HomeNewsAnalysisMexico's Fight Against Money Laundering Comes Down to Resources
ANALYSIS

Mexico's Fight Against Money Laundering Comes Down to Resources

MEXICO / 11 NOV 2016 BY ARTURO ANGEL* EN

Mexico's fight against money laundering has been losing funds and efficiency. With the budget for these types of investigations down by nearly 50 percent, the success rate for prosecutions has declined in recent years. 

The laundering of criminal proceeds has increased on a yearly basis and is now equivalent to nearly 2 percent of the country's Gross Domestic Product (GDP), according to figures from Mexico's National Institute of Statistics and Geography (INEGI) and the Finance Ministry. According to these figures, at least 200 billion pesos -- nearly $10 billion -- are being laundered annually. For comparison, the amount of illicit cash that was laundered during the 1990s is believed to only have reached around 0.5 percent of the GDP.

This article was published by Animal Político and was translated, edited for clarity, and published with permission. It does not necessarily reflect the views of InSight Crime. See the Spanish original here.

Of the 204 money laundering probes launched between 2012 and July 2013, only 75 were presented before a judge, for a rate of 36 percent, according to official reports from the administration of President Enrique Peña Nieto. By July 2014, the rate had gone down to 30 percent, before reaching 27 percent a year later and finally falling to below 20 percent by July of this year. (See Animal Politico's chart below)

More than 80 percent of the money laundering investigations launched over the past year were thus never assigned to a judge, rendering the identification of the culprits impossible.

16-11-9-Mex-Chart

Only a small number of investigations have led to incarceration. The Attorney General's Office (Procuraduría General de la República - PGR) reported that 144 individuals were investigated over the last year on money laundering charges, but that only 27 were imprisoned. The majority of these 27 prison sentences were related to cases that are several years old.

Cut in Funding for Money Laundering Investigations

Injecting money from illegal activities into legitimate businesses or into the banking system is a type of criminal offense referred to as "operations involving resources derived from illicit sources." The responsibility for investigating this type of federal crime falls to the PGR.

SEE ALSO: Coverage of Money Laundering

In July 2013, former Attorney General Jesús Murillo Karam published a decree that created the Special Unit for Financial Analysis. It answers directly to the PGR and was tasked with compiling all the information necessary for the resolution of investigations into money laundering. 

The unit was given a total of 20 responsibilities, which included, among others, the investigation of financial crimes, the identification of behavioral patterns, and diagnostic assessments. This specialized institution has participated in several money laundering investigations, including the case against the company Oceanografía.

The Special Unit for Financial Analysis' budget reached 65 million pesos ($3.2 million at current exchange rates) in 2015, but fell to 42 million ($2 million) this year and will be brought down to 37 million pesos ($1.8 million) in 2017. The unit's budget will thus have been cut by 44 percent by next year.

Mexico also has a specialized unit for investigating funds sourced from organized crime activity. It is tasked with investigating those money laundering crimes which are specifically related to drug trafficking.

This unit's budget stood at 69,320,000 pesos ($3.4 million) in 2015 and remained stable this year. But it will decrease to 65 million pesos ($3.2 million) in 2017, the equivalent of a nearly 6 percent drop.

On top of these budget cuts, the Finance Ministry's Financial Intelligence Unit -- which is in charge of monitoring possible money laundering activities and informing the PGR -- will see its funds cut by 3 percent in 2017, from 202 million pesos ($9.8 million) to 196 ($9.5 million).

Increase in Million-Dollar Laundering Operations

In 2012, the Finance Ministry estimated that the annual amount of money laundered in Mexico reaches 170 billion pesos ($8.2 billion), but independent organizations have argued that the real number could be as much as three times that high, if taking into account all the illicit operations unnoticed by authorities.

In September 2016, a firm that specializes in combating money laundering, TM Sourcing, said that up to 340 billion pesos ($16.5 billion) could have been laundered in 2013, based on INEGI's estimates. According to that same company, up to $50 billion could be laundered within the Mexican economy every year.

TM Sourcing found that money launderers take advantage of areas where there is weak financial legislation, such as digital platforms, to hide the real origin of illicit funds, in addition to using the more traditional means like front companies.

SEE ALSO: Coverage of Cyber Crime

Meanwhile, the PGR reported that between September and July 2016, it managed to seize 49.2 million pesos ($2.4 million) and $4.2 million in cash, as well as 187 million pesos ($9.1 million) that were held in bank accounts.

Over that same period, the Finance Ministry froze more than 1.5 billion pesos ($73.1 million) potentially coming from illicit activities linked to a total of 600 legal entities.

Funds for Terrorism

In Peña Nieto's latest annual report to Congress, the Interior Ministry revealed for the first time that it had the frozen the tax registration of either individuals or companies because of their alleged financing of terrorist activities around the world. A total of 104 entities had their assets frozen, according to the report.

The PGR has also reported the launch of a money laundering investigation related to the financing of terror groups, which is based on information provided by the United Nations, but the authorities have not provided any further details on the operation.

The only certainty is that the agencies responsible for combating money laundering have been losing financial resources to carry out their operations, even as the amount of money being laundered continues to increase. 

*This article was published by Animal Político and was translated, edited for clarity, and published with permission. It does not necessarily represent the views of InSight Crime. See the Spanish original here.

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