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Column 112204 Andrade

Monday, November 22, 2004

 

The social debate on Mexican casinos

 

By Enrique Andrade González

 

Mexican Cardinal Norberto Rivera has come out against the possible opening of casinos, saying that while he is not opposed to entertainment as long as casinos can be used for money-laundering authorities must not allow their presence in Mexico.

 

Money laundering is a crime in Mexico according to Article 400 Bis of the Federal Penal Code.  Furthermore, it imposes a sentence of from five to 15 years in prison on anyone convicted of acts or operations with money known to come from an illegal activity when the origin, location or destination of the proceeds are covered-up.

 

According to the Mexico affiliate of Ernst & Young, Mancera Ernst & Young, money laundering operations in Mexico have risen to a whopping US$24 billion, almost five percent of the total for the entire world.  Patricia Torres, the manager of Mancera Ernst & Young, also notes that those measures that have been adopted to fight the problem, “a never-ending road,” are insufficient.

 

Mexico is one of 29 member countries of the Financial Action Task Force on Money Laundering (FATF), that was established at the G-7 Summit in Paris in 1989 in response to mounting concerns over money laundering.  The FATF has issued 40 recommendations that represent the international standard for fighting this crime.

 

Basically the recommendations call for countries to criminalize money laundering; for financial institutions to identify their clients; for all concerned to ensure there are adequate supervisory and control systems over financial institutions; and for the signing, ratification and implementation of applicable treaties and international conventions.

 

Dirty money, according to financial specialists, always looks for countries with weak political and financial institutions, and with serious efficiency problems in their legal systems.  And while the recommendations will not be do away with money laundering entirely, international cooperation is essential in order to detect the crime.

 

To date Mexico has been unable to satisfactorily apply all of the FATF international recommendations, even though its financial system can be considered strong as shown by the presence of important international banks like Citibank, HSBC and BBVA.

 

As well, some measures for the detection of money laundering operations are in place, such as the Secretariat of Finance requiring banks and brokerage firms to report monetary transactions over US$10,000.00, questionable dealings and transfers to fiscal paradise or secret bank account countries.

 

However the efficiency of the legal system is weak.

 

With respect to Latin America money laundering, Mexico is on a par with other countries suffering from problems that in turn promote this type of criminal activity.  Countries like Colombia due to narcotics trafficking and Argentina because of corruption.

 

Hence Benjamín Vidagras, vice president of the National Banking and Securities Commission, acknowledges that the Mexican legal system must be modified in order to establish mechanisms that will bring about the prevention of money laundering and not just its punitive pursuit, as do the devices currently in place.

 

But the opening of casinos in Mexico does not have to be stopped in order to prevent money laundering.  What needs to be done is to fully comply with the 40 recommendations of the FATF, especially the points that require in this case independent professionals to verify the identity of casino owners and operators, and those setting better parameters for risk detection as well as the monitoring of operations.

 

The proposed legislation for a new Gaming and Raffles Law also includes certain safeguards for the prevention of money laundering, such as requiring proof of legality of corporate and partner funds that are invested in the casinos.  Furthermore, every three months the gaming commission must receive financial reports from casino permit holders and operators, reports that will show income, expenditures, wager receipts and payoffs.  Those reports will then be given to the finance ministry, including anything that seems unusual precisely in order to detect possible money laundering.

 

Article 162 in the bill states that the gaming commission, to be created according to the new law, will then establish in its regulation suitable procedures and controls so as to detect and prevent gaming activities and wagering with resources that are illegal in origin.

 

The crime of money laundering will continue with or without casinos.  What is needed is coordination in new intelligence efforts, so that this crime can be prevented without slowing growth in Mexico’s tourism industry or in the creation of jobs due to a fear of something that not only already exists but also goes virtually unchecked.

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Enrique Andrade González (a www.mexidata.info columnist) is an attorney and Mexican business consultant with offices in Mexico City.  Lic. Andrade, who received his LL.M. in Constitutional and Protection (“Amparo”) Law from the Universidad Iberoamericana, is also a law professor at the Universidad Intercontinental.  His e-mail address is enrique@abogadomx.com.