Supplemental Advisory On The Procurement Of Illicit Fentanyl And Other Synthetic Opioids

Secretary of the Treasury Janet Yellen stated that FinCEN has released an advisory targeting the new trends concerning the illicit supply chain of fentanyl pointing to the fact that US institutions need to strengthen the identification and reporting of suspicious activities related to Mexican transnational criminal organizations and the procurement of fentanyl precursors and manufacturing equipment originating in People’s Republic of China-based suppliers.

Under the new guidelines, banks and other counterparties are alerted to “red flags” such as transactions involving Chinese or Hong Kong-based chemical and pharmaceutical enterprises, or vendors on e-commerce or “darknet” sites that use Chemical Abstracts Service numbers to determine their offerings.

The FinCEN guidelines also state that Mexican businesses that have little to no web presence or that largely conduct business with Chinese pharmaceutical or chemical industries should be evaluated suspiciously.

Financial institutions are asked by FinCEN to be more watchful and to report on any transactions involving fentanyl precursor chemicals and manufacturing equipment. When reporting suspicious activity, use the key phrase “FENTANYL FIN-2024-A002.”

Reporting of such transactions will assist FinCEN and other affiliated departments in detecting and capturing traffickers; the move is a positive step in fighting fentanyl and other synthetic opioids.

“This helps one track the funding of the fentanyl that is illicit and enables law enforcement authorities to focus on the wrongdoers who are funding and executing the opioid epidemic,” Yellen pointed out in the statement prepared to present for presentation at the Richard B. Russell Federal Building in Atlanta.

Yellen also urged for enhanced collaboration with Mexico on the issue of trafficking fentanyl and its related analogs and maintained that the Biden administration will focus on this aspect in its interactions with Mexico’s elected president Claudia Sheinbaum.

Besides fentanyl, Treasury said that La Nueva Familia Michoacana is involved in the trafficking of cocaine and methamphetamines into the country, and the smuggling of migrants across the southern border of the United States.

Recent Developments In The U.S. Opioid Crisis

The Supplemental Advisory was issued on 20, June 2024 to provide clarity on issues critical over new information to assist U. S. banks and other financial establishments to avoid activity linked with the supply chain of illicit substances, like fentanyl.

The advisory features new trends and potential red alert signs like the use of shell firms, low-dollar payments, and interactions with chemical businesses based in the PRC, which are indicative of activity connected with the purchasing of precursor chemicals and producing equipment employed in the creation of illicit fentanyl and other synthetic opioids.

In 2023, drug overdoses claimed the lives of over 107,000 Americans, of which over 74,000 involved synthetic opioids like fentanyl.

In 2023, the DEA found 12,000 pounds of fentanyl powder and almost 80 million fake tablets, which is equivalent to 381 million deadly doses. At the southwest border, over 27,000 pounds of fentanyl were taken into custody by US Customs and Border Protection.

It is noteworthy to report on such financial transactions from financial institutions suspected of engaging in illicit business with fentanyl and narcotics trafficking to support enforcement endeavors as well as Treasury’s sanctions worldwide.

Strict Efforts To Curb These Ills

“The opioid crisis, and particularly rising synthetic opioids like fentanyl, continues to wreak havoc on the nation’s communities, and hundreds of thousands of Americans have lost their lives,” said Secretary of the Treasury Janet L. Yellen.

President Biden and I remain determined to utilize all available tools to target illicit fentanyl and its chemicals precursors to shut down these dangerous supply chains, she added.

“Treasury has the capacity and specialty in processing the financial activities of these cartels poisoning our society and we will surely go after them,” she explained.

In the past two years, Treasury has sanctioned more than 250 targets under the Trump administration for their connection to drug trafficking, ranging from large cartel bosses to small chemical manufacturing sites, transport networks, and procurement.

Moreover, FinCEN and IRS CI initiated a new public-private information-sharing partnership series titled “Promoting Regional Outreach to Educate Communities on the Threat of Fentanyl” (PROTECT).

“The PROTECT series is a partnership between financial institutions and federal agents to fighters share typologies and strategies within the Counter-Fentanyl Strike Force to stop the illicit fentanyl distribution to U. S. cities that are most affected by the opioid crisis.”

Improving cooperation with China via the U.S.-PRC Counternarcotics Working Group and Mexico and Canada through the North American Drug Dialogue is essential to breaking the fentanyl supply chain.

FinCEN Supplemental Advisory 2019

This Supplemental Advisory expands the 2019 Advisory with new typographies and red flags that financial institutions could use to identify suspicious transactions potentially linked to Mexico-based TCOs and their acquisition of fentanyl precursor chemicals and manufacturing equipment from PRC-based suppliers.

Since 2019 Mexican cartel-based transnational criminal organizations emerged as the primary source of fentanyl and other synthetic opioids in the United States of America.

These TCOs source precursor chemicals and manufacturing apparatuses from chemical suppliers and brokers in the PRC and import or acquire synthesized illicit fentanyl and other synthetic opioids through clandestine labs in Mexico.

They then supply these highly addictive and lethal drugs to the TCOs which in turn transport these to the U. S. southwest border and into American society.

Relevant BSA Obligations For U.S. Financial Institutions

The Supplemental Advisory expands FinCEN’s efforts on reducing the financing of drug trafficking organization activity and transnational criminal organization activity, both of which are the mentioned FinCEN Anti-Money Laundering /countering the financing of Terrorism National Priorities and is being issued under Section 3202 of the FEND Off Fentanyl Act.

Financial institutions must exchange information with one another to detect, report, and stop illegal activity, such as the purchase of precursor components for fentanyl. U.S. financial institutions are required to exchange information regarding possible terrorist activity or money laundering under the USA PATRIOT Act section 314(b).

In particular, about drug trafficking and associated cross-border operations, FinCEN promotes this voluntary exchange.

The report states that for continuous customer due diligence, financial institutions—banks, brokers, mutual funds, and futures commission merchants—must implement risk-based processes.

Furthermore, they must identify and authenticate the beneficial owners of legal entity clients, paying particular attention to those who might be connected to foreign individuals who are politically exposed (PEPs).

It also builds upon the work of the North American Drug Dialogue Illicit Finance Working Group that consists of FIUs of Canada, Mexico, and the United States; for the past year as the working group has been operating, for example, they are still determining possible indicators connected to illicit fentanyl.

Financial institutions are encouraged to join the larger effort to address the opioid crisis by utilizing improved monitoring and information exchange methods to identify and report suspicious behavior.

Read the complete report here for more detailed information.