FinCEN published an advisory on August 21, 2019 to remind financial institutions of their due diligence and other Bank Secrecy Act (BSA) obligations regarding the illicit financial schemes and mechanisms related to the trafficking of fentanyl or other synthetic opioid drugs. By complying with these obligations, financial institutions can help combat the opioid drug epidemic the U.S. is currently facing.
Detecting Fentanyl and Synthetic Opioid Drug Trafficking
Fentanyl and other opioid drug trafficking often follows specific patterns that can be detected if financial institutions are looking for the appropriate signs. If a financial institution suspects illicit activity, a Suspicious Activity Report (SAR) should be filed with all pertinent available information included in the SAR form and narrative.
Below are the red flags listed in FinCEN’s alert that may provide helpful context for identifying financial activity related to fentanyl and other opioid drug trafficking:
Money Services Businesses (MSBs): Money Transfer Red Flags
- The money transfer beneficiary lists a phone number or email address associated with a pharmaceutical company or chemical sales website.
- U.S. remitter sends low-dollar money transfers to an individual in China for no apparent legitimate purpose. Conversely, a U.S. remitter sends a high volume of money transfers to apparently unrelated individuals.
- Multiple U.S. remitters send money transfers to the same individual beneficiary in China.
- Seemingly unrelated beneficiaries share the same phone number or email address to receive transactions.
- The volume of outgoing money transfers is not consistent with the expected activity of a U.S. remitter.
- A U.S. remitter adjusts the money transfer to avoid BSA reporting and recordkeeping requirements. Additional red flags may be involved when a U.S. remitter sends multiple structured money transfers:
- Remitter uses multiple agent locations.
- Remitter sends money transfers to the same beneficiary consecutively instead of aggregating in a single sum.
- Multiple seemingly unrelated remitters are linked together by shared attributes. These remitters then coordinate transactions to evade the recordkeeping threshold.
Depository Institutions: Structuring and Funnel Account Activity Red Flags
- Account owners or third parties structure cash deposits at bank branches nationwide into the same account.
- Depository institutions have a suspicion concerning the physical condition of deposited banknotes.
- The source of funds cannot be corroborated.
- Multiple transactions occur below the applicable Currency Transaction Report threshold. Additional indicators may include:
- Suspicious use of multiple locations
- Multiple individuals working together
- Suspicious use of multiple accounts
- A transaction is out of pattern for the customer or business type.
- A transaction seems to have no apparent purpose.
Depository Institutions: Shell Company Red Flags
- Unclear business model:
- The company’s North American Industry Classification System (NAICS) code(s) is/are in a different industry than the business name indicates.
- Commercial databases reveal the company is associated with multiple businesses in unrelated industries.
- Open source information reveals that the company lack or has vague company websites.
- Company address or location discrepancy:
- Open source searches of the address provided reveal a business with a different name or operating location inconsistent with the business model.
- Commercial databases associate the company with multiple active addresses or operating locations, but reveal few, if any, indications the company has franchises or multiple branches, subsidiaries, or agents.
- Company name discrepancy:
- The company’s name is vague, non-descriptive, or does not align with its business model.
- Commercial databases reveal the company has three or more name variations or has multiple “doing business as” (dba) names.
- Employer Identification Number (EIN) discrepancy:
- Commercial databases reveal the company is a small business but has multiple EINs or shares EINs with other businesses.
Depository Institutions and MSBs: Clearnet and Darknet Marketplace Fentanyl Purchase Red Flags
- Direct or indirect transactions with Darknet marketplaces or CVC mixing services.
- Customers with past criminal histories regarding drug-related offenses.
- Customers discussing drug purchases in the transaction notes field available on the exchange.
- Use of virtual private network (VPN) services or Tor to access CVC exchange accounts.
ACA Telavance Guidance
Financial institutions should ensure they have AML transaction monitoring solutions that are expertly tuned to create alerts for the above listed red flags.
How ACA Telavance Can Help
ACA Telavance has deep experience working with financial institutions to improve the efficiency and efficacy of transaction monitoring systems. This includes:
- Model risk management and validation
- Model implementation and optimization
- Help to assess the effectiveness of your monitoring strategy
- Conduct an in-depth relationship analysis to help formulate segments
- Transaction monitoring model tuning
- Pre-implementation testing and threshold setting
- False positive alert management and reduction
- Retrospective transaction reviews (“Lookbacks”)
- AML compliance reviews and assessments
- Tuning (ATL/BTL testing)
We can work with your organization to mitigate the risks associated with a “poorly tuned” transaction monitoring system, increasing the quality of alerts and the effectiveness of your monitoring program.
- 5 Key Challenges When Tuning AML Transaction Monitoring Software
- Six Steps to Analyzing an AML Program’s Efficiency and Effectiveness
- Risk-Based Transaction Monitoring Through Analytical Segmentation
- How Link Analysis Can Help In Anti-Money Laundering Investigations
- Technology Enhancements for Beneficial Ownership Implementation
- Anticipated Behavior Profile