Mexico: Authorities Pass First Batch Of Secondary Regulations For Fintech Law

Last Updated: 17 October 2018
Article by Miguel A. Peralta, Pedro Said Nader and Patrick Stockdale

Most Read Contributor in Mexico, October 2018

The General Provisions referred to in Article 58 of the Law to Regulate Financial Technology Institutions (“Fintech Law”), Circular 12/2018 addressed to the Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico), relative to the general provisions applicable to the operations of the Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) and the General Provisions applicable to the Financial Technology Institutions ("Fintechs"), were published in the Federal Official Gazette (Diario Oficial de la Federación) on September 10, 2018 (collectively the "Secondary Provisions")

Purpose of the Secondary Provisions

Mexico's Central Bank (Banco de México)

Circular 12/2018

(a) Establish the characteristics of the transactions carried out by the Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) (electronic wallets);

(b) Establish the terms and conditions regarding the issuance of electronic payment funds in connection to foreign currency and, in general, carrying out transaction with foreign currency, as well as the provision of the money transfer service referred to in the Fintech Law, in foreign currency;

(c) Determine limits to the amounts of the credits or loans for overdrafts that the Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) (electronic wallets) grant in terms of the Fintech Law;

(d) Establish the terms and conditions for the offering of non-monetary benefits by the Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) (electronic wallets);

(e) Establish the limits to the resources that the Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) (electronic wallets) will be able to maintain in name and behalf of their clients or of those that a client will be able to dispose through them; and

(f) Determine the information related to the activities and transactions of Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) (electronic wallets) that these should report to the Central Bank of Mexico (Banco de México), as well as their corresponding periodicity.

Treasury Department ("SHCP")

General Provisions referred to in Article 58 of the Law to Regulate Financial Technology Institutions

(a) Establish the minimum measures and procedures that the Fintechs must observe to prevent and detect acts, omissions or transactions that may favor, provide aid, assistance, or cooperation of any kind to commit the offenses set forth in Article 139 Quáter of the Federal Criminal Code or that could be located in the cases provided by Article 400 Bis of said Code;

(b) Provide the form and terms in which the Fintechs must submit to the National Banking and Securities Commission (“CNBV”) the Compliance Manual, that is, the manual in which said Fintech develop their respective policies of KYC (know-your-customer), as well as the criteria, internal procedures and measures that must be adopted to comply with the provisions in question;

(c) Indicate the form, terms and modalities under which the Fintechs must submit to the SHCP through the CNBV, the reports related to:

a. The acts, transactions and services performed with their clients and the operations between them, which may be related to the cases foreseen in Articles 139 Quáter or 400 Bis of the Federal Criminal Code.

b.The acts, transactions and services performed by the members of their board of directors or sole administrator, their directors, officers, employees, commission agents or attorneys-in-fact, who could update the assumptions indicated in the preceding paragraph, as well as contravene or fail to comply with the obligations established in these provisions.

(d) Specify the characteristics that must be met by the acts, transactions and services that must be reported by the Fintechs; and

(e) Provide for the cases, the form and the terms in which the Fintechs will comply with the obligations set forth in the Fintech Law and the other obligations set forth in these provisions, as well as the terms and means through which they will communicate or present to the SHCP , through the CNBV, or the latter, as appropriate, the information and documentation that proves it.

SHCP-CNBV

General Provisions applicable to the Financial Technology Institutions

(a) Establish the information and additional documentation necessary to request authorization to organize and operate as Fintechs;

(b) The minimum capital that must be available to Collective Financing Institutions (crowdfunding) that has been authorized to carry out only one type of transaction in national currency must be the equivalent in national currency to 500,000 Units of Investment (“UDIs”), approximately MXN $3,040,800.00 (three million forty thousand eight hundred pesos 00/100) or US $155,940.00 (one hundred fifty-five thousand nine hundred forty dollars);

(c) The minimum capital that must be available to Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) (electronic wallets) that has been authorized to carry out their transactions in national currency and whose authorization does not contemplate the performance of additional transactions indicated in the second paragraph of Article 7 of these dispositions, will be the equivalent in national currency to 500,000 UDIs, approximately MXN $3,040,800.00 (three million forty thousand eight hundred pesos 00/100) or US $155,940.00 (one hundred and fifty-five thousand nine hundred forty dollars);

(d) The minimum capital that must be available to Collective Financing Institutions (crowdfunding) that has been authorized to carry out two or more types of transactions of those set forth in the Fintech Law, as well as to carry out transactions with virtual assets or foreign currency in accordance with the provisions of Article 16, fourth paragraph of the Fintech Law or, operate, design or market derivative financial instruments that have virtual assets as underlying assets in accordance with Article 33, second paragraph of the Fintech Law, will be the equivalent in national currency to 700,000 UDIs, approximately MXN $4,260,000.00 (four million two hundred sixty thousand pesos 00/100) or US $218,460.00 (two hundred eighteen thousand four hundred sixty dollars);

(e) The minimum capital that must be available to Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) (electronic wallets) that have been authorized to carry out their transactions in national currency, as well as to carry out transactions with cryptocurrencies, transactions in foreign currency, act as a clearinghouse in the payment dispenser network (redes de medios de disposición) in accordance with the Law for the Transparency and Order of Financial Services, as well as operate, design, commercialize derivative financial instruments that have virtual assets as underlying assets in accordance with Article 33, second paragraph of the Fintech Law, will be the equivalent in national currency to 700,000 UDIs, approximately MXN$4,260,000.00 (four million two hundred sixty thousand pesos 00/100) or US $218,460.00 (two hundred eighteen thousand four hundred sixty dollars);

(f) Note that in the event that the Fintechs obtain the registration of their debt securities in the National Registry of Securities (“RNV”) of the CNBV, the minimum capital they must have will be the equivalent in national currency to 700,000 UDIs, approximately MXN $4,260,000.00 (four million two hundred sixty thousand pesos 00/100) or US $ 218,460.00 (two hundred eighteen thousand four hundred sixty dollars), regardless of whether they are located in the cases provided for in these provisions;

(g) Specify that in the event that one of the Fintechs mentioned above modifies its bylaws to provide for the performance of only the transactions referred to in Article 6 of these provisions, as appropriate, it must have the minimum equivalent capital in national currency to 500,000 UDIs, approximately MXN $3,040,800.00 (three million forty thousand eight hundred pesos 00/100) or US $155,940.00 (one hundred and fifty-five thousand nine hundred forty dollars);

(h) Establish that the minimum capital that Fintechs must have must be subscribed and paid by the last business day of the year in which it is processed;

(i) Establish the limits for the receipt of cash resources and transfer of resources that the Electronic Payment Funds (Instituciones de Fondos de Pago Electrónico) (electronic wallets) must follow, with the understanding that the authorization requested by said institutions to the CNBV will be granted for amounts not exceeding what is established in the present provisions;

(j) Establish the limits that Collective Financing Institutions (crowdfunding) must follow, regarding the CNBV authorization request for the receipt of resources in their clients’ national currency;

(k) Indicate the controls that should be indicated in the requests for authorization by the Fintechs for compliance with the limits for receiving cash resources and transfer of resources established in these provisions;

(l) Establish the accounting criteria to which the Fintechs shall be subject, the rules for the valuation of the securities and other financial instruments, as well as the virtual assets that form part of their financial estate to which the Fintechs shall also be subject;

(m)Establish the processes for the preparation of basic financial statements in accordance with the accounting criteria to be developed by the Fintechs;

(n) Establish the processes that Collective Financing Institutions (crowdfunding) must follow to obtain an electronic certificate from investors;

(o) Indicate the limits of resources that Collective Financing Institutions (crowdfunding) can maintain on behalf of their clients;

(p) Rules to which the Collective Financing Institutions (crowdfunding) that celebrate mandates or commissions with their clients must adjust to; and

(q) Establish a Business Continuity Plan, that is, a set of strategies, procedures and actions that allow the continuity in their operations of the Collective Financing Institutions (crowdfunding).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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