Written By: Jorge Ojeda

Cacheaux Cavazos & Newton

San Pedro Garza García, Mexico

On July 18, 2013, the Federal Law for the Prevention and Identification of Transactions Conducted with Illicit Funds (known by its Spanish acronym “LFPIORPI”), went into effect, the same which was issued for the purpose of serving as a vehicle enabling authorities to centralize information in the fight against money laundering. The law establishes activities which are susceptible to illicit fund transactions and guidelines which companies should follow in order to maintain an identification file for their clients and cases in which notice should be given to the Mexican Department of Treasury and Public Credit (“SHCP”). The LFPIORPI lists the leasing and subleasing of real property among the susceptible activities, therefore, landlords and tenants should comply with the obligations to correctly identify all of the parties that participate in a transaction, and prepare a physical or digital file which contains, in accordance with LFPIORPI, and our review, the following information:

1. Identification of the landlord(s) and tenant(s). In the case of an individual, his/her official form of identification as well as information relating to his/her employment or source of income. In the case of a business entity, its bylaws, most recent amendment to the same, and power of attorney of the legal representative and his/her official form of identification.
2. Information regarding the activities of the parties and the use of the real property, such as publicity, pamphlets, propaganda and presentations.
3. Application for registration with the Federal Taxpayer Registry, most recent notice of change of activities and a copy of the latest registration card with the Federal Taxpayer Registry.
4. Request, whether by means of a separate document or by incorporation in the contract itself, a legal representation confirming whether a beneficial owner of the transaction exists, in the event there is a different owner, and obtain the information that allows the identification of such person in the event such is available or obtain a declaration stating that such information is unavailable.
5. Obtain and confirm commercial and banking references.
6. Include in the contract a legal representation under oath, as applicable, that all of the funds used to acquire or construct the property, as well as those used to pay rent, derive from legal sources.

It is important to mention that the LFPIORPI establishes the obligation to notify the SHCP when monthly rent exceeds 3,210 times the minimum salary in effect for the Federal District (approximately Mx$207,000 Mexican Pesos or $16,500 U.S. Dollars). With respect to such, the LFPIORPI excludes the obligation to maintain the secrecy of this information pursuant to professional and banking confidentiality, attorney-client privilege, and confidentiality agreements, etc. The LFPIORPI establishes several penalties in the event of not possessing the identification file, not providing such to the SHCP or not presenting the corresponding notices. Depending on the type of violation, such penalties range from approximately Mx$13,000.00 Mexican Pesos ($1,000.00 U.S. Dollars) to Mx$4,855,000 Mexican Pesos ($388,000 U.S. Dollars), and in certain serious cases, may constitute a criminal felony charge punishable by imprisonment. It is important to mention that publication of the Regulations to the LFPIORPI remains pending, which should serve to clarify various aspects of how to comply with the new law. Based on the above and other characteristics established in the LFPIORPI, it is of utmost importance to obtain advice on the new law and prepare manuals and internal controls to identify potentially susceptible transactions, prepare the corresponding files and present required notices.

For more information about Mr. Ojeda, a partner of Cacheaux, Cavazos & Newton, please visit www.ccn-law.com or the International Society of Primerus Law Firms.

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