Financial Action Task Force (FATF) Report: Recommendations on risk indicators and measures to prevent 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. According to the Centres for Disease Control and Prevention, in 2020, 82% of the drug overdose deaths in the US involved synthetic opioids.

Drug trafficking risk indicators

In the report, the FATF notes that underlying predicate offences can become difficult to ascertain after the placement stage of the money laundering process. Therefore, subject persons need 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; and
• An account holder attempts to close an account to avoid due diligence questioning.

Specific synthetic opioid risk indicators

According to the report, criminal groups specialising 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 being commonly used to market the illicit products, with payment taken through virtual assets, including anonymity-enhanced cryptocurrencies.

Preventative measures implementation

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

• Ensure more rigorous risk assessment practices for a 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; and
• 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.

How can Deloitte help?

Our FinCrime team can assist with the performance of a Typology assessment specific to your business. A typology assessment sits at the heart of any robust risk-based approach as it helps to identify areas of vulnerability and to develop targeted prevention and detection measures.

Speak to us for more information on our solutions.