The use of dollars in the economy represents a vulnerability for any country, recognized in an analysis by the Financial Intelligence Unit (UIF) of the Ministry of Finance and Public Credit (SHCP).
As part of its National Risk Assessment of Money Laundering and Financing of Terrorism in Mexico (ENR) 2019-2020, the UIF concluded that financial entities are obliged to send reports of operations carried out by clients or users above certain amounts (equal to or exceeding USD 250 for bank users and USD 500 for operations in brokerage houses) to that authority.
For example, banks must provide the anti-money laundering unit with reports of cash transactions with U.S. dollars, while stockbrokers and exchange houses must alert for cash purchase transactions, receipt of deposits, receipt of payment of credits or services, or transfers or status of funds made with the green bill.
According to the UIF, in Mexico 4,492,338 reports were generated on cash operations during 2019, which implied an increase of 0.1% in this indicator with respect to the previous year.
The ENR 2019-2020 is part of the recommendations of the Financial Action Task Force (FATF) and focuses on showing that the use of cash, both in dollars and other currencies in a country’s economy, can facilitate and open the door to various financial transactions. However, it also recognizes that this can constitute a vulnerability for economies.
In Mexico, the number of cash dollar operations exceeded the amount of foreign currency demanded by some institutions, so as of 2010, the SHCP issued modifications to limit their capture.
In order not to generate an economic distortion in geographic areas or activities that by their nature capture dollars in cash, the operation of exchange commissioners approved by the multiple banking institutions was allowed. Since 2016, Mexico has been conducting the ENR in compliance with the FATF recommendations.
On November 23rd, Senator Ricardo Monreal presented an initiative to modify the Bank of Mexico Law that intends to facilitate the flow, exchange and circulation of dollars in cash, for the benefit of people who receive remittances or depend on tourism and commerce in border areas.
The Morena party legislator indicated that the reform would help eliminate the limitations to the healthy flow of foreign currency, since currently fewer pesos are reported for each dollar exchanged, compared to those that could be received if there were a less restrictive banking system.
“The process of disposing of and managing foreign currency in cash has become increasingly difficult, since since 2012 the U.S. Government imposed a series of restrictions on operations with dollars from and to its territory, seeking to combat operations with resources of illicit origin,” he said.
One of the most controversial points of this proposal implies that the Bank of Mexico (Banxico) be obliged to acquire the surplus dollars from financial institutions in order to incorporate them into the international reserves of the Latin American country.
In this regard, the Governor of Banxico, Alejandro Díaz de León, warned that the foreign currency in cash forced to be acquired for this concept would not comply with the economic conditions to be part of the international assets reserve, so he called on legislators to seek other alternatives to improve the problem of buying and selling foreign currency in Mexico. (SN)
by Jeremy Abbott – American Correspondent