- FinCEN has warned that gangs are increasingly using cryptocurrencies to facilitate the illicit fentanyl supply chain
- FinCEN has published a notice alerting readers to the use of BTC, ETH, XMR, and USDT for such reasons
- The advisory has called on US financial institutions to enhance vigilance in detecting and reporting suspicious activities involving virtual currencies
The Financial Crimes Enforcement Network (FinCEN) has warned that gangs are increasingly using cryptocurrencies to facilitate the illicit fentanyl supply chain. FinCEN published a notice yesterday which alerted readers to the use of the likes of BTC, ETH, XMR and USDT by transnational criminal organizations (TCOs) in the creation of the drug. The advisory called on US financial institutions to enhance their vigilance in detecting and reporting suspicious activities involving virtual currencies.
Drug Manufacturers Buying Chinese Equipment
FinCEN outlined the opioid epidemic in stark terms, noting that it continues to ravage communities across the United States, with over 107,000 Americans dying from drug overdoses in the 12-month period ending December 2023. Of these deaths, more than 74,000 involved synthetic opioids, primarily illicitly manufactured fentanyl. FinCEN warns that the social and economic impacts of these deaths are “sobering, far-reaching, and unprecedented.”
The core message from FinCEN’s notice was to point out that a significant shift has been observed in the supply chain dynamics, with Mexico-based TCOs purchasing fentanyl precursor chemicals and manufacturing equipment from companies in the People’s Republic of China (PRC). These materials are then used to synthesize illicit fentanyl in clandestine labs in Mexico before being trafficked into the United States.
Compounding this issue is the TCOs’ increasing reliance on cryptocurrencies to finance and obscure these transactions.
Cryptocurrencies Used to Buy Equipment and Ingredients
“Mexico-based TCOs are increasingly purchasing fentanyl precursor chemicals and manufacturing equipment from PRC-based suppliers in virtual currency, including Bitcoin, Ether, Monero, and Tether,” the advisory notes.
These transactions often involve payments sent to individuals affiliated with PRC-based suppliers or secondary money transmitters with hosted wallets at virtual asset service providers. This method provides an added layer of anonymity and complexity, making it more challenging for law enforcement to trace and intercept illicit activities.
FinCEN Acting Director Himamauli Das emphasized the importance of vigilance in the financial sector:
BSA reporting to FinCEN allows law enforcement to follow the money behind the illicit fentanyl supply chain, identify and prosecute the illicit actors that profit off this unprecedented epidemic, and ultimately aid in the effort to save American lives.
The advisory outlines specific red flags that financial institutions should watch for, including low-dollar or virtual currency payments to beneficiaries involved in the chemical manufacturing and pharmaceutical industries in the PRC, as well as transactions that attempt to evade currency transaction report (CTR) filing requirements.
By including the key term “FENTANYL FIN-2024-A002” in Suspicious Activity Reports (SARs), financial institutions can help FinCEN and law enforcement agencies better target and dismantle these illicit networks.
Working Group Aims to Tackle Issue
DEA Administrator Anne Milgram pointed out the severe dangers posed by counterfeit medications:
Counterfeit prescription medications containing illicit fentanyl are largely made and distributed by two Mexican drug cartels, the Sinaloa Cartel and the Jalisco New Generation Cartel (CJNG), and are designed to look identical to real prescription medications, including OxyContin®, Percocet®, and Xanax®, and are often deadly.
In response to this evolving threat, the U.S.-PRC Counternarcotics Working Group, established in January 2024, aims to coordinate efforts to reduce the flow of precursor chemicals and target the illicit financing of TCO networks. This bilateral cooperation underscores the need for a global approach to combating the fentanyl epidemic.
President Biden’s Unity Agenda continues to prioritize this issue, calling for bipartisan action to halt the influx of fentanyl, prosecute those responsible, and deliver life-saving treatments across America. The FinCEN advisory serves as a crucial tool for financial institutions, emphasizing the pivotal role they play in identifying and disrupting the cryptocurrency-based financial activities of fentanyl traffickers.
