Decree Strengthens Sanction and Revocation Procedures

On March 22, 2023, an initiative was published in the Senate Gazette on administrative procedures, which impacted the imposition of sanctions and revocation of authorizations. 

Later, on Jan. 24, 2024, the “Decreto por el que se refomran, adicionan y derogan diversas leyes financieras en materia de procedimiento administrativo” (Decree amending, adding and repealing various financial laws on administrative procedure – the Decree) was published in the Official Register (Diario Oficial de la Federación, or DOF, it's acronym in Spanish), which can be consulted at this link.

The purpose of the Decree is to reinforce the administrative procedures of sanction and the revocation of authorizations since, as stated in the whereas of the Decree, there are jurisprudential criteria that declare the unconstitutionality of various rules that regulate these processes. Therefore, the sanctions imposed by the financial authorities ( CNBV,  CONDUSEF, Banxico, for example) are declared illegal, allowing offenders to escape the sanctions imposed and continue to break the law.

In the resolutions, the judges have established that the procedure established in all the financial laws,(1) prior to the Decree, transgressed the principle of legal certainty, since they did not establish in a clear and precise manner the totality of the stages, deadlines for each stage, or the exact period for the authority to notify the resolution that put an end to the administrative sanctioning procedure or the revocation of any authorization.

In view of the above, the authorities in imposing a sanction or revocation of authorization shall be subject to the following terms:

1. Administrative sanctioning procedures may not last more than 265 working days;

2. All proceedings must have the following stages: notification of the sanction, right to a hearing, presentation of evidence and presentation of pleadings;

3. Once the previous stages have been completed, the issuance and notification of resolutions by the authorities may not exceed 180 working days.

The power of the authorities to impose sanctions or revoke authorization for any breach of the rule will expire (become ineffective) in five years; however, the previous deadline must be counted depending on the type of conduct carried out and will be suspended when the offender is not located at the registered address and did not notify the corresponding authority of such change and/or when any act related to the process of imposing sanctions has been disputed.

The Decree came into force on Jan. 25, 2024, forcing the authorities to carry out the new process; however, proceedings initiated prior to the entry into force of the Decree must be continued until their conclusion, in accordance with the procedure in force at the time of notification to the alleged infringer.

With the entry into force of the decree, financial institutions will have to adjust their operations and regulatory compliance in order to avoid sanctions, which can seriously affect the capital of the entities, since the amounts that can be applied through the sanctions are so high that a company could easily become insolvent and with the reputational damage that a sanction implies. 

From the above, it should be noted that the penalties for anti-money laundering and financing of terrorism are the highest in terms of amount and can reach up to MXN$10,857,000.00 (US$644,000) for a single obligation, like failing to comply with reports or not having an adequate knowledge of your client regime, among others.

At Campa & Mendoza we understand that Mexican law is complicated and complex. Therefore, we help national and international financial entities to comply with the regulation and avoid any sanctions.

Reference:
(1)  Law on Credit Institutions, Law to Regulate Financial Technology Institutions, Law for the Transparency and Regulation of Financial Services, General Law on Organizations and Auxiliary Activities of Credit, Law on the Protection and Defense of the User of Financial Services, Law on the Securities Market, Law to Regulate Financial Groups, Law to Regulate Credit Information Companies,  Investment Funds Law, Popular Savings and Credit Law, Law to Regulate the Activities of Savings and Loan Cooperative Societies, Credit Unions Law, Insurance and Bonding Institutions Law and Retirement Savings Systems Law. 
A) Continuous. From the moment it ceases, or
B) Continued. From the consummation of the last conduct.