A new law in Mexico aims to combat money laundering by limiting cash transactions and requiring businesses to report suspicious dealings, as part of a government push to target the finances of criminal organizations.
The law, which went into effect on July 17, makes cash transactions over $40,000 illegal and requires businesses and individuals to report any dealings above that amount. According to BBC Mundo, the law is focused on regulating "vulnerable" sectors such as the jewelry, automobile, and art industries.
However, there are potential drawbacks to the broad nature of the legislation. Specialist Angelica Ortiz told BBC Mundo that one possible problem with the law was that cash transactions of this nature were used often in Mexican businesses, particularly in the agricultural sector, and not just for illicit purposes.
In an interview with El Economista, the former head of the country's Financial Intelligence Unit (UIF), Luis Urrutia, said that the law would help track criminal proceeds and help formalize the economic transactions in the country.
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Some Mexican officials estimate that $50 billion in illicit funds is laundered in Mexico each year, though other analysts' estimates put the figure between $19 and $39 billion. According to the US State Department, drug trafficking funds sent from the US are the main source of money laundered in Mexico. Between $19 billion and $29 billion are sent by drug traffickers from the US to Mexico each year, the State Department says.
This legislation is a continuation from Mexico's last presidential administration to put more controls on the movement of money in the country. In 2011, a bill was passed toughening sentences on money launderers; in October 2012, a law was approved that, like the new legislation, limits large cash purchases in certain sectors; and legislation recently sent to Congress for review would facilitate investigation and prosecution of people who help launder criminal assets.
However, as pointed out by security analyst Alejandro Hope*, these kinds of measures may ultimately have little impact on the drug trafficking industry. According to Hope, Mexico suffers less from a lack of anti-laundering legislation than from inherent difficulties in tracking drug money, necessary for effectively implementing such laws once they come into effect.
*Hope is also a member of InSight Crime's Board of Directors.