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Government Reports Show Mexico Still Struggles to Combat Money Laundering

Angelika Albaladejo - InSight Crime
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November 8, 2017
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In 2014, more than 1,000 federal and local agents raided 75 different locations in Los Angeles’ fashion district. They seized around $90 million dollars, most of it in bulk cash, from the Sinaloa Cartel. Authorities claim it was the biggest money seizure in U.S. history. Correspondent Mike Kirsch examined the issue in this feature documentary for Americas Now. (CGTN America)

Several recent government reports show that Mexico continues to struggle with combating money laundering, a longstanding problem exacerbated by a lack of political will and an overemphasis on militarized responses to crime.

A classified Mexican government report accessed by Reuters highlights the seriousness of the problem of illicit financial flows in Mexico.

According to the report, which is set to be submitted to an international anti-money laundering body known as the Financial Action Task Force (FATF) and has not yet been made public, "the view is that the risk represented by illicit funds susceptible to money laundering in Mexico generated within the jurisdiction is HIGH."

The report states that "significant" progress has been made since Mexico's last FATF evaluation in 2008. But it also estimates that the drug trade, tax fraud and other criminal activities generate at least 1.13 trillion pesos ($58.5 billion) a year in Mexico -- and all of that money is susceptible to laundering.

Another recently released report by Mexico's Government Accountability Office (Auditoría Superior de la Federación - ASF) accessed by Animal Político suggests that the fight against money laundering is floundering. According to the ASF's analysis, Mexican authorities are identifying more suspected cases of financial crimes each year, but investigations and prosecutions very rarely reach successful conclusions.

From 2013 to 2016, the number of "high risk" money laundering suspects identified by the Attorney General's Office's Financial Intelligence Unit (Unidad de Inteligencia Financiera - UIF) nearly tripled, and a rising proportion of those suspects faced formal criminal charges each year. But less than 5 percent of all cases filed in 2016 were resolved by the end of the year, and more than half were rejected by the Attorney General's Office based on determinations that they had not been properly filed.

The ASF report also found that a special unit of the federal police tasked with preventing and combating money laundering has not taken proactive measures to stop the crime. Instead, the report says, the unit has only launched investigations based on tips submitted by authorities and citizens, which fluctuate each year and do not account for the full breadth of illicit financial flows taking place.

Of the 386 investigations launched by the special police unit in 2016, more than three-quarters did not lead to the successful identification of criminal structures, the report found.

The authors argue that Mexico's failure to successfully investigate and prosecute money laundering "represents a risk not only for the financial sector but for public security." Despite a recognition on the part of authorities that money laundering is a "significant threat," the report warns that deficient investigations and impunity in these cases are creating "space for the strengthening of criminality."

InSight Crime Analysis

Mexico's continuing ineffectiveness in the fight against money laundering likely stems from the government's resource allocation decisions.

While significant funding has been dedicated to militarizing the fight against crime, comparatively little has been put toward improving the capacity of the authorities to mount complex investigations like those required to take down money laundering operations. In fact, the UIF and the special police unit analyzed in the recent ASF report have both had their budgets steadily slashed in recent years, decreasing by 40 and 6 percent respectively from 2015 to 2016.

As InSight Crime has previously reported, experts say that governments working to bring down criminal organizations should place greater emphasis on going after the money.

Channing May, a policy analyst for the Washington DC-based advocacy group Global Financial Integrity (GFI), told InSight Crime in March that the criminal structures engaged in money laundering "are businesses, and you can't try to use techniques that have been used."

"We have to go after the money. Any business, regardless of goods or services, they have to have money in order to function," May added.

See the original at InSight Crime

InSight Crime is a foundation dedicated to the study of the principal threat to national and citizen security in Latin America and the Caribbean: organized crime. They seek to deepen and inform the debate about organized crime in the Americas by providing the general public with regular reporting, analysis and investigation on the subject and on state efforts to combat it.


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