MEXICO Law and Practice Contributed by: Fernando Hernández G., Elvia Ríos Saldaña, Ana Karen Inzunza Sánchez and Luis Andrés Estrada Intriago, Vázquez Aldana, Hernández Gómez & Associates (VAHG)
economic activity of customers of notaries public and financial institutions should be completed. • Notices and reports: Transactions that exceed legal thresholds (for “vulnerable activities”) or are suspi - cious (financial sector) must be reported. • Risk-based approach: Clients must be classified by risk level. Regarding the oversight on the part of the board of directors/managers of Mexican companies, the fol - lowing are the main activities required to comply with AML provisions. • Mandatory approval: The company’s compliance manuals, policies and programmes must be vali - dated. • Appointments: A compliance officer and a commu - nication and control committee must be appointed. • Audit review: The results of internal and external AML audits must be received and addressed annu - ally. • Monitoring: A company must ensure it has the technological and human resources to detect unu - sual transactions. Members of the board of directors/managers could face the following sanctions if they transgress AML provisions in Mexico. • Criminal: Imprisonment from five to 15 years if it is proved that board members facilitated or permitted transactions involving funds of illicit origin. • Administrative: Direct financial penalties and dis - qualification from holding similar positions. • Civil: Lawsuits from shareholders/partners or third parties for damages resulting from negligence in supervision. • Reputational: Inclusion on blacklists that prevent any activity within the global financial system. 6. Audit, Risk and Internal Controls 6.1 External Auditors As mentioned in 5.1 Financial Reporting Require- ments , the obligation to appoint an external auditor in connection with a company’s financial statements is contingent upon the company’s legal nature and its
applicable regulatory regime. Publicly traded compa - nies (S.A.B.) and issuers of securities subject to the oversight of the National Banking and Securities Com - mission are required to retain an independent external auditor to audit and issue an opinion on their annual financial statements, in accordance with the Securi - ties Market Law and the general provisions issued by the National Banking and Securities Commission. In the case of non-public commercial entities, the L.G.S.M. does not generally impose such requirement. However, under certain circumstances – particularly for tax compliance purposes – specific taxpayers may be required to obtain an external audit report, such as those obliged to file a tax audit report pursuant to Article 32-A of the Federal Tax Code. Additionally, in practice, this requirement frequently arises from the needs of financial statement users. Most commonly, it derives from compliance with covenants agreed with financial institutions, which, in connection with lending arrangements, require bor - rowers to submit financial statements audited by an independent external auditor. Similarly, such require - ment may be imposed at the request of sharehold - ers or other stakeholders seeking a higher degree of assurance regarding the company’s financial position. The relationship between the company and the exter - nal auditor is governed by principles of independence, professional competence, and adherence to the Inter - national Standards on Auditing, as well as the appli - cable financial reporting framework, which typically includes the Mexican Financial Reporting Standards (NIF), the International Financial Reporting Standards (IFRS), or US Generally Accepted Accounting Princi - ples (US GAAP). The external auditor is appointed by the sharehold - ers’ meeting, upon recommendation of the board of directors or the audit committee, and reports directly to such governing bodies. The auditor is responsible for the accuracy and reliability of its opinion and may be subject to liability and sanctions in cases of negli - gence or professional misconduct.
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