Anti-Terrorist FinancingBankingFinTech

A new era for Mexican finance

By March 6, 2018 No Comments

¡Arriba! Mexico’s Congress passes the FinTech bill

In an exciting step forward for Latin American FinTech, Mexican lawmakers last Friday passed the “FinTech Bill”. The bill, which now only awaits the signature of the President before it becomes law, could make Mexico a serious player in the FinTech market and give financial access to some of the 120 million un-and-underbanked people in Mexico. The premise of the bill is simple but also responsible – promote innovation and adoption without enabling money laundering and other economic crimes.

How will it achieve this? The bill will regulate any company offering alternative access to finance: those involved in electronic payments, exchanges of virtual assets and cryptocurrencies. By regulating these FinTechs it gives them clear parameters in which to operate in, removing them from a regulatory no man’s land and encouraging investment. Additionally, to promote competition the bill will also introduce “open banking” similar to what was brought in with Europe’s PSD2. The bill brings in KYC and AML safeguards for different business models and requires FinTech businesses to be tied to authorized bank accounts where AML checks have been carried out. A lot of the details are yet to be written and will be worked out by “secondary legislation”, but for now Mexicans should be excited, a new financial era is just around the corner.

The clock moves closer to midnight – FATF issues new guidance

In the current political climate, it sometimes feels like everyday a new sanction or warning is issued against North Korea or Iran in response to their pursuit of nuclear weapons. As a financial institution you need to be checking that you never handle the money associated with their nuclear weapons or weapons of mass destruction programmes (proliferation financing), but it can be hard to stay ahead of risks. Fortunately, last week FATF published fresh guidance on this topic, bringing existing guidance into line with recent United Nations Security Council Resolutions.

Compliance officers will find it a valuable read as it adds useful detail to FATF recommendations 2 and 7 on proliferation financing. For example, it goes into detail on threats from non-state actors, as well as the specific threat from state actors such as Iran and North Korea. There is also a useful Annex which goes through scenarios which are typical of proliferation financing, like when the destination of a delivery or product is a freight forwarding company and not a final address. It is important to note that this guidance is non-binding but as the threat from proliferation only continues to increase, firms would be wise to incorporate them into their compliance program. Nothing would harm a business’ reputation more than potentially contributing to proliferation financing.

Solicitors under the spotlight

Another UK supervisor has put their sector under the anti-money laundering spotlight and found it not quite up to scratch. The Solicitors Regulation Authority (SRA) surveyed 50 of its members to assess how well they were complying with the Money Laundering Regulation 2017 (MLR 2017) and in results published last week, found that although most were complying, there were recurrent worrying weaknesses. The two main areas of concern were firms not keeping proper records of risk decisions and firms not having a proper written risk assessment – which only one third had!

Along with the results of the survey, the SRA published a refreshed warning notice which highlights the potential indicators of criminal activity in the legal sector. It has also provided guidance to help solicitors fill the gaps in their MLR 2017 compliance processes, clarifying vagaries such as when CDD should be performed. The SRA also published figures on firms who have fallen foul of money laundering regulations. Over the past three years eight firms have been closed down and a subsequent 14 have closed down voluntarily mostly due to the improper movement of money. As the UK government switches its focus to the facilitators of economic crimes, expect further sector supervisors to turn the spotlight on their industries.

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