FATF Report Sheds Light on Money Laundering Amidst the Synthetic Opioid Epidemic: Insights and Implications
Tuesday, April 11, 2023
FATF Report Sheds Light on Money Laundering Amidst the Synthetic Opioid Epidemic: Insights and Implications
On November 30, 2022, the Financial Action Task Force (FATF) issued a critical report addressing the pressing issue of money laundering linked to the fentanyl and synthetic opioid epidemic. Co-led by the United States and Canada, this report comes with invaluable recommendations aimed at prosecutors and law enforcement officials for combatting illicit financial flows associated with the drug trade.
The Synthetic Opioid Crisis and the High Stakes
According to data from the Centers for Disease Control and Prevention, synthetic opioids like fentanyl were the primary contributors to drug overdose deaths in the United States in 2020. This crisis prompted Brian E. Benczkowski, Under Secretary of Treasury for Terrorism and Financial Intelligence, to emphasize the significant progress made in addressing this issue. Tackling the synthetic opioid epidemic is a top priority for the Biden-Harris administration, with the Treasury Department playing a pivotal role in the comprehensive government response.
FATF's Recommendations
The FATF report outlines how criminal organizations involved in trafficking synthetic opioids employ various methods to launder illicit proceeds. These methods encompass bulk cash smuggling, trade-based money laundering (TBML), wire transfers (particularly between front and shell companies), cash couriers, money brokers, and the use of the dark web, where vendors offer illicit products and accept payments in anonymous cryptocurrencies.
To mitigate the risk of money laundering in this context, the FATF recommends a series of measures:
1. Implement more rigorous risk assessment practices to combat illicit opioids.
2. Enhance coordination and information sharing among law enforcement and authorities to counter money laundering associated with the emerging drug trade.
3. Provide additional training for prosecutors and law enforcement personnel to bolster financial investigations related to drug trafficking.
4. Identify and leverage existing mechanisms to expand international cooperation in disrupting synthetic opioid supply chains.
5. Raise awareness within the private sector regarding the risks posed by new technologies to prevent criminals from exploiting platforms or products for money laundering.
Read more about AML regulations in article: Understanding the EU AML Package: A Comprehensive Overview
Indicators of Money Laundering Linked to Drug Trafficking
The FATF underscores the importance of recognizing broader risk indicators to detect money laundering schemes connected to drug trafficking. Compliance teams should be vigilant and consider several high-risk activity indicators, including:
• Frequent small payments or transfers to the same accounts with high frequency.
• Frequent deposits and subsequent transfers unrelated to the account holder.
• Diverting wires sent to trade-related accounts to unrelated accounts.
• Unusual transaction patterns deviating from typical behavior.
• Deposits below reporting thresholds from multiple third parties across different locations.
• Multiple currency exchanges involving various currencies.
• Attempting to close accounts to evade future scrutiny.
The FATF acknowledges that individual indicators alone may not necessarily suggest criminal behavior. However, if compliance staff identify any of these indicators, further monitoring and examination are warranted.
Key Takeaways for Businesses
To safeguard against illicit financial activities related to synthetic opioids, businesses should heed the guidance provided in FinCEN's Advisory on Illicit Financial Methods Related to Synthetic Opioid Trafficking. Compliance teams must regularly assess the effectiveness of their Anti-Money Laundering (AML) policies in detecting and reporting suspected money laundering activities.
When filing Suspicious Activity Reports (SARs) related to potential connections between suspicious transactions and synthetic opioid trafficking, financial institutions are encouraged to include all relevant information and reference the key term "FENTANYL FIN-2019-A006" in SAR field 2. This practice ensures that regulators have the necessary context to address these critical issues effectively.
