The Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), and the Federal Bureau of Investigation (FBI) have sent an urgent alert to financial organizations in Washington, D.C, on July 16, 2024.

The notice has drawn attention to the increasing risk of timeshare fraud by emphasizing its methods, types, and warning signs that are interlinked with it.

Reports have indicated that transnational criminal organizations (TCOs) based in Mexico, specifically the Jalisco New Generation Cartel (CJNG), have been executing timeshare fraud.

Key Points:

• Fraudsters use organized telemarketing scams to target timeshare owners in the U.S. who are easy to scam mainly older people.
• Scammers use money obtained from illegal activities to produce and illegally transfer fentanyl  and other synthetic drugs into the U.S
• Almost 6,000 victims have claimed they lost approximately $300 million between 2019 and 2023, but this is a rough calculation due to underreporting.

What are the proceeds?

Call centers under the supervision of TCO in Mexico conduct scam through fake telemarketers who present themselves as time-share lawyers, salespersons, or agents in the U.S.

They promise the victims accommodation purchases, sales, or rental profits from time-shares and make them agree to pay a “fee or taxes” in advance, which they will never return.

What methods of payments are involved?

Victims usually send money through U.S. foreign banks to fake shell companies in Mexico. These companies then send the money using different financial channels to hide its source and where it is going.

Scammers again target the already scammed individuals by faking themselves as someone from government authorities or lawyers and making them believe that they will recover their lost money and thus gain more funds.

Top 7 Red Flag Indicators

Financial institutions are asked to keep an eye on these alarming signs:

• Unusual transfer of money to Mexico to save their timeshare agreement.
• Client wiring funds from their retirement or trust accounts using several stages.
• Frequent money transfer patterns to Mexican banks
• Odd, repetitive, small multiple transfers with written notes of “taxes” or “fees.”
• Receiving business is a newly registered company in Mexican timeshare or having less or no online visibility
• Recipient is a newly opened Mexican company with a bank account opened six months ago.
• The recipient company has recently entered the timeshare industry, but its background is full of consumer complaints against its last name.

What Sanctions are Imposed?

OFAC sanctioned more Mexican people and organizations directly or indirectly involved in the Jalisco New Generation Cartel (CJNG) and their illicit activities in timeshare following E.O. 14059 on 16 July 2024 based on three measures implemented in 2023.

As per reports, Puerto Vallarta, Jalisco, and Mexico are home to these people and organizations. It is the key center for CJNG that is involved in drug trafficking and other illicit financial operations.

These sanctions target scammers and underscore U.S. efforts to combat fraudulent CJNG activity and other criminal operations.

Must Read: FinCEN Released Year In Review For Fiscal Year 2023

Strategies for Institutions

• According to FinCEN, the institutions mentioned include:
  • Casinos
  • Precious Metals or Jewelry
  • Depository firms
  • Money Services Businesses
  • Mortgage companies/Brokers
  • Insurance Industry
  • Securities and Futures
• Targeted organizations must include the critical term “FIN-2024-NTC2” in SAR filings. Authorities must also attentively monitor transactions related to Mexican timeshares.
• To recover money from scammers, victims, and organizations are advised to report alleged fraud to the FBI’s IC3 and use the Rapid Response Program of FinCEN.
• Regulatory bodies recommend that financial organizations maintain vigilance and report any suspicious activities related to timeshares to lessen fraudulent activities by scammers in Mexico.

What is needed to prevent timeshare fraud?

Once can improve the usefulness of this joint notice by integrating AML screening tools and resources for detecting and preventing timeshare fraud.

AML Watcher provides extensive screening solutions, including watchlist, pep, and adverse media screening, which can detect and prevent your business from individuals involved or linked in these fraudulent schemes.

By incorporating the AML compliance regime, financial institutions can remain vigilant, improve their reporting abilities by obliging with regulatory authorities including  FinCEN, OFAC, FBI and more.