Bitcoin exchanges have reported around 2,400 cases of suspicious activity to the Financial Intelligence Unit (FIU) of Mexico. They did so in compliance with the recommendations of the Financial Action Task Force (FATF) and the legislation in force in that country.

Of those 2,400 reported cases, only two corresponded to illicit activities that the FIU was able to detect. The director of this entity, Santiago Nieto Castillo, indicated in statements to the press that one of them was related to human trafficking and the other a group of hackers who wanted to hit the financial system. In both cases, the criminals used cryptocurrencies as a tool to carry out their illicit activities.

Fintech Law Regulates Bitcoin Exchanges in Mexico

Those who operate in a regulated manner in Mexico must report the authorities about the exchanges before making movements in their platforms. This requirement is established by the Law to Regulate Financial Technology Institutions, better known as the Fintech Law.

Due to this regulation, since September last year, exchanges had to implement new measures to identify their customers. Since April 2020, they have started reporting to the FIU. Among other red flags, it raises suspicions, and any operation that is equal to or greater than 645 UMA should be reported, which is equivalent to around MXN 56,000 (USD 2,500).

This is because trading with Bitcoin and other cryptocurrencies are considered an “emerging risk”. That means that, for the FIU, they meet the conditions to be considered suspicious of money laundering or terrorist financing.

As a consequence, Mexican exchanges must register as a vulnerable activity, integrate the files of their clients, present notices of their operations, safeguard and protect their information (which means that they can only share it with the State agencies that request), receive verification visits and have an internal policy manual.

The Fintech law was criticized by recognized members of the Mexican bitcoiner community, among them Manuel Flores, who organizes the Bitcoin Day meeting. In July of this year, he held a dialogue with CriptoNoticias in which he assured that this law is an obstacle to the development of new projects with cryptocurrencies.

Mexican regulations could be further toughened if the latest FATF recommendations were adopted. These establish, among other things, that they will be considered “red flag indicators”, among other activities:

Immediately Transfer Funds to Multiple Exchanges.

Users can make multiple high-value transactions in less than 24 hours. Besides, users can structure transactions, in small quantities, below the record-keeping or report thresholds, make a cryptocurrency exchange to fiat, or vice versa with a potential loss.

Also, users can receive transactions from many unrelated wallets with subsequent transfer to another wallet or exchange for fiat currency.

Owning Most of the Wealth as a Product of Investments in Crypto Assets.

It is relevant to clarify that the member countries of the FATF (among which is Mexico) should not comply with its recommendations to the letter. The regulatory entities of each jurisdiction can adapt them to apply to their respective legal and constitutional schemes.

By: Jenson Nuñez.