TERRORIST FINANCE: MEXICO CITY'S RESPONSE TO

UNCLAS SECTION 01 OF 02 MEXICO 005793 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/MEX, EEB/ESC KATHERINE LEAHY AND LEANNE CANNON, EEB/ESC/TFS JAY JALLORINA AND JEAN CLARK, S/CT PATTY HILL, S/CT FINANCE GALER AND NOVIS, INL E.O. 12958: N/A TAGS: EFIN ETTC KTFN PREL PTER MX SUBJECT: TERRORIST FINANCE: MEXICO CITY'S RESPONSE TO ILLICIT CASH COURIERS ACTION REQUEST REF: A. SECSTATE 152008 ¶B. MEXICO 1119 ¶1. (SBU) This cable is Mexico City's response to Ref A. -- Status of laws specifically criminalizing bulk cash smuggling, and key elements of those laws ¶2. (SBU) The Government of Mexico continues efforts to implement an anti-money laundering program according to international standards such as those of the Financial Action Task Force (FATF),which Mexico joined in June 2000. Money laundering related to all serious crimes was criminalized in 1996 under Article 400 bis of the Federal Penal Code, and is punishable by imprisonment of five to fifteen years and a fine. Penalties are increased when a government official in charge of the prevention, investigation, or prosecution of money laundering commits the offense. ¶3. (SBU) In December 2000, Mexico amended its Customs Law to reduce the threshold for reporting inbound cross-border transportation of currency or monetary instruments from USD 20,000 to USD 10,000. At the same time, it established a requirement for the reporting of outbound cross-border transportation of currency or monetary instruments of USD 10,000 or more. Mexico's Financial Intelligence Unit (FIU) receives these reports. ¶4. (SBU) Regulations have been implemented for banks and other financial institutions (mutual savings companies, insurance companies, financial advisers, stock markets, and credit institutions),as well as exchange houses, and money remittance businesses to know and identify customers and maintain records of transactions. These entities must report suspicious transactions, transactions over USD 10,000, and transactions involving employees of financial institutions who engage in unusual activity to the FIU. Real estate brokerages, attorney, notaries, accountants and dealers in precious metals and stones are required under a November 2005 provision of the tax law to report all transactions exceeding USD 10,000 to the FIU, via the Tax Administration Service. -- Cross-border reporting requirements for inbound/outbound movement of currency and monetary instruments ¶5. (SBU) Article 9 of the Customs Law requires that all cross-border transactions worth USD 10,000 or more must be declared to the customs authority. Failure to do so is an administrative offense. Failure to declare currency in excess of USD 30,000 upon entering or leaving Mexico is a criminal offense. If convicted, the amount exceeding USD 30,000 becomes the property of the Federal Fiscal Authority, unless the defendant can establish its legal origin. -- Host country actions to interdict potential cash couriers or to throw risk into the system ¶6. (SBU) Mexico continues to implement reforms with guidance from FATF standards as discussed above. Nonetheless, U.S. law enforcement officials say that Mexico is one of the most challenging money laundering jurisdictions for the United States, especially with regard to the investigation of money laundering activities involving the cross-border smuggling of bulk currency from drug transactions. -- Status of investigations into bulk cash smuggling ¶7. (SBU) DEA, DHS/ICE, and CBP have active investigations under bulk cash smuggling laws. This has been validated by the FIU. According to a FATF report, 30 preliminary inquires into money laundering offenses were initiated by the Federal Public Prosecutor from May 16, 2005 to September 15, 2005. -- Prosecutions under bulk cash smuggling laws ¶8. (U) Unknown. -- How mission elements have engaged relevant partners to develop and execute a cash courier interdiction plan ¶9. (SBU) In August 2005, ICE, CBP, and the State Department MEXICO 00005793 002 OF 002 initiated a training program with Mexican authorities on ways to combat cash smuggling. Since 2003, USG agencies and Mexican Customs have seized approximately USD 60 million, mostly at Mexico City's airport. Treasury's Financial Crimes Enforcement Network (FinCEN) in Washington also has worked with Mexico's Secretariat of Finance and Public Credit on this issue. FinCEN recently briefed FIU analysts on its efforts regarding cash couriers and identified areas for future collaboration. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity and the North American Partnership Blog at http://www.intelink.gov/communities/state/nap / GARZA