(Adds comments from Financial Action Task Force's report)
MEXICO CITY, Jan 3 (Reuters) - Mexico is failing to root out money laundering because it uses a reactive case-by-case investigation approach and law enforcement agencies suffer from corruption, according to a report on Wednesday by an international body that fights illicit cash.
Money laundering "is not investigated and prosecuted in a proactive and systematic fashion.... Consequently, the number of prosecutions and convictions for money laundering are very low. Significant shortcomings were found in the way in which money-laundering cases are investigated," said the report by the Financial Action Task Force (FATF).
The group is an inter-governmental organization established in 1989.
Mexico's finance ministry and the attorney general's office promised in a joint statement to improve efforts. "The authorities commit to strengthening the areas of opportunity detected, but above all to continue safeguarding the national financial system and supervising vulnerable activities," they said.
Mexico is making little headway in seizing illicit cash, according to the government's own estimates.
Mexico seized just $32.5 million in 2016. That represents less than 0.1 percent of the $58.5 billion of illicit revenues the government estimates is generated by organized crime annually.
Although the FATF said Mexican authorities generally have "a good understanding of money laundering and terrorist financing risks ... this financial intelligence does not often lead to investigations of money laundering, underlying crimes, and terrorist financing."
Mexico is the top source of illegal drugs to the United States and both countries' authorities have been criticized by civil society groups for leaving drug gang finances largely intact.
"The level of corruption affecting law enforcement agencies, in particular at the state level, undermines their capacity to investigate and prosecute serious offences," said the report.
In a draft of the report previously seen by Reuters, FATF commended efforts to clean up the Mexican banking sector after U.S. investigations in the mid-2000s showed global banks processed billions of dollars in drug gang cash.
But it said tax authorities did not do enough to monitor businesses outside the financial sector used for money laundering, such as real estate. (Reporting by Anthony Esposito and Stefanie Eschenbacher; Editing by Chizu Nomiyama and Cynthia Osterman)
Our Standards: The Thomson Reuters Trust Principles.