On November 30, 2020, the Mexican Ministry of Finance ("SHCP") issued the list of requirements for registration of the persons and entities that offer, on a professional basis, the exchange and custody of virtual assets with the Mexican Revenue Service ("SAT"). This, to comply with their anti-money laundering obligations.
Vulnerable activities and virtual assets
The "Anti-money laundering Act" of Mexico (in Spanish: Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita, the "Act") was enacted in October 2012 to implement recommendations 21 and 22 from the Financial Action Task Force, regarding anti-financial crime measures applicable to designated non-financial businesses and professions (also known, informally, as "Gatekeepers").
The Act sets forth a list of "Vulnerable Activities", this is, those activities that can be exploited by criminals to launder money. Said Vulnerable Activities are conducted both, by financial entities, on the one hand, and designated non-financial businesses and professions, on the other hand.
Every type of financial entity in Mexico (e.g., banks, broker-dealers, insurance companies, etc.) has its own laws and regulations concerning anti-money laundering. Nonetheless, Vulnerable Activities conducted by persons different from financial institutions must comply with the Act’s provisions.
In March 2018, the Act was reformed to include as Vulnerable Activities:
- The exchange, on regular and professional basis, of virtual assets by individuals or entities that are not financial institutions, conducted through electronic platforms, and
- The custody of virtual assets, in terms different from those established in the Mexican "Fintech Law" (in Spanish: Ley para Regular Instituciones de Tecnología Financiera).
In that regard, and according to the Act, a virtual asset is any representation of value registered electronically, generally used to pay obligations, which can only be transferred through electronic means.
Those who undertake Vulnerable Activities and are not financial institutions must abide with certain anti-money laundering obligations, including performing due diligence and know-your-customer measures, filing reports with the SAT once certain thresholds are reached, among others.
Specifically, to file such reports, it is necessary that the relevant entity registers with the authority in charge of the Act’s enforcement, this is, the SAT.
Registration requirements in connection with virtual assets
On November 30, 2020, the SHCP enacted modifications to the General Rules of the Act. These modifications established certain requirements applicable to virtual currency exchanges and custody services to obtain their registration with the SAT and, afterwards, file the transactional reports that will be ultimately analyzed by the Financial Intelligence Unit (Unidad de Inteligencia Financiera) of Mexico (an agency of the SHCP).
Below is a summary of the aforementioned requirements, differentiated between those applicable to legal entities and those for individuals:
|Table 1. Registration requirements to those rendering services of exchange and custody of virtual assets, in terms of the Mexican Anit-money Laundering Act|
a) Certified copy of articles of association/incorporation, as well as their modifications. It should include evidence of the record before the Mexican Public Commerce Registry, or indicate it is underway;
b) Proof of address, including of every establishment in which the Vulnerable Activity will be performed;
c) List of those who will participate in the equity of the legal entity rendering the exchange and/or custody services;
d) Commercial name and webpage of the relevant entity, and
e) Identification and information about the applicable attorney-in-fact.
a) Proof of address, including of every establishment in which the Vulnerable Activity will be performed;
b) Commercial name and webpage of the relevant individual;
c) Copy of ID;
d) Copy of Population Registration Code, and
e) Copy of registration in the Federal Taxpayers’ Registry held by the SAT.
The required information and documents referred to in the table above must be physically filed with the SAT. Thereafter, the relevant person will be registered as a person that conducts one or more Vulnerable Activities.
Mexican authorities (particularly, the SAT and the SHCP) are increasingly focusing on the provision of services related to virtual assets, as well as to the prevention of, and combat against, money laundering. This happens in a context in which the Financial Intelligence Unit shows having the political support necessary to enforce the Mexican Anti-money laundering Law staunchly.
Services of exchange and custody of virtual assets, with a growing market in Mexico, have important regulatory considerations that must be addressed in time to avoid sanctions, particularly in connection with the supervisory authority of the regulators on these matters.
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