Luxury Purchases Expose Dirty Money to the SAT
The recent designation of six Mexican cartels as terrorist groups by the United States, along with President Donald Trump's push for increased collaboration on security issues, will intensify the efforts of organizations like the Tax Administration Service (SAT) and the Financial Intelligence Unit (UIF). Both institutions are working together to identify illicit-origin money that materializes in the purchase of properties such as houses, cars, jewelry, and art in legal ways. “This new situation in the United States does not necessarily imply an immediate change in the SAT's fiscal actions. Rather, it’s about collaborating with other entities and, within our means, reviewing compliance among sectors deemed to be at risk,” commented Gari Flores, General Administrator of Tax Collection at the SAT.
How are alerts generated to the SAT and the UIF?
Since 2013, following recommendations from the Financial Action Task Force (FATF), an intergovernmental organization responsible for setting standards and conducting reviews to prevent such crimes, Mexico implemented the Federal Law for the Prevention and Identification of Operations with Illicit Resources. This law defines activities that present risks and establishes conditions to trigger alerts to the SAT. Virginia Ríos Hernández, a member of the Tax Investigation Technical Committee of the College of Public Accountants of Mexico (CCPM), explained: “The SAT has a unit dedicated to investigating matters related to illicit-origin resources and can conduct administrative reviews on companies or taxpayers deemed at risk. For instance, notaries and construction companies are required to notify the SAT and the UIF about their operations, carrying out 'due diligence,' meaning knowing their clients, and that information is analyzed by us.”
What are the susceptible activities?According to Article 17 of the Law, the following activities are considered susceptible to risks: gambling, issuance or sale of service cards, granting credit by non-financial entities, construction or development of real estate, sale of metals and jewelry, art auctions, sale of vehicles of all kinds, and transfer of valuables. These activities are considered vulnerable when the prices exceed certain amounts stipulated in the law. For example, a jewelry store that sells goods exceeding 91,077.7 pesos (equivalent to 805 UMAs) or a construction company whose property exceeds 907,948 pesos. Those engaged in these activities must be registered with the RFC and report information about their clients and users. In the sale and purchase of vehicles, the seller must identify the buyer with an official ID if the vehicle's value exceeds 363,179.4 pesos.
Traces of Cash
The Law establishes specific amounts that require the identification of the buyer and notification to the authorities. Thus, when a purchase exceeds 726,358.8 pesos, the seller must notify the SAT, which in turn communicates this to the UIF, along with the identification document reference and the buyer's activities. The SAT then investigates the RFC to see what reported activities exist, how much taxes are paid, and analyze inconsistencies that could lead to a deeper investigation or criminal penalties. "There may be money coming from illicit activities; sometimes the leaders of these groups employ third parties to carry out these purchases, and they are monitored to identify the source of the money,” added the CCPM member. Since tracking cash can be complicated, the Law imposes restrictions on its use. For example, for acquiring jewelry, transactions can only be made in cash up to 181,589.7 pesos. For vehicles, the limit is 363,179.4 pesos; if the price exceeds this, the client must pay the difference with a card, check, or transfer, and the seller is required to notify the SAT.
In an environment where control and regulation over the flow of money is increasing, it is essential for both consumers and business owners to maintain a proactive approach in their tax declarations and transparency in their transactions. Avoiding excessive use of cash and being aware of tax obligations not only helps prevent legal issues but also contributes to the formalization of the Mexican economy. Responsibility and foresight are key to navigating this economic landscape effectively.
