FinCEN has released an advisory for banks to become aware of, and assess the purchase and trafficking of fentanyl online for financial crime compliance. Fentanyl is imported in bulk from Mexican cartels and follows the same typology as typical TCOs and money laundering activities. It is also imported from China via online sales on the darknet using Bitcoin, Ether or Monero and the red flags in respect thereof are different.
With respect to fentanyl ordered online, the way it works is as follows:
- A person accesses through TOR a darknet marketplace that allows vendors to sell fentanyl, or the person locates an online vendor in the normal way;
- The person opens an account, makes the purchase and pays in Bitcoin;
- The darknet marketplace uses its pooled Bitcoin wallet to broker the deal and so the person paying is paying to the marketplace in escrow, not the vendor;
- The darknet marketplace extracts commission in Bitcoin for brokering sales of illegal drugs and they send the remaining Bitcoin to the drug dealer; and
- The drug dealer uses the postal service or a courier to ship the fentanyl to the buyer.
Knowing that that’s the process, things for banks to be aware of to gate-keep the financial system are as follows:
- With respect to digital currency exchanges, undertake due diligence to ensure that you are aware of any in your ecosystem (including your clients who bank exchanges) that have darknet capabilities.
- With respect to digital currency exchanges, undertake due diligence to be comfortable that the terms of use are adequate.
- With respect to digital currency exchanges, undertake due diligence to ensure that the entity has an incorporation jurisdiction that is disclosed publicly.
- With respect to digital currency exchanges, undertake due diligence to ensure the officers are identified publicly.
The FinCEN advisory mentions AlphaBay, the Canadian darknet marketplace that was the largest in the world which operated with bank accounts processing billions of dollars in Bitcoin and money solely for criminal activities, including the sale of fentanyl which resulted in the untimely death of young adults around the world. You can read about AlphaBay here.
Red flags also include transactions involving countries that are known for lax financial crime compliance.
You can read more from FinCEN here.