On January 18, 2021, the Financial Intelligence Unit (“FIU”) of Mexico’s Tax Administration Service modified applicable rules governing loans made between entities that belong to the same business group. This provides clarity to one of the most frequently asked questions regarding so called “vulnerable transactions” and mandatory compliance with the Federal Law for the Prevention and Identification of Transactions Conducted with Resources of Illicit Origin (“Anti-Money Laundering Law”). Put succinctly, the question is: “Will centralized treasury operations and/or intercompany loans made between companies from the same Business Group be considered vulnerable transactions?”
Article 27 Bis, section I, subsection a) of the General Rules referred to in the Anti-Money Laundering Law (the “Rules”), establishes that loan transactions entered into between companies that are part of the same business group are considered to be vulnerable transactions. However, such loans do not trigger the notice requirements referenced in article 17, section IV of the same Law if the parties to the loan present a monthly report indicating that the transactions carried out are exempt for purposes of the notice requirement of article 27 Bis of the Rules.
It is important to note that the new criteria adopted by the FIU means that loan transactions carried out between companies that are part of the same business group are considered vulnerable transactions but are exempt from the notice requirements referenced in article 17, section IV of the Anti-Money Laundering Law and Rules. That is, parties other than financial institutions may regularly or professionally offer loans or guaranties, with or without a personal or corporate guarantee, so long as such are for less than 1,600 Updated Measurement Units (UMAs by its acronym in Spanish) (UMA - $89.62 pesos, or $4.40 U.S. Dollars at an approximate exchange rate of $20.00 pesos per Dollar). In this scenario, only monthly reports in zeros need be filed, so long as the total amount of the transaction has been conducted through Mexican financial system institutions.
Therefore, intercompany loans between companies in the same business group will be characterized as vulnerable transactions, and the companies involved will be subject to compliance with all the obligations established in the Anti-Money Laundering Law, except for the obligation to file notices if: i) the total amount of the transaction does not exceed the amount of 1,600 UMAs ($143,392 pesos, or $7,169.6 US Dollars at an approximate exchange rate of $20.00 pesos per Dollar); ii) the loan was administered through Mexican financial system institutions; and, iii) the companies that are parties to the loan are part of a business group in terms of article 3, section X of the Rules.
Based on the above, it is advisable for all businesses and financial institutions to understand the FIU’s clarification in order to fully comply with these obligations and avoid sanctions for non-compliance.