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Government passes bill to combat money laundering

October 18, 2012

President Felipe Calderon signed into law a bill prohibiting large cash transactions on Tuesday in a clampdown on money laundering by Mexican drug gangs.

First proposed by Calderon two years ago, the long-awaited bill was passed by Mexico’s lower house earlier this year and finally received unanimous approval in the Senate last Thursday.

“It is essential to fight organized crime, particularly crime that is organized multinationally, at the very heart of its activities – in the flow of money that gives it the power to corrupt authorities, to intimidate citizens and to expand its illicit activities,” Calderon said upon signing the law.

According to the LA Times, U.S. officials estimate that Mexican drug cartels launder 19 to 29 billion dollars in drug money each year, while some Mexican officials have said the annual total could be as high as 50 billion dollars, equivalent to three percent of the legitimate Mexican economy.

The new law prohibits cash transactions of over one million pesos (around 77,520 dollars) in real-estate purchases. It also forbids the buying or selling of vehicles for more than 200,000 pesos (15,500 dollars) in cash; and cash payments above 300,000 pesos (23,260 dollars) in the purchase of jewelry, watches, precious metals, gemstones and works of art.

Under the new law, notaries, brokers and dealers are all required to report the form of payment in any purchase of more than 500,000 pesos. Similar reporting will also be required for credit card payments when monthly balances exceed 50,000 pesos (3,875 dollars).

The bill also establishes the creation of a new federal unit within the Attorney General’s Office dedicated to fighting money laundering, as well as limiting cash transactions linked to gambling, lotteries and the issuing or trading of non-bank credit cards and travelers checks.

Violators of the law will face up to 20 years in prison, although the new rules will not come into effect for nine months in order to allow the authorities time to properly enforce them.

As Calderon’s term comes to an end and Enrique Peña Nieto prepares to take office, the Institutional Revolutionary Party (PRI) has been unusually cooperative in helping the outgoing National Action Party (PAN) pass legislature it had previously opposed, such as this anti-money-laundering bill and the recent labor reforms.

“We have to stem the flow of dirty money in Mexico, which has been the main driver of the growing violence in the country,” said PRI Senator Arturo Zamora.

Yet the bill had been stalled in Congress since 2010, when less comprehensive restrictions on cash dollar transactions were passed, limiting the amount of dollars a person could exchange to about 1,500 a month in most cases. These limits inconvenienced travelers and expatriates, as many banks opted to close their dollar-exchange services, leading to less competition and higher rates among the fewer businesses that continued to change currencies dollars into pesos.

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