FATF report: Money laundering from fentanyl and synthetic opioids

On November 30, 2022, the Financial Action Task Force (FATF) issued its inaugural report on money laundering from fentanyl and synthetic opioids. Co-led by the US and Canada, the report includes recommendations for prosecutors and law enforcement authorities on countering financial flows from the illicit drug trade. 

Currently the main driver of drug overdose deaths in the US, the Centers for Disease Control and Prevention has said that at least 82% of opioid-involved overdoses in 2020 involved synthetic opioids. Speaking about the crisis, Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said, “Combatting this scourge is a top priority of the Biden-Harris administration, and the Treasury plays an important role in the whole-of-government response.”

FATF recommendations 

According to the report, criminal groups specializing in synthetic opioid trafficking have been found to move illicit proceeds through bulk cash smuggling, trade-based money laundering (TBML), wire transfers (especially between front and shell companies), cash couriers, funnel accounts, and money brokers. Dark web vendor sites are also commonly used to market the illicit products, with payment taken through virtual assets, including anonymity-enhanced cryptocurrencies.

To mitigate the threat of these money laundering tactics, the FATF recommends law enforcement and other operational authorities implement the following practices:

• Ensure more rigorous risk assessment practices to develop more robust legal and regulatory frameworks to combat illicit opioids 
• Better coordinate and share information and intelligence on the methods used to launder the illicit proceeds from the emerging drug trade
• Provide prosecutors and law enforcement authorities, including those with an extensive background in financial investigations, with additional training on investigations into the financial elements of the precursor supply chain
• Identify and leverage existing mechanisms to expand international cooperation in combating synthetic opioid supply chains
• Ensure the private sector is aware of the risks of new technologies (including dark web marketplaces and digital assets) to launder the proceeds of drug trafficking and take appropriate measures to deny criminals access to their business platforms or products

Risk indicators indicative of the larger ecosystem of money laundering linked to drug trafficking

Concluding the report, the FATF notes that underlying predicate offenses can become difficult to ascertain after the placement stage of the money laundering process. Therefore, compliance staff needs to be aware of broader risk indicators that may help them identify money laundering schemes. Several indicators of high-risk activity associated with drug-related trafficking identified by the FATF include:

• An individual receives numerous small-scale electronic funds transfers or makes a significant number of small payments to the same accounts in high frequencies 
• An account displays frequent deposits in cash that are then transferred to persons or entities in free trade zones or offshore jurisdictions without a business relationship with the account holder
• Incoming wire transfers to a trade-related account are split and forwarded to multiple non-related accounts
• A client conducts untypical cash transactions given their profile, such as ATM transactions for larger amounts than would normally be expected
• A client has funds deposited into an account in amounts below the reporting threshold from what appear to be multiple third parties located in various parts of a city or region
• An account holder undertakes numerous currency exchanges involving multiple currencies
• An account holder attempts to close an account to avoid due diligence questioning

The FATF notes that a single risk indicator about an account or transaction may not warrant suspicion of money laundering linked to the trafficking of illicit synthetic opioids on its own. Nor will a single indicator necessarily provide a clear indication of such activity. However, should compliance staff identify any of the indicators highlighted by the FATF, teams should undertake further monitoring and examination as appropriate.

Key takeaways

In FinCEN’s Advisory on Illicit Financial Methods Related to Synthetic Opioid Trafficking, firms are reminded that they must conduct risk-based due diligence and implement enhanced policies, procedures, and controls into their compliance programs where necessary. Compliance teams should also ensure assessments are carried out regularly to establish whether their protocols effectively detect and report known or suspected money laundering activity. 

When filing suspicious activity reports (SARs) to indicate a possible connection between suspicious transactions and synthetic opioid trafficking, FinCEN instructs firms to provide all relevant information and reference the key term “FENTANYL FIN-2019-A006” in SAR field 2.