While China remains a significant source of chemicals used to manufacture drugs such as fentanyl and other synthetic opioids, Mexican and South American cartels continue to operate separate DTOs for the trafficking of drugs such as cocaine. One thing they all have in common is the reliance on the use of TBML via the utilization of Asian networks. With this in mind, Financial Institutions should be aware of transactions involving China that are at or near the Capital Flight Restriction (50,000.00 USD).
What does this mean for financial institutions?
- Financial institutions should be mindful of changes in customers’ transaction patterns involving foreign-based transactions.
- Financial institutions can expect additional scrutiny from regulators and auditors on EDD processes and high-risk customer monitoring.
- This is particularly important for entities with complex ownership structures that could be shell companies, but also to ensure an entity is not doing business or affiliated with a DTO
Additionally, here are some red flags to help identify and report potential TBML schemes (FATF)
- Complex/illogical ownership structures
- Trade entities registered in jurisdictions with weak AML controls
- Lack of expected business transactions (i.e., payroll, tax payments)
- Transaction volumes/amounts not aligned with stated anticipated activity
- Staffing numbers non-commensurate with stated business activities/volumes
- Trade activity not aligned with stated type of business (ex: phone accessory manufacturer importing clothing)
- Invoices have inconsistent pricing based on market values (i.e., under- or over-invoicing)
- Round dollar amount transactions for trades
Keep in mind, the existence of a red flag is not inherently suspicious on its own. The above are indicators of potential TBML activity that may warrant further investigation or scrutiny.
As DTOs continue to evolve their money-laundering operations, they will likely remain a FinCEN Priority. Financial Institutions should continue to monitor advisories and other communications from FinCEN for additional information regarding DTOs, including how to meet regulatory obligations.