FinCEN Issues Alert on Bulk Cash Smuggling and TCO Detection for Financial Institutions

FinCEN, the anti-money laundering (AML) unit of the U.S. Treasury, has issued an alert for financial institutions (FIs) focusing on the detection of transnational criminal organizations (TCOs) engaged in bulk cash smuggling. The full alert outlines several typologies related to illicit financial activities.

The intent behind this alert is commendable—FinCEN is making efforts to provide operational guidance for FIs. However, there is hope that in the near future, FinCEN will distribute direct red flags through secure channels that are both more operational and more timely. As it stands, there are undoubtedly other methods that TCOs use to move and store money, and it is widely understood that FinCEN is aware of these alternative tactics. The challenge is ensuring that illicit actors are not tipped off through publicly available information. A side note: it is perplexing that the same U.S. administration considering a significantly higher AML cash reporting threshold is simultaneously emphasizing the critical role of cash in sustaining TCOs.

For financial institutions, the most crucial takeaways from this alert include:

1. Armored car services used by customers must undergo comprehensive vetting. Not only should customers be conducting this due diligence, but financial institutions themselves should also be verifying these entities before accepting their cash deposits or processing ACH/wire transactions associated with an armored car service or related business.

2. The alert gives little attention to stored value, money orders, cryptocurrency, wires, and funnel accounts, only referencing them in a footnote on page 1. This omission means that if a TCO-related business were to read this publicly available advisory, they might simply avoid using cash. As a result, financial institutions should remain vigilant about non-cash methods of storing and moving money.

3. As discussed at the AML Partnership Forum a few weeks ago, operationalizing the detection and reporting of Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs) intersects with four of the eight National Priorities: TCOs, Drug Trafficking Organizations (DTOs), Human Trafficking/Smuggling, and Terrorist Financing. FinCEN acknowledged that this advisory specifically pertains to two of the eight National Priorities.

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5. While the alert includes red flags related to Mexico, it is important to recognize that other countries also facilitate money movement for named cartels. Additionally, offshore and even onshore U.S. states that allow for anonymous incorporation can create the appearance of a "domestic" business, masking foreign ownership. This brings to mind the Corporate Transparency Act—what could have been.

6. A 2013 article titled "Structuring: You’re Probably Not Getting it Right" seems to be vindicated by this alert. As noted, "U.S.-based financial institutions should not conflate the presentation of a CMIR (Report of International Transportation of Currency or Monetary Instruments) as an indication that the source of the funds is legitimate... the obligation... is not a justification of its origins." Simply put, just because someone is willing to have a Currency Transaction Report (CTR) or CMIR filed does not automatically mean their activities are legitimate.

7. The red flags listed on pages 6-7 of the advisory present challenges for practical implementation, as they focus heavily on Mexico, cash transactions, and armored car services. While there is a brief mention of the northern U.S. border, the emphasis remains on the southern border. From a strategic perspective, one might ask: if you were thinking like a criminal, where would you go?

By fLEXI tEAM