Bitcoin Exchanges Reported Over 2,000 Suspicious Activity to the FIU

Key facts:
  • Of the 2,400 reported cases, only two were used to detect illicit activities.

  • Exchanges must report any transaction that exceeds $ 2,500.

Bitcoin exchanges around 2,400 cases of suspicious activity have been reported before the Financial Intelligence Unit (FIU) of Mexico. They did so in compliance with the recommendations of the Financial Action Task Force (FATF) and the legislation in force in that country.

Of those 2,400 reported cases, only two corresponded to illegal activities that the FIU was able to detect. The director of this entity, Santiago Nieto Castillo indicated in statements to the press that one of them was related to human trafficking and the other a group of hackers who wanted to hit the financial system. In both cases the criminals used cryptocurrencies as a tool to carry out their illicit activities.

Fintech law regulates Bitcoin exchanges in Mexico

The report to the authorities by the exchanges before certain movements on their platforms is something required for all those that operate in a regulated manner in the territory of Mexico. This is how the Law to Regulate Financial Technology Institutions, better known as Fintech Law.

Due to this regulation, since September last year, exchanges had to implement new measures to identify their customers. Since April 2020, they started reporting to the FIU.

Among other warning signs, it raises suspicions and Any operation that is equal to or greater than 645 must be reported AN, which is equivalent to around MXN 56,000 (USD 2,500).

banknotes regulation authorities transactions

Exchanges must report any transaction that exceeds MXN 56,000 (USD 2,500) to the authorities. Source: juliangvm / pixabay.com

This is because trading with Bitcoin and other cryptocurrencies are considered “emerging risk”. That means that, for the FIU, they meet the conditions to be considered suspicious of money laundering or terrorist financing.

As a consequence, Mexican exchanges have the obligation to register as a vulnerable activity, integrate the files of their clients, present notices of their operations, safeguard and protect their information (which means that they can only share it with State agencies that request it), receive verification visits and count with an internal policy manual.

The Fintech law was criticized by recognized members of the Mexican bitcoiner community, among them Manuel Flores, who organizes the Bitcoin Day meeting. In July of this year he maintained a dialogue with CriptoNoticias in which he assured that this law is an obstacle for the development of new projects with cryptocurrencies.

Anyway, Flores also considered that it helps to stop possible scams and “gives a little more security to end users who want to invest in this thing called ‘cryptocurrencies'”.

Will regulations on Bitcoin be tightened in Mexico?

Mexican regulations could be further toughened if the latest ones are adopted recommendations of the FATF. These establish, among other things, that they will be considered “red flag indicators”, among other activities:

  • Immediately transfer funds to multiple exchanges.
  • Make multiple high-value transactions in less than 24 hours.
  • Structure transactions in small amounts and below recordkeeping or reporting thresholds.
  • Make a cryptocurrency exchange to fiat, or vice versa, with a potential loss.
  • Receive transactions from many unrelated wallets, with subsequent transfer to another wallet, or exchange for fiat currency.
  • Owning most of the wealth as a product of investments in crypto assets.

It is important to clarify that the member countries of the FATF (among which is Mexico) do not have the obligation to comply with its recommendations to the letter. The regulatory entities of each jurisdiction can adapt them to be applicable to their respective legal and constitutional schemes.

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