FinCEN Illicit MEX Fentanyl Advisory

On Jun. 20, FinCEN advised financial entities on supply chain trends.

  • FinCEN issued a supplemental advisory on the illicit procurement of fentanyl precursor chemicals and manufacturing equipment to alert US financial institutions to new trends
  • The agency urged financial institutions be vigilant in identifying, reporting suspicious activity associated with Mexico-based transnational criminal organizations (TCOs).
  • Concurrent with US Treasury Yellen remarks on actions US to combat the opioid crisis.
  • Also concurrent with US Treasury announcement of OFAC sanctions against top leaders of Mexico’s La Nueva Familia Michoacana Drug Cartel for trafficking fentanyl, #216511.
  • Advisory Overview
  • FinCEN advisory entitled Procurement of precursor chemicals and manufacturing equipment used for the synthesis of illicit fentanyl and other synthetic opioids.
  • Advisory highlights new trends in fentanyl supply chain since FinCEN’s 2019 advisory on illicit financial schemes and methods related to the trafficking of fentanyl, #64082.
  • The 2019 Fentanyl Advisory and the typologies and red flags therein remain valid.
  • New advisory highlights how Mexico-based TCOs buy fentanyl precursor chemicals, pill presses, die molds, and other manufacturing equipment (precursors/equipment).
  • Primarily originating from companies located in the People’s Republic of China (PRC).
  • TCOs use precursors/equipment to synthesize illicit fentanyl and other synthetic opioids in Mexico before the substances enter the illicit drug market in the US.
  • The advisory also includes typologies and red flags associated with the purchase of precursors/equipment to assist firms in identifying and reporting suspicious activity.
  • Illicit Fentanyl Supply Chain Shift
  • US law enforcement has observed a big shift in fentanyl supply chain in recent years.
  • Previously, complicit chemical and pharmaceutical companies in PRC directly shipped illicit fentanyl to US-based individuals for personal consumption/domestic distribution.
  • In addition, they shipped fentanyl to TCOs and smaller criminal networks in Mexico.
  • From Mexico trafficked into the United States across the US southwest border.
  • The PRC government scheduled all fentanyl-related substances as class in May 2019.
  • So, he direct purchase and shipment from PRC-based suppliers declined substantially.
  • Since 2019, Mexico-based TCOs, such as the Sinaloa Cartel and the Jalisco New Generation Cartel (CJNG), have become the predominant traffickers of illicit fentanyl.
  • The TCOs purchase precursors/equipment primarily from PRC-based suppliers. to
  • Synthesize illicit fentanyl and other synthetic opioids in clandestine labs in Mexico.
  • After the TCOs use precursors/equipment to synthesize illicit fentanyl and others in Mexico, the illicit drugs are typically smuggled across the US southwest border.
  • Smuggle it as a powder, adulterant in other drugs, or pressed or encapsulated into counterfeit medication; sold to American consumers via person-to-person drug sales.
  • Also sold to consumers via mail from e-commerce marketplaces and darknet vendors, as well as through in-person deliveries that are arranged on social media platforms.
  • Current Typologies
  • Advisory informs on typologies associated with procurement of precursors/equipment.
  • Chemical brokers often serve as middlemen for precursors/equipment procurement.
  • These brokers may represent multiple PRC-based suppliers and Mexico-based TCOs.
  • They can be based in Mexico, PRC, or other jurisdictions, and leverage connections in mainland PRC and Mexico to connect the PRC-based suppliers and Mexico-based TCOs.
  • Through these connections, brokers can sell and buy precursors/equipment on behalf of their clients and ultimately obfuscate the illicit diversion from mainland PRC to MEX.
  • PRC-based suppliers and chemical brokers may explicitly advertise in English language the sale precursors/equipment on chemical and pharmaceutical company websites.
  • Also, on e-commerce marketplaces, social media platforms, and the darknet.
  • Precursors are often marketed in advertisements through their associated Chemical Abstracts Service (CAS) number for ease of reference to potential illicit buyers.
  • Advertisements may prominently feature shipping services uncharacteristic of a legit supplier, such as explicitly offering to provide exit and entry customs clearance.
  • The term exit and entry customs clearance is a euphemism for disguising and mislabeling the shipments to avoid scrutiny by law enforcement and customs officials.
  • Such ads may signal or direct Mexico-based TCOs and other illicit buyers to contact a sales representative of the supplier or their chemical broker to negotiate the sale.
  • Payments
  • Payments for precursors/equipment in single or multiple transactions from MEX, US.
  • Structured through multiple senders and beneficiaries to evade BSA requirements.
  • Payments often involve low-dollar amounts, but can result in significant amounts.
  • Often use money transfers through banks, MSBs, and online payment processors.
  • These transactions may be sent from Mexico or the United States to mainland PRC (including via Hong Kong and other jurisdictions) to individuals and shell and fronts.
  • Individuals, companies associated with a PRC-based supplier or a chemical broker.
  • Virtual currency, including bitcoin, ether, monero, and tether, among others, also used.
  • Shell and Front Companies
  • Shell and front companies are used to create opaque layers of corporate ownership.
  • Obfuscate the source of activity, appearing to be legitimate Chinese exporters or Mexican importers in the chemical manufacturing and pharmaceutical industries.
  • In some instances, these shell and front companies may also appear to be associated with entirely unrelated business sectors such as textiles, food, or electronics industry.
  • PRC-based suppliers generally sell precursors/equipment to shell and front companies
  • The shells or fronts are under their control to create the façade of legitimate activity.
  • They ultimately sell the precursors/equipment to Mexico-based TCOs, often utilizing chemical brokers that control other shell and front companies to further obfuscate.
  • Red Flag Indicators
  • FinCEN has identified red flags to help firms detect, prevent, report suspicious activity.
  • Including that A customer or counterparty has previous drug-related convictions.
  • Open-source reporting indicates customer's connections to clandestine lab operations.
  • Chemical or pharmaceutical company in the PRC, Hong Kong, or another jurisdiction with a residential address or a business address shared with other similar businesses.
  • Has no physical presence or shows other indicators of possible illicit shell company.
  • A counterparty, with no supposed affiliation with the PRC, uses a PRC-based phone.
  • Uses IP address of website of Chinese chemical or pharma pharmaceutical company.
  • A customer or counterparty is a vendor on an e-commerce or darknet marketplace.
  • Advertises the sale of precursor chemicals (using chemical names, abbreviations, or CAS numbers in the advertisement) and manufacturing equipment used for synthesis.
  • Mexican company that, according to open-source and commercially available reporting, is importing shipments of precursors/equipment without appropriate importing licenses
  • A Mexican company with little or no online presence and is involved in their import.
  • Multiple, seemingly unrelated Mexican importing companies share phone numbers, email addresses, or physical addresses and transact with the same PRC-based firms.
  • Mexican importing company that predominantly transacts only with chemical or pharmaceutical companies in the PRC or Hong Kong for no apparent legitimate reason.
  • Suspicious Activity Reporting
  • FinCEN requested suspicious activity report (SAR) filings by financial institutions should reference this supplemental advisory in SAR field 2 (Filing Institution Note to FinCEN).
  • In addition, the narrative by including the key term: “FENTANYL FIN-2024-A002”.
  • Yellen Remarks
  • Combatting the trafficking of fentanyl is a significant challenge, not solved overnight.
  • US Treasury’s recently established Counter-Fentanyl Strike Force will help coordinate efforts and make sure leveraging all authorities; will continue to work with all partners.

Regulators FinCEN; US Treasury
Entity Types B/D; Bank; BS; Corp; IA; Ins; Inv Co; MSB
Reference FinCEN: PR, Adv FIN-2024-A002, 6/20/2024; US Treasury: Sp, 6/20/2024
Functions AML; Anti-Bribery; Compliance; Financial; Legal; Operations; Reporting; Sanctions
Countries China; Mexico; United States of America; Cross-Border
Category AML FIU; Central Government
Products Banking; Commodities; Deposits; Fund Mgt; Insurance; Loan; Securities
Regions Am
Rule Type Final
Rule Date 6/20/2024
Effective Date 6/20/2024
Rule Id 216506
Linked to Rule :64082
Reg. Last Update 6/20/2024
Report Section AML & Enforcement

Last substantive update on 06/24/2024