On Sunday June 21, 2020, the Mexican Banking and Securities Commission ("CNBV") ―in charge of the anti-money laundering and counter-financing of terrorism ("AML/CFT") supervision of the banking sector in Mexico― communicated temporary simplification guidelines on certain know-your-customer ("KYC") measures. Said guidelines are, in turn, part of draft regulation in process of enactment.
Simplification of KYC measures
On June 21, 2020, the CNBV enacted extraordinary KYC simplification measures for AML/CFT purposes applicable to banks and legal entities authorized to give loans as their main corporate purpose that have patrimonial ties to financial groups (Sociedades Financieras de Objeto Múltiple Reguladas). This, in order to mitigate the effects of the COVID-19 pandemic in Mexico.
This governmental agency issued said guidelines in terms of the "Decree that establishes certain temporary and extraordinary measures, and suspends the deadlines applicable to financial entities and other persons subject to the supervision of the CNBV, by virtue of the COVID-19" (Acuerdo por el que se establecen las medidas temporales y extraordinarias y se suspenden algunos plazos para la atención de las entidades financieras y personas sujetas a supervisión de la Comisión Nacional Bancaria y de Valores, a causa del coronavirus denominado COVID-19).
Said decree was originally enacted in the Federal Official Gazette on March 26, 2020.
Specific measures put in place
- Legal entities opening accounts remotely-The possibility to execute contracts with banks, as well as opening bank accounts remotely, has been extended to legal entities. Before, it applied exclusively to individuals. The relevant accounts to which this KYC applies have full transactionality and no limits in deposits or withdrawals.
- Pre-existing clients having easier access to new banking products and services- KYC for those who are already clients of the relevant bank is more expedite, requiring only the verification of certain biometric data and its comparison vis-à-vis official registries. Nonetheless, those who are not already clients need to go through the whole due diligence procedures provided by the Banks AML/CFT Rules (Disposiciones de Carácter General a que se refiere el artículo 115 de la Ley de Instituciones de Crédito).
- Identification of beneficial owners- Despite the flexibility referred to, above, the legal representatives of legal entities have to be clearly identified for purposes of knowing the beneficial ownership of the relevant vehicle.
- Innovative ways for due diligence interview- In lieu of a personal KYC interview, banks may hold a brief videocall with the prospect client (i.e., with whom the bank does not already have an executed contract), which can be recorded and conducted by bots or other IA mechanisms devised by the banks themselves.
New regulation ahead
This is part of a series of proposed amendments to the General Rules applicable to Banks (Disposiciones de Carácter General aplicables a las Instituciones de Crédito, also known as Circular Única de Bancos), which are subject to public comments until July 14, 2020 in the webpage of the National Commission for Regulatory Improvement (Comisión Nacional de Mejora Regulatoria). In case these amendments are enacted, they would cease to be extraordinary and would become definite.
The proposed amendments set forth the technological requirements that banks must comply with to conduct remote KYC. These banks shall have databases of their clients' fingerprints, means to prove the client's data, among others.
These measures reflect the efforts of the Mexican government to strike a balance between financial inclusion, consumer protection, data privacy, and effective combat to financial crimes such as money laundering and financing of terrorism. In this regard, these steps definitely foster financial inclusion and represent valuable opportunities in the Mexican financial sector. Furthermore, it may be possible to see more KYC simplification measures in the months to come (e.g., for non-banking financial intermediaries).
Nonetheless, the regulatory requirements they represent to banks and other financial institutions can be convoluted, calling for specialized legal advice.
White & Case Mexico will update this client alert, accordingly, once the changes to the banking regulation are enacted.
Click here to download 'Draft regulation with provisional simplification of KYC measures for the banking sector in Mexico' PDF in Spanish.