Adequate balance between AML/CFT regime and Financial Inclusion policy Mexican Experience. May 2011

Transcription

1 Adequate balance between AML/CFT regime and Financial Inclusion policy Mexican Experience May 2011

2 Context In the last years, Mexico has been involved in a financial inclusion process. According to a World Bank publication in 2004, only 25% of the population in Mexico had access to a saving account Users 25% Users 45% Users 60% Non-users 75% Non-users 55% Non-users 40% World Bank (inlude only traditional deposits Products) SHCP (Include all financial products) SHCP (include all financial products) Source: Finance for All? Policies and Pitfalls in expanding Access, World Bank ; 2007 Financial Education Survey. Ministry of Finance, Mexico; 2009 Access to Financial Services Survey. Ministry of Finance, Mexico. 2

3 Context The level of Financial Inclusion has been increasing significantly in the past years, but 40% of the population still unattended. - Level of Financial Inclusion + Population with high Inclusion 16.7% Population with more than 2 categories of financial products. User Population 59.9% Population with medium Inclusion 17.1% Population with 2 category of financial product. Population with Basic Inclusion 26.1% Population with 1 category of financial product. Non User Population 40.1% 3

4 Context The use of financial services are lower in particular for low income population and rural area, where the available banking infrastructure is not sufficient or expensive to develop. Type of Population Urban area 59.3% Rural area 48.2% User Population 59.9% Economic and Social Level A, B and C+ 82.2% C 66.6% D+ 55.3% D and E 31.7% 4

5 Financial Inclusion The effectiveness of regulatory policy to increase the level of financial inclusion lies in the establishment of an adequate balance between financial inclusion and the prevention of ML and TF activities for low risk financial products. New channels to increase financial inclusion Banking Agents Utilization of non financial entities, such as commercial retail stores or convenient stores, to provide basic banking services to sectors and regions where financial entities have no presence Mobile Banking Mobile network geographic coverage is exploited to provide basic banking services to the population AML/CFT regime Special regime, with simplified KYC and CDD requirements, for specific transactions, products and financial services, 5

6 Financial Inclusion & AML/CFT framework (Currently) The new legal framework for AML/CFT for banking institutions, establish 3 differentiated account levels which determine the required information to integrate the file, CDD and applicable reporting policies: a) LOW TRANSACTIONAL ACCOUNTS b) LOW-RISK ACCOUNTS c) TRADITIONAL ACCOUNTS 6

7 Financial Inclusion & AML/CFT framework (Currently) a) Low Transactional Accounts (payroll accounts and mobile banking scheme): Transactional level Accounts for natural persons whose monthly deposits transactions are below 2,000 UDIs (approx. US $720.43). KYC (File integration) The file requires to be integrated only with the client basic data (name, address and birth date) and it is not required to maintain a copy of the documentation. However, in the event that the accumulated amount of transactions exceeds the maximum allowed transactional level, the banking institution is obliged to either, obtain additional information or integrate a complete file, according to the new risk level Account opening This could be achieved at the banking branch or at a banking agent. (i.e. Telco agent, commercial retail and convenient stores, etc.) Monitoring and Reporting Banking institutions should monitor that the account does not exceed the threshold of 2,000 UDIS. If this threshold is exceeded, institutions should require more information and if necessary, submit STRs and report whenever a single transaction exceeds the threshold limit of US $10,000 UDI: Unit of Investment, a fictional currency that mainly reflects the inflation. On May 10 th, 2010: UDI= Mexican Pesos, and US $ / Mexican Pesos =

8 Financial Inclusion & AML/CFT framework (Currently) b) Low Risk Accounts: Transactional level Accounts for natural and legal persons whose accumulated transactions, including deposits and withdraws, on a monthly basis do not exceed 40,000 UDIs (approx. USD13,500). The National Banking and Securities Commission has authority to modify the abovementioned threshold, taking into consideration the operability and conditions of these products. KYC (File integration) The file requires to be integrated with the client s whole list data requirements, however it is not required to maintain a copy of the documentation. Account opening This could be achieved at the banking branch or at a banking agent. (i.e. TelCo agent, commercial retail and convenient stores, etc.). Monitoring and Reporting The banking institution is obliged to monitor the operations and the transactional profile of the client, and whether the case, to present STRs and report whenever a single transaction exceeds the threshold limit of US $10,000. UDI: Unit of Investment, a fictional currency that mainly reflects the inflation. On May 10 th, 2010: UDI= Mexican Pesos, and US $ / Mexican Pesos =

9 CHALLENGE Challenges to financial inclusion & AML/CFT in Mexico The key challenges and barriers to financial inclusion in Mexico are described as follows: New methods to verify the identity of the client (Lack of unique national ID system Adopt a non face to face scheme to open a bank account Connectivity and characteristics for each type of low risk bank account Simplify the regulation (Understandability) 9

10 Goals to financial inclusion & AML/CFT in Mexico The propose for a new legal framework for AML/CFT for banking institutions, establishes 4 differentiated account levels which determine the required information to integrate the file, CDD and applicable reporting policies: a) LEVEL 1 b) LEVEL 2 c) LEVEL 3 b) LEVEL 4 10

11 Goals to financial inclusion & AML/CFT in Mexico a) LEVEL 1 (100% Non face to face open process, very limited amounts) Description of the product and financial facilities Amount/threshold limitation Customer identification requirements Low risk account that may allow a non face to face open process, but subject to monitoring from financial entities and to enhanced supervision of the financial authorities. Main characteristics: Customer ID verification could be exempted. Restricted use for payment of services and/or products. Not linked to a mobile phone account (For funds transfers) Valid only in Mexico. Contracted at banking branches, banking agents, by phone or at the banking institution website. Restricted to transfer funds (to other accounts or products) Limited to a maximum deposit amount of 750 UDIS per month (Based on the EU 2,500 USD/Euros threshold for reloadable cards) Limited to a non-cumulative maximum amount of 1,000 UDIS (USD315). Not compulsory 11

12 Goals to financial inclusion & AML/CFT in Mexico b) LEVEL 2 (ID verification a posteriori, but limited to USD 470 per month) Description of the product and financial facilities Amount/threshold limitation Customer identification requirements Customer ID verification could be conducted a posteriori, which would allow the contracting of low risk products under a non-face to face scheme, subject to further ID verification and monitoring by financial entities (Banking institutions should verify the data in a period no longer than 24 months). Limited to a maximum deposit amount of 1,500 UDIS (USD470) per month. Electronic file requires to be integrated only with basic client s data (Name, address, birth place and date and gender). No copies required. Contracted at banking branches, banking agents, by phone or at the banking institution website. May be linked to a mobile phone account. May be used for transference of funds Valid only in Mexico. 12

13 Goals to financial inclusion & AML/CFT in Mexico c) LEVEL 3 (Maximum deposit amount of USD 950, with ID verification a posteriori through the system of the National Population Registry) Description of the product and financial facilities Filing requirements are obtained from basic data of the client (from an official ID) and should be subject to monitoring by financial entities. Two schemes: a) Contracted directly at banking branches and banking agents. b) On a non-face to face scheme, by phone or at the banking institution website, subject to a further ID verification and monitoring by financial entities. Based on this scheme, the data verification process banking institutions will validate the data through the system of the National Population Registry or RENAPO which contains relevant information from individuals living in Mexico. Amount/threshold limitation Limited to a maximum deposit amount of 3,000 UDIS (USD 950) per month. Customer identification requirements In case of the scheme a), the banking institution must obtain complete data on the name, birth date and address. Only name and birth date, should match with the official ID presented by the client. In case of the scheme b) the banking institution should validate that the data provided by the client matches that at the National Population Registry (RENAPO) using a unique official ID number CURP). Moreover, the national banking supervisor, with the authorization from the Ministry of Finance, may authorize the use of other IDs to validate the data. Electronic file requires to be integrated only with basic client s data (Name, address, birth place and date and gender). No copies required. 13

14 Goals to financial inclusion & AML/CFT in Mexico d) LEVEL 4 (Maximum deposit amount of USD 3,150, with data obtained from an official ID) Description of the product and financial facilities Amount/threshold limitation Customer identification requirements The file requires to be integrated with the client s whole data list requirements (Obtained from an official ID). May be contracted in banking branches, banking agents or companies. May be linked to a mobile phone account. Limited to a maximum deposit amount of 10,000 UDIS (USD 3,150) per month. Electronic file requires to be integrated with the client s whole list data requirements (Name, gender, address, profession, birth date, telephone number, profession, nationality, place of birth, ID information, , federal taxpayer s registry, among others). Could be used for funds transfers. No copies required. 14

15 Adequate balance between AML/CFT regime and Financial Inclusion policy Mexican Experience May 2011