February 6, 2018 / 5:43 PM / 6 months ago

Canadian AML regulator highlights flags for fentanyl trafficking, mainly from China

TORONTO/NEW YORK (Thomson Reuters Regulatory Intelligence) - Canada's anti-money laundering (AML) agency has alerted financial institutions to newly identified transaction patterns used in the trafficking of fentanyl, an ultra-potent drug central to North America's lethal opioid crisis (here).

A box of the Fentanyl-based drug Subsys, made by Insys Therapeutics Inc, is seen in an undated photograph provided by the U.S. Attorney's Office for the Southern District of Alabama.

Laundering tactics used by fentanyl traffickers exhibit certain "unique characteristics," while otherwise mimicking the methods used by "low-level" drug dealers, the Financial Transactions and Reports Analysis Centre (FINTRAC) said in an operational alert issued last week(here).

Traffickers procure fentanyl and its precursors “mainly [from] China,” using wire transfers, money orders, and occasionally virtual currency, FINTRAC noted, citing its analysis of financial data from Canadian firms and law enforcement agencies.

“Fentanyl and its analogues are typically smuggled into Canada through the postal system, prior to being distributed through networks in a small area surrounding the arrival point,” FINTRAC said. “The laundering of the proceeds of fentanyl trafficking in Canada generally takes place through Canadian banks, caisses populaires, and credit unions.”

FINTRAC urged reporting entities to consider the following indicators to effectively identify potential laundering activities associated with fentanyl trafficking.

INDICATORS OF FENTANYL PROCUREMENT VIA MONEY SERVICES BUSINESSES

— Client purchases wire transfers or money orders for amounts below the C$10,000 reporting threshold at multiple money services businesses over a short time period, normally with cash or prepaid credit cards. Typically, the wire transfers and money orders are sent by numerous, seemingly unconnected individuals in Canada to the identical recipients in China (in Wuhan, Zhuhai, Guangzhou, Xianju and Shanghai, in particular), Ukraine, and India.

— Client pays for wire transfers in Canadian funds, which are then received in even dollar amounts.

— Client sometimes uses a post office box as a mailing address.

— Client receives multiple direct-deposits from global payment processing and/or virtual currency exchange platforms, typically in amounts below the reporting threshold.

— Client requests wire transfers to companies advertising the sale of fentanyl and/or its known chemical precursors: NPP (1-Phenethyl-4-piperidone); ANPP (4-azido-2-nitrophenyl Phosphate) and Norfentanyl (N-phenyl-N-pieridin-4ylpropanamide).

INDICATORS OF MONEY LAUNDERING THROUGH BANKS, CAISSE POPULAIRES AND CREDIT UNIONS

— Client deposits cash into an account and then immediately moves it via email money transfers, transfers between accounts, drafts or cheques, or withdraws it, often at multiple financial institutions.

— Client conducts significantly more email money transfers, generally for small amounts, than otherwise typical for a customer with the same profile.

— Client has funds coming into and out of their account via email money transfers more quickly than normal.

— Client receives payroll deposits that are inconsistent with their stated occupation, or multiple deposits that have no apparent purpose and are inconsistent with their employment or income.

— Client consistently receives government deposits (e.g. welfare, employment insurance) alongside regular deposits from email money transfers, bank transfers, or cash.

— Client deposits cheques, such as those for governmental assistance payments, endorsed by third parties.

— Client frequently requests drafts payable to self or transfers funds to his or her accounts at other financial institutions.

— Client deals with firms that advertise pharmaceuticals, supplements, weight-loss medications, and related products. These firms’ transactions can—knowingly or unknowingly—be used to mask fentanyl trafficking, since they use packaging and shipping services similar to those in the fentanyl trade.

INDICATORS OF LAUNDERING OF THE PROCEEDS OF LOW-LEVEL DRUG TRAFFICKING

— Client makes transactions that are inconsistent with their employment or profile.

— Client conducts cash transactions inconsistent with their profile.

— Client makes ATM transactions for larger amounts than normally expected.

— Client lives beyond their apparent means, as indicated by large credit card or other bills, or expenses for real estate or luxury goods.

— Client incurs significant travel expenses that are inconsistent with their profile, such as for car rentals, hotel bills, airline tickets and gasoline.

— Client receives deposits below the reporting threshold from multiple third parties located in many parts of the city, a broader geographic area, or several provinces.

— Client is involved in financial transactions that attracted negative media coverage (stories about drugs and weapons offences).

— Client uses multiple financial institutions, their account has significant cash flow-through, and they conduct little typical banking activity (such as paying household bills).

— Client is a commercial entity that engages in trade transactions for products that do not appear to fit its known business profile.

(Daniel Seleanu is a correspondent for Thomson Reuters Regulatory Intelligence in Toronto. Email Daniel at daniel.seleanu@thomsonreuters.com)

This article was produced by Thomson Reuters Regulatory Intelligence and initially posted on Feb. 1. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters

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