Mexican Credit Union’s $184 Million Fraud Triggers Review

Mexican credit unions are coming under fresh scrutiny from regulators after the industry’s biggest fraud in more than a decade saddled 6,000 savers with losses.

New rules may include revisions to asset-concentration limits, Gabriel Diaz, vice president of financial regulator CNBV, said in an interview. Ficrea SA, which was seized by regulators in November, had outstanding loans of about 5.8 billion pesos ($395 million), 98 percent to a single company that is now under investigation, according to the CNBV.

“It will be necessary to revise certain regulations, to make some changes in legal matters,” Diaz said from Mexico City.

Under Mexican law, credit unions are subject to a different level of regulation than banks and have their own insurance system that guarantees deposits only up to 131,000 pesos, less than a 10th the limit for bank accounts. Interest rates as high as 10 percent on savings, more than three times the average bank rate, fueled a 43 percent surge in credit unions’ assets in the 12 months through September to $7.7 billion, regulatory data show.

Jaime Gonzalez, president of the CNBV, said in a Jan. 6 interview on Radio Formula that Rafael Olvera, Ficrea’s 57-year-old majority owner, diverted $184 million from the company for his personal use. Prosecutors have issued an arrest warrant for Olvera and sought help locating him from Interpol, a police organization that operates in 190 countries.

Savings Fraud

Mexican directory assistance couldn’t provide a contact number for Olvera, and the main phone number on Ficrea’s website has been disconnected. An Internet search turned up no pages for him on Facebook, LinkedIn or Twitter. Press officials for the CNBV and the prosecutor’s office didn’t respond to requests for information about a lawyer for Ficrea.

Only 42 percent of Ficrea’s customers will get all their savings back, Gonzalez told Radio Formula in December. The CNBV’s decision to seize and dissolve Ficrea came after the government decided not to bail it out, Gonzalez said.

Diaz said it’s the biggest fraud in Mexico’s savings industry since 1999, and regulators were initially concerned that Ficrea’s collapse might trigger a run on similar credit unions. No credit run has taken place, he said.

Last month, a group of angry Ficrea customers stormed a Mexico City office of the country’s financial-consumer protection agency and held employees hostage for nine hours, according to the newspaper Reforma. Deputy Finance Minister Fernando Aportela arrived on the scene and helped to negotiate a peaceful resolution and release of the employees, Reforma reported.

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