MEXICO Law and Practice Contributed by: Lizette Neme, Andrea López-Malo, Shannon Reilly, Rodolfo Flores and Dunia Salum, Áurea Partners
From a regulatory standpoint, regulated financial entities are subject to licensing, prudential regulation, AML/CFT obligations, and, in some cases, capital adequacy and risk management requirements. By contrast, non-regulated commercial lenders are not subject to prudential supervision but remain subject to AML law, general commercial law, and other applica - ble regulatory frameworks depending on the structure of the product and the target market. 4.2 Underwriting Processes Underwriting processes in Mexico are not strictly dic - tated by regulation, although regulated financial enti - ties must comply with certain minimum standards relating to credit assessment, reserves, AML/CFT, KYC, risk management, and consumer protection. Industry participants typically rely on a combination of: • credit bureau reports and historical credit behav - iour; • proof of income, bank statements or financial statements; • tax returns; and • alternative and behavioural data, or device meta - data. For regulated entities, underwriting practices must align with internal policies approved by management and, where applicable, supervisory expectations regarding risk classification, provisioning and portfo - lio management. For non-regulated lenders, underwriting remains largely market-driven, subject to general AML/KYC and fraud prevention obligations. 4.3 Sources of Funds for Fiat Currency Loans The sources of funds for fiat currency lending in Mexi - co vary depending on the type of lender and the busi - ness model, including the following. • Peer-to-peer (P2P) lending or crowdfunding: retail investors or institutional investors lend directly to borrowers via a P2P platform. The platform must: obtain the relevant licence and disclose risks and returns to investors; implement AML/CFT and
KYC procedures; ensure proper dispute resolution mechanisms and transparent operations; and fully comply with the Fintech Law. • Capital raised from investors: private equity, ven - ture capital, or institutional investors that inject funds into a lender (such as a SOFOM or com - mercial entity) for lending purposes. Regulation is focused on investors’ KYC and source of funds, and full transparency to borrowers. • Deposit taking: banks may use the funds from their clients’ deposits and lend them to other cli - ents. Fully regulated, banks must obtain a proper licence, comply with capital adequacy and liquidity regulations, and AML/CFT provisions. • Securitisations or public market: regulated under the Securities Market Law. Proper disclosures, risk management and investor protection are key com - pliance requirements. 4.4 Syndication of Fiat Currency Loans Loan syndication does take place in Mexico, although it is more commonly associated with large-scale cor - porate, infrastructure, or cross-border financings, rather than consumer or small-ticket lending. In a syn - dicated structure, one or more lenders act as arrang - ers, co-ordinating multiple lenders that participate in a single loan facility. The applicable legal framework generally consists of commercial and financial law provisions, and, where syndication is combined with securitisation or capital markets instruments, securi - ties regulation may also apply. In practice, syndicated lending in Mexico largely fol - lows international market standards, with contractual structures and risk allocation mechanisms similar to those used in other major financial markets. 5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails In Mexico, payment processors generally operate through existing, authorised infrastructures such as the Interbank Electronic Payment System (SPEI), the Interbank Payments System in US Dollars (SPID), or established card payment networks. These pay - ment rails are subject to strict regulatory oversight by
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