and Anti-Money Laundering Laws: What you Need to Know
In July 2013, Mexico’s Federal Law for the Prevention and Identification of Transactions Involving Illegal Funds, commonly known as the Anti-Money Laundering Law, went into effect. As its name indicates, the objective of this legislation is to prevent and detect acts or transactions carried out with illegally-obtained resources, as well as identify the financial structures of criminal organizations to protect Mexico’s financial system and the national economy through the investigation and prosecution of crimes derived from these transactions.
With its enactment, a catalog of what are referred to as “vulnerable activities” was created, outlining the obligations of natural persons or corporate entities engaging in these activities. The main obligation it imposes on vulnerable activities related to real estate is that of brokers to provide identifying information of clients with whom they are carrying out said activities. This includes information regarding the client’s establishment as a legal entity (for corporate entities), as well as tax details, and a disclosure of the existence or absence of any third parties benefitting from the transaction via the client. In order to comply with this obligation, Brokers must compile the supporting documentation for the aforementioned data and keep a Unique User ID File or Know Your Customer Questionnaire (KYC) as it is known in English-speaking systems.
There are several activities classified as vulnerable in which these obligations are imposed on individuals working in the real estate sector in Mexico, and with regard to brokerage, there are two main ones that principally apply in the area of industrial real estate in Mexico.
The first involves individuals acting as intermediaries in leasing transactions. Although the agent or broker is not directly bound by the Anti-Money Laundering Law, they are required to collect the abovementioned identification information from the Lessee, and if applicable, of the declared Beneficiary Owner. In addition, they must also have the Beneficiary Owner sign the KYC in order to fully comply with this obligation.
It is crucial for the Broker to comply with this obligation in as timely a manner as possible as it has become common practice for the Lessee to stipulate in the commission contract that they may withhold part or all of the agreed upon commission price until the Broker fully meets said obligation.
The second situation in which the Anti-Money Laundering Law directly imposes obligations on the Broker is when they act as an intermediary in any transaction that implies the transmission of ownership, under any title, of real property. In this case, the Broker is required to fully identify their client, regardless of whether they are the buying or selling the property object of the transaction. This means that the Broker must collect the corresponding documents, create the unique user ID or KYC file, and keep it for five years from the date of the signing of the commission contract.
In addition to the above, the Broker must actively participate in the integration of said file, both for the seller and the buyer, and deliver the required documentation to the Notary Public formalizing the transaction so that the Notary Public is able to comply with their corresponding obligations as well.
In this way, the Anti-Money Laundering Law is very clear on the obligations it imposes on industrial real estate transactions in Mexico. This means that it is key for the Broker to play an active role in collecting the required documentation so that their client (the buyer or seller, as applicable), is able to comply with their obligations under this law and avoid sanctions or future consequences.
By Legal Real Estate Team | American Industries Group®
Did you find this content interesting? Sign up for our monthly newsletter to receive more articles and infographics.
If you would like to find out more about this topic or are interested in receiving a complimentary business case analysis for your operation in Mexico, please fill out this form or contact us at: