Mexico’s money laundering crackdown
With the backdrop of FinCen-related investigations in the media, Santiago Nieto appears to be serious about prosecuting money laundering and corruption.
Santiago Nieto, the head of Mexico’s Financial Intelligence Unit (UIF), presented the country’s National Risk Evaluation related to money laundering and terrorist financing. This sort of evaluation is usually a check the box exercise to show compliance to the Financial Action Task Force (FATF). Nieto appears to be taking it more seriously, suggesting that increased investigations and prosecutions of money laundering are on their way.
According to the UIF’s statistics, they presented double the number of indictments and obtained almost ten times as many judicial actions in 2019 as 2018. They are freezing many more bank accounts allegedly connected to criminal organizations including 2,000 related to the CJNG and 330 related to the Sinaloa Cartel.
Nieto is positioning the UIF as a critical institution for combating organized crime. A significant portion of the presentation was dedicated to discussing the growth of various criminal organizations that went well beyond their money laundering efforts. A version of the report published in August suggested that the UIF will focus its enforcement efforts on the seven banks in Mexico that comprise 80% of all banking activity. He also presented the map below to highlight what he said are the 19 organizations that are causing the biggest challenges in the country.
Above: The relatively blurry map of cartel activity presented by the UIF yesterday.
Politics is inevitable when prosecuting corruption
On top of the criminal issues, Nieto focused on criticizing previous administrations for their failures to combat money laundering. He stressed that he has launched more investigations in his first 18 months than were conducted during the entire Calderon sexenio. He spent significant time on the growth of various criminal organizations during the Peña Nieto term. Worth noting, Santiago Nieto was famously fired by President Peña Nieto when the UIF attempted to investigate Odebrecht-related corruption. Nieto’s organization is now a key part of prosecuting former Pemex CEO Lozoya and has flagged Peña Nieto’s bank accounts as connected to corruption investigations.
There are political concerns in Nieto’s focus. President Lopez Obrador has used the UIF’s ability to freeze bank accounts as a way of pressuring his political opponents. As he criticizes past administrations for both corruption and security failings, Nieto’s comments seem to be speaking to AMLO and his priorities, suggesting he understands and is playing to the political implications of his efforts.
At the same time, there are signs the head of the UIF and the president may not be totally aligned. Nieto recently proposed a truth commission to investigate potential corruption by former administrations. AMLO rejected the proposal, stating that he’d prefer to have his referendum on potentially prosecuting previous presidents. Given Nieto’s potential independence, would the UIF seriously investigate corruption that touched AMLO’s allies or family? That’s an open question.
The UIF can’t analyze all of the Suspicious Activity Reports
Nieto’s presentation yesterday comes against the global backdrop of the FinCen articles published by ICIJ, Buzzfeed and others. Among the Mexican related coverage, there are records of Enrique Peña Nieto work with JJ Rendon and a financial connection between a Chinese-born weapons dealer in Mexico and Iranian missiles.
Mexicanos Contra la Corrupción (MCCI), which partners with ICIJ, leads with “laundering money in Mexico is easy” and says that in the past 13 years, the Mexican government has opened up 1,632 investigations into money laundering and only convicted 44 people of the crime.
According to UIF statistics published by MCCI, there were over one million suspicious activity reports filed within Mexico in 2018. The organization receives the reports in real time but does not have the personnel necessary to analyze patterns. This a problem shared by financial intelligence units around the world including in Mexico.
Even when investigations and indictments occur, getting convictions in Mexico is difficult due to challenges in the judicial system and corruption. Government officials note that there are multiple cases of people detained while traveling through the Mexico City airport with over US$50,000 in cash. Many of those cases are later dropped due to mishandling of evidence or mistreatment of the detained.
As if to highlight that judicial challenge, this week a local court ordered the UIF to unfreeze the bank accounts of Libre Abordo, a company that assisted the Maduro regime in violating sanctions. The UIF is appealing the decision.
Thanks for reading
There is lots more to read and cover related to the Latin America angles of the FinCen articles that have been published so far. I’ll likely do so next Tuesday. If you want to be added to the newsletter distribution list, please enter your email at https://boz.substack.com/ or email me at boz@substack.com and I will add you.