By Manuel Vélez *
Operational independence and autonomy of Financial Intelligence Unit (FIUs) around the world is a cornerstone for the proper functioning of the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime. However, it is not uncommon to find FIUs or other AML/CFT law enforcement agencies that deviate from these two core principles under certain political contexts.
Examples of financial intelligence abuse have occurred in Nigeria, India, Serbia, Algeria and Russia. Egmont Group, the private network of 166 FIUs that promotes safe intelligence sharing, issued a public warning in 2021 on this subject. The statement did not target any specific government, but it was clear enough to pinpoint that abuses that the Egmont Group was informed of, affected political opponents as well as critical civil society actors.
A recent example of improper conduct by a local FIU can be found in Nicaragua where the Ortega and Murillo dictatorship threatened banks and other financial institutions to disclose information about opposition and civil society leaders. While sharing information between regulated entities and FIUs should be a relatively normal process, the abuse of these practices without proper democratic controls can give it a more ominous meaning.
The conduct of Mexico’s FIU in recent years provides an example of the dangers of an overtly-politicized body that should put on alert international authorities and fellow bodies in other countries, particularly among Mexico’s closest allies.
It is not an exaggeration to say that the autonomy and operational independence of Mexico’s FIU has been compromised since the appointment of Pablo Gómez as its head in 2021. A longtime fixture in Mexican leftist circles and a close ally of President Andrés Manuel López Obrador, Mr. Gómez began his tenure openly speaking about the political controversies of the day in unusual behavior for a person in such a delicate position. Mr. Gómez has publicly bragged about opening investigations on former Mexican presidents while not achieving any success. Without any prudence, Mr Gómez has particularly targeted Mexico’s independent elections body (INE, by its acronym in Spanish), arguing in Mexican media that it was complicit in a 2012 election fraud case known as the Monex case. Most recently, in March, he sent out a series of threatening messages via Twitter against some retiring members of INE’s general council. Mr. Gómez openly cited three different statutes (Art. 127 from Mexico’s Constitution, Art. 217 from Mexico’s Criminal Code and Art. 28 from Mexico’s Federal Employees Remuneration Law) as a way to intimidate the retiring councilors who have repeatedly clashed with President López Obrador. In quite unusual behavior for a FIU country-head, Mr. Gómez forewarned the councillors that they would commit a crime if they decided to collect their retiring benefits to which they were legally entitled.
It must be said that the misuse of the Mexican FIU’s powers predates Mr. Gómez arrival. Since the beginning of President López Obrador’s term in December 2018, the country’s FIU found itself suddenly in the spotlight when it deployed an aggressive policy of publicly advertising the blacklisting of individuals as well as disclosing financial investigations during the President’s morning press conferences. Unlike other governments that deem it unwise, the López Obrador government opted to bring a key intelligence agency into the spotlight. Since it was born in 2004, Mexico chose to give its newly-created FIU an administrative role inside the Finance Ministry. The current actions of the Mexican FIU show how this type of model is vulnerable to a higher risk of political influence.
What makes the current Mexican case more pressing is that, unlike other countries in Central and South America where AML/CFT architecture is less mature, Mexico’s state capacities are more robust. The Mexican AML/CFT regime has made long strides and has reached major achievements according to the most recent Financial Action Task Force (FATF) recommendations. Still, AML experts highlight that there are areas where Mexico is still lagging behind. This is the case of Designated Non-Financial Businesses and Professions as well as pushing successfully for prosecutions of ML offenses and asset forfeiture procedures. The current politicization of Mexico’s FIU threatens to derail progress.
Walking down the path of a less independent and autonomous FIU can have consequences that go beyond the ephemeral scandals of the day in Mexican politics. A much more serious consequence of this behavior would include a potential observation mission by the Egmont Group to Mexico. If proven, the wrongful conduct of Mexico’s FIU head could theoretically force the unit to be excluded temporarily from the group’s information-exchange platform. Back in 2017, the Nigerian FIU was suspended due to its lack of effective independence from the Finance Ministry as a result of not protecting systematically confidential information from suspicious transaction reports and international exchanges.
Of particular concern is the Mexican FIU’s role in the upcoming 2024 presidential election. Given its most recent developments, there are worries that the López Obrador government may be tempted to abuse the FIU’s powers to target political opponents and members of Mexico’s civil society. The use of financial intelligence resources could easily be disguised as part of the government’s anti-corruption efforts. Unfortunately, the recent revelations of how the López Obrador administration had used military capabilities to spy on human rights activists is not a good omen. The government trivialized this episode as routine intelligence gathering.
It is true that any government can prioritize certain FIU activities and strategies as well as allocate specific budgetary resources. However, the prioritization of certain activities and strategies should be risk-based and must not deploy undue political interference with the FIU’s operations. Effective check and balance mechanisms should be in place to prevent the wrong use of FIUs capacities during politically challenging times like in Mexico today. Failing to do so will not only affect the FIU reputation but will also hinder efforts against illicit financial flows.
* Manuel Vélez is Deputy Research Director at the Mexico City-based the National Citizen Observatory (ONC, by its acronym in Spanish) is a civil society organization that aims to improve the levels of security, justice and legality in Mexico. Twitter: @ObsNalCiudadano