Know Your Coustumer

Relevant aspects of Know Your Customer
It is very important to study the legal concept of “Know Your Customer” (KYC), since nowadays it is vital to understand the figure and its application to individuals and to entities engaged into commercial activities that generates any profit or involve any cash transaction. The KYC figure is focused on preventing corruption, fraud, terrorism, organizedcrime and money laundering, in addition to the frauds committed within the big companies such as Ponzi investment schemes, and the Enron and WorldCom frauds.
Several countries have been forced to face these crimes through legislation, with laws and statues that are applicable to the financial institutions and in Mexico to the stock market, to the retirement saving system; to credit unions, foreigncompanies, investment institutions, savings cooperatives and insurance companies.
In this article we will discuss the countries that are now implementing these regulations through the legislation of companies’ policies; about the KYC´s objective and the actual situation in Mexico, and the advantages of its application within the economic, security and social aspects.
Precedents
The first legalprecedent referred to this area was the Patriot Act of the United States of America (PAUS). Main purpose and nature of PAUS was to provide the necessary tools to fight intercept and obstruct terrorism. This act was signed into by President George W. Bush on October 24 of 2001 as a result of the terrorist attacks of September 11, 2001. The act was based on the Foreign Intelligence Surveillance Actwhich granted the authorities the required elements to obtain the necessary information for the prevention or resolution of terrorism crimes. The Act contains the resolutions of the Fiftieth General Assembly, the resolutions of the National and Immigration Act of the United States issued by the United Nations as 1373, 1390, and the U.S. National Security Act. In addition, effects of PAUS areextra-territorial because it covers international jurisdiction and is based on international conventions and treaties.
Other countries that regulate this legal concept are Germany, with the Law on Money Laundering of 1993; Spain with Law 19/1993 issued on December 28 of 1993; South Africa through the Prevention of Organized Crime adopted in 2001; India through the guidelines that founded the ReserveBank in 2004; New Zealand with KYC laws in 2010 and in Mexico, a law project named the Federal Law on the Prevention and Identification of Operations with funds of Illicit Origin and Financing of Terrorism (FLPIOFIOFT) undertaken by the President on August 2, 2010. There are currently more than 65 countries that now regulate in this area.
Mexican Legislation concerning KYC
In Mexico, KYC wasimplemented by the enactment of FLPIOFIOFT and the modification proposed to the Mexican Tax Code (MTC) in the Article 27 and the addition of Article 27 BIS, according to the recommendations made by the Financial Action Task Force on Money Laundering (FATF). Both the enactment of FLPIOFIOFT and modification proposed to the Mexican Tax Code (MTC) were approved by the Senate in April, 2011, but haveyet to be published in the gazette of the federation . Article 27 of the Mexican Tax Code establishes that people acquiring shares through recognized markets and those considered placed with public investors will be exempted from the necessity to apply for registration in the Federal Register of Taxpayers and the electronic signature certificate. Now it introduces the obligation to extend notarypublic disclosures to identify the payment of consideration and the instrument that was covered. Article 27 BIS provides the obligation for legal entities to inform the tax authorities of a change of partners or shareholders, as well as names of people in control of the corporate rights or property of the company.
In Mexico, the enactment of FLPIOFIOFT and the modifications proposed to articles...