 60 percent of their revenues from selling marijuana in the USA. Subsequently, as much as USD 29 billion in cash is smuggled back into Mexico every year, and no more than 1 percent of the funds crossing the border is intercepted by Government agents. As over 75 percent of transactions in Mexico are cash, and the purchase of luxury goods is a popular method of money laundering, the new law could seriously hinder the usability of the successfully smuggled money. Ultimately, it is hoped that a lack of easy money laundering techniques will debilitate gangs’ ability to fund their operations.

Under the proposed legislation, individuals caught accepting large cash transactions could face prison sentences of up to 15 years. The new laws will also require proprietors of betting parlors, debit card issuers, automotive bulletproofing shops, lawyers, accountants and jewelers to report suspicious transactions.

Photo by World Economic Forum