Connect ► twitter| youtube|  Log In ► Members Only  |  Corporate One Safekeeping  |  Search

Fentanyl trafficking: Detecting and reporting this illegal activity

By Kristina Davis, BSA/AML Investigator

Imagine that early one November morning in Ohio, you wake up to hear this alarming news: you and every other person in the state could have been killed overnight. Not from a bomb or a terrorist threat, but from a few individuals with enough of the synthetic drug fentanyl to kill the entire 11-million population of the state of Ohio multiple times over. So much fentanyl, in fact, authorities deemed it a “weapon of mass destruction.” Just a few weeks ago, this was the scary wakeup call of every Ohioan.

Available on-demand through December 31: BSA/AML compliance training webinars

If you’re a BSA officer, compliance officer, operations manager, front-line team member, or audit staff, it’s not too late to meet your FFIEC training standard for 2019. Originally presented live by Mark W. Dever, CAMS, AAP, and vice president at ProBank Austin, both of our on-demand webinars make it easier than ever to stay abreast of all the current BSA/AML industry news and information.

BSA/Latest Information, Regulatory Update and Examiner Focus
Length: 1 hour

BSA Essentials
Length: 3 hours

Fentanyl use has not only taken over communities in Ohio but also the U.S. overall, and the epidemic appears to only be getting worse. Every day in this country, more than 130 people die from an opioid-related overdose. According to data from the National Institute on Drug Abuse, as of May 2019, Ohio was second only to West Virginia in opioid-involved overdoses.

While fentanyl was never intended to be used in such a destructive manner, its recent spike in illicit use has had a devastating impact on the lives of individuals, their families, and our communities. Not only has this impact caught the attention of local and national law enforcement and politicians, it has also caught the eye of the Financial Crimes Enforcement Network (FinCEN).

In August 2019, FinCEN issued an important advisory (FIN-2019-A006) to financial institutions to alert them to illicit financial schemes and mechanisms related to the trafficking of fentanyl, fentanyl analogues, and other synthetic opioids, and to assist them in detecting and reporting related activity. In today’s article we are going to discuss several of the typologies and red flags provided by FinCEN that financial institutions should be on the lookout for regarding fentanyl so that you can protect your credit union and community from this destructive opioid.

Understanding what Fentanyl is

Before we look at FinCEN’s recommendations, let’s start with a little background. The National Institute on Drug Abuse defines fentanyl as a powerful synthetic opioid similar to morphine but 50 to 100 times more potent. It is important to point out that there are two forms of fentanyl. The first type is the pharmaceutical form of fentanyl, also known as Actiq, Sublimaze and Duragesic. This form of fentanyl is legal and typically used medicinally to treat those in severe or chronic pain such, as those coming out of surgery or battling cancer. The second type of fentanyl is the illegally made form, which is used in the production of various drugs like heroin and methamphetamine. Some of the name variations of illegal fentanyl include China Girl, China White, Dance Fever and Jackpot. In this article, we are focusing solely on the illegally made form of fentanyl, which is being trafficked by criminals at an alarming rate.

Detecting and reporting activity indicative of fentanyl trafficking

To assist with the detection and reporting of transactional activity indicative of possible fentanyl trafficking, FinCEN’s advisory lays out multiple typologies and red flags to aid financial institutions with this task. Per FinCEN, by detecting and reporting the activity, financial institutions can disrupt the illegal activity of criminals by making it harder and more costly for criminals to commit these crimes, hide and use their illicit money, and continue fueling this epidemic.

According to Advisory FIN-2019-A006, fentanyl trafficking generally follows one of two pathways. The first way is via the direct purchase of fentanyl from China by U.S. persons for personal consumption or for domestic distribution. The second way is via the cross-border trafficking of fentanyl from Mexico by transnational criminal organizations (TCOs) and smaller criminal networks.

Within those categories there are various funding processes associated with the trafficking of fentanyl. Those processes are:

  • Purchases from a foreign source of supply made using money service business (MSBs), bank transfers, or online payment processors;
  • Purchases from a foreign source of supply made using convertible virtual currency (CVC) such as bitcoin, ethereum, monero, bitcoin cash, etc.;
  • Purchases from a U.S source of supply made using an MSB, online payment processor, CVC, or person-to-person sales;
  • Other, more general money laundering mechanisms associated with TCO procurement and distribution.

Identifying red-flag indicators of fentanyl-related activity

FinCEN’s advisory provides 14 red flags for depository financial institutions to look for involving possible fentanyl trafficking-related activity. Some of these are listed below:

Structuring and funnel account activity

  • Account owners or third parties structure cash deposits at bank branches nationwide into the same account, which funds outgoing transactions on the southwest border, including cash with withdrawals or wire transfers to Mexico (i.e., funnel account activity and rapid movement of funds).
  • The depository institutions have a suspicion concerning the physical condition of deposited banknotes (e.g., the bills smell of drugs or detergent, or are excessively worn).
  • The source of funds cannot be corroborated.
  • The transaction is out of pattern for customers or business type.
  • Transactions with no apparent business purpose.

Shell/front company red flags

  • Unclear business model
  • Company address or location discrepancy
  • Company name discrepancy
  • Employer Identification Number (EIN) discrepancy

Again, it is important to point out that the information provided above is just a synopsis of what FinCEN’s advisory states. It is important that you read the information provided in the advisory for yourself and use it to protect your financial institution and community. The opioid crisis may just seem like a topic for law enforcement, but it’s not. As banking and compliance professionals, it is our job to detect and report suspicious activity—possible fentanyl trafficking included.