FinCEN says illicit use of crypto by criminals creates new 'opportunities' for detection
In an updated advisory released on June 20, FinCEN specifically cited the use of Bitcoin (BTC), Ethereum (ETH), Monero (XMR), and USDT, among other tokens, in these illegal transactions.
FinCEN said financial institutions need to remain vigilant in identifying and reporting suspicious transactions as criminals have become more adept at using new technology for illicit activity.
However, it also noted that the increasing use of crypto in illicit financial activity also presents new “opportunities” for law enforcement. According to the watchdog:
“Cryptocurrency transactions present unique challenges, but they also offer new opportunities for detection and disruption of the fentanyl supply chain.”
Illicit crypto transactions
The advisory highlighted a significant shift in the payment methods used by Mexico-based transnational criminal organizations (TCOs), such as the Sinaloa Cartel and the Jalisco New Generation Cartel (CJNG).
According to FinCEN, criminal organizations in Mexico are “increasingly purchasing fentanyl precursor chemicals and manufacturing equipment” from suppliers based in China, with payments often conducted via digital assets. These transactions frequently result in funds being transferred to the Chinese suppliers’ wallets hosted by crypto firms, sometimes through secondary money transmitters.
FinCEN said it has identified several red flags associated with the illicit use of cryptocurrencies in the fentanyl supply chain. These include low-dollar payments sent to chemical and pharmaceutical industries in the PRC, Hong Kong, or other jurisdictions without apparent legitimate purposes, and the use of multiple shell companies to obfuscate transaction origins and destinations.
Financial institutions are urged to incorporate procedures for detecting suspicious crypto transactions into their Anti-Money Laundering (AML) programs. This includes leveraging blockchain analytics to trace and link virtual currency addresses associated with PRC-based suppliers and Mexico-based TCOs.
The advisory encouraged financial institutions to share information through FinCEN Exchange, a public-private partnership initiative, to enhance the detection and reporting of illicit activities related to the fentanyl supply chain.
The opioid crisis
The issuance of the advisory is part of the US government’s comprehensive approach to combating the opioid crisis, which President Biden has declared a national emergency.
The administration has implemented extensive measures to disrupt the illicit fentanyl supply chain, including imposing sanctions on foreign persons involved in drug trafficking and collaborating with international partners to strengthen regulatory and enforcement actions.
The urgency of these measures is emphasized by the alarming statistics surrounding fentanyl overdoses in the US. Fentanyl has become the leading cause of death for individuals aged 18 to 45, with the synthetic opioid being 100x more potent than morphine, according to the Drug Enforcement Administration (DEA).
The updated FinCEN advisory aims to alert US financial institutions to the complex network of criminal organizations involved in the production and distribution of fentanyl. It emphasizes the need for heightened vigilance and proactive measures to combat the misuse of cryptocurrencies in this deadly trade.
