FATF and synthetic opioids

Nicola Sharp of Rahman Ravelli details the main points in the Financial Action Task Force’s first report on money laundering linked to synthetic opioids.

The Financial Action Task Force’s (FATF) inaugural report on money laundering linked to synthetic opioids (man-made drugs) includes recommendations for prosecutors and law enforcement authorities on how to tackle the flow of finance that is generated by the illicit drug trade.

According to the report, which has been co-led by the US and Canada, criminal groups specialising in the trafficking of synthetic opioids such as fentanyl have been found to be moving their proceeds of crime via the bulk smuggling of cash, trade-based money laundering (TBML), wire transfers involving shell companies, cash couriers, funnel accounts and money brokers. They are also using dark web vendor sites to promote their products, with payment being taken in the form of virtual assets, such as cryptocurrency.

Recommendations

In order to tackle these money laundering practices, the FATF’s report recommends law enforcement agencies and other authorities:

• Ensure more rigorous risk assessment practices are developed to ensure more robust legal and regulatory frameworks to combat illicit opioids.
• Improve coordination and the sharing of information and intelligence regarding the methods used to launder the illicit proceeds being generated.
• Provide extra training to prosecutors and law enforcement authorities - including those with a background in financial investigations - on investigations into the financial elements of the supply chain.
• Identify and make the most of existing mechanisms to expand international cooperation in combating synthetic opioid supply chains.
• Ensure that those in the private sector are aware of the risks of new technologies being used to launder drug trafficking proceeds and take appropriate steps to prevent criminals gaining access to their business platforms or products.

Risks

The FATF concludes its report by stating that underlying predicate offences can become difficult to ascertain after the placement stage of the money laundering process. This, it argues, makes it imperative that compliance staff are aware of broader risk indicators that may help them identify money laundering schemes.

The FATF says that indicators of high-risk activity associated with drug-related trafficking include:

• An individual receiving numerous small-scale electronic funds transfers or making many, frequent small payments to the same accounts.
• An account showing frequent cash deposits which 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 being split and forwarded to a number of non-related accounts.
• A client conducting cash transactions that do not seem to match their profile, eg: ATM transactions for larger amounts than the client would normally handle.
• Funds being deposited into a client account in amounts that are below the reporting threshold from what appear to be numerous third parties located in various parts of a city or region.
• An account holder conducting a number of currency exchanges involving multiple currencies.
• An account holder attempting to close an account in order to avoid due diligence questioning.

The FATF says that a single risk indicator about an account or transaction may not, on its own, justify suspicion of money laundering linked to the trafficking of illicit synthetic opioids. But if any such indicators are present, compliance staff should ensure that further monitoring and examination is conducted whenever it is appropriate.

In its Advisory on Illicit Financial Methods Related to Synthetic Opioid Trafficking, FinCEN (the US Department of the Treasury’s Financial Crimes Enforcement Network) reminds firms of their need to conduct risk-based due diligence and introduce new procedures into their compliance programmes when they appear to be needed. It also emphasises the need for compliance teams to carry out regular assessments to check their procedures are effective when it comes to the identification and reporting of known or suspected money laundering activity.

The US national public health agency, the Centers for Disease Control and Prevention, has said that at least 82% of opioid-related overdoses in 2020 involved synthetic opioids.