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Fraud a la Mexicana

Raoul Rodriguez-Walters

In the wake of the tragedy of 11 September, 2001, I was reading as much news as I could get my hands on. I was shocked to read one article that talked about a scam that briefly made the rounds in the US, where the promoters were asking for donations for the victims of New York, Washington and Pennsylvania. Sadly, the thieves were just taking advantage of so many by pocketing the donations for their own private charities…if you know what I mean.

But those intent on committing fraud do not limit themselves to taking advantage of our charitable intentions, nor is fraud a first world phenomenon only. Some scams take advantage of our lack of sophistication or knowledge, while others pray on our desire for the quick buck. On other occasions we may feel that the financial institutions that we work with, such as banks, insurance companies or brokerage houses, while not committing fraud, have taken actions (or refrained from taking actions) that have caused us financial harm. Obviously, as foreigners, we are even more vulnerable because often we are not familiar with the language, the laws or customs in Mexico. What are our options when financially harmed in Mexico?

Fortunately, if you have a complaint against a financial institution, you can turn to the CONDUSEF. The acronym stands for Comisón Nacional para la Defensa de los Usuarios de los Servicios Financieros (National Commission for the Defense of Users of Financial Services). This commission is authorized to mediate and resolve conflicts between financial institutions and the consumer. Note the key words: financial institutions. These are companies such as banks, brokerages, insurance companies, mutual fund companies, exchange brokers and the like. The CONDUSEF has no authority over financial advisors, insurance agents, real estate agents, notarios, charities, or other independent financial service providers.

The first thing that the commission encourages the parties to do is to come to an agreement before an official complaint is made. If that does not work, they will ask the parties if they would accept binding arbitration. If the answer is yes, then the CONDUSEF's decision is final. However, most large financial institutions generally will not accept arbitration sponsored by the CONDUSEF because they feel that the arbitration panels, which are exclusively appointed by the commission, are biased against them. While the CONDUSEF can still proceed to study the case and issue a legal opinion without the cooperation of the offending party, this commission currently does not have enforcement powers. The CONDUSEF has offices in all state capitals and also has a website in English that can be found at www.condusef.gob.mx.

Fraud is one of the most common crimes in Mexico, and most crimes of this type are perpetrated by individuals and companies which are not registered as financial institutions. These entities are not covered by the CONDUSEF, and your only recourse is provided by the Mexican courts. Admittedly, the legal system in Mexico is not the most efficient, but I know people who have been legitimately jailed for fraud. My point is that if this is your only recourse, use it. Mexican attorneys are permitted to work on contingency, which is especially advantageous if a significant portion of your net worth has been lost.

CONDUSEF officials tell me that they are aware of the shortcomings in Mexican legislation and they are actively looking into ways to extend coverage to financial advisors and improve the Commission's credibility vis-à-vis the financial institutions. One possibility which is being studied is to use an ombudsmen scheme, similar to the system in several European jurisdictions. In this case, arbitration would probably be compulsory. This would be a wonderful step in the right direction.

However, I think most of you will agree that an ounce of prevention is worth more than a pound of cure. Always conduct some due care research, such as asking for references and registration numbers. Follow your common sense. If there is a problem, try to settle with the entity first before you take the matter further. If this is not successful, ask the CONDUSEF's advice. As a final resort, use the courts.

Published or Updated on: January 1, 2006 by Raoul Rodriguez-Walters © 2008
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