Lift-off for Mexico? Crime and finance in money laundering governance structures

Author:Timo Behrens
Position:SFB 700 – Governance in Areas of Limited Statehood, German Institute for International and Security Affairs (SWP), Berlin, Germany
Pages:17-33
SUMMARY

Purpose - The purpose of this article is to analyse Mexico’s money laundering governance with a focus on its 2007-2013 reform process. It provides a view of money laundering governance as a politically contested policy area and a reflection on the reach and purpose of the international regime promoted by the Financial Action Task Force (FATF). Design/method... (see full summary)

 
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Lift-off for Mexico? Crime and
nance in money laundering
governance structures
Timo Behrens
SFB 700 – Governance in Areas of Limited Statehood, German Institute
for International and Security Affairs (SWP), Berlin, Germany
Abstract
Purpose – The purpose of this article is to analyse Mexico’s money laundering governance with a
focus on its 2007-2013 reform process. It provides a view of money laundering governance as a
politically contested policy area and a reection on the reach and purpose of the international regime
promoted by the Financial Action Task Force (FATF).
Design/methodology/approach The analysis uses an actor-centred approach on governance
structures relating groups of public and private actors with competing policy preferences.
Findings – Three ideal-typical groups of actors are identied. Of these, the Financial Integrity and
Criminal Enforcement Groups were central proponents of prevention- and prosecution-based policies,
respectively. While criminal enforcement was initially sidelined, its role was strengthened in Mexico since
2007. Despite early signs of success, diverging policy preferences between these groups continue to
complicate money laundering governance in Mexico through a complex distribution of tasks between them.
Practical implications To address wider crime ghting concerns, more emphasis should be put on the
role of prosecutorial actors in money laundering governance. Beyond the domestic level, the results raise
concerns about the increasing focus of the FATF on money laundering as a threat to nancial integrity.
Originality/value – The article adds to a better understanding of money laundering governance in
Mexico. Further, the presented systematisation of actors can inform the analyses of money laundering
governance and underlying political tensions in other country cases. By focusing on organised crime
and prosecution, the case deviates from the international trend to concentrate on issues of market
integrity and prevention-orientated policies.
Keywords Mexico, FATF, Governance, Money laundering, Prevention, Prosecution
Paper type Case study
Introduction
Between 2007 and 2013, Mexico reformed its money laundering policies[1], culminating
in the introduction of the country’s rst comprehensive money laundering law (DOF,
2012a). This policy reform process focussed on the strengthening of prosecutorial policy
The article is based on research carried out in the project “Security Governance in Latin America”
which forms part of the Collaborative Research Center SFB 700 “Governance in Areas of Limited
Statehood” based at the Freie Universität Berlin. The author is grateful for the helpful discussions
with his colleagues at the SFB 700 and the German Institute for International and Security Affairs
(SWP). The author also thanks Markus Lederer and John Bailey for their input on an earlier draft
of the article.
The views expressed herein are those of the author and do not necessarily reect the views of
the United Nations.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
Money
laundering
governance
structures
17
Journalof Money Laundering
Control
Vol.18 No. 1, 2015
pp.17-33
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-10-2013-0039
aspects and the regulation of formerly unregulated sectors of the economy. By
concentrating on the role of prosecution, Mexico geared its money laundering policies
towards ghting organised crime in the context of growing violence related to the
transnational trade in illegal narcotics. This echoes an old theme in money laundering
policy-making that on the international level has been overshadowed by concerns of
international nancial markets (Hüllse, 2007, pp. 173-174; Tsingou, 2010), primarily
relying on preventive strategies. Mexico’s recent policy reform goes against this trend
and provides an interesting contemporary case study to reect on the purpose and
working logics of money laundering policies as a politically contested eld.
While some observers like Edgardo Buscaglia see the reform as a “predictable
failure”[2](Zeta, 2013[3]) largely due to doubts about its implementation, early results
indicate that Mexico’s prosecutorial reform strategy yielded noteworthy effects. The US
Department of State, for example, has observed a marked jump in prosecution rates for
money laundering with 160 criminal convictions reached between November 2011 and
November 2012 (US Department of State, 2013a, p. 164). This would present roughly a
doubling of the total number of convictions because the country rst declared money
laundering an offence in 1989. This raises two important sets of questions:
(1) What explains this increase and is it sustainable or will prosecution rates soon
drop to their pre-reform levels?
(2) What are the implications for the international level and its increasingly narrow
focus on nancial integrity and prevention?
The answers lie in structural changes to Mexico’s domestic money laundering
governance since 2007. Governance structures are understood as relationships of power
and authority between different actors engaged in “institutionalized modes of social
coordination to produce and implement collectively binding rules, or provide collective
goods” (Risse, 2011, p. 9). The country initially built its money laundering governance
structure around nancial market actors which led to a focus on nancial market
integrity and preventive money laundering policies. As a result, law enforcement and
judicial actors were sidelined and with them prosecutorial policies, explaining the
previous low-conviction levels. Only in the context of growing violence associated with
organised crime has the Mexican government begun to gear money laundering policies
towards a wider crime ghting agenda. These efforts included governance reforms
strengthening actors from prosecution and judiciary that started to show results in 2012.
As the established structural reforms permanently changed the emphasis of Mexican
money laundering policies, they are likely to lead to a long-term increase in the
prosecution of money laundering and its predicate offences. The most serious
short-term threats to this scenario are political tensions due to the persistent role that
nancial market concerns continue to play in the country’s current money laundering
governance, and capacity limitations of public institutions. These tensions and concerns
could be met by further strengthening the role of prosecutorial agents and potentially
relocating further governance task, like nancial intelligence gathering, to this sector.
There are both analytical and policy implications of these ndings. With regard to
analysing national money laundering governance, it has proven fruitful to systematise
actors according to their policy preferences, as presented in the rst section of this paper.
Rather than seeing money laundering as a monolithic policy eld in which international
standards are either implemented or not, an actor-centred approach reveals competing
JMLC
18,1
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