
Financial Crime Threat Assessment
“Government of the people, by the people for the people, shall not perish from the Earth”
Abraham Lincoln
CONTENTS
Section 1 – Executive Summary …………………………………………………………. Page 4
Section 2 – Country Information ……………………………………………….……….. Page 5
Section 3 – Country Ratings ………………………………………………………………. Page 6
Section 4 – FCN Country Ratings ………………………………………………………… Page 8
Section 5 – Key Harms Summary ……………………………………….………….….. Page 12
Section 6 – Key Threats Summary & In more Detail ……………………….….. Page 14
Section 6.1 – Corruption ………..…………………..………………………………… Page 26
Section 6.2 – Drug Trafficking …………………………………….………..….……. Page 30
Section 6.3 – Transnational Organised Crime ……………………………………. Page 43
Section 6.4 – Fraud …………………………………………..…………………..…..… Page 50
Section 6.5 – Cybercrime ……………………..…………………………….….………. Page 58
Section 6.6 – Human Trafficking ………………………….………………………… Page 71
Section 6.7 – Human Smuggling …………………………….……….……….…… Page 77
Section 6.8 – Proliferation Finance …………………………..……….………….. Page 84
Section 6.9 – Special Focus – Wildlife Trafficking (& Green Crimes) .… Page 96
Section 6.10 – 15 – Additional Threats ………………………………….. Page 106
6.10 – Arms Trafficking… Page 106; 6.11 – Counterfeiting/Fake Goods … Page 109; 6.12 – Tax Fraud/Tax Evasion … Page 114;
6.13 – Acquisitive Crimes … Page 116; 6.14 – Murders … Page 118; 6.15 – Illegal Gambling … Page 118; 6.16 – Kidnapping for
Ransom … Page 119; Market Abuse … Page 120.
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CONTENTS – Continued – 🇺🇸
Section 7 – Sanctions & Embargoes …………………………………….…..……… Page 121
Section 8 – Terrorism & Terrorism Finance ………………………………….….…. Page 130
Section 9 – Money Laundering ……………………………………………….………. Page 148
Section 10 – Summary Response ……………………………………………..…… Page 182
Section 10 – Response ………………………………………………………………… Page 184
Section 11 – Opinion & Editorial From FCN ………………………………..…… Page 221
Section 12 – Detailed FATF Results ………………………………..…..…..………. Page 234
Section 13 – Remittance & Migration Data ……………………………..….…….. Page 235
Appendix 1- Threat Types Mapping …………………………………………..…… Page 236
Appendix 2 – FInCEN Advisories Notices & Bulletins ……………….…….….. Page 237
Appendix 3- Sources ………………………………………………………..….…..….. Page 239
Endnotes …………………………………………………………………………..……….. Page 240
This Threat Assessment for the USA 2022 is produced and published by Financial Crime News and all rights are reserved
including copyright with Metriqa Limited. This TA should not be used for commercial purposes without obtaining rst a licence or
express permission from the publisher. Authors & Contributors are John Cusack & Ursula M’Crystal.
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Section 1 – Executive Summary 🇺🇸
Grey Lists: USA is not included on any FATF/
TCO/Corruption, Human Rights etc. USA a
EU “Grey” lists.
Tier 1 (High Threat) PPI Index rating/controls
US INCSR: According to the 2021 US DoS
INCSR 2022, the US categorised itself as a
“Major Money Laundering Country” along
with 79 other countries.
score 1,080/1,300. USA at 28/135 with a
“medium” score of 4.961 Global Terrorism
Index 2022.
Tax/Financial Secrecy: TJN ranks the USA
NRA: The latest RA’s for ML, TF and PF were
published in 2022. National Priorities are:
Corruption, DT, Fraud, Cybercrime, HT/HS, PF,
& TF. Additional focus on IWT.
Corruption: In TI’s 2021 CPI, the USA is
ranked 27/180 with a score of 67/100.
1st/141 countries in the Financial Secrecy
Index 2022, based on a secrecy score of
67/100 & its share (5.74%) of the global
market for offshore nancial services.
Response & Resilience: The UNODC
estimated proceeds of crime to be approx
US$300 billion in 2010 (2% of 2010 GDP),
Organised Crime: According to the 2021
which was referenced in the US NMLRA in
OC Index, Criminality 5.5/10, (ranked 66th of
2015 & 2018. Consensus estimates agree 2%
193 countries). USA is assessed “High
of GDP, representing 2020 – US$415 billion
Criminality – High Resilience”. Main markets
with the proceeds available for laundering
are drugs – synthetics (7.5/10), cocaine (7/10),
estimated at US$320 billion, & transnational
arms traf cking (6.5/10) & heroin (6.5/10).
OC proceeds estimated at US$195 billion.
The main actors are “Criminal Networks”
The FATF MER 2016 & 2020 was mostly
(6.5/10), and “Foreign Actors” (5.5/10).
positive (equal 3rd on effectiveness) but very
Drug Traf cking: There are 10.7 million
people with illegal drug disorders,
representing 3.7% of the USA’s population.
Human Traf cking: US TIP: Tier 1; Global
Slavery Index: Low incidence of 1.26/1000;
403,000 estimated to be living in modern
slavery and government response of “BBB.”
Sanctions & Terrorism: No material
critical on Company/BO transparency and
DNFBPs. In the 2021 OC Index, “Resilience” is
scored at 6.58/10 ranked 28/193. Federal
asset recoveries at US$1.4 billion (2021).
Overall Risk Rating: USA is rated overall as
“Moderate” risk, scoring 56/100 for nancial
crime by FCN. Threats are rated “Moderate High” at 35/100 & Responses “Moderate High” at 77/100.
sanctions against USA. Major foreign targets
include Iran, Syria, Cuba, Russia (& Belarus),
North Korea and Venezuela, plus TF/PF, DT/
FCN Rating: “Moderate” Risk 56/100
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Section 2 – Country Information 🇺🇸 !
People & Geography: The USA is the third
world’s safest countries). According to the
largest country in the world and is home to some
Numbeo 2021 Crime Index4, the USA is rated
of the most famous landforms, most notably the
57 out of 142 countries at 48.16/100.
Grand Canyon, Great Plains & Great Salt Lake. The
country is rich in natural resources, especially coal
Terrorism: Attacks from terrorists have killed
& oil. The demographic makeup of the USA’s
more than 300 to end 2017 (266 between
population of 332 million is made up of white
2013-17) since 2001, which saw more than
(61.6%), African-American (12.4%), Asian (6%),
3,000 killed.
Amerindian and Alaska native (1.1%).1
Recent History & Leadership: The USA
declared independence from Great Britain in
1776 and today the government functions as a
constitutional federal republic encompassing 50
states and 1 district. President Joe Biden was
elected 46th President taking of ce in
January 2021.
Finance: The USA is an international nancial
centre. Its 4 largest banks by total assets are
JP Morgan Chase (US$3.3 billion) Bank of
America (US$2.5 billion), Wells Fargo Bank
(US$1.7 billion) & Citibank (US$1.6 billion)5.
According to the US FED6, in 2018, non cash
retail payments (credit cards, debit cards,
Economy & Trade: The USA has the worlds
largest GDP of US$20.5 trillion (2020 est)
checks, and ACH payments) reached 174.2
billion in 2018, valued at US$97.04 trillion,
(US$69,387 per capita 2021 est). The USA
representing an average payment value of
exported US$2.1 trillion worth of goods to other
US$560. By volume, Debit Cards we’re the
countries in 2020, with most to Canada 17%,
largest component (86.5 billion followed by
Mexico 16%, China 7%, Japan 5% (2019) & main
Credit cards (44 billion), ACH payments (28.5
commodities of re ned petroleum, crude
billion) & Checks (14.5 billion). By value, ACH
petroleum, cars and vehicle parts, integrated
payments were the largest component
circuits, aircraft (2019). Imports of US$2.8 trillion
(US$64.16 trillion), followed by Checks
overall in 2020 mainly from China 18%, Mexico
15%, Canada 13%, Japan 6%, Germany 5% (2019)
with main commodities being cars, crude
petroleum, computers, broadcasting equipment,
packaged medicines (2019)2.
Crime: The USA is considered the 71st safest
country out of 134 in the 2021 Global
Finance ranking3 (which factors in risks of
natural disaster with crime, terrorism and war
to present a more rounded analysis of the
(US$25.8 trillion), Credit Cards (US$4 trillion)
& Debit Cards (US$3 trillion). Commercial
payments are excluded including FEDWIRE
US$840 trillion in 2020 (mainly wholesale
payments between FIs).
World Bank data (via Pew Research7), reports
remittances outbound were estimated at
approx US$148 billion, & inbound at US$6
billion (2017). See Section 13 below.
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“The AML/CFT framework in the US is well developed and robust. Domestic coordination & cooperation on AML/CFT issues is sophisticated & has matured. The
understanding of ML & TF risks is well-supported by a variety of ongoing and complementary risk assessment processes. The national AML/CFT strategies, key
priorities and efforts of LEA & other agencies seem to be driven by these processes and are coordinated at the Federal level across a vast spectrum of agencies
in a number of area. The financial sectors bear most of the burden in respect of required measures under the BSA. FIs have an evolved understanding of ML/TF
risks and obligations, and have systems and processes for implementing preventive measures, including for on-boarding customers, transaction monitoring and
reporting suspicious transactions; However, the regulatory framework has some significant gaps, including minimal coverage of certain institutions and
businesses (investment advisers (IAs), lawyers, accountants, real estate agents, trust and company service providers (other than trust companies) & lack of timely
access to adequate, accurate & current BO information remains one of the fundamental gaps in the U.S. context.” Source: FATF 2016 MER
! Key Harms & Effects
7% in the US reported having paid a
bribe, & 64% think the US
government is run by a few big
interests; most corrupt sectors seen
as Political Parties & US Congress
120 million crimes committed in
(2017) (24 million violent crimes) &
financial impact of US$2.6 trillion;
403,000 modern day slaves, an
incidence of 1.26 in 1,000 (low).
10.7 million people with illegal drug
disorders – 3.7% of the USA’s
population. 100,306 drug overdose
deaths – year ending April 2021 & 23
million Americans recovering
1,398 cases per 100,000 for theft
(larceny); 86.2 cases for robbery;
376.1 for burglary & 6.5 cases for
murder (16,669 murders).
300 killed by terrorists to end 2017
(266 between 2013-17) since 2001,
which saw more than 3,000 killed,
the largest loss of American lives in 1
day (since the American Civil War).
! Key Crimes, Crime Proceeds and Laundered Monies (Wide range of estimates)
US$420 billion
US$294 billion
>US$ billions
OC Index 202 – Criminality
(2% of GDP for Proceeds of Crime 2020 Estimates for 2010 was US$300 billion or 2% of
GDP ex Tax – UNODC 2011)
(1.4% of GDP for ML – 0.9% Domestic, 0.1%
Foreign, 0.4% Transit & up to 2% for financial
crime &- Walker & Ungar – 2020)
(High threats are corruption drug trafficking,
fraud, cyber, org crime, human trafficking/
smuggling, TF, PF & ML)
“High Criminality” at 5.5/10 Criminality score ranked 66th/193 countries,15th/35 countries in the
Americas. Main markets are drugs – synthetics (7.5/10), cocaine (7/10), arms trafficking (6.5/10) &
heroin (6.5/10). Main actors are “Criminal Networks” (6.5/10), & “Foreign Actors” (5.5/10)
Corrupt Persons
Fraudsters/Cybercrimes
Organised Criminals
Drug Traffickers
Terrorists/Proliferators
Costs of corruption based on est of 1% of GDP this would
represent US$210 billion & est value of bribes by the World
Bank would be US$21 billion. TI, CPI 2021, the USA was
ranked 27/180 (1 being the best), with a score of 67/100, down
from 75/100 in 2017 & with the US failing to rank within the top
20 nations for the first time in 8 years, raises a concern as the
US holds a symbolic position as a leading advocate in favour of
tackling corruption. Scott Greytak, the advocacy director for the
TI USA highlighted, a broader “decay” in U.S. political
institutions was seen as a major contributor to the country’s
declining rating. Gretyak noted that public confidence in U.S.
elections has been undercut by disinformation & record-setting
amounts of untraceable money in elections, especially in 2020,
when twice as much was spent compared with 2016. US
opinion is overwhelmingly in favour of US election (campaign)
finance reform whether its democrats or republicans polled. To
many, the influx of large sums of money into US politics, puts
corporate interests first, & results in corruption. Some claim that
corruption has been effectively legalised & enshrined in the
system. TI corruption barometer 2013 (based on a scale 1–5,
where 1 means not at all corrupt, 5 means extremely corrupt)
rates sectors as follows:Political Parties (4.1), US Congress
(3.7%), Military (2.9%), NGOs (3%), Media (3.5%), Religious
Bodies (3.1), Business / Private Sector (3.6%), Education system
(3,1%), Judicial system (3.3), Medical & Health (3.3), Police (3.3)
& Public Official / Civil Servants (3.6). In December 2021,
President Biden announced the U.S. Strategy on Countering
Corruption, which includes curbing illicit finance, as well as
addressing, “deficiencies in the U.S. AML regime, (incl by
effectively collecting BO information on those who control
anonymous shell companies & by increasing transparency in
real estate transactions)”, & “holding corrupt actors
accountable”..
Fraud est proceeds at least at US$166 billion – including US
government fraud of US$148 billion (healthcare & social
security fraud) and others including consumer fraud at US$5.6
billion of which US$2.3 billion is due to imposter scams, while
online shopping accounted for about US$392 million & card
fraud at US$10.6 billion.
“Fraud, both in the private sector and in government benefits
and payments, continues to be the largest driver of money
laundering activity in terms of the scope of activity and
magnitude of illicit proceeds, generating billions of dollars
annually”. Romance scams are considered one of the fastest
growing fraud trends, and are also seeing vast increases in illicit
proceeds generated. “Scams which involved the use of social
media, to include online shopping, romance scams, and
supposed economic relief or income opportunities, have been
rising steadily over the past few years…. reports that people lost
money to scams that started on social media more than tripled
in the past year, with a sharp increase in the second quarter of
2020”. “The exploitation of data, mainly personal identifiable
information (PII) that is stolen, hacked, or compromised, remains
one of the most common methods fraudsters, launderers, and
other criminals use to set up bank accounts and conceal
fraudulent activity…Large organised fraud groups use vast
money mule networks as third-party money laundering
mechanisms to launder illicit proceeds from fraud and other
financial crimes(e.g.,romance scams, employment scams, workfrom-home scams). A money mule is someone who, either
wittingly or unwittingly ,transfers or moves illegally acquired
money on behalf of someone else. Source: NMLRA 2022,
According to the FBI, Americans were hit by an unprecedented
rise in cybercrime in 2021, with nearly 850,000 reports to the
FBI and losses surpassing US$6.9 billion. The FBI Internet
Crime Report 2021 says that older Americans bore the brunt of
the financial hit.
Transnational organised crime proceeds est at US$195 billion.
“The Biden Administration in December 2021 announced that
“Transnational organised crime (TOC) poses a direct &
escalating threat to public health, public safety, & national
security. TOCs engage in a broad range of criminal activities,
including drug and weapons trafficking, migrant smuggling,
human trafficking, cybercrime, intellectual property theft, money
laundering, wildlife and timber trafficking, illegal fishing, and
illegal mining.” TOCs identified by the FBI as active and
significant include TOC’s from all corners of the World, from
Africa, the Balkans, Middle Eastern, Asian, Eurasian, Italian & so
called Western Hemisphere Gangs (from Colombia, Peru,
Bolivia, Central America & Mexico). There are also approx
33,000 violent street gangs, motorcycle gangs, and prison
gangs criminally active in the US, according to the FBI.
“Drug trafficking groups, mainly networks and gangs, dominate
the attention of US investigators and prosecutors. There are
thousands of active gangs nationwide, whose activities focus on
drug, arms and human trafficking. Most use violence and work
alongside foreign drug trafficking networks. Despite a decrease
in activity, mafia-style groups continue to operate in the US,
including five major family groups descending from the Cosa
Nostra Sicilian mafia, all of which exert substantial control in
New York, southern New Jersey and Philadelphia. Collectively,
Cosa Nostra has thousands of US-based members and
associates involved in illegal markets, including heroin
trafficking, money laundering and healthcare fraud targeting the
Medicare programme. These groups have significant access to
weapons and carry arms openly. Outlaw Motorcycle Gangs, of
which there are several hundred operating across the country,
are the archetypal mafia-style group in the US. The gangs are
highly transnational in nature and are predominantly involved in
the drug trafficking market, particular cross-border
trafficking.Source: OC Index 2021
Drug Trafficking est proceeds of – US$64 – US$146 billion
Drug trafficking “continues to pose a threat to public health in
the United States, generates significant proceeds for the
criminal organisations that supply the U.S. and global markets.
Drug trafficking organisations (DTOs) engaged in the trafficking
of a variety of drugs into the United States, use numerous
methods to launder proceeds, which remain predominantly
cash based. DEA estimates that DTOs continue to generate
billions of dollars in illicit proceeds every year. The
movement and laundering of proceeds associated with the
illicit drug market in the United States continue to include
traditional methods and techniques, such as bulk cash
smuggling (BCS) and trade-based money laundering (TBML),
although the COVID-19 pandemic caused some initial
disruptions to DTOs using those methods due to travel
restrictions and a slower global economy. Financial institutions,
including banks and money services businesses (MSBs), remain
vulnerable to exploitation by DTOs that use front and shell
companies and third parties (including money mules) to wire
proceeds from the United States to their base of operations.
Another popular way to launder drug proceeds in the United
States is through the purchase of real estate as an investment, to
use as stash houses, or to grow, manufacture, or distribute illicit
narcotics. The role of professional money launderers, particularly
Chinese MLO’s is also frequently cited as a growing & significant
challenge to LEA tracing the movement of drug proceeds.
DTOs are growing more comfortable with darknet markets and
the use of virtual assets to launder funds, although the size and
scope of drug proceeds generated on the darknet and
laundered via virtual assets remain low in comparison to cash
based retail street sales. The main drug types causing concern
are illicit opioids, heroin, cocaine, methamphetamine &
marijuana. Source: NMLRA 2022
US is ranked 28/138 (increasing 1 position since 2020) with
Canada falling in ranking from 56 to 48. The US has “medium”
impact rating, with a score of 4.961/10,000 in the 2022 Global
Terrorism Index. “Over the past decade in the US there has
been a shift away from religiously motivated terrorism towards
politically motivated terrorism. Since 2007, there have been 84
attacks in the US which IEP attributes to politically motivated
groups and individuals, compared to 19 attacks attributed to
religiously motivated groups. The shift from religious to political
terrorism has also been mirrored by a shift away from terrorism
affiliated with specific groups, towards individuals and groups
who are driven by a specific ideology, but are not formally
affiliated with an organised group. Of the 161 attacks recorded
between 2007 and 2021, just 19 were affiliated with a specific
terrorist group”. Despite developing deep expertise on TF
vulnerabilities, those that remain include: Banks, MSB,
Unlicensed Money Transmission, Cash, Virtual Assets & the
Misuse of Charitable Organisations. Source: NFTRA 2022.
The main countries of concern are DPRK, Iran, Russia, China,
Syria & Pakistan. The DPRK, are increasing their focus on the
virtual asset sector to generate funds and move resources. The
US is increasingly concerned about Chinese & Russian military
modernisation. China & Russia are seeking US. original tech
they cannot produce on their own, often adopt similar
methodologies. The principal threat of PF arises from
proliferation support networks. These networks of individuals &
entities, such as trade brokers & front companies, seek to
exploit the US. financial system to move funds that will be used
either: (1) to acquire WMD or delivery systems or their
components or (2) in the furtherance or development of statesponsored weapons programs, including the evasion of UN or
U.S. sanctions. Global correspondent banking is a principal
vulnerability and driver of proliferation financing risk within the
US. Source: NPFRA 2022
Arms Traffickers
Green Criminals
Counterfeiters (Goods)
Human Traffickers
Human Smugglers
“The US is the world’s biggest exporter of arms, & is a source &
destination for difficult-to-purchase firearms, incl machine guns.
The legal purchase of guns is relatively easy in some states;
these are then trafficked to states or countries with stricter guncontrol laws. Despite the liberal gun laws that make access to
firearms relatively easy, the US nevertheless hosts a significant
black market for weapons.US foreign trade & support often
takes the form of military & arms-related support, furthering
global dissemination. Most firearms seized & traded in Mexico
are purchased in SW US border states, and the US is also the
biggest source of illegal foreign guns in Brazil. Weapons legally
& illegally exported from the US are obtained by armed gangs,
DTOs & terrorist orgs, fuelling conflict, shootings, suicides,
homicides, as well as drive-by, law enforcement, unintentional
and mass shootings. Growing distrust of US LEA has also led to
increased gun violence”. Source OC Index 2021.
“US FIs are vulnerable to unwittingly processing transactions
associated with wildlife trafficking given the importance of the
U.S. dollar and financial system to international trade and
finance, the difficulty of identifying underlying illicit connections,
and a lack of financial intelligence on these types of crimes.
More broadly, environmental crimes threaten biodiversity,
accelerate climate change, perpetuate forced labor, and
increase risks for the spread of zoonotic diseases, which have
national security implications.” NMLRA 2022.
“illegal imports include ivory, rhino horn, narwhal tusk, shark
fins, turtles & reptiles. The US is the main market for species
illegally harvested in LATAM, incl parrots, reptiles, molluscs,
monkeys & frogs. Domestic wildlife crimes target mountain
lions, bobcats, rattlesnakes & paddlefish eggs. A large % of
wildlife products entering the US with documentation have
laundered or illegal origins.” OC Index 2021
An estimated 3.3% of world trade in 2016 was made up from
trade in counterfeit goods. Whilst the US is estimated as having
a low propensity to export counterfeit products with a score of
0.131/1 (2016) with export trade to the rest of the world, it
nevertheless is expected to be involved in significant
counterfeit imports. This compares with other countries that
have similar rates like Canada 0.137, Mexico 0.144, France
0.129, UK 0.152. Countries with the highest scores are from
China and Hong Kong, Bangladesh, Cambodia, Djibouti,
Egypt, Jordan, Honduras, India (0.708), Malaysia (0.390),
Mauritania (0.744), Morocco (0.989), Pakistan (0.952), Qatar,
Senegal, Sri Lanka, Syria, Turkey, UAE & Uruguay. Important
transit points for trade in counterfeits, include Hong Kong,
Singapore and the UAE & Panama. Source: EUIPO Report on
Illicit Trade in Counterfeit Pharma Products
“Based on 403,000 exploited victims, est proceeds of US$6.5
billion, with US$4.3 billion from sexual exploitation, US$1.8
billion from forced labor & US$500 million domestic
servitude.“In 2020, a total of 11,193 situations of HT were
identified through the US HT Hotline. The illicit proceeds from
HT can include income associated with logistics, such as
housing & transportation of victims, as well as earnings from the
exploitation of victims. In the US HT occurs in a broad range of
industries, incl, hospitality, agriculture, janitor services,
construction, restaurants, care for disabled, salon services,
massage parlours, retail, fairs & carnivals, peddling & begging,
childcare, domestic work, & drug smuggling & distribution. Illicit
proceeds from HT can be paid in cash, electronic funds
transfers/remittance systems, credit card tranx, payment apps, or
virtual assets”. Sex trafficking may be perpetuated and facilitated
through online platforms by TCOs.” NMLRA 2022,
Human Smuggling (HS) proceeds est between US$3.7-US$4.2
billion (2016), via the southern border with between US$200
million & US$2.3 billion (2017) from the Northern Triangle
region of Guatemala, Honduras, & El Salvador. Source: UNODC
& RAND. “The illegal business of HS includes independent
operators, ad hoc groups, loose networks, & some more
formally structured networks, such as TCO’s that maintain
control over drug smuggling territory profit from this illegal
activity by charging HS orgs a fee or tax to pass through their
territories”. Source: NMLRA 2022 “The northward route, with the
US as the final destination tends to be travelled primarily by
Central Americans & decreasing numbers of Mexican citizens.
Migrants along this route travel mostly by land & air & to a
lesser degree by sea. Following the significant build-up in
security on the border, such crossings have largely
disappeared. Migrants now seek the assistance of HS”. UNODC
! Key Countries, Territories & Regions of Concern / Impacted on – by USA
Countries of Concern from the FATF & EU
(FATF list June 2022 – 25 countries – EU list January 2022, also representing 28 countries.
FATF: Albania ” Barbados # Burkina Faso $ Cambodia % Cayman Islands & Gibraltar ‘ Haiti
Major Money Laundering Countries
(The US identifies via the annual INCSR Report in Volume 2, “major money laundering countries” which are set out below – Sources: INCSR 2021)
Afghanistan ; , Albania ” , Algeria ? , Antigua & Barbuda @ , Argentina A , Armenia B , Aruba C , Bahamas D , Barbados # , Belgium E , Belize F ,
Benin G , Bolivia H , Brazil I , BVI J , Burma . , Cape Verde K , Canada L , Cayman Islands & , China M , Colombia N , Costa Rica O , Cuba P ,
( Iran ) Jamaica * Jordan + Mali , Morocco – Myanmar . Nicaragua / N Korea 0
Curacao Q , Cyprus R , Dominica S , Dominican Republic T , Ecuador U , El Salvador V , Georgia W , Ghana X , Guatemala Y , Guyana Z , Haiti ( ,
Pakistan 1 Panama 2 Philippines 3 Senegal 4 South Sudan 5 Syria 6 Turkey 7 Uganda 8
Honduras [ , Hong Kong \ , India ] , Indonesia ^ , Iran ) , Italy, Jamaica * , Kazakhstan _ , Kenya ` , Kyrgyzstan a , Laos b , Liberia c , Macau d ,
UAE 9 Yemen : ; EU: FATF list (except Albania) plus Afghanistan ; Trinidad and Tobago < Vanuatu = Zimbabwe >
Malaysia e , Mexico f , Morocco – , Mozambique g , Netherlands h , Nicaragua / , Nigeria i , Pakistan 1 , Panama 2 , Paraguay j , Peru k ,
Philippines 3 , St Kitts & Nevis , St Lucia l , StVincent & Grenadines, Senegal 4 , Seychelles m , St Maarten n , Spain o , Suriname p , Tajikistan q ,
Tanzania, Thailand r , Trinidad & Tobago < , Turkey, Turkmenistan s , Ukraine t , UAE 9 , UK u , USA ! , Uzbekistan v , Venezuela w , & Vietnam x . Page 6 of 247 ! Money Laundering – Key Vulnerabilities “In the popular imagination, the money laundering capitals of the world are small countries with histories of loose & secretive financial laws. But there’s a good argument that, right now, the best place to hide & launder ill gotten gains is actually the US.” , US Janet Yellen, US Treasury Secretary, Summit for Democracy, Washington DC – December, 2021. The proceeds available for laundering in the US is est at US$320 billion. ML Concerns: “Criminals continue to use a ML Methods: The Black Market Peso Exchange ML Vulnerabilities 1: Cash (Cash Smuggling, ML Vulnerabilities 2: Misuse of Legal Entities, ML Vulnerabilities 3: Virtual Assets: “While the wide range of ML techniques to move & is a TBML technique used by Colombia drug Postal Money Orders, Funnel Accts, Cash Status BO Requirements, Shell & Shelf Co’s, use of virtual assets for ML remains far below conceal illicit proceeds” & “The US continues to cartels, to repatriate narco dollars through Intensive Businesses). “A funnel account Trusts, Complicit merchants & Prof’s (Merchants, that of fiat currency & more traditional methods, involves an account in one geographic area that Attorneys, Real estate profs, FI staff). U.S. LEA have detected an increase in the use receives multiple cash deposits, often in Compliance deficiencies (Banks, MSBs, of virtual assets to pay for online drugs or to face persistent & emerging ML risks: 1 the exporting goods, bought in dollars in the US & continuing misuse of legal entities, 2 the lack of shipped to Colombia & then converted to transparency in certain real estate transactions, PESOs after sale of the goods. US securities amounts below the cash reporting threshold, & Securities broker dealers, Casino’s); Luxury & launder the proceeds of drug trafficking, fraud, 3 complicit merchants & professionals that markets are the largest in the world & attract from which the funds are withdrawn in a high value goods (Real Estate, Precious Metals and cybercrime, including ransomware attacks misuse their positions or businesses; & 4 both criminal behaviour (market abuse) as well different geographic area with little time stones & jewels, Art Industry; Entities not as well as other criminal activity, including pockets of weaknesses in compliance or as a destination to invest & launder illicit funds. elapsing between the deposits & withdrawals.” subject to full AML/CFT requirements (IAs & 3rd sanctions evasion.” “A large number of VASPs Used in frauds scams & by DTOs to get illicit party payment processors, None federally operating abroad have substantially deficient cash out of the US. NMLA 2022. chartered Puerto Rico FE’s). NMLA 2022. AML programs.” NMLA 2022. supervision of some US FIs.” NMLRA 2022 ! FATF Related Reporting ! US Threat Assessments 2022 – Major Inherent Risks / Vulnerabilities FATF 4th Round MER 2016 & FUR 2020 Financial Crime Higher Inherent Risks by Category ! 40 Recommendations: Based on a simple scoring model developed by FCN, the USA is rated at 63% -10 Core results: R8 (NPOs) – LC, R10 (CDD) – PC, R12 (PEPs) – PC, R13 (CBR) – LC, R14 (MVTS) LC, R15 (NT) – LC, R22 (DNFPBs CDD) – NC, R26 (FI Supervision) – LC, R28 (DNFPBs Supervision) NC, R29 (FIU) – C. Taking these core elements, FCN scored the USA at 53%. NC Ratings were for R22 (DNFPBs CDD), R23 (DNFPBs Other Measures), R24 (Transparency & BO of Legal Persons) and R28 (DNFPBs Supervision). PC ratings were for R1(RBA), R10 (CDD), R12 (PEPs), R16 (Wire Transfers), R20 (STRs), and R25 (Transparency & BO of Legal Arrangements. 11 Immediate Outcomes FCN scores the USA at 67%. Key IO results were: IO3 (Supervision) – ME, IO4 (Preventative Measures) – ME, IO6 (FIU) – SE and IO8 (Confiscations) – HE. LE for IO5 Legal Persons. For just core elements, FCN scores the US at 58% for effectiveness in key areas. The FATF 2020 Follow Up Report (FUR) reported the only improvement in ratings was for R10 (CDD) which was changed from PC to LC. ! ML/TF Risk/Resilience Indicators & LEA/FIU/Regulatory Activity OC Index 2021 – Resilience (Scores USA 6.83/10, ranked 28/193) Asset Recoveries Basel AML Index 2021 (USA scored of 4.6/10 and ranked 83/141) ML Cases (Estimated below 1% at US$1.4 billion (2021) (2000-18 – US$3 billion p.a. & 2012-21 US$2.258 billion p.a.) – Source DOJ 2021) (US achieves over 1,200 ML convictions a year. Many of these cases are large, complex, white collar crime cases – Source: FATF 2016 MER) Law & Order Spend National Risk Assessment (Total L&O spend in excess of 2%) (NRAs on ML/TF/PF published in 2022) STR Filing (2 million SARs in 2017 and 3 million in 2021) SAR by Reporting Entities (Depositary institutions 46.5%, MSBs 37%, Other FIs 12%, Securities Firms 2% & Casinos & Card Clubs at 1.8% – Source: FinCEN 2021) FIU Resources (FinCEN resources at 340 (but FIU staffing estimated at 25-33% of total) TI CP Index ( USA is ranked 27/180 and scored 67/100) Foreign Corruption Cases Global Terrorism Index 2022 (28/138 & a “medium” impact score 4.961/10) Human Trafficking Cases (US sanctioned 287 persons for foreign bribery (1999-2019) with 4 acquittals – Source: OECD 2020) (In 2020, 337 HT cases, 309 convictions cases. TIP Tier 1 Rated – Source: US TIP 2021) Reg Balanced Scorecard Public Private Partnership (Focus is on Tech Compliance – Regulators should include SAR Filing as part of inspection) (FinCEN Exchange since 2017) ! Key AML/CTF Reform & Action Plans The US National Strategy Combatting Terrorism & Other Illicit Financing includes 4 main goals: Close legal and regulatory gaps in the U.S. AML/CFT framework, Continue to make the U.S.AML/CFT regulatory framework for financial institutions more efficient and effective, Enhance the operational effectiveness of law enforcement and other U.S. government agencies in combating illicit finance, & Enable the benefits of technological innovation while mitigating risks. Source: https://home.treasury.gov/system/files/136/2022-National-Strategy-for-Combating-Terrorist-and-Other-Illicit-Financing.pdf Page 7 of 247 Information from leading sources produce 40 plus ratings for the USA, covering both threats and responses in ghting nancial crime, sanctions, proliferation nance, terrorism & terrorism nance. No. Threats USA 🇺🇸 No. Responses USA 🇺🇸 1 GDP – Economic Size * GDP per Capita US$20.563 billion – GDP – 2020 est) (US$69,287 per capita – (2021 est) 1 OECD – Global Forum * on Transparency & Exchange Info for Tax Purposes Largely Compliant (2018) 2 World Economic Forum * Security (OC, Terrorism, Homicides, Policing) 76.7 (2019) 76.7/141 (61.9/83.7/83.3/78.1) 2 Global Slavery Index * Country Response Rating BBB (ratings from AAA, AA, A, BBB) 3 World Economic Forum * Organised Crime 61.9 (2019) 3 US Dept of State * Traf cking in Persons (2022) Tier 1 Numbeo Crime Survey 2022 48.16/100 57/142 (1 being the worst) 4 Proliferation Index – PPI * Controls 1080/ 1300 Controls score (2021/22) 5 US Inst Health Metrics and Evaluation 2019 Illegal Drug Dependency / Disorders * Number/Share 10.7 million(2019 – (+0.91% since 1990) 3.7% (2019 – (+0.62% since 1990) 5 Global Cybersecurity Index 2020 100/100 1/194 6 Transparency International (TI) Corruption Perceptions Index* 67/100 (2021) 6 World Bank Regulatory Quality * from WB Global Governance Indicators 1.24 (2020) 27/192 (1 being the best) 7 TRACE Bribery Risk Matrix 22/100 Ranked 23rd out of 194 7 TI – Exporting Corruption * Enforcement of the OECD Anti-Bribery Convention Green Rated (2020) “Active Enforcement” 8 Proliferation Index – PPI Threat * Tier 1 Highest Threat Level 8 Freedom House Freedom Index (2022) 83/100 “Free” 9 US Dept of State INCSR Vol I & Vol II * Included (2021) 9 Heritage Foundation Economic Freedom Index (2022) 72.1/100 “Mostly unfree” 25th out of 169 10 US Dept of State Country Reports on Terrorism * Not Included (2020) 10 Basel AML Index 2021 83/110 (1 being the worst) 11 Global Slavery Index GSI Incidence * 1.26/1,000 Incidence of human traf cking (2018) 11 FIU Egmont Member Interpol / Europol Member Egmont & Interpol 12 Global Slavery Index No of estimated Modern Day Slaves 403,000 (2018) Estimated numbers of modern day slaves 12 Asset Con scations * over 1% of Criminal Proceeds Estimated below 1% at US$1.4 billion (Federal – 2021) (2000-18 – US$3 billion p.a. & 2012-21 US$2.258 billion p.a.) 13 US Dept of Labor Child Labour Not Included Country National Risk Assessment * NMLRA /NTFRA/NPFRA 2022 (Also earlier NMLRA In 2015 & 2018) 14 Global Terrorism Index 2022 * GTI – Impact 2022 “Medium” Impact 5.26 14 Financial Information Sharing Partnership FinCEN Exchange (Since 2017) IOM Migration 50.6 million migrants (15.3% – 2020) 15 Environment Performance Index 2022 2022 51.1 (43/180) Illegal Unreported and Unregulated (IUU) – IUU Fishing Index * 2.51/5 (2021) 27/152 16 Government Spending on Law & Order * Knoema USA spent 2.01% of GDP (2016, down from 2.18% in 2011 (estimated US$400 billion in 2020) EU Listing of Countries for Illegal Fishing No 17 Know Your Country (2022) Country Money Laundering Index Not Included 18 US DoS – Wildlife Traf cking * Focus / Countries of Concern Not Included 18 European Union * Third Country Grey List Not Included 19 EUIPO & OECD Counterfeit Goods * Propensity of Exports 0.131% (2016) 19 FATF Standards 40 Recommendations* 63 20 UNODC Thefts Per 100,000 people * 1750/100,000 12/74 (2016) 20 FATF Standards 11 IO’s on Effectiveness* 67 21 EU List of None Co operative Jurisdictions for Tax purposes Not Included 21 FATF Standards Core 10 Recommendations * 53 22 Global Financial Integrity Illicit Financial Flows* Advanced Economy 22 FATF Standards Core 4 IO’s on Effectiveness * 58 23 Fund For Peace (2021) Fragile States Index 44.6 (137/173) 23 FATF Counter – Measures * Strategic De ciencies List 4 15 16 17 13 4.6/10 Not Included * Indicates the information is included in the FCN Country Index fi fi fi fi fi fi fi Page 8 of 247 fi fi Section 3 – Country Ratings 🇺🇸 Section 4 Continued – Threat & Responses Rating Scorecard The Country Dashboard RAG (RED/AMBER/GREEN) ratings are established based on the FCN Threats and Responses Rating Scorecard – 2022, set out below. Threats Responses No Higher Moderate Lower No Lower Moderate Higher 1 >US0.5 trillion
>US$100 billion – 0.5 trillion
<US$100 billion
1
Non Compliant
Partially Compliant
Largely Compliant / Compliant
2
<50 >50 – <75 >75
2
“CC” “C” “D”
“CCC”
“AAA” “AA” “A” “BBB” “BB” “B”
3
<50 >50 – <75 >75
3
Tier 3
Tier 2 & T2 Watchlist
Tier 1
4
>60
>40 – 60
<40
4
T3 <360 Controls / 1,300
T2 <426 Controls /1,300
T1 Country <650/1,300 T3 >360-425 Controls /1,300
T2 >426-650 Controls /1,300
T1 650-975/1,300
T3 >426 Controls / 1,300
T2 >650 Controls /1,300
T1 >975/1,300
5
>1%
>0.75% – 1%
<0.75%
5
<0.33 >0.33- 0.66
>0.66
6
<40
40 – 59
60 – 100
6
<0 – -2.5 0-1 >1 -2.5
7
>55
38 – 55
<38
7
Little of No Enforcement
Limited/Moderate Enforcement
Active Emforcement
8
Tier 1
Tier 2
Tier 3
8
<40 Between 40 – 70 >70
9
Included
N/A
Not Included
9
O – 59.9 Mostly Unfree/
Repressed
60 – 69.9 Moderately Free
70 – 100 MostlyFree/Free
10
Included
N/A
Not Included
10
>7
6-7
<6 11 >5%
>2% – 5%
<2% 11 No N/A Yes 12 >1 million
>50,000 – 1 million
<U50,000
12
<1% of est criminal proceeds >1% – 5% of est criminal
proceeds
>5% of est criminal proceeds
13
>10% child labour (4-15
ages)
>5% – 10% child labour (4-15
ages)
<5% child labour (4-15 ages) 13 No Yes >3 Years Old
Yes <3 Years Old 14 >4 -10
>2 -4/10
0-2/10
14
No
N/A
Yes
15
N.A.
N.A.
N.A.
15
<40 40 – 60 >60
16
>2.4
2 – 2.4
<2
16
< 1.5% of GDP >1.5% – 2% of GDP
over 2% of GDP
17
Yes Red Card
Yes Yellow Card
No
17
<50 50-70 >70
18
Focus Countries
N/A
Not Included
18
Included
N/A
Not Included
19
>0.3
>0.2 – 0.3
<0.2
19
<50 using FCN Scoring Model Between 50 – 75 using FCN Scoring Model >75 using FCN Scoring Model
20
>1,500
>783 – 1,500
<783
20
<50 using FCN Scoring Model Between 50 – 75 using FCN Scoring Model >75 using FCN Scoring Model
21
Listed Red
Listed Amber
Listed Green / Unlisted
21
<50 using FCN Scoring Model Between 50 – 75 using FCN Scoring Model >75 using FCN Scoring Model
22
Above 20% of Trade
(with 36 Advanced
Economies) OR
1 of 36 Advanced Economies
Between 10 – 20% of Trade
(with 36 Advanced
Economies) OR
1 of 36 Advanced Economies
Below 10% of Trade
(with 36 Advanced Economies) OR
1 of 36 Advanced Economies
22
<50 using FCN Scoring Model Between 50 – 75 using FCN Scoring Model >75 using FCN Scoring Model
23
>80 – 120
>60 – 80
<60
23
No
N/A
Yes
* Indicates the information is included in the FCN Country Index
FCN Scoring Model
Risk Score
Risk Rating
Risk Score
Risk Rating
Risk Score
Risk Rating
Risk Score
Risk Rating
Risk Score
Risk Rating
1 – 19
High Threat
Low Response
High Risk
20 – 39
High Moderate
Threat
Low Moderate
Response
Moderate High
Risk
40 – 59
Moderate Threat
Moderate
Response
Moderate Risk
60 – 79
Low Moderate
Threat
Moderate High
Response
Low Moderate
Risk
80 – 100
Low Threat
High Response
Low Risk
Page 9 of 247
From all the available information collected and results summarised in Section 3 above, more
than 26 ratings have been selected, covering a broad base of threats and responses in ghting
nancial crime, proliferation nance, terrorism & terrorism nance. The results make up the FCN
Country Threat / Response & Overall Risk scores for the USA.
FCN Final Ratings – 🇺🇸
Financial Crime News
Threat Rating
35/100
“Moderate – High” Threat
Financial Crime News
Financial Crime Risk Rating
“Moderate” Risk – 56/100
Financial Crime News
Response Rating
77/100
“Moderate – High” Response
Trend
Neutral
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Section 4 Continued – Key Country Ratings – 🇺🇸
Page 11 of 247
The harms that result from the realised threats
faced by the USA from crime, proliferation
nance, terrorism/terrorism nance,
• Vehicle Theft – According to the US FBI,
reported vehicle thefts averaged just under
773,000 per year in 2017, with industry
corruption tax crimes and money laundering
experts estimating that vehicle thefts
(see Section 6, 7, 8 & 9 for details) include:
account for US$6 billion9 in losses
• More than 120 million crimes were
cases per 100,000 population in 2019 for
committed in the US in 2017 (including 24
million violent crimes), amounting to a
nancial impact of US$2.6 trillion
annually. Additionally there were 219.4
private motor vehicle theft, down from
228.9 cases per 100,000 population in
2018. 810,400 vehicles were stolen in 2020.
In TI’s Corruption Barometer in 20138 (since
• 1,398 cases per 100,000 of the population
then the US CPI ratings have still worsened):
for theft (larceny) in 2020, a decrease from
• 7% of those surveyed in the US reported
having paid a bribe,
• 64% think the US government is run by a
few big interests looking out for
themselves;
the previous year, when the larceny-theft
rate stood at 1,569.2 cases per 100,000 also down from a high of 3,228.8 in 1991 to
2,484.6 in 2001 to 1,974.1 in 2011.
• 86.2 cases per 100,000 population in 2018
for robbery, down from 98.6 cases per
And those sectors considered most corrupt
(based on a scale 1–5, where 1 means not at
all corrupt, 5 means extremely corrupt) were:
• Political Parties (4.1), US Congress (3.7%),
Public Of cial / Civil Servants (3.6), Business
/ Private Sector (3.6%), Media (3.5%),
Judicial system (3.3), Medical & Health (3.3),
Police (3.3), Education system (3,1%),
Religious Bodies (3.1), NGOs (3%), Military
(2.9%).
100,000 population in 2017.
• 376.1 cases per 100,000 population in
2018 for burglary to 339.7 cases per
100,000 population in 2019,
• 6.5 cases per 100,000 population in 2020
(21,570 murders), up from 5.1 cases per
100,000 population in 2019 (16,669
murders).
• 4.1 cases per 100,000 population in 2020
• Property crime in the U.S. is more common
than violent crime with a total of 2,109.9
property crimes per 100,000 people,
compared with 379.4 violent crimes per
100,000 people (2019).
for homicides by rearms, up from 3.2
cases per 100,000 population in 2019
• 10.7 million people10 with illegal drug
use disorders (an increase of 91% between
1990 and 2019), representing 3.7% of the
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Section 5 – Key Harms Summary -!🇺🇸 “
population (an increase of 62% between
• The recent increase in domestic terrorism
1990 and 2019), much greater than the
began around 2014. From 2014 to 2021,
world average (0.94%).
there have been an average of 31 fatalities
• 100,306 drug overdose deaths during
the12-month period ending in April 2021,
with overdose deaths from opioids
increasing to 75,673, up from 56,064 the
year before. Synthetic opioids (other than
methadone) are currently the main driver of
drug overdoses
• 23 million Americans in recovery from
addiction including from drugs11.
• Attacks from terrorists have killed more
than 300 to end 2017 (266 between
2013-17) since 2001, which saw more than
3,000 killed, the largest loss of American
per year from so called domestic terrorism indicating that 30 deaths in 2021 are
typical of this period. This is substantially
more than the period from 1994 to 2013,
during which there were only three years in
which more than 8 individuals were killed in
terrorist attacks in the United States.
• Nearly 108 million Americans experienced
cybercrime, and more than 719 million
hours were lost with Americans spending
an average of almost 7 hours to resolve the
issues created.
• Synthetic identity theft is the fastest
lives in one day on 9th September, 2001
growing nancial crime in the US. It targets
since the battle of Antietam on September
vulnerable citizens,
17th 1862, which recorded 3,650 dead
(2,100 Union troops; 1,550 Confederate
troops) in the American Civil War.
• 403,000 modern day slaves, an incidence
of 1.26 in 1,000.
• US$113.5 billion lost in tax every year,
• Whilst the 9/11 Attack on America was
equivalent to 3.1% of tax revenue (tax
carried out by Al Qaeda, a foreign terrorist
revenue of $4 trillion) equivalent to loss of
organisation, the Islamist terrorist threat
US$352 per member of population,
remains however domestic terrorism is in
through mainly tax abuse, with tax evasion
the rise with so called home grown white
by individuals at US$37 billion (2021),
supremacists, with ready access to funds
which amounts to about a fth of the
and weapons. For example the fatal
US$590 billion spent on the military.
shooting of 9 people at a church in South
Carolina in 2015, where 11 were killed in a
mass shooting at a synagogue in Pittsburgh
in 2018 and 20 killed in El Passo in 2019.
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In the FATF December 2016 Report12, (FATF
• Others – loan sharking – US$14 billion
2016 MER), an estimate for the proceeds of
(3%); motor vehicle theft – US$8 billion
crime for the USA was reported as at
(1.7%), illegal gambling – US$7.6 billion
approximately US$300 billion in 2010 based
(1.7%), theft US$3.8 billion (0.8%),
on prior IMF and UNODC research.
burglary US$3.5 billion (0.7%), Robbery –
The UNODC research published in 201113,
provided a range of US$235 – US$350
billion for the USA (1.6% – 2.3% GDP),
US$0.5 billion (0.2%), Counterfeiting US$0.1 billion (0.02%), Fraud/Arson US$0.04 billion (0.008%).
resulting in an overall estimate of US$300
Furthermore, the UNODC suggested in 2011,
billion or 2% of GDP (for 2010).
that, “while tax evasion, drugs and fraud are
likely to continue to play important roles for
overall criminal proceeds, one can assume
that other crimes have gained in importance
over the last two decades and would now
appear higher on the list.”
These exclude estimates for tax evasion. In
That reported estimates for the size of the US
2000, estimates for nancial crime (excluding
drug market for the year 2000 showed a total
tax evasion) was US$224 billion or 2.3% of
gure of US$64 billion, down from US$115
GDP and (including tax evasion) was US$779
billion, expressed in constant 2000 dollars,
billion (or 8% of GDP), and in 1990 the
or a decline from 1.7% in 1990 to 0.6% in
estimates were US$209 billion or 3.6% of
2000, “due to the overall lower quantities of
GDP (excluding tax evasion) and US$471
drugs consumed in the USA (as many heavy
billion or 8.1% of GDP (including tax
users either received treatment or were
evasion). The 1990 estimates (including tax
imprisoned for drug dealing) as well as a
evasion) were made up of:
decline in drug prices in the 1990s as a
• Tax evasion – US$262 billion (56%),
• Drug traf cking – US$97.2 billion (20.6%)
consequence of more competition in the drug
markets, following the dismantling of the big
Colombian drug cartels.” The UNODC a
cocaine (13%); heroin (3.7%), marijuana
report also suggested that, “the proceeds
(2.9%) & other (1%).
from other crime, expressed as a %age of
• Fraud – US$59.3 billion (12.6%)
• Human traf cking – US$14.9 billion
(3.14%) prostitution (3.1%); HT (0.04%).
GDP, also declined. This was linked to lower
consumption of drugs (notably of cocaine and
crack- cocaine) and lower levels of all forms of
acquisitive crime (including burglaries,
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Section 5 – Key Threats Summary -!🇺🇸 “
larceny-theft and motor vehicle theft) and
billion of proceeds for potential laundering,
violent crime, including robberies and
based on the sources and analysis cited in the
homicides”.
2015 NMLRA.”
Whilst traditional forms of acquisitive crime
The NMLRA 2018 also stated that, “The
have been on decline for more than 2
crimes that generate the bulk of illicit
decades, it seems that fraud, turbocharged
proceeds in the United States are fraud, drug
by cyber-enabled means are more than
traf cking, human smuggling, human
making up for these declines.
traf cking, organised crime, and corruption.
In the FATF 2016 MER14, it reported that,
“Fraud (including healthcare fraud, identity
theft, tax fraud, mortgage fraud, retail and
consumer fraud and securities fraud)
generates the largest volume of illicit
proceeds, particularly healthcare fraud
against the Federal government which
accounts for approximately US$80 billion
annually. Other major sources of proceeds are
drug traf cking (generating about US$64
billion annually) and transnational organised
crime (sourced from the NMLRA 2015). The
U.S. is an attractive destination for domestic
and foreign proceeds at the integration
stage.”
The FATF 2016 MER also includes (sourced
from the National Money Laundering Risk
Assessment – NMLRA 2015) “5 categories of
predicate crime: fraud (including healthcare
fraud, identity theft, tax fraud, mortgage fraud,
retail and consumer fraud and securities
fraud) drug traf cking, human smuggling,
organised crime, and public corruption (both
domestic and foreign).”
The many varieties of fraud, including bank
fraud, consumer fraud, healthcare fraud,
securities fraud, and tax refund fraud, are
believed to generate the largest share of illicit
proceeds. Healthcare fraud alone generates
proceeds of approximately US$100 billion
annually,” and that, “law enforcement
agencies have seen an increase in
cybercrime, which encompasses a variety of
illicit activity including phishing, malware
attacks, and cyber-enabled crime such as
credit card fraud, business e-mail
compromise; and various types of consumer
scams, including fake romance and lottery
schemes, and employment offers that all
inevitably involve the victim receiving
requests for money.”
The NMLRA 202216, stated that the “most
signi cant money laundering threats” were
from, Fraud (Covid 19 Related Frauds and
Scams; Synthetic Identity Fraud, Healthcare
Fraud; Drug Traf cking (Illicit Opioids and
Heroin, Cocaine, Meth, Marijuana),
Cybercrime, (Ransomeware Business E Mail
Compromise, Compromise and sale of
The NMLRA 201815, continued, “to estimate
Financial Information); Professional Money
that domestic nancial crime, excluding tax
Laundering (Money Brokers & Chinese ML
evasion, generates approximately US$300
Orgs) Corruption (Foreign & Domestic);
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Human Traf cking & Human Smuggling &
ransomware, and business email compromise
Wildlife Traf cking.
(BEC) fraud.”
The NMLRA 2022 did not include an updated
These Risk Assessments fed into the 2022
estimate if the proceeds of crime. Instead it
National Strategy for Combating Terrorist and
relied on the 2010 UNODC estimate of
Other Illicit Financing17 (Illicit Financing
US$300 billion (2% of 2010 GDP) referenced
Strategy 2022), published in May 2022, which
in both the 2015 & 2018 NMLRAs.
summarised the ML threats (referencing the
The NMLRA 2022 concluded, though that,
“fraud dwarfs all other proceed-generating
crimes that are laundered in or through the
United States. The exploitation of data, mainly
personal identi able information that is
stolen, hacked, or compromised, remains one
of the most common methods fraudsters,
launderers, and other criminals use to set up
NMLRA 2022) by stating that: “The predicate
crimes that generate the largest amount of
criminal or illicit proceeds laundered in, or
through the United States include: (1) fraud,
which is the largest revenue-generating
crime; (2) drug. traf cking; (3) cybercrime; (4)
human traf cking and smuggling; and (5)
corruption.”
bank accounts and conceal fraudulent activity.
This above summary described the Strategy
Drug traf cking, cybercrime, human
as “the key threats from the 2022 NRAs” but
traf cking and smuggling, and corruption also
also that these threats are also consistent with
generate signi cant volumes of illicit
and complement the AML/CFT National
proceeds within the United States or through
Priorities identi ed by FinCEN in 202118,
the U.S. nancial sector. The COVID-19
These are summarised in the Strategy as “(1)
pandemic affects almost every aspect of
corruption; (2) cybercrime, including relevant
social interaction and human activity globally,
cybersecurity and virtual currency
to include how criminals earn money and
considerations; (3) foreign and domestic
launder their proceeds. Criminals have
terrorist nancing; (4) fraud; (5) transnational
exploited government-led economic support
criminal organisation activity; (6) drug
programs during the pandemic. The
traf cking organisation activity; (7) human
pandemic has led to an increase in fraud risk
traf cking and human smuggling; and (8)
for online nancial services and general
proliferation nancing”.
commerce, resulting in a dramatic spike in the
number of stimulus, healthcare, bank, elder,
and government fraud schemes and scams.
Cybercriminals and malicious foreign state
actors have and are continuing to exploit the
COVID-19 pandemic through phishing
schemes, exploitation of remote applications,
FinCEN informed US covered Institutions (as
required by the AML Act 2020 once
regulations are promulgated) to “incorporate
these Priorities into their risk-based AML
programs”, recognising that, “not every
Priority will be relevant to every covered
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Page 16 of 247
evasion) would generate US$420 billion
should, review and incorporate, as
(2020 GDP of US$21 trillion), and at least 6%
appropriate, each Priority based on the
of GDP (including tax evasion) of US$1.26
institution’s broader risk-based AML
trillion (2020).
program.”
These priories are to be update at least once
every four years19.”
In December, 2021, US Treasury Secretary
Janet Yellen20 at the Washington DC Summit
for Democracy, stated that, “in the popular
imagination, the money laundering capitals of
the world of small countries with histories of
loose and secretive nancial laws. But there’s
a good argument that, right now, the best
place to hide and launder ill gotten gains is
actually the United States.”
A much earlier study from the UNODC
published in 2011, concluded core nancial
crime (excluding fraud) was estimated at
generating criminal proceeds at US$2.1
trillion or 3.6% of Global GDP. These studies,
if applied to the US, would generate an
estimate of US$750 billion, with monies
available for laundering being US$575
billion, and OC proceeds estimated at
US$350 billion.
Taking a bottom up assessment of best
estimates for the proceeds of nancial crimes
reveals the following (with sources found
Finally, according to research conducted by
Walker &
Ungar21
2020, using their nancial
crime and money laundering calculation
model they estimated that money laundering
estimates for the USA for 2014 could be
estimated at US$242 billion or up to 1.4%
of GDP for money laundering (ML). This is
made up of 0.9% Domestic, 0.1% Foreign &
0.4% Transit money laundering. They
estimate ( nancial crime) proceeds may be at
later in Section 6 of this report):
• Fraud at least at US$166 billion – including
US government fraud of US$148 billion
(healthcare & social security fraud) and
others including consumer fraud at US$5.6
billion – of which US$2.3 billion is due to
imposter scams, while online shopping
accounted for about US$392 million &
card fraud at US$10.6 billion.
2% of GDP or US$294 billion (2019).
• Drug Traf cking US$64 – US$150 billion.
Based on these estimates, a 2% of GDP
• Trade in Fake Goods is estimated at 3.3% –
gure for nancial crime (excluding tax
if applied to US imports of US$2.6 trillion
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institution, but each covered institution
(2019) would generate US$86 billion.
of GDP), with the proceeds available for
Seized fake goods in the US (2020) are
laundering estimated at US$320 billion, and
valued at US$1.3 billion.
transnational organised crime proceeds
• Acquisitive Crime at more than US$70
estimated at US$195 billion.
billion including from cargo theft at US$35
billion, organised retail theft at US$30-37
billion, vehicle thefts at US$7.4 billion,
precious metals & stones theft at US$838
million & Cash at US$1.25 billion.
• Tax Evasion by individuals at least at
US$37 billion (2021) but the tax gap could
be as high as US$441 billion , or US$700
billion or US$1 trillion a year.
• Costs of Corruption in the US estimated at
between US$210 billion – US$1 trillion
with values of bribes of US$21 billion.
• Human Traf cking of US$6.5 billion, with
US$4.3 billion from sexual exploitation,
US$1.8 billion from forced labor and
US$500 million from domestic servitude.
• Human Smuggling between US$3.7US$4.2 billion (2016), via the southern
border with between US$200 million and
US$2.3 billion (2017) from the Northern
Triangle region of Central America—
Guatemala, Honduras, and El Salvador.
• Counterfeit Currency at US$147 million
• Cybercrime at US$7 billion
These bottom up gures closely correspond
to the previous estimates given by the
UNODC in 2010. The use of these gures in
the NMLRAs in 2015 & 2018 are re ected in
the FATF 2016 MER and by Walker & Ungar in
their 2020 study.
Taking the estimated 2% of GDP as nancial
crime proceeds (US$420 billion) and an
estimated US$320 billion available for
laundering through the US nancial system,
these illicit funds represent about 0.04% of
the total value of payments, or 0.3% of the
total value of retail payments (2020).
Assuming an average payment value of
US$560 (see Section 2 above), this would
represent 571 million transactions or an
Taking all of these estimates (using mid
estimated 0.33% or 1 in 300 payment
values) and aggregating them provides an
transactions, that could represent illicit funds.
estimate of US$415 billion (representing 2%
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Section 6 – Key Threats in More Detail -!🇺🇸
In this Section 6, the most important criminal
supervision of certain nancial entities and
markets, are assessed and summarised.
intermediaries;
6.0.1 National Risk Assessments (NRA): In
March 2022, the USA published22, the
National Money Laundering Risk Assessment
NMLRA 2022), and the National Terrorist
Financing Risk Assessment (NTFRA 2022)
both RAs are the 3rd published after the rst
in 2015, & the National Proliferation
3. Weaknesses in foreign AML/CFT
regulatory frameworks for virtual assets
and other risk areas and supervision of
foreign nancial institutions more broadly,
4. Occasional AML/CFT compliances
de ciencies at U.S. nancial institutions; &
Financing Risk Assessment (NPFRA 2022), the
second RA since the 1st was published in
5. Challenges in detecting and seizing illicit
proceeds transferred in cash and
2018.
These risk assessments fed into the 2022
National Strategy for Combating Terrorist and
Other Illicit Financing23, (Illicit Financing
Strategy 2022). See above for more details.
6.0.2 US TF & Illicit Financing Strategy: The
Illicit Financing Strategy states that “To
combat this illicit nance activity, the United
States must start at home and maintain an upto-date AML/ CFT legal and operational
framework and continue to lead globally on
combating illicit nance. This will require the
United States to address both persistent and
emerging illicit nance challenges and risks.
These key challenges and risks are:
1. “Weak or non-existent reporting and
disclosure requirements for company
formation and non- nanced real estate
identifying complicit merchants and
professionals facilitating illicit nance.
Goals and Priorities of National Strategy for Combating Terrorist
and Other Illicit Financing – 🇺🇸
Close legal and regulatory gaps in the U.S. AML/CFT framework that are
exploited by illicit actors to anonymously access the U.S. nancial system. This
includes enhancing transparency for company formation and non- nanced real
estate transactions, addressing the uneven application of AML/CFT measures
to certain non-bank nancial institutions and key gatekeeper professions and
sectors, as well as updating, as appropriate, regulatory requirements applicable
to virtual assets activities.
Continue to make the U.S.AML/CFT regulatory framework for nancial
institutions more e cient and e ective. Speci cally, this will focus on
optimising reporting requirements and applicable thresholds to sharpen the
focus on detecting illicit nance activity and providing actionable information to
law enforcement, continuing to make the supervisory process more risk- and
outcome-focused, and adequately resourcing AML/CFT supervision for certain
non-bank nancial institutions.
Enhance the operational e ectiveness of law enforcement and other U.S.
government agencies in combating illicit nance. This requires regularly
updating and communicating key illicit nance threats and risks, including the
AML/CFT National Priorities, using targeted law enforcement authorities and
continuing interagency coordination against priority illicit nance challenges,
improving and expanding on public-private information- sharing e orts, and
strengthening implementation of global AML/CFT standards.
Enable the bene ts of technological innovation while mitigating risks. The
U.S. government will provide regulatory and policy support for trustworthy
digital identity solutions and to innovative technologies in AML/ CFT
compliance, continue to enhance the use of arti cial intelligence (AI) and data
analytics in U.S. government e orts to detect and disrupt illicit nance, and
promote U.S. technological leadership on payments that re ect U.S. standards,
practices, and values.
Source: https://home.treasury.gov/system/ les/136/2022-National-Strategy-for-Combating-Terrorist-and-OtherIllicit-Financing.pdf
transactions;
The overall goal of the 2022 Strategy is to
2. The lack of comprehensive AML/CFT
requirements or under-resourced
encourage continued efforts to modernise the
U.S. AML/CFT regime so that the public and
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Page 19 of 247
private sectors can effectively focus resources
6.0.3 Threats and Vulnerabilities: The
against the most signi cant illicit nance
threats and vulnerabilities identi ed in the
risks.”
Illicit Financing Strategy are set out below:
To achieve this goal, the Illicit Financing
Strategy identi es four priorities:
• Close legal and regulatory gaps in the U.S.
AML/CFT framework;
• Continue to make the U.S. AML/CFT
regulatory framework for nancial
institutions more ef cient and effective;
• Enhance the operational effectiveness of
law enforcement & other U.S. government
agencies in combating illicit nance; and
• Enable the bene ts of technological
innovation while mitigating risks.
6.0.4 National Money Laundering Risk
Assessment 2022 (NMLRA 2022):
According to the NMLRA 2022, “Criminals
continue to use a wide range of money
laundering techniques to move and conceal
illicit proceeds and promote criminal activity
depending on availability and convenience.
The crimes that generate the largest amount
of illicit proceeds laundered in or through the
US include: fraud, the largest proceeds
generating crime, drug traf cking,
cybercrime, human traf cking and smuggling;
and corruption. The US continues to face both
Source: https://home.treasury.gov/system/ les/136/2022-National-Strategy-for-Combating-Terrorist-and-OtherIllicit-Financing.pdf
persistent and emerging money laundering
risks related to 1) the continuing misuse of
legal entities, 2) the lack of transparency in
certain real estate transactions, 3) complicit
merchants & professionals that misuse their
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positions or businesses; & 4) pockets of
6.0.5 National Terrorist Financing Risk
weaknesses in compliance or supervision at
Assessment 2022 (NTFRA 2022):
some regulators US FIs.”
According to the NTFRA 2022, “With respect
According to the NMLRA 2022, the main
threats were from Fraud (Covid 19 Related
Frauds and Scams; Synthetic Identity Fraud,
Healthcare Fraud; Drug Traf cking (Illicit
Opioids and Heroin, Cocaine, Meth,
Marijuana), Cybercrime, (Ransomeware
Business E Mail Compromise, Compromise
and Sale of Financial Information);
Professional Money Laundering (Money
Brokers & Chinese ML Orgs) Corruption
(Foreign & Domestic); Human Traf cking &
Human Smuggling & Wildlife Traf cking.
to foreign terrorist groups, that was common
form of nancial support from U.S. based
individuals continues to be the transfer of
small samples (hundred to tens of thousands
of dollars) to facilitators outside of the US
working on behalf of ISIS and it’s af liates, Al
Qaeda and it’s af liates and Hezbollah. The
2020 NTFRA analyses for the rst time the
funding methods that support domestic
violent extremists (DVE) While many DVE
attacks are self funded,DVE networks may
raise funds through solicitations to supporters,
commercial ventures, or criminal activity.” For
According to the NMLRA 2022, the main
more see Section 8 Terrorism and Terrorism
vulnerabilities and risk were from: “Cash (Bulk
Finance below.
Cash Smuggling, Postal Money Orders,
Funnel accounts, Cash Intensive Businesses)
Misuse of Legal Entities (Status of BO
Requirements, Shell and Shelf Companies,
Trusts), Virtual Assets (VASP Registration and
Compliance Obligation, Anonymity Enhanced
Cryptocurrencies and Service Providers) ;
Complicit merchants and Professionals
(Merchants, Attorneys, Real estate
professionals, Financial services Employees).
6.0.6 National Proliferation Finance Risk
Compliance de ciencies (Banks, Securities
Assessment 2022 (NPFRA 2022):
broker dealers, Casino’s); Luxury and high
According to the NPFRA 2022, “The
value goods (Real Estate, Precious Metals
Democratic People’s Republic of Korea
stones and jewels, Art Industry; Entities not
(DPRK), followed by Iran, continues to pose
subject to comprehensive AML/CFT
the most signi cant PF threats for the United
requirements (Investment Advisers and third
States, and the United States has prioritised
party payment processors, None federally
preventing PF networks linked to those
chartered Puerto Rico Financial Entities)”.
governments from exploiting the U.S. nancial
system. Since the 2018 NPFRA, China and, to
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a lesser extent, Russia continue to engage in
traf cking and transnational organised
PF activities by expanding their efforts to
criminal organisations are also involved.
acquire U.S.-origin goods in violation of
relevant export control laws”. For more see
Section 7 Sanctions & Embargoes.
Another is arms traf cking. Whilst the US
Mexico border is seen mostly as a threat from
drug traf cking and human smuggling north,
6.0.7 FinCEN Priorities: Based on the above
the trade in illegal rearms sourced and
Risk Assessments, FinCEN has issued AML/
smuggled from the US going south, supports
CFT National Priorities identi ed in 202124, as
these operations. DTOs & TCOs have used
required by the AML Act 2020. These are
high caliber weapons to ght Mexican &
summarised as “(1) corruption; (2)
Central American authorities and to entrench
cybercrime, including relevant cybersecurity
organised crime in Mexico and in the
and virtual currency considerations; (3)
Northern Triangle creating the conditions that
foreign and domestic terrorist nancing; (4)
encourage migration north. They are also
fraud; (5) transnational criminal organisation
making the Caribbean a much more violent
activity; (6) drug traf cking organisation
place.
activity; (7) human traf cking and human
smuggling; and (8) proliferation nancing”.
Another important crime which generates
signi cant criminal proceeds is organised
FinCEN requires US covered institutions to,
acquisitive crime, where retail theft and in
“incorporate these Priorities into their risk-
particular cargo theft has long been a
based AML programs”, recognising that, “not
mainstay of organised crime in the US. For
every Priority will be relevant to every covered
these reasons wildlife traf cking, arms
institution, but each covered institution
traf cking & organised acquisitive crime still
should, review and incorporate, as
present signi cant threats despite not being
appropriate, each Priority based on the
expressly included in the National Priorities.
institution’s broader risk-based AML
Other major crimes include counterfeit
program.”
products, including counterfeit currency,
6.0.8 Other Predicate Crimes: Despite not
making it onto the list of National Priorities,
there are a number of offences, that still
warrant in particular greater attention. For
example, wildlife traf cking was included in
the NMLRA 2022, and whilst it didn’t make it
goods smuggling and tax crimes which
represent the crimes that still generate
signi cant amounts in criminal proceeds and
or in the case of tax crimes deny the US
government from huge sums of unpaid tax
dollars.
into the National Priorities it is a threat that
Less important individual crimes, including;
has come increasingly to the fore and has
usury/loan sharking, illegal gambling,
grown in importance, not least as drug
forgery, extortion and business in ltration,
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though these crimes are used by organised
Terrorist Financing Risk Assessment (NTFRA),
crime and can be considered as important in
which were both published”
this context where transnational organised
crime is a National Priority.
”The global dominance of the U.S. dollar
generates trillions of dollars of daily
Less important from a US perspective are
transaction volume through U.S. banks, which
maritime piracy, which is not an issue
creates signi cant exposure to potential ML
around US waters, or kidnapping for
activity (generated out of both domestic and
ransom, where gures are very low.
foreign predicate offences) and risks of cross-
Finally there is market abuse. The US is
home to the world largest securities markets,
with the average daily trading volume for
equities in U.S. markets at US$10.9 billion in
202025. Not only are the securities markets
targeted and criminal abuse carried out,
including insider trading, the securities sector
also poses a signi cant money laundering
risk notably in the layering phase, and
therefore more dif cult to spot. This is a not
identi ed as a National Priority, but is likely to
be a priority nevertheless for US FIs in
particular broker dealers.
border illicit ows. The U.S. also faces
signi cant risks from TF and is vulnerable to
such abuse because of the unique scope,
openness and reach of its nancial system
globally, and the direct threat posed by
terrorist groups to U.S. interests. The United
Nations of ce on Drugs and Crime (UNODC)
estimated proceeds from all forms of nancial
crime in the U.S., excluding tax evasion, was
US$300 billion in 2010 (about 2% of the U.S.
economy). Fraud (including healthcare fraud,
identity theft, tax fraud, mortgage fraud, retail
and consumer fraud and securities fraud)
generates the largest volume of illicit
For more details see Sections 10.9 – 10.15
proceeds, particularly healthcare fraud
below.
against the Federal government which
6.0.9 FATF: The FATF 2016 MER was
published in December 201626. The 3rd
Enhanced Follow-Up Report was published in
March 2020 (FATF 2020 FUR)27.
Overall FATF assessors found that, “The AML/
CFT framework in the U.S. is well developed
and robust and that the understanding of ML
and TF risks is well-supported by a variety of
ongoing and complementary risk assessment
processes, including the 2015 National ML
Risk Assessment (NMLRA) and National
accounts for approximately US$80 billion
annually. Other major sources of proceeds are
drug traf cking (generating about US$64
billion annually), transnational organised
crime, human smuggling and public
corruption (both domestic and foreign).”
“The main ML vulnerabilities assessed by the
U.S. were in the cash, banking, MSB, casino
and securities sectors, and were characterised
as: use of cash and monetary instruments in
amounts under regulatory record-keeping
and reporting thresholds; opening bank and
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brokerage accounts using nominees to
and ranked 96/141, terrorism incidence rate
disguise the identity of the individuals who
83.3/100 (ranked 129/141) & police service
control the accounts; creating legal entities
reliability at 78.1/100 and ranked 26/141 (in
without accurate information about the
all cases higher scores are better).
identity of the bene cial owner; misuse of
products and services resulting from de cient
compliance with AML obligations; and
merchants and FIs wittingly facilitating illegal
activity. The main TF threats and
vulnerabilities include: raising funds through
criminal activity, individuals raising funds
under the auspices of charitable giving but
outside of any charitable organisation,
individual contributions and self-funding;
moving and placing funds through banks,
6.0.11 Crime Rates: The USA is considered
the 71st safest country out of 134 in the 2021
Global Finance ranking29 (which factors in
risks of natural disaster with crime, terrorism
and war to present a more rounded analysis
of the world’s safest countries). According to
the Numbeo 2021 Crime Index30, the USA is
rated 57 out of 129 countries at 48.16/100.
For more details on Acquisitive crime see
Section 6.13 and homicides see Section 6.14.
licensed MSBs, unlicensed money
6.0.12 Overall Threat Landscape: Based on
transmitters and cash smuggling; and
the threats identi ed & prioritised by the US
potential emerging threats from global
authorities, & those also included in this
terrorist activities, cybercrime and identity
comprehensive Threat Assessment, the main
theft, and new payment systems”.
threats are set out in the Chart below. Threats
6.0.10 Security: According to The World
Economic Forum’s Global Competitiveness
may increase or decrease based on the
business & customer relationships involved.
Index 201928, under Pillar 1 Institutions, the
Threats & Priorities – 🇺🇸
USA’s rating for “Security” is 76.7/100, ranked
64th out of 141.
This overall score is made up of scores for
Level
Threat Type
High
Corruption, Drug Tra cking, Transnational
Organised Crime, Fraud, Cybercrime, WMD
Proliferation Finance, Terrorism Finance, Human
Tra cking & Human Smuggling & Professional
Money Laundering
Medium
Wildlife Tra cking, Arms Tra cking & Organised
Acquisitive Crime
Not
Rated
Usury/Loan Sharking, Illegal Gambling, Forgery,
Extortion, Business In ltration (though note
these may be used by Organised Crime), Tax
O ences, Markets Abuse, Kidnap for Ransom, &
Maritime Piracy
Source: FCN. USA TA 2022 based on FinCEN Priorities & NMLRA/NMPFRA/NMTFRA 2022
organised crime at 61.9 (ranked 69/141),
homicide at 83.7 (rate of 5.3/100,000 people)
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AML/CFT National Priorities identi ed by
expressly included in the 2021 FinCEN
FinCEN in 202131 are: “(1) corruption; (2)
priorities. For more details see Section 6.9.
cybercrime, including relevant cybersecurity
and virtual currency considerations; (3)
foreign & domestic terrorist nancing; (4)
fraud; (5) transnational criminal
organisation activity; (6) drug traf cking
organisation activity; (7) human traf cking
and human smuggling; & (8) proliferation
nancing.
For more details on foreign and domestic
terrorism see Section 8 below and on
proliferation nance, see Section 7 below.
For more threats in addition to these National
Priorities, see later in this Section 6.
FinCEN, in coordination with relevant federal
and state regulators, also issued statements,
to banks32 and the other non bank nancial
institutions (NBFIs), providing further
guidance on the current application of their
Priorities, as regulations relating to the
Priorities are not likely to be issued for many
months. The statements emphasised that
banks and NBFIs are not required to make
immediate changes to their risk-based AML
programs in response to the Priorities, but
should begin evaluating how to incorporate
the Priorities into their respective AML
compliance programs.
These Priorities were issued pursuant to new
provisions included in the Anti-Money
Laundering Act of 2020 (the “AML Act”), a
request made by many experts and nally
The NMLRA 2022 also included
“professional money laundering” as a main
threat (Money Brokers, Chinese ML Orgs). For
more details see Section 9 below.
adopted in the US. As required by the AML
Act, FinCEN will update the Priorities to
account for new, or evolving AML/CFT threats
at least once every four years.
Additionally there was a special focus on
Wildlife Traf cking, but this was not
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Section 6 Continued – Main U.S. National Priorities – From FinCEN 🇺🇸
In this Section 6.1 the threat from corruption,
pillars”. See Sections 6.1.8 for more
which is one of the US National Priorities is
information on the US Strategy on
assessed and summarised
Countering Corruption.
6.1.1 2022 NMLRA:, “Corruption takes on
6.1.2 Foreign Corruption: According to the
many forms and is used to further various
NMLRA 2022, “As of 2021, the DOJ’s
illicit behaviours. Types of corruption include
Kleptocracy Asset Recovery Initiative had
grand corruption, administrative corruption,
recovered and assisted in recovering and
kleptocracy, state capture and strategic
repatriating approximately US$1.7 billion in
corruption. Public corruption within the
assets and had an additional approximately
United States involves the corruption of local,
US$2.2 billion in assets restrained pending
state, and federal government of cials. The
forfeiture litigation and forfeited pending
proceeds of foreign corruption affect the
return negotiations….Proceeds from
United States when foreign corrupt of cials
corruption cases can often be dif cult to
seek to invest their illicit proceeds in or
detect, as bad actors may use front and shell
through the U.S. economy and markets. These
companies to pay or otherwise in uence
crimes are generally committed for private
individuals and entities engaging in nancial
gain and often rely on money laundering to
activity that is not necessarily discernible as
conceal or hide the source and ownership of
illicit. Front and shell companies also mask the
the illicit proceeds. Common money
identities of those pro ting from kickbacks,
laundering methods rely on opaque foreign
fraud, embezzlement, and bribery, sometimes
nancial systems and the misuse of
making it dif cult for law enforcement to
professional service providers, nominees, and
identify the ultimate bene cial owners.
legal entities and other corporate vehicles,
Complicit businesses that provide nancial
including anonymous shell companies, and
services may also play a role in concealing,
limited liability companies.
pro ting from, and moving corruption
The 2015 and 2018 NMLRAs had previously
identi ed corruption as a priority money
laundering threat and President Biden in
proceeds. As a result, kleptocrats are able to
integrate the proceeds into tangible property,
real estate, investments, and other assets”.
December 2021 signalled a redoubled
6.1.3 Domestic Corruption: The NMLRA
emphasis on anti-corruption as a national
2022 also states that, “Prosecutable domestic
security priority via the issuance of a U.S.
corruption often involves money laundering
Strategy on Countering Corruption, which
activity as individuals seek to disguise bribes
includes curbing illicit nance as one of its key
paid to and received by corrupt of cials
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Section 6.1 – Corruption -!🇺🇸
….Like foreign corruption activity, domestic
contributions to the commissioner’s re-
corruption often involves other crimes,
election campaign. Another individual,
ranging from tax evasion to contracting fraud.
chairman of a North Carolina state political
Recent domestic corruption cases have also
party, who was part of the scheme, transferred
involved unlawful campaign contributions, as
US$250,000 of monies contributed to the
both U.S. and foreign individuals have sought
to illegally in uence elections within the
state party to go toward the commissioner’s
re-election campaign”.
United States. Like foreign corruption cases,
such activity can be dif cult to detect as
perpetrators of domestic corruption seek to
conceal their involvement by obfuscating
their identity.
In one 2019 case, a federal grand jury
indicted several individuals for their part in an
elaborate scheme to make unlawful political
6.1.4 Transparency International:
contributions to in uence the U.S. political
According to Transparency International’s,
process. In March 2020, an executive of a
multinational insurance company and a
consultant were convicted for public
corruption and bribery charges pertaining to
a scheme to covertly direct illegal campaign
contributions to a candidate for public of ce
at the state level in North Carolina in return for
a favourable action regarding the insurance
company by the candidate. According to
evidence presented at trial, between April
2017 and August 2018, the executive and the
consultant sought to funnel millions of dollars
in campaign contributions and other things of
value in exchange for the Commissioner of
the North Carolina Department of Insurance’s
removal of the deputy commissioner, who
was responsible for regulating the executive’s
company. To conceal this scheme, the
schemers set up two corporate entities to
form an independent expenditure committee
to anonymously funnel US$1.5 million in
(“TI”) Corruption Perceptions Index 202133,
the USA was ranked 27/180 (1 being the
best), with an overall score of 67 out of 100.
There has been a decline over the last few
years from 75/100 in 2017 and with the US
failing to rank within the top 20 nations for
the rst time in eight years, raises a concern
as the US holds a symbolic position as a
leading advocate in favour of tackling
corruption.
According to Scott Greytak, the advocacy
director for the TI USA a broader “decay” in
U.S. political institutions was seen as a major
contributor to the country’s declining rating.
Gretyak noted that public con dence in U.S.
elections has been undercut by
disinformation and record-setting amounts of
untraceable money in elections, especially in
2020, when twice as much was spent
compared with 2016. “Second, and
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increasingly important, are these series of
large corporations, their multibillionaire
really bombshell exposés by media outlets
shareholders, or powerful unions – can pour
that are demonstrating how much dirty money
hundreds of millions of dollars into political
is owing into the United States’ nancial
campaigns, as long as their efforts are
system.”34
independent of candidates. To many, the
In TI’s Corruption Barometer in 201335,
• 7% of those surveyed in the US reported
having paid a bribe; and
in ux of large sums of money into American
politics, puts corporate interests rst, and
results in corruption. Some even go so far as
to claim that corruption has been effectively
legalised and enshrined in the system. That’s
• 64% think the US government is run by a
why campaign nance reformers, politicians,
few big interests looking out for
and academics alike have been arguing for
themselves.
decades that large sums of money imperils
Those sectors considered more corrupt than
US democracy.
others (based on a scale 1–5, where 1 means
According to the Centre for Responsive
not at all corrupt, 5 means extremely corrupt)
Politics36, amounts paid by so called “Super
were:
PACs” in the 2012 Presidential election was
• Political Parties (4.1), US Congress (3.7%),
Military (2.9%), NGOs (3%), Media (3.5%),
Religious Bodies (3.1), Business / Private
Sector (3.6%), Education system (3,1%),
Judicial System (3.3), Medical & Health
US$600 million & over US$1 billion was
spent in 2016. In the 2010 midterm elections
for congress, less than US$100 million was
spent. This rose to more than US$300 million
in 2014 and over US$800 million in 2018.
(3.3), Police (3.3) & Public Of cial / Civil
6.1.6 TRACE: The 2021 TRACE Bribery Risk
Servants (3.6)
Matrix37 rates the USA at a “low” risk level,
6.1.5 Election Finance: US opinion is
overwhelmingly in favour of US election
(campaign) nance reform whether its
ranking 23rd among 194 places with a risk
score of 22. This places the USA as having the
same scoring as Lithuania and Hong Kong.
democrats or republicans polled. In 2010 the
6.1.7 GAN: The GAN Integrity Business Anti-
US Supreme Court ruled in Citizens United v.
Corruption Portal (2022)38 has the view that,
Federal Election Commission that companies
“Corruption does not represent a signi cant
and labor unions enjoy the same right to
political speech as individuals. With this
decision, many restrictions on money in
American politics were undercut.
Subsequently, so-called super PACs – political
action committees that are nanced in part by
business risk for foreign investors in the US.
The US offers a competitive market and
abundant business opportunities; however,
companies should be prepared to deal with
bureaucracy due to the decentralised
structure and business activities governed by
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federal, state, county and municipal laws.
bribery and in uence peddling schemes and
Business costs are increased by extensive
also on 64 entities owned or controlled by
anti-corruption legislation and tough
them, signalling greater intent to use
requirements for compliance and internal
available tools in this area40. For more see
controls. Money laundering, abuse of of ce,
Section 7 Sanction’s & Embargoes below.
extortion and commercial bribery are
prohibited by law. Companies should be
aware that the US government actively and
effectively enforces the established anticorruption legislative framework, including
the FCPA. The FCPA provides a narrow
exception for facilitation payments & for
recorded gists of appropriate, minimal value.
While gifts and facilitation payments are
uncommon in practice, they may violate other
6.1.9 Corruption Potential Red Flags: See
BSA/AML Exam Manual – Appendix F ML/TF
Red Flags which include examples of
potentially suspicious activities, or “red ags”
for both ML & TF, which includes corruption
red ags41. Also red ags are available from
the FinCENs Advisory on Kleptocracy &
Foreign Public Corruption 2022 (See
Appendix 2) & from the Wolfsberg Group42.
anti-corruption laws depending on their value
6.1.10 Corruption Estimates: Whilst there is
and purpose”.
no of cial estimate for the amount of bribes
6.1.8 US Strategy on Countering
Corruption 2021: In December 2021, U.S.
President Biden signalled a redoubled
emphasis on anti-corruption as a national
security priority via the issuance of a U.S.
Strategy on Countering Corruption, which
includes curbing illicit nance as one key
pillar, as well as addressing, “de ciencies in
the U.S. AML regime, (including by effectively
collecting bene cial ownership information
on those who control anonymous shell
companies, and by increasing transparency in
real estate transactions)”, & “holding corrupt
actors accountable” as a second pillar39.
Earlier in June 2021, the US used expanded
Magnitsky sanctions which has now enabled
the US to target foreign corrupt persons, for
example OFAC issued sanctions on three
Bulgarian citizens for their roles in large-scale
paid or the overall costs of corruption for the
US, the UN Secretary General in 201843
referenced that the World Economic Forum,
had estimated the global cost of corruption
at least at US$2.6 trillion, or 5% of the global
gross domestic product (GDP), and the World
Bank had estimated that businesses and
individuals pay more than US$1 trillion in
bribes every year44. Another estimate
released by the EU45 in 2014 estimated that
corruption costs Europe €120 billion (US$162
billion), or 1% of the EU’s GDP. Applied to
the US, based on a WEF estimate of 5% of
GDP, this would amount to costs of
corruption in the US of US$1 trillion. Based
on the more conservative EU estimate of 1%
of GDP this would represent US$210 billion.
Estimates for the US based on estimates of
the value of bribes by the World Bank would
represent US$21 billion.
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Section 6.2 – Drug Trafficking -!🇺🇸
In this Section 6.2 the threat from drug
operations. Another popular way to launder
traf cking, which is one of the US National
drug proceeds in the United States is through
Priorities is assessed and summarised
the purchase of real estate as an investment,
6.2 Drug Traf cking Organisations: Drug
traf cking is one of the main US nancial
crime related priorities.
to use as stash houses, or to grow,
manufacture, or distribute illicit narcotics. The
role of professional money launderers,
particularly Chinese money laundering
6.2.1 NMLRA: The NMLRA 2022 found that
organisations (CMLOs), is also frequently cited
drug traf cking “continues to pose a threat to
as a growing and signi cant challenge to law
public health in the United States, generates
enforcement tracing the movement of drug
signi cant proceeds for the criminal
proceeds. DTOs are growing more
organisations that supply the U.S. and global
comfortable with darknet markets and the use
markets. Drug Traf cking Organisations
of virtual assets to launder funds, although the
(DTOs), engaged in the traf cking of a variety
size and scope of drug proceeds generated
of drugs into the United States, use numerous
on the darknet and laundered via virtual
methods to launder proceeds, which remain
assets remain low in comparison to cash-
predominantly cash based. DEA estimates
based retail street sales. Worldwide sales on
that DTOs continue to generate billions of
major darknet markets appear to have
dollars in illicit proceeds every year. The
remained modest when compared to overall
movement and laundering of proceeds
illicit drug sales. For example, during 2017–
associated with the illicit drug market in the
2020, drug-related darknet market sales
United States continue to include traditional
amounted to approximately US$315 million
methods and techniques, such as bulk cash
annually, or about 0.2% of the combined
smuggling (BCS) and trade-based money
estimated illicit annual retail drug sales in the
laundering (TBML), although the COVID-19
United States and European Union”.
pandemic caused some initial disruptions to
DTOs using those methods due to travel
restrictions and a slower global economy.
Financial institutions, including banks and
money services businesses (MSBs), remain
According to the NMLRA 2022, the main
drug types causing concern are illicit opioids,
heroin, cocaine, methamphetamine &
marijuana.
vulnerable to exploitation by DTOs that use
6.2.1.1 Illicit Opioids and Heroin: “Opioids
front and shell companies and third parties
are a class of drugs that include the illegal
(including money mules) to wire proceeds
drug heroin, synthetic opioids such as
from the United States to their base of
fentanyl, and pain relievers available legally
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by prescription, such as oxycodone
from Mexico. The markets for fentanyl and
(OxyContin®), hydrocodone (Vicodin®),
heroin are substantially intertwined, as
codeine, morphine, and many others. The
distributors often lace heroin with fentanyl to
dramatic spike in the abuse of prescription
increase their pro ts while maintaining the
drugs, heroin, and synthetic opioids such as
potency of their product.
fentanyl and its analogues has accelerated
over the past three years.
In addition to the illicit traf cking of fentanyl
by DTOs, there have been numerous cases of
The COVID-19 pandemic did not appear to
medical professionals, such as doctors and
signi cantly disrupt the use of illicit fentanyl in
pharmacists, prescribing or lling
the United States, which the National Drug
prescriptions for opioid painkillers even
Threat Assessment (NDTA)46 has ascribed to
though their patients had no medical need for
the small number of pills needed to generate
them. While many complicit professionals
high revenue and to induce the intended
took cash fees up front to arrange for these
effect in users. While direct shipments of
prescriptions, others adopted more
fentanyl from China to the United States have
sophisticated money laundering techniques,
decreased substantially since China began
including the use of shell companies to hide
controlling all forms of fentanyl as a class of
the proceeds from law enforcement scrutiny.
drugs in 2019, Chinese companies and
individuals continue to export precursor
chemicals to Mexico for use by DTOs there to
manufacture fentanyl before it is shipped to
the United States. Labs and pill presses are
In 2019, a FinCEN advisory for FIs described
the schemes and methods that illicit actors
used to conceal nancial ows related to the
traf cking of fentanyl & synthetic opioids47.
present throughout Mexico, and cartels traf c
Provisional data from the Centres for Disease
their nished product to the United States
Control and Prevention’s (CDC’s) National
alongside other drugs like heroin and
Centre for Health Statistics indicates that there
cocaine. These DTOs are prioritising building
were an estimated 100,306 drug overdose
indigenous production capacities to reduce
deaths in the United States during the 12
their reliance on foreign-sourced precursor
month period ending in April 2021. The new
chemicals.
data documents that estimated overdose
While fentanyl’s availability has risen in many
parts of the United States, heroin, which is
primarily sourced from Mexico, also continues
to be readily available. Seizure data shows
that the southwest border area of the United
deaths from opioids increased to 75,673 in
the 12-month period ending in April 2021, up
from 56,064 the year before. Synthetic
opioids (other than methadone) are currently
the main driver of drug overdose deaths.
States remains a critical entry point for heroin
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Red Flag Indicators for Fentanyl-related Activity – FINCEN 2019 🇺🇸
Below are suspected schemes related to illicit fentanyl tra cking. “Some red ags listed may also be applicable more generally to drug tra cking, or apply to other tra cked
drugs, or to other money laundering or illicit activity, but are detailed in order to provide context for nancial activity related to fentanyl”.
MSBs: Money Transfer Red Flags
1. The money transfer bene ciary lists a phone number or email address associated with a
pharmaceutical company or chemical sales website.
2. U.S. remitter sends low-dollar money transfers to an individual in China for no apparent legitimate
purpose. Individual transfers may range from $10 to $100, with an aggregated amount of multiple
transfers totaling approximately $600. Conversely, a U.S. remitter sends a high volume of money
transfers to apparently unrelated individuals.
3. Multiple U.S. remitters send money transfers to the same individual bene ciary in China (i.e., many
to one).
4. Seemingly unrelated bene ciaries share the same phone number or email address to receive
transactions.
5. The volume of outgoing money transfers is not consistent with the expected activity of a U.S.
remitter.
6. A U.S. remitter adjusts the money transfer amount to avoid BSA reporting and record keeping
requirements (i.e., structuring). When a U.S. remitter sends multiple structured money transfers,
additional red ags may be involved:
• Remitter uses multiple agent locations.
• Remitter sends money transfers to the same bene ciary consecutively, instead of aggregated in a
single sum.
• Two or more seemingly unrelated remitters are linked together by shared attributes such as common
addresses or pro le information. These remitters then coordinate transactions to evade the record
keeping threshold.
Depository Institutions: Structuring and Funnel Account Activity Red Flags
7. Account owners or third parties structure cash deposits at bank branches nationwide into the same
account, which funds outgoing transactions on the SWB, including cash withdrawals or wire transfers
to Mexico (i.e., funnel account activity and rapid movement of funds).
8. The depository institutions have a suspicion concerning the physical condition of deposited
banknotes (e.g., the bills smell of drugs, detergent, or are excessively worn).
9. The source of funds cannot be corroborated.
10. Multiple transactions below the applicable Currency Transaction Report (CTR) threshold (i.e.,
structuring), which may involve additional indicators:
• Suspicious use of multiple locations.
• Two or more individuals working together.
• Suspicious use of multiple accounts.
11. Transaction out of pattern for customers or business type.
12. Transaction with no apparent business purpose.
Depository Institutions: Shell Company Red Flags
13. Unclear business model:
• The company’s North American Industry Classi cation System (NAICS) code(s) is/are in a di erent
industry than the business name indicates.
• Commercial databases reveal the company is associated with multiple businesses in unrelated
industries.
• Open source information reveals that the company lacks or has vague company websites.
14. Company address or location discrepancy:
• Online or other open source searches on the address provided reveal a business with a di erent
name, or an operating location inconsistent with the business model, such as a residence.
• Commercial databases associate the company with multiple active addresses or operating locations,
but reveal few, if any, indications the company has franchises or multiple branches, subsidiaries, or
agents.
15. Company name discrepancy:
• The company’s name is vague, non-descriptive, or does not align with its business model.
• Commercial databases reveal the company has three or more name variations or has multiple “doing
business as” (dba) names.
16. Employer Identi cation Number (EIN) discrepancy:
•
Commercial databases reveal the company is a small business with fewer than 500 employees
but has multiple EINs or shares EINs with other businesses.
Depository Institutions and MSBs: Clearnet and Darknet Marketplace Fentanyl Purchase Red
Flags
17. Direct or indirect transactions with Darknet marketplaces or CVC mixing services. The names of
several current popular Darknet marketplaces include:
•
Empire
•
Tochka/Point • Valhalla
•
Rapture
•
Berlusconi
18. Customers with past criminal histories for drug-related o enses.
19. Customers discussing drug purchases in the transaction notes eld available on the exchange,
including referencing drugs or weight measurements like grams (e.g., “1 gram fent”). Customers may
reference the informal slang names48 (e.g., “Fenty”) or the actual chemical names (e.g.,
“Acetylfentanyl”).
20. Use of virtual private network (VPN) services or Tor to access CVC exchange accounts.
Source: https://www. ncen.gov/sites/default/ les/advisory/2019-08-21/Fentanyl%20Advisory%20FINAL%20508.pdf
6.2.1.2 Cocaine: “Cocaine, produced almost
from other countries, including China and
entirely in Latin America (particularly Bolivia,
India.”
Colombia, and Peru) and traf cked through
Mexico, continues to maintain a signi cant
share of the U.S. drug market and remains
one of the primary drugs that DTOs export to
this country. Colombian and Mexican DTOs
control the supply chain of cocaine, with
Mexican DTOs controlling distribution within
the United States.”
6.2.1.3 Methamphetamine: “As with many
other illicit drugs, the southwest border area
remains the principal transport point for
methamphetamine produced in Mexico at
scale for the U.S. market. As with the illicit
production of fentanyl, DTOs have adapted to
restrictions on the availability of precursor
chemicals (in this instance, put in place by the
Mexican government) by importing them
6.2.1.4 Marijuana: “Marijuana continues to
be the most widely consumed illicit drug in
the United States. Mexico remains the largest
source of imported marijuana according to
the DEA, its market share has steadily eroded
as domestic production, which occurs in all 50
states, has increased.”
6.2.1.5 Priority Threat Actors: “The Sinaloa
Cartel and the Cártel Jalisco Nueva
Generación (CJNG) are the two largest and
most sophisticated DTOs, controlling
transportation and distribution routes
throughout Mexico and the United States,
although multiple Mexican DTOs maintain a
signi cant presence in the UnitedStates. In
addition to their traditional control of heroin,
cocaine, and marijuana traf cking, Mexican
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DTOs have embraced the growing fentanyl
foreign actors, including Mexican ma a-style
market. Mexican DTOs use a variety of money
groups. Methamphetamine use has
laundering methods, including BCS, misuse
skyrocketed in the US in recent years, and
of MSBs and banks, and TBML. Of the major
primarily originates in Mexico as a low-cost,
money laundering methods, COVID-19 may
high-purity and high-potency alternative to
have temporarily affected BCS and TBML the
that in the US. Synthetic cannabinoids,
most, as decreased traf c across the border
cathinones and precursors are mostly
generated larger seizures of cash or products
traf cked into the US by Chinese networks.
tied to DTO activity.”
Illicit Fentanyl and other synthetic opioids are
6.2.2 Organised Crime Index – Drug
Traf cking: The 2021 OC Index reports that
in terms of criminality scores, drug trade is
the highest with the synthetic drugs (7.5/10),
cocaine (7/10), heroin (6.5/10) & cannabis
(5/10) – a combined average of 6.5/10.
It also states that, “the US drug markets are all
among the largest in the world. Cannabis is
the most commonly used illicit drug in the US,
and the country is both a source and
destination for cannabis. While illegal under
federal law, states have different regulations
regarding possession, use and cultivation.
Most cannabis is illicitly produced
domestically by drug-traf cking organisations
or by state-licensed growers. The illicit market
is supplied by illegal, domestically produced
cannabis; diverted domestic, state-approved
cannabis; and foreign-produced cannabis
traf cked into the US, mainly from Mexico
and, to a lesser extent, Canada and the
Caribbean. However, the quality of Mexican
and Caribbean cannabis is considered inferior
to that produced in the US and Canada.
the most lethal opioids used in the US. One of
the biggest market impacts is the increase in
lethal overdoses involving synthetic opioids
and psycho stimulant drug poisoning.
Although law enforcement agencies are
dedicated to combating the market, dark-net
Fentanyl and social media transactions are
extensive.
Although heroin has largely been displaced
by opioids such as Fentanyl, seizures of the
drug have increased, especially on the southwest border, and the mixing of heroin with
Fentanyl is common. The US heroin market
primarily involves Mexican heroin, and ma astyle groups control smuggling routes across
the south-west border. The trade also
contributes to territorial struggles between
gangs. Thousands of deaths in the US are
attributed annually to heroin overdoses,
increasingly due to high potency and the
mixing of heroin or cocaine with Fentanyl.
High disease rates have also resulted from
shared syringes, and there is a relationship
between the opioid crisis and the rise in
numbers of children in foster care. The
Synthetic opioids generally dominate the US
availability of cocaine has increased in recent
market, with pro ts mostly being accrued by
years due to record levels of coca cultivation
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and cocaine production in Colombia, the
Cartel show signs of expansion in Mexico,
primary source of US cocaine, which mostly
demonstrating their continued in uence even
enters via the south-west border through
compared to other Mexican TCOs. These
Mexican networks. In the main, domestic
expand their criminal in uence by engaging
street gangs control retail-level distribution.”
in business alliances with other organisations,
6.2.3 Drug Use, Disorders & Deaths:
According to Our World in Data, in 2019 the
USA had an estimated 10,7 million people48
with illegal drug use disorders (an increase of
including independent DTOs and working in
conjunction with transnational gangs, prison
gangs and Asian money laundering
organisations (MLOs).”
91% between 1990 and 2019) representing
3.7% of the population (an increase of 62%
between 1990 and 2019), much greater than
the world average (0.94%), and higher even
than Canada (2.72%), UK (2.19%), Australia
(2.4%), Switzerland (2.19%), New Zealand
(1.84), Spain (1,78%).
Other countries to compare and contrast
include France (1.25%), Germany (1.07%),
Brazil (1.11%), China (0.69%), India (0.52%) &
In total 9 Mexican TCOs are considered, “as
Japan (0.85%).
having the greatest drug traf cking impact on
6.2.4 USA DEA National Drug Threat
Generation Cartel,Beltran Leyva Organisation,
Assessment 2020: The DEA TA 2020
reports49
that, “Mexican TCOs continue to
control major smuggling corridors, primarily
across the south west border, and maintain
the greatest drug traf cking in uence in the
USA. The 2 largest organisations are the
Sinaloa Cartel and Jalisco New Generation
the USA: Sinaloa Cartel, Jalisco New
Cartel del Noreste and Lo’s Zetas, Guerreros
Unidos, Gulf Cartel, Juarez Cartel and La
Linea, La Familia Michoacana, & Los Rojos.”
Others highlighted include Colombian
Cartels, Dominican TCOs (who use Puerto
Rico as a transit hub into the USA) & Asian
TCOs.
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6.2.4.1 Mexican TCOs: “Mexican TCOs
6.2.4.4 Asian TCOs: “Asian TCOs in the US
generate billions of dollars annually through
play a key role in the laundering of illicit drug
the sale of illegal drug in the USA. The cartels
proceeds. Asian TCOs involved in money
utilise a variety of methodologies to counter
laundering contract their services and
law enforcement efforts to identify and
sometimes work jointly with other criminal
con scate illicit proceeds in the United State
groups, such as Mexican, Colombian &
and Mexico.”
Dominican TCOs. Money laundering tactics
6.2.4.2 Mexican TCO Money Laundering:
“TCOs use members to transport cash across
the border in vehicles, small aircraft, and by
couriers. They also use wire transfers, shell
and legitimate business accounts, funnel
accounts, and structured deposits with money
remitters in order to move money while
concealing the routing of the illicit proceeds.
Mexican TCOs also use cryptocurrencies to
further their criminal enterprise. Furthermore,
Asian MLOs engage in laundering of drug
proceeds on behalf of the Mexican TCOs.”
6.2.4.3 Colombian TCOs Money
Laundering: “The principal mechanism by
which Colombian TCOs launder their drug
proceeds are the Black Market Peso Exchange
(BMPE) & trade based money laundering
(TBML). Colombian TCOs rely on international
networks of money launderers who pro t from
foreign exchange transactions and trade
based activity. Although not as prominent as
with Mexican TCOs, there has been an
increase in the presence of Asian MLOs in
areas where Colombian TCOs operate. There
has also been evidence of the utilisation of
cryptocurrencies by Colombian TCOs in order
to transfer their proceeds internationally.”
employed by Asian TCOs generally involve
the transfer of funds between China and
Hong Kong, using front companies to
facilitate international money movement.
Asian TCOs also use underground banking
and mirroring schemes. US based Asian TCOs
rely on domestic cash intensive businesses to
facilitate money laundering activities. Law
enforcement reporting indicates an increase
in Chinese money laundering groups and
Mexican TCOs collaborating to move/launder
money.”
6.2.4.5 Asian Money Laundering
Organisations: “Asian MLOs are working in
conjunction with Hispanic DTOs with
increasing frequency. In some cases, there
appear to be agreements between Mexico
based TCO leaders & Asian MLO heads
based in Mexico. Asian MLOs provide access
to long-standing laundering networks for US
based Mexican TCO members. Various DEA
of ces have observed Mexican DTOs
increasingly utilising domestic Asian MLOs to
facilitate drug money movement across a
variety of methods including TBML, the
Chinese underground banking system, virtual
currencies, and even bulk currency storage
and shipment. Within the US, the laundering
networks operate in and around most major
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metropolitan areas. Outside of the US, Asian
and transport in small amounts simply by
MLOs operate on behalf of drug traf ckers
mail. Further, because the chemicals used to
have been identi ed in Mexico, as well as in
produce illicit fentanyl still have legal uses, it
Central & South America. Moreover, beyond
is very dif cult to control their diversion.
mainland China, Asian MLOs also operate in
Hong Kong, Australia, New Zealand, and other
Far East & South East Asian countries.”
Each year the DoS identi es, “major illicit
drug producing and/or drug-transit
countries,” with the following countries
identi ed in 2021: Afghanistan, The Bahamas,
Belize, Bolivia, Burma, Colombia, Costa Rica,
Dominican Republic, Ecuador, El Salvador,
Guatemala, Haiti, Honduras, India, Jamaica,
Laos, Mexico, Nicaragua, Pakistan, Panama,
Peru, and Venezuela.
Another list of countries considered as major
sources of precursor or essential chemicals
used in the production of illicit narcotics
includes: Afghanistan, Belgium, Belize,
Bolivia, Brazil, Burma, Canada, China,
Colombia, Costa Rica, Ecuador, El Salvador,
Germany, Guatemala, Honduras, Hong Kong,
India, Republic of Korea, Mexico, the
Netherlands, Nigeria, Pakistan, Peru, Poland,
South Africa, Taiwan, Thailand, the United
6.2.5 US DoS (INCSR): According to the
Arab Emirates, the United Kingdom, and
annual INCSR report by the US State
Venezuela.
Department50 published in 2022, “Synthetic
opioids remain the foremost drug-related
threat to the United States. The extreme
potency of these opioids ensures that the
pro t margin to traf ckers is huge, even for
small amounts. In contrast to the plant-based
drugs used to produce cocaine and heroin,
6.2.5.1 Afghanistan: Whilst Afghan opium is
the main country of origin for heroin around
the world, it is not a major supplier of opiates
to the United States, representing less than
1% by weight of heroin samples tested in the
United States.
synthetic opioids are inexpensive to produce,
6.2.5.2 Mexico: Mexico is identi ed as the
can be manufactured anywhere without
most important source and transit country as
having to construct elaborate labs or
far as drugs are concerned. It is a major
processing facilities, and are easy to conceal
source of precursor or essential chemicals
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used in the production of illicit narcotics. In
bene ts hostile actors such as Hezbollah and
respect of drug -related vulnerabilities, the
the Assad regime in Syria”
report highlighted that “Mexico and the
United States have a shared responsibility to
disrupt the drug threat. Mexican criminal
organisations have a signi cant global
presence, including in Europe, Asia, and
Africa, and most of the heroin,
methamphetamine, and fentanyl and its
analogues consumed in the United States
originates in Mexico. Mexico is also a major
transit country for cocaine from South
America to the United States and a
destination for fentanyl precursors originating
mainly from the People’s Republic of China
(PRC). Notably, while Mexican fentanyl
production has soared, fentanyl seizures by
Mexican authorities have as well, increasing
525% in the three-year period 2019-2021,
compared to 2016-2018. The rapid shift in
fentanyl production from the PRC to Mexico
re ects another extremely worrying trend: the
ability of transnational criminal organisations
to rapidly adapt to changing circumstances
and the truly global reach of the drug
traf cking trade. In addition to Mexican
The report further states that “To avoid
Chinese controls on the export of precursors,
some entrepreneurs and dealers, including
Mexican-based criminal organisations, have
shifted to India as a new source for precursor
chemicals. Multi-ton consignments of
precursor materials from India have been
shipped to Africa and Mexico. This trend is
expected to continue and expand. Mexico
controls six fentanyl precursor chemicals: 4AP, 4-AP Dihyrdochloride, Propionic
Anhydride, Propionyl Chloride, NPP, and
ANPP. On May 25, 2021, Mexico published a
new 14-chemical watchlist to ag these
chemicals to government and private sector
entities to reduce diversion to TCOs. These
controls have forced transnational criminal
organisations (TCOs) to seek chemical
alternatives, while providing Mexican
regulatory and law enforcement agencies a
legal basis to seize these substances and le
criminal or civil charges against those illegally
importing them.
criminal organisations establishing a foothold
The U.S. government continues to enhance
in China, cocaine originating in South
Mexico’s capacity to track chemical imports
America is traf cked to virtually every other
and exports electronically and builds the
region on earth; Nigerian traf ckers have
Mexican Navy’s ability to interdict illicit goods
expanded their worldwide reach; the cocaine
and control ports to disrupt the supply chain
markets in Europe and Asia have exploded;
of precursor chemicals used to make illicit
and precursor chemicals from the PRC and
drugs. The United States cooperates closely
India are diverted to all parts of the globe.
with Mexico on synthetic drugs to reduce the
Captagon production and traf cking
supply of illicit opioids in the United States.
throughout the Middle East has also
The U.S. government sponsors training and
increased dramatically, which potentially
conferences to promote awareness of
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synthetic drugs and seizure trends and
such goods to TCOs. TBML also includes
supports forensic chemistry labs to improve
invoice manipulation to justify the transfer of
criminal investigations involving synthetic
large sums of funds into Mexico’s nancial
opioids. The United States also assists
system. A 2019 executive order strengthens
COFEPRIS in issuing electronic permits and
penalties for fraudulent tax invoices, often
tracking the international import and export of
associated with TBML.
precursor chemicals through the National
Drug System (NDS).
Illicit actors in Mexico invest in nancial and
real assets. ML through the luxury real estate
Despite controls, transnational criminal
sector remains a concern, especially as a
organisations stay ahead of scheduling laws
vehicle for laundering the proceeds of public
by using pre-precursors, and easily available,
corruption. Two popular ML methods include
off-the-shelf products to synthesise precursors
structuring deposits and funnel accounts.
and avoid existing regulations.
Asia- based money launderers continue to
The Government of Mexico continued to
target suspected fentanyl labs, facilities
producing fentanyl-laced counterfeit pills
(known as pill mills), and fentanyl in transit in
2021. The United States is working with FGR
and other agencies, including military units
who perform counternarcotics work, to create
judicial records of seizures and establish
protocols for reporting to a central database.
Volume II of the 2022 INCSR provides further
information in relation to money laundering
methods used, “Illicit drug proceeds
originating in the United States are the
principal sources of funds laundered through
compete with traditional Mexican launderers,
conducting “mirror transactions” more
ef ciently and at a lower cost. Narcoticsrelated proceeds are also laundered through
unlicensed exchange houses, although
Mexico’s main banking regulator, the National
Banking and Securities Commission (CNBV),
issues regulations and has a special unit that
curtailed the number of unlicensed exchange
houses in operation.
Mexican authorities are evaluating the risks
for criminal exploitation of nancial
technology, including virtual currencies like
bitcoin”.
the Mexican nancial system. Mexican
6.2.5.3 Colombia: According to US INCSR
transnational criminal organisations (TCOs)
Report 2022, “Colombia is the world’s top
launder funds using a variety of methods.
cocaine producer and exporter and a source
Trade-based money laundering (TBML)
of heroin and marijuana. The U.S. government
involves the use of dollar-denominated illicit
estimates Colombia’s potential pure cocaine
proceeds to purchase retail items for export to
production increased from 918 metric tons
and re-sale in Mexico or the United States,
(MT) in 2019 to 1,010 MT in 2020. Under
and then routing the revenue from the sale of
President Duque, Colombia has increased
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efforts against the illicit drug trade. Colombia
to adhere to their obligations under
reported seizing or assisting with the seizure
international counternarcotics agreements
of 579.8 MT of cocaine and cocaine base
and to take the measures expected by the US
during 2020 and nearly 758 MT during 2021.
Government.”
In December 2020, President Duque
announced the Colombian government met
its target of eradicating 130,000 ha in 2020.
At least 95% of the cocaine samples seized in
the United States in 2020 and subjected to
laboratory analysis were of Colombian origin”.
6.2.5.6 Venezuela: Of the 22 countries
identi ed in the US INCSR Report 2022, as
major illicit drug producing and/or drugtransit countries, “Bolivia and Venezuela were
additionally designated as having “failed
demonstrably” during the previous 12 months
6.2.5.4 Peru: According to US INCSR Report
to adhere to their obligations under
2022, “Peru is the world’s second largest
international counternarcotics agreements”
cultivator of coca and producer of cocaine.
and to take the measures expected by the US
Potential pure cocaine production in Peru rose
Government. “Venezuela is a major drug
25% in 2020, to 810 metric tons (MT).
transit country and a preferred traf cking
Peruvian cocaine is traf cked throughout
route in the Western Hemisphere for illegal
South America for shipment to Europe, East
drugs, predominately cocaine. On January 10,
Asia, Mexico, and the United States. Peru also
2019, Nicolás Maduro began a second term
is a major importer of precursor chemicals for
as president. Juan Guaidó, as President of the
cocaine production.
National Assembly, invoked the Venezuelan
Former President Francisco Sagasti’s
government published a new 2021-2030
Drug Control Strategy in December 2020. The
government of President Pedro Castillo, who
took of ce in July 2021, continues to
implement it. As of November 4, 2021, Peru
reported eradicating 2,594 ha of coca.”
constitution on January 23, 2019, to assume
the role of Interim President, but Maduro
refused to cede power. Guaidó has
condemned the Maduro regime’s complicity
with illegal armed groups, including the
National Liberation Army (ELN) and dissident
elements of the former Revolutionary Armed
Forces of Colombia (FARC-D). He has
6.2.5.5 Bolivia: “Bolivia is the third largest
characterised the regime as a drug traf cking
source country of cocaine and a major transit
cartel lacking full control of Venezuelan
zone for Peruvian cocaine.” Of the 22
territory, running the risk of turning Venezuela
countries identi ed in the US INCSR Report
into a “failed state” and a “sanctuary for
2022, as major illicit drug producing and/or
organised crime.” The regime’s practically
drug-transit countries, “Bolivia and Venezuela
nonexistent international drug control
were additionally designated as having “failed
cooperation, usurpation of the judiciary and
demonstrably” during the previous 12 months
military services for its own illicit ends,
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corruption, and cooperation with criminal
Saba are special municipalities of the country
elements provide ideal conditions for drug
of the Netherlands. Aruba and Curaçao are
traf cking and associated violence. Given the
located 30 to 40 miles north of Venezuela and
economic crisis due to its corruption and
serve as northbound transshipment points for
mismanagement, the regime increasingly
cocaine originating from Colombia and
depends on illicit proceeds from drug
Venezuela. Cocaine is primarily transported
traf cking. The regime took no action in 2021
via go-fast vessels, shing boats and inter-
against persons and companies designated
coastal freighters for transshipment to the
as Specially Designated Narcotics Traf ckers
United States, other Caribbean islands, Africa,
or indicted by the United States for drug
and Europe. Sint Maarten is in the Eastern
traf cking. Designees and those indicted
Caribbean and is a transshipment hub for
include Maduro himself and members of the
cocaine, heroin, and marijuana transiting
regime’s cabinet.”
onward to Puerto Rico and the U.S. Virgin
6.2.5.7 The Caribbean: Caribbean Islands
Islands as well as Europe.
such as The Bahamas, Dominican Republic,
“The Dominican Republic is a transit country
Haiti, & Jamaica are all included in the 22
for most of the cocaine owing from South
countries listed due to their locations and
America through the Caribbean. Maritime
proximity to drug producing and other transit
routes involving the use of “go-fast” boats and
countries as well as transit gateways towards
commercial containers are the primary
the US.
method of transportation. The Dominican
Also included more generally is “the Eastern
Caribbean which refers to the region’s seven
independent countries: Antigua and Barbuda,
Barbados, Dominica, Grenada, Saint Kitts and
Nevis, Saint Lucia, and Saint Vincent and the
Grenadines. The region is a transshipment
route for cocaine and marijuana to North
America, Europe, and the wider Caribbean
basin.”
government continued its cooperation with
the U.S. government in 2021 to interdict illicit
drug shipments, extradite criminals, and
combat the in uence of drug traf ckers and
transnational criminal organisations. Despite
this cooperation, corruption continues to
hamper these efforts. While illicit drugs
remain available locally, most drugs are
transshipped for onward movement to the
United States and Europe. The Dominican
Also included is “the Dutch Caribbean which
Republic does not have a signi cant
consists of Aruba, Curaçao, Sint Maarten,
capability to produce precursor chemicals.”
Bonaire, Sint Eustatius, and Saba. Aruba,
Curaçao, and Sint Maarten which are semiautonomous countries within the Kingdom of
the Netherlands. Bonaire, Sint Eustatius, and
6.2.5.8 China: “China’s geographical
location, vast land area, massive population,
large chemical industry, and expanding
economy have all contributed to its status as a
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major source of precursor chemicals for
and North America. U.S.-based customers use
fentanyl and other drugs, new psychoactive
online pharmacies and call centres to illegally
substances (NPS), and synthetic drugs
obtain pharmaceutical drugs through mail
including methamphetamine. China shares
shipments from India. Websites registered in
borders with drug source countries in both
India advertise a range of drugs, including
Southeast and Southwest Asia and is a major
fentanyl and fentanyl analogues. India
destination and transit country for heroin
authorises and regulates legal opium
produced in these areas. Domestic Chinese
production in three states for pharmaceutical
criminal organisations traf c illicit drugs within
manufacturing. Opium poppy is also grown
the PRC as well as to international markets,
illicitly for domestic consumption. Billions of
and PRC authorities have noted the presence
tablets of opioids and several tons of
of international drug traf cking organisations
precursor chemicals originating in India were
originating from Mexico and Southeast Asia
seized worldwide in 2021.”
operating in the country. Its numerous coastal
cities with high-volume seaports and its vast
network of international airports make the
PRC an ideal hub for drug and precursor
chemical production and traf cking.”
6.2.5.9 Pakistan: “Pakistan is one of the
world’s top transit corridors for opiates and
cannabis products, which are traf cked
through its porous borders with Afghanistan
and Iran. Pakistan’s seaports, airports, postal
6.2.5.8 India: “India is a source, transit, and
services, and unpatrolled coastal areas allow
destination point for illicit narcotics. India is
illicit drugs to be distributed globally. The
committed to addressing its drug production,
UNODC estimates Pakistan is the transit
traf cking, and use challenges. It has
country for 45% of the opiates produced in
tightened regulations and increased law
Afghanistan. Precursor chemicals used to
enforcement authorities related to illicit
produce heroin and methamphetamine also
production but faces resource and capacity
transit Pakistan before global distribution.”
limitations relative to the country’s large
population. Challenges are compounded by
India’s large pharmaceutical sector,
geographic location, and transportation
infrastructure. Drug traf ckers exploit high
levels of technical expertise and supplies of
chemicals in India to manufacture synthetic
drugs and precursor chemicals for markets in
the United States and elsewhere. Illicit drugs
and precursor chemicals originating in India
are available in Europe, Africa, Southeast Asia,
6.2.8 US Strategy on Countering Drug
Traf cking: In December 2021, the Biden
Administration published details51 on how
increased sanctions would target drug
traf ckers alongside targeting transnational
criminal organisations that bene t from this
trade. A new “U.S. Council on Transnational
Organised Crime”52 was being established
to bring together numerous agencies and
new authorities established, “Imposing
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Sanctions on Foreign Persons Involved in
Generation (CJNG) cartels; targeted narco
the Global Illicit Drug Trade”53.
traf ckers and related asset freezes and
seizures up by 365%; the number of
defendants convicted in active drug related
investigations that incorporate FinCEN/SAR
data is up by 14%; & the number of incident
reports for precursor chemicals sourced from
China or India up by 125%.
6.2.9 Potential Red Flags: See BSA/AML
Exam Manual – Appendix F ML/TF Red Flags
which include examples of potentially
suspicious activities, or “red ags” for both
ML & TF, which includes potential drug
traf cking red ags55. See also Section 6.2.2.1
above for a 2019 FinCEN advisory for FIs
described the schemes and methods that
illicit actors used to conceal nancial ows
related to the traf cking of fentanyl &
In the Biden Administration’s Drug Control
Strategy 202254, published in April 2022, the
focus is on 2 critical drivers of the drugs
epidemic in the US – untreated drug
addiction and drug traf cking. The strategy
instructs federal agencies to prioritise actions
that save lives, and get people the treatment
they need and to go after drug traf ckers
pro ts and make better use of data to guide
all these efforts. This strategy is the product of
a rigorous process led by the Of ce of
National Drug Control Policy in close
collaboration with the 18 National Drug
synthetic opioids56
6.2.10 Estimated Drug Proceeds: The
Of ce of National Drug Control Policy
estimated that US$100 billion57 worth of
illegal drugs were sold in the US in 2013,
whilst the gure of US$64 billion58 has also
been suggested in the NMLRA 2015 (&
referenced in the FATF 2016 Report). The
RAND corporation estimated spending by
Americans of US$150 billion in 2016 just
less than estimated for alcohol at US$158
billion in 201759.
Control Agencies. Key targets by 2025 for
The World Drug Report 2021, from the
reducing illicit drug supply to the US are
UNODC, reported that the estimated illicit
included, for example, the supply of heroin
annual retail drugs sales (2016/17) in the US
down by 30% & cocaine by 10%; increased
was US$146 billion60.
targeting of Sinaloa or Jalisco New
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Section 6.3 – Transnational Organised Crime -!🇺🇸
In this Section 6.3 the threat from
called Western Hemisphere Gangs (from
transnational organised crime, which is one
Colombia, Peru, Bolivia, Central America &
of the US National Priorities is assessed and
Mexico). There are also approx 33,000 violent
summarised.
street gangs, motorcycle gangs, and prison
gangs criminally active in the US, according
to the FBI.62
For more on President Biden’s Strategy to
Combat TCOs see Section 6.3.7 below.
6.3.1 National Emergency against
Transnational Criminal Organisations
(TCOs): In 2011, the then US President
Obama declared a national emergency with
respect to TCOs pursuant to the International
Emergency Economic Powers Act (50 U.S.C.
1701 et seq.) to deal with the unusual and
extraordinary threat to the national security,
foreign policy, and economy of the US
6.3 Transnational Criminal Organisations:
constituted by the activities of signi cant
The Biden Administration in December 2021
TCOs. In 2019, then President Trump,
announced61 that “Transnational organised
extended these measures, con rming the
crime (TOC) poses a direct and escalating
National emergency continues63. These
threat to public health, public safety, and
Presidential Orders allow the US Treasury to
national security. Transnational criminal
deploy nancial sanctions tools to target
organisations engage in a broad range of
TCOs. The Bureau of International Narcotics
criminal activities, including drug and
and Law Enforcement Affairs leads the
weapons traf cking, migrant smuggling,
Department’s foreign policy input and
human traf cking, cybercrime, intellectual
coordination with the Department of the
property theft, money laundering, wildlife and
Treasury on the sanctions program.
timber traf cking, illegal shing, and illegal
mining.” Transnational Organised Crime
For more details see Section 7 below.
(TOC’s) Groups identi ed by the FBI as active
“In 2011, under former President Obama’s
and signi cant include TOC’s from all corners
administration, additional authorities were
of the World, from Africa, the Balkans,
used to sanction Transnational Criminal
Middle Eastern, Asian, Eurasian, Italian & so
Organisations (TCO) including members and
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nancial fraud and counterfeiting; and
transnational criminal organisations. As a
launder money. Some organised criminal
result, sanctions went beyond sanctioning
groups cooperate across ethnic and racial
drug traf ckers to those involved in any
lines, engage in white-collar crimes, and co-
criminal activity. While the rst term of the
mingle illegal activities with legitimate
Obama administration saw more than 1,500
business ventures”.
transnational crime–related sanctions—
averaging 234 sanctions per year—the Trump
administration averaged 81 sanctions per
year and reached a total of just 323 new
designations by the end of 2020.
The use of transnational crime–related
designations during Obama’s time in of ce
(1,789) was more than ve times greater than
during Trump’s (323), making it one of the
only sanctions programs more actively used
under the Obama administration than the
Trump administration. (U.S. Treasury Of ce of
Foreign Asset Control).”
6.3.4 Top International Criminal
Organisations Target (TICOT) List: The
TICOT list65 from the NMLRA 2015 include:
•
La Cosa Nostra: “La Cosa Nostra has
operated in the United States for more
than 100 years, becoming entrenched in
almost all aspects of business, particularly
in New York. While this organisation will
intermingle illicit proceeds with legitimate
business pro ts, the FBI notes that one of
the dif culties in tracing Ma a proceeds is
the group’s preference for cash (bank
notes). Payouts related to fraud, extortion,
6.3.2 Organised Crime NMLRA: The
and other criminal activities are generally
NMLRA 2022 does not provide speci c
made in cash. Ma a members will store
information on OCGs in the report.
up to several million dollars in cash rather
6.3.3 FATF 2016 MER: The FATF 2016 MER
refers to the NMLRA 201564 in relation to
organised crime. “Organised criminal groups
from all over the world are present in the
United States and target the United States
from abroad. These organisations include the
Italian La Cosa Nostra (Ma a), as well as
groups from Africa, Asia, Eurasia, and the
Middle East. Criminal activity associated with
organised crime includes extortion, illegal
gambling, kidnapping, loan sharking, murder,
prostitution, and racketeering. These groups
than place the money in a bank. In 2011
the FBI led the largest Ma a investigation
in the Bureau’s history, resulting in
approximately 64 arrests, predominantly
in New York. Charges included murder,
drug traf cking, arson, loan sharking,
illegal gambling, witness tampering, labor
racketeering, and extortion. According to
the FBI New York eld of ce, the Ma a
extortion racket, or so-called “mob tax,”
alone generates millions of dollars
annually.”
also smuggle aliens; traf c in drugs; commit
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those who offer material support to,
African Criminal Enterprises: “African
to perform some activity that helps to
criminal enterprises have been identi ed
support another criminal scheme.
in major metropolitan areas across the
– Check cashing/funds transfer fraud,
United States selling illegal drugs and
which involves a person outside the
perpetrating various fraud schemes. The
United States asking for help
political, social, and economic conditions
transferring funds. The victim, who
in African countries like Nigeria, Ghana,
may be contacted as a result of
and Liberia have helped some enterprises
posting a resume online, may receive
expand globally. Nigerian criminal
money orders, checks, or funds
enterprises are among the most
transfers, and is asked to take a
aggressive and expansionist of the
percentage and transfer the funds
international criminal groups. The
offshore. The funds received are
Nigerian groups are infamous for their
typically fraudulent or stolen.”
nancial frauds, which cost the United
States an estimated US$1 billion to US$2
•
Eurasian Organised Crime: “According
billion annually. Schemes are diverse,
to law enforcement, Russian and Eurasian
targeting individuals, businesses, and
organised crime groups leverage close
government of ces. Examples include:
political ties abroad to protect their
– Advance fee (or 419) fraud which
typically involves a person claiming
to have access to a large amount of
money that they are willing to share
in return for help transferring or
depositing the funds. The victim is
asked for money to pay initial fees.
After the money is transferred, the
benefactor disappears.
– Online dating scams, which involve
interests and facilitate access to the
international nancial system. Eurasian
organised crime groups are a particular
concern because of their systemic use of
sophisticated schemes to move and
conceal their criminal proceeds using U.S.
banking institutions and U.S. incorporated
shell companies. FinCEN, citing SARs,
reported in 2006 on the apparent abuse
by Russian criminal groups of U.S. shell
companies used to open bank accounts
taking advantage of individuals who
outside the United States. A review of SAR
are led to believe a serious
data on both a macro and micro scale
relationship is developing. The victim
indicates that suspected shell companies
may be asked for money to pay for
incorporated or organised in the United
travel in order to meet, or for a health
States have moved billions of dollars
emergency. Once the money is
globally from accounts at banks in foreign
transferred the paramour disappears.
countries, particularly those of the former
Alternatively, the victim may be asked
Soviet Union, and predominantly the
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•
They commonly use money mule networks
these companies are LLCs and
to launder proceeds. In a 2017 case that
corporations … Many of the U.S.-based
involved tens of millions of dollars in fraud
suspected shell companies were observed
proceeds, unsuspecting victims of online
to maintain banking relationships with
romance scams cashed counterfeit checks
Eastern European nancial institutions,
and money orders on behalf of the
particularly in Russia and Latvia.
perpetrators and sent them the proceeds
Middle Eastern Criminal Enterprises:
The FBI notes that although there is a
nexus between terrorist nancing and
nancial crime supporting Islamist
by non-bank wire transfers, and received
and re-shipped merchandise purchased
with stolen credit card numbers.
• Asian TCOs: According DEA’s 2017
extremist groups, there are also Middle
National Drug Threat Assessment (NDTA),
Eastern criminal groups operating to make
Asian organised crime groups in the
money through illegal activities. These
United States are prominent in money
Middle Eastern groups typically are
laundering for Mexican, Colombian, and
loosely organised theft and fraud rings
Dominican drug traf cking organisations.
and have been active in the United States
Money laundering tactics vary by
since the 1970s”.
organisation with some using cash-
The NMLRA 201866 updates this information
as follows: “A number of Transnational
Criminal Organisations (TCOs) operate in the
United States. Mexican and Russian TCOs
operating in the U.S. remain priority threats,
with African and Asian organisations
becoming more signi cant each year. Drug
cartels in Colombia, Peru, and throughout
Central America also operate as independent
TCOs.”
intensive businesses in the United States to
move drug proceeds into the nancial
system for laundering. Generally, Asian
TCOs transfer funds to and from China and
Hong Kong, using front companies as part
of their international money movement
schemes. Law enforcement agencies have
reported interconnectivity between
Chinese money laundering organisations
and Mexican drug cartels. According to the
FBI, Asian TCOs also conduct traditional
• African TCOs: “According to the FBI,
racketeering activities normally associated
Nigerian criminal enterprises are the most
with organised crime—extortion, murder,
signi cant of the Africa TCOs. They are
kidnapping, illegal gambling, prostitution,
primarily engaged in drug traf cking and
and loansharking. They also smuggle
nancial fraud, including business e-mail
persons; traf c heroin and
compromise schemes and various
methamphetamine; commit nancial
con dence scams in the United States.
frauds; steal autos and computer chips;
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•
Russian Federation and Latvia. Most of
products; as well as money laundering.”
• Mexican and Columbian TCOs: “Mexican
TCOs dominate the U.S. drug trade and
associated money movement. DEA
investigations show that six major Mexican
drug cartels maintain drug distribution
cells in cities across the United States. It is
anticipated that Mexican TCOs will
continue to grow in the United States
through the expansion of distribution
networks and relationships with
intermediaries, such as U.S.-based
Dominican traf ckers and local gangs.
Colombian TCOs dominate the production
and supply of the majority of cocaine
shipped to U.S. markets. Colombian TCOs
rely on their partnership with Mexican
TCOs for the sale and distribution of
wholesale quantities of cocaine and heroin
in the United States. Smaller Colombian
TCOs maintain direct cocaine and heroin
routes into the United States through
couriers and air cargo on commercial
ights. Colombian TCOs also maintain a
physical presence in the United States to
facilitate the laundering of illicit proceeds.
The groups rely on bulk cash smuggling,
TBML, and transactions conducted through
nancial institutions to move their illicit
proceeds. Professional money launderers
can provide worldwide services to facilitate
the movement of billions of dollars on
behalf of both Mexican and Colombian
cartels.”
• Eurasian TCOs: “According to the FBI,
Eurasian TCOs engage in a wide range of
criminal activity and have caused hundreds
of millions of dollars in losses to U.S.
businesses and investors. The roots of
Eurasian organised crime in the United
States lie with the Vory V Zakone, or
“Thieves-in-Law.” The Thieves-in-Law is a
global criminal organisation, active in the
United States. Based on SAR analysis,
FinCEN has determined that Russian
organised crime groups in the United
States engage in a variety of crimes
including, illegal gambling, money
laundering, and various types of fraud.
SARs indicate suspicions of money
laundering activity involving cross-border
wires from bank accounts held by shell
companies and TBML involving auto sales.
In December 2017 OFAC designated the
Thieves-in-Law, along with 10 individuals
and two entities, pursuant to Executive
Order 13581, which targets signi cant
groups and their supporters. In 2017, DOJ
settled a money laundering and civil
forfeiture action associated with a $230
million tax refund fraud scheme committed
by Russian organised crime against the
Russian treasury. In a complex series of
transactions, the $230 million was
laundered through bank accounts in Russia
and other countries, with a portion of the
funds used to buy real estate in Manhattan.
The company accused of laundering the
fraud proceeds agreed to pay $5.9
million.”
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counterfeit electronics and clothing
For more on TCOs see above in Section 6.2.4
arms and human traf cking. Most use
in Drug Traf cking & in Section 7 Sanctions &
violence and work alongside foreign drug
Embargoes
traf cking networks. Despite a decrease in
6.3.5 Organised Crime Index: The main
areas of organised criminal activity are in
drugs and arms traf cking, followed by
human and wildlife traf cking, human
smuggling illegal mining.
activity, ma a-style groups continue to
operate in the US, including ve major family
groups descending from the Cosa Nostra
Sicilian ma a, all of which exert substantial
control in New York, southern New Jersey and
Philadelphia. Collectively, Cosa Nostra has
The main organised crime type operating in
thousands of US-based members and
the USA, according to the 2021 Organised
associates involved in illegal markets,
including heroin traf cking, money
laundering and healthcare fraud targeting the
Medicare programme. These groups have
signi cant access to weapons and carry arms
openly. Outlaw Motorcycle Gangs, of which
there are several hundred operating across
the country, are the archetypal ma a-style
Crime Index (OC Index)67 are Criminal
group in the US. The gangs are highly
Networks (6.5/10) followed by Foreign Actors
transnational in nature and are predominantly
(5.5/10) and Ma a Style Groups and State
involved in the drug traf cking market,
Embedded Actors (5.0/10).
particular cross-border traf cking.
There are many foreign actors involved in
organised crime activities affecting the US.
Cybercrimes –particularly identity, nancial
and election fraud – often have their source in
Eastern Europe and Asia. Latin American
criminal organisations are involved in US drug
markets (as conduits between source
countries and the wholesalers in the US, as
In terms of criminal actors, the OC Index
opposed to directly on US soil), as are African,
2021 reports that, “Drug traf cking groups,
Asian, Eurasian, and Middle Eastern criminal
mainly networks and gangs, dominate the
organisations. Asian and Balkan criminal
attention of US investigators and prosecutors.
organisations are also involved in human
There are thousands of active gangs
smuggling and traf cking. Foreign actors may
nationwide, whose activities focus on drug,
exert economic and nancial power in the US,
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National Intelligence. The USCTOC is to
by focusing on so-called swing states and
monitor the production and implementation
assisting in the production of polarising
of coordinated strategic plans for whole-of-
rallies. Government corruption may also be
government counter-TOC efforts in support of
on the rise, although investigations and
and in alignment with policy priorities
prosecutions have been declining. Some in
established by the President through the
former president Donald Trump’s inner circle
National Security Council. These strategic
were convicted on federal charges of money
plans shall be informed by intelligence
laundering and other illicit activities, and
assessments, be developed in coordination
Trump himself was accused of engaging with
with agencies, and include recommendations
ma a-style groups before taking of ce”.
for actions by agencies.”
6.3.6 WEF Organised Crime: According to
6.3.8 Potential Red Flags: See BSA/AML
The World Economic Forum’s Global
Exam Manual – Appendix F ML/TF Red Flags
Competitiveness Index 201968, scores for
which include examples of potentially
organised crime are at 61.9 (ranked 69/141).
suspicious activities, or “red ags” for both
6.3.7 US Strategy on Countering
Transnational Organised Crime: In
ML & TF, which includes potential
transnational organised crime red ags72.
December 2021, the Biden Administration
6.3.9 Estimated OC Proceeds: According to
published details69 on how increased
the Biden Administration, “Transnational
sanctions would target drug traf ckers
organised crime is a billion-dollar business
alongside targeting transnational criminal
that transcends geographical boundaries and
organisations that bene t from this trade. A
threatens global stability. Every year, millions
new “U.S. Council on Transnational
of lives are affected by transnational criminal
Organised Crime”70 was being established
organisations, including through drug
to bring together 6 existing agencies and
overdose and use, violence, rearm deaths,
new authorities established, “Imposing
and human traf cking and smuggling.73”
Sanctions on Foreign Persons Involved in
the Global Illicit Drug Trade”71.
According to the UNODC 2011 Report,
transnational organised crime is estimated at
“The new USCTOC will report to the President
approx 46% of overall nancial crime
through the National Security Council and
proceeds. Taking 2% of US GDP for overall
consist of the following members or their
nancial crime proceeds (See Section 5
designees:the Secretary of State; the
above for details) generates an estimate for
Secretary of the Treasury; the Secretary of
criminal proceeds bene ting organised crime
Defence; the Attorney General; the Secretary
at US$195 billion.
of Homeland Security; and the Director of
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attempting to in uence presidential elections
Section 6.4 – Fraud -!🇺🇸
In this Section 6.4 the threat from fraud, which
launderers, and other criminals use to set up
is one of the US National Priorities is assessed
bank accounts and conceal fraudulent
and summarised:
activity…Large organised fraud groups use
Research published in 201874 estimates all
types of fraud (excluding tax) is likely at a
minimum of 3%, probably 6% and possibly
more than 10% of GDP, (with high amounts
for less developed countries).
vast money mule networks as third-party
money laundering mechanisms to launder
illicit proceeds from fraud and other nancial
crimes(e.g.,romance scams, employment
scams, work-from-home scams). A money
mule is someone who, either wittingly or
6.4.1 Fraud: According to the NMLRA 2022,
unwittingly ,transfers or moves illegally
“Fraud, both in the private sector and in
acquired money on behalf of someone else.
government bene ts and payments,
continues to be the largest driver of money
laundering activity in terms of the scope of
activity and magnitude of illicit proceeds,
In 2021, during the 10-week Money Mule
Initiative campaign, agencies took action
against approximately 4,750 individuals
generating billions of dollars annually”.
suspected of being money mules. Law
Romance scams are considered one of the
organised fraud rings are increasingly using
fastest growing fraud trends, and are also
credit cards and stored value gift cards to
seeing vast increases in illicit proceeds
launder money”.
generated.
enforcement has also observed that
“Online scams are designed to defraud
“Scams which involved the use of social
victims into sending money to bank accounts,
media, to include online shopping, romance
debit cards, and virtual wallets controlled by
scams, and supposed economic relief or
criminals. For example, in romance scams, a
income opportunities, have been rising
criminal adopts a fake online identity to gain
steadily over the past few years…. reports that
a fraud victim’s affection and trust. The
people lost money to scams that started on
scammer then uses the illusion of a romantic
social media more than tripled in the past
or close relationship to manipulate or steal
year, with a sharp increase in the second
from the fraud victim. To carry out the
quarter of 2020”.
schemes, the criminals often use fake
“The exploitation of data, mainly personal
identi able information (PII) that is stolen,
hacked, or compromised, remains one of the
most common methods fraudsters,
passports with numerous aliases or in the
name of other accountholders to open bank
accounts to collect and launder the proceeds
of the romance scams. The criminals then
make large cash withdrawals from those
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the FTC’s Identity thef.gov website, about
and generally structured in amounts less than
twice as many as in 2019.
US$10,000 to evade detection and reporting
requirements. These transfers are often
authorised by, and conducted in the names
of, account holders, despite warnings from
law enforcement or the fraud departments of
nancial institutions”.
For both traditional and synthetic identity
theft, criminals use various tactics to gain
access to PII of their victims. Such methods
include malware that can be distributed using
malicious social media ads, phishing emails,
and other channels, such as caller identity
6.4.2 Synthetic Identity Fraud (SIF):
document spoo ng to trick victims into giving
According to the NMLRA 2022, “In 2021, the
criminals sensitive data. Another common
Federal Reserve System announced an
source for PII is data breaches. Criminals can
industry-recommended de nition of Synthetic
purchase compromised PII data via the
Identity Fraud (SIF),which was developed by a
internet or darknet marketplaces where
focus group of fraud experts. SIF is the use of
hackers monetise stolen data. Moreover, the
a combination of real and fake PII to fabricate
randomisation of issuing SSNs by the Social
a person or entity in order to commit a
Security Administration (SSA) since 2011 has
dishonest act for personal or nancial gain.
made it more dif cult to detect fraud as it is
The FBI identi es synthetic identity theft, a
no longer easy to associate an individual’s
term which falls within SIF, as the fastest
age and geography to an application.
growing nancial crime in the United States. It
targets some of society’s most vulnerable
citizens: children and the elderly. Synthetic
identity the is different from traditional
identity theft in that both real and ctitious
information is used to create a new identity.
While SIF is not new, inconsistent de nitions
made it dif cult to identify and address this
type of fraud.
In July 2019, the Federal Reserve System
issued a white paper highlighting
vulnerabilities that are inherent in the credit
process in the United States and allow
fraudsters to create synthetic identities. For
fraudsters to create a synthetic identity, they
must create a credit pro le of record with the
major credit bureaus that is generated when
the criminal applies for credit (e.g., typically a
Traditional identity theft involves a victim’s
credit card, using a fabricated set of PII
actual identity being used without their
derived from actual and fake PII). Regardless
knowledge (e.g., applying for a credit card or
of the disposition of the credit application, the
other loan, using the victim’s real name, date
credit bureaus automatically create a “new”
of birth, address, and social security number
credit pro le, which can then be used by the
[or SSN]). According to the Federal Trade
criminal to apply for credit at a different
Commission(FTC), in 2020, nearly1.4 million
reports of identity theft were received through
nancial institution and pass identity
veri cation processes.
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accounts, often multiple times in a single day
healthcare eld have incentivised patients to
accounts, open credit card accounts, make
purchase their services or products by
fraudulent purchases, but also to gain access
illegally offering to pay for co-pay charges.
to the U.S. nancial sector anomalously. For
For example, in one scheme, a
example, a synthetic identity may be created
pharmaceutical company allegedly used a
for an individual who might otherwise be
charitable foundation as a conduit to pay the
unable to access the U.S. nancial system
co-pays of thousands of Medicare patients
(e.g., Specially Designated Nationals or
taking the company’s product.
individuals with a criminal record). There have
been recent efforts to identify criminal
In 2020, in the largest healthcare fraud and
schemes in which perpetrators create
opioid enforcement action in DOJ’s history,
synthetic identities and use them to defraud
345 defendants, including more than 100
nancial institutions out of millions of dollars,
doctors, nurses, and other licensed medical
harming individual victims in the process. One
professionals, were charged in related
of the main fraud tactics for the“buy now, pay
healthcare fraud schemes involving more than
later” (BNPL) payment method recently
$6 billion in alleged fraud losses. The largest
reported is SIF. This has happened when
amount of alleged fraud loss charged in
fraudsters have signed up for a BNPL account
connection with the cases – US$4.5 billion in
using a real identity that has been constructed
allegedly false and fraudulent claims—related
from multiple data points combined with false
to schemes involving telemedicine: the use of
information (e.g., name, surname, shipping
telecommunications technology to provide
address).”
health care services remotely.
6.4.3 Healthcare Fraud: “Healthcare fraud
The outbreak of the COVID-19 pandemic
continues to be an area of focus, with DOJ
ushered in an era of unprecedented
estimating that it accounts for the loss of
opportunity for criminals to defraud
billions of dollars every year. The often high
healthcare bene t programs, stimulus
cost of pharmaceuticals, medical procedures,
programs, and individual consumers
and related devices can make detecting
searching for legitimate sources of medical
suspicious nancial transactions more
aid. Early fraud schemes during the pandemic
dif cult. As healthcare fraud schemes can be
abused federal stimulus programs and
complex and have involved complicit doctors,
increased exploitation of Medicare, Medicaid,
pharmacists, and other medical professionals,
and TRICARE, as well as healthcare programs
the money ows can mimic legitimate
provided through the Departments of Labor
transactions from insurers to healthcare
and Veterans Affairs and private health
providers. In some cases, complicit healthcare
insurance companies. Fraudsters have also
providers and other companies in the
targeted COVID-19 relief funds for healthcare
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Synthetic identities are used to establish bank
providers, such as those provided under the
“During the pandemic, illicit actors have taken
PPP and Health Care Enhancement Act”.
advantage of several COVID-19-related
In the FATF December 2016 Report75, it
reported that, “Fraud (including healthcare
fraud, identity theft, tax fraud, mortgage fraud,
retail and consumer fraud and securities
fraud) generates the largest volume of illicit
proceeds, particularly healthcare fraud
against the Federal government which
accounts for approximately US$80 billion
annually.
measures, including the increased use of
remote applications, virtual environments,
and remote identity processes, to steal
information and credentials and disrupt
operations. Cybercriminals and state actors
have also conducted phishing campaigns,
often via email and using COVID-19-related
themes, to lure victims. In these schemes,
phishing scammers often reference payments
related to the CARES Act or advertise ways to
The National Money Laundering Risk
make money, such as through investing in
Assessment 201876, stated that, “the many
virtual assets. Cybercriminals leverage
varieties of fraud, including bank fraud,
accesses from these campaigns to conduct
consumer fraud, healthcare fraud, securities
ransomware attacks, BEC scams, and other
fraud, and tax refund fraud, are believed to
illicit activity”.
generate the largest share of illicit proceeds.
Healthcare fraud alone generates proceeds of
approximately US$100 billion annually,”
“What is clear is that the pandemic provided
an opportunity for fraudsters to exploit PII
stolen through the large-scale data breaches
6.4.4 Covid 19 Related Fraud: According to
that have occurred over the past few years.
the NMLRA 2022, “The global COVID-19
Some cases demonstrate repeat offenders
pandemic, the largest public health crisis in
who were engaged in other types of fraud
modern times, has signi cantly accelerated
prior to the pandemic. Law enforcement
the transition from in-person nancial
suspects that large fraud groups were looking
activities to online account opening,
for new fraud schemes to exploit this stolen
payments, and lending. This has increased the
data in a more ef cient manner and found it
fraud risk for online nancial services and
with the shift to the use of online nancial
commerce in general and led to a dramatic
transactions by both government and private
spike in the number of stimulus, healthcare,
sector actors. As of October 25, 2021, the
bank, elder, and government fraud schemes
DOJ publicly charged 984 defendants with
and scams exploiting the COVID-19
pandemic. It remains to be seen if this trend
is transitory or represents a permanent shift in
consumer behaviour”.
criminal offences in 682 cases based on fraud
schemes connected to the COVID-19
pandemic. These cases involved attempts to
obtain over US$753 million from the U.S.
government and unsuspecting individuals.
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Criminals and bad actors have exploited the
Automated Clearinghouse (ACH)
increased use of remote access to online
payments disbursed to a single bank
accounts and stimulus programs. Many of the
account held by a suspected money mule
schemes observed during the pandemic
not named as a payment bene ciary. Law
mirror the kinds of illicit nance activity seen
enforcement also identi ed the use of
prior to the pandemic. However, criminals
funnel accounts in these schemes, which
have been leveraging COVID-19 themes as
involve multiple deposits sent to a single
lures, targeting vulnerable individuals and
account. The misuse of a large portion of
companies that are seeking healthcare
PPP/EIDL loan funds involved purchasing
information and products or contributing to
real estate, luxury vehicles, travel, and
relief efforts, as well as individuals who lost
merchant purchases. The USSS notes that
work during the pandemic and are seeking
banks and investment rms have been
new employment. Individual scammers and
used to receive the proceeds of the loans
complex TCOs (e.g., Nigerian fraud rings)
and that various online investment
have been taking advantage of the pandemic
platforms have also been used to launder
for their own pro t. Below are two of the
funds obtained from these programs.
largest categories of pandemic-related fraud.”
•
Law enforcement and government
6.4.4.1 Exploiting stimulus measures:
oversight mechanisms have identi ed
“Beginning in the initial phases of the
several vulnerabilities presented by the
pandemic, fraudsters focused on various
online EIDL application processes, which
government stimulus programs aimed at
criminals exploited. These include the lack
relieving the negative economic impact of
of trustworthy online access identity
COVID-19, provided under the Coronavirus
proo ng and appropriate eligibility
Aid, Relief, and Economic Security (CARES)
determinations for the loan programs. For
Act, including the Paycheck Protection
example, criminals have often used
Program (PPP), unemployment insurance (UI),
multiple synthetic emails with the same
and Economic Injury Disaster Loan (EIDL).
Internet Protocol (IP) address to submit
•
Criminals have often relied on the use of
false documents and statements to exploit
the use of previously hacked PII to illegally
apply for bene ts to the programs noted
above and to open various types of
accounts online (e.g., bank, investment) to
deposit these funds. Money mule
networks have often moved proceeds
generated by fraudsters using multiple
numerous applications for bene ts across
many claims. This vulnerability could be
addressed by more robust identity
proo ng of applicants and authentication
of eligible bene ciaries for payments of
bene ts and loan distribution. Several
EIDL/PPP cases also involved bank fraud.
In just one example, individuals allegedly
created 12 ctitious business entities that
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•
were used to fraudulently apply for PPP
of federally backed mortgage loans were
loans, and then sent multiple applications
required to grant borrowers loan
for the same businesses to more than 10
forbearances for up to 12 months,
different banks, without disclosing to
including extension requests, without the
those banks that they were submitting
accrual of additional interest or fees.
duplicative applications.
According to federal and state law
Criminal actors ranging from domestic
low-level criminals to TCOs have targeted
UI program funds by using stolen
identities to le for bene ts. Given that
applications are made through each state,
individuals have stolen identities of
people who have not yet applied and
applied in their names. After account
holders received payments, they moved
some or all of the money, often to a third
party, using a variety of methods,
including wire transfers, cash withdrawals,
money orders, virtual assets, gif cards, and
mobile payment systems. Several UIrelated cases have involved imprisoned
individuals who applied for bene ts under
•
enforcement sources, criminals took
advantage of this program by setting up
fraudulent loan modi cation and debt
relief services targeting mortgagers
suffering nancial hardships caused by
the COVID-19 pandemic. The fraudsters
collected up-front fees for loan
modi cation or aid, and then disappeared
with the fees mortgagers paid them.
Sometimes criminals directed
homeowners to make monthly mortgage
payments to the fraudulent loan
modi cation companies, while the bank
holding the mortgage was led to believe
the homeowner had chosen to go into
forbearance.”
their own name or who used the PII of
6.4.4.2 Vaccine fraud, fake cures, and
other inmates to submit fraudulent claims.
fraudulent vaccine cards: “COVID19
In an example of the former, the inmates
vaccine fraud may include the sale of
used jail phones or other inmate
unapproved and illegally marketed purported
communications to direct or assist persons
vaccines, the sale of counterfeit versions of
outside the prison to le claims online
approved vaccines, and the illegal diversion
using the inmate’s accurate PII, including
of legitimate vaccines. In the early days of the
their full name, date of birth, and social
pandemic, fraudsters offered, for a fee, to
security number, but falsely asserting that
provide potential victims with a vaccine
the inmate was available to work and
sooner than permitted under the applicable
unemployed as a result of the COVID-19
vaccine distribution plan. Scammers around
pandemic.
the world have also been attempting to sell
Additionally, the CARES Act included a
foreclosure moratorium, whereby services
fake and unlawful cures, treatments, and
personal protective equipment (PPE). This
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includes instances of major fraud against
6.4.5.1 US Government Fraud: According
theUnited States dealing with hoarding or
to McKinsey Research in 201877 the US
price gouging of PPE and non delivery scams.
government paid out US$148 billion in
Criminals have preyed on the public’s fear of
fraudulent claims or payments, with US$65.4
COVID-19 to overcharge for, or defraud them
billion in health, US$51.2 billion in social
into purchasing, counterfeit PPE33 and
services, US$14.3 billion in procurement,
vaccines. Cases have demonstrated a variety
US13 billion in grants and loans, US$3.6
of payment mechanisms used to move illicit
billion in payroll and US$1 billion in other
proceeds within criminal networks to include
payments.
peer-to-peer (P2P) mobile payment apps to
transfer money among the co-conspirators.
With the recent implementation of regulations
& guidelines requiring vaccination cards &
identi cation to enter certain venues (e.g.,
restaurants, theatres, etc.), the FBI has also
witnessed an increase in the manufacturing &
sale of fraudulent vaccine cards.
In addition, cybercriminals, including
ransomware operators, have exploited the
COVID-19 pandemic. The websites of
legitimate medical and biotechnology
companies have been spoofed to trick the
public into purchasing vaccines which do not
exist. Fraudsters are adapting their techniques
based on the timing of the vaccine rollouts. By
using traditional phishing techniques, they
6.4.5.2 Consumer Fraud: The US Federal
Trade Commission (FTC) data shows that
consumers reported losing more than
US$5.8 billion to fraud in 2021, an increase
of more than 70% over the previous year. For
more details see Section 6.5.7 below.
6.4.5.3 Card Fraud: According to a 2021
Report from Nilson Report78 actual losses
experienced by issuers, merchants and
acquirers exceed the US$28.58 billion lost
globally in 2020. Despite making up only
22% of total card volume globally, the U.S.
accounted for 36% of card fraud last year or
US$10.6 billion. By 2030, U.S. fraud losses
are expected to reach US$17 billion, with
total card volume at nearly $19 trillion79.
have created fraudulent COVID-19 vaccine
6.4.5.3 Tax & Trade Fraud: Fraud carried out
surveys for consumers to ll out with the
to cheat the IRS comes in many forms, but
promise of a prize or cash at the conclusion of
also includes smuggling to evade Customs &
the survey when, in fact, the surveys are used
sales taxes, as well as various types of trade
to steal money from consumers & unlawfully
based activity prevalent in TBML schemes
capture consumers’ personal information.”
including misinvoicing. Global Financial
6.4.5 Other: Main Fraud types generating
signi cant criminal proceeds include US
government fraud, fraud against consumers
and card fraud including by cybercrime.
Integrity80 (GFI), reported in 2015 that trade
misinvoicing, which involves the deliberate
falsi cation of the value or volume of an
international commercial transaction, is the
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Flags which include examples of potentially
ows they measured, which was close to
suspicious activities, or “red ags” for both
US$1 trillion for developing countries & so
ML & TF, which includes potential fraud red
amounted to an estimated US$800 billion of
ags83. See also FinCEN Advisories including
illicit nancial out ows were due to the
an Advisory on COVID-19 Health Insurance-
fraudulent mis-invoicing of trade.81 .
and Health Care-Related Fraud in 2021 (see
6.4.6 Cybercrime: Many of the crimes that
Appendix 2 for more details.
are carried out by cyber means are frauds &
6.4.9 Estimated Proceeds: Research
scams. Based on FBI reports (at least as far as
published in 2018 from Crowe Clark
reported crime is concerned) estimates of
Whitehill, together with the UK’s University of
proceeds in 2021 for cybercrime was US$6.9
Portsmouth’s Centre for Counter Fraud
billion. For more details see Section 6.5.
Studies (CCFS), reported fraud is estimated at
6.4.7 Fraud Prevention Strategy: At his
more than 10% of Global GDP. Taking the
March 2022 State of the Union Address,
President Biden
announced82
new measures,
a minimum of 3%, probably 6% and possibly
most conservative amount, (i.e. 3% – 2018)
values fraud globally at US$2.6 trillion84 and
“to prevent, deter, and punish identity theft
the US therefore is estimated to lose approx
and other forms of pandemic fraud by serious
US$630 billion due to fraud on this basis.
criminal syndicates.” Also that, “the DOJ will
appoint a Chief Prosecutor to focus on the
most egregious forms of pandemic fraud
including identity theft by criminal syndicates;
Heightened resources and enhanced
penalties for egregious pandemic fraud in
areas like PPP loans and UI; A new EO on
preventing Identity Theft in Public Bene ts
Programs; Building on existing efforts to crack
Many frauds remain unreported. Reported
available gures suggest fraud losses and
proceeds to criminals likely in the hundreds
of billions oof dollars, with fraud against the
government at US$150 billion, including
mainly for healthcare & social security fraud
with huge fraud losses due to claims and
payments made during the Covid 19
pandemic when US government
down on COVID 19 Fraud and Serious Identity
programmes were massively defrauded.
Theft of Public Bene ts; An Interagency
Fraud in the private sector for consumers via
COVID 19 Fraud Enforcement Task Force;
cybercrime at US$7 billion and US$10.6
Initiative on Identity Theft Prevention and
billion for card fraud. In aggregate estimates
Public Bene ts & Re established Respect and
for reported fraud can amount to US$166
Transparency with Oversight Community.”
billion.
6.4.8 Fraud Potential Red Flags: See BSA/
AML Exam Manual – Appendix F ML/TF Red
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largest component (80%) of illicit nancial
Section 6.5 – Cybercrime -!🇺🇸
In this Section 6.5 the threat from cybercrime,
The FBI says the total number of reports was
which is one of the US National Priorities is
fuelled by increases in ransomware attacks,
assessed and summarised.
business e-mail compromise schemes and
In 2018 former President Trump summarised
the opportunities and challenges of the new
criminal use of cryptocurrency. Overall
reports jumped 7% from 2020.
digital world. “The American people are
increasingly dependent upon the Internet for
daily conveniences, critical services, and
economic prosperity. Substantial growth in
Internet access and networked devices has
facilitated widespread opportunities and
innovation. This extraordinary level of
connectivity, however, has also introduced
progressively greater cyber risks for the
United States. Long-standing threats are
evolving as nation-states, terrorists, individual
criminals, transnational criminal organisations,
and other malicious actors move their
activities into the digital world85”.
6.5.1 FBI Internet Crime Report 2021:
According to the FBI, Americans were hit by
an unprecedented rise in cybercrime in 2021,
with nearly 850,000 reports to the FBI and
losses surpassing US$6.9 billion. The FBI
Internet Crime Report 2021 says that older
Americans bore the brunt of the nancial
hit86.
“The over 60s had the most complaints and
lost a total of US$1.68 billion
Among key ndings in the 2021 report:
• People ages 40 to 49 led 89,184 reports to
the FBI’s Internet Crime Complaint Centre,
ic3.gov. Their losses rose to US$1.19
“Overall, there were nearly 24,000 techsupport complaints to the FBI last year, and
60 percent of victims of this type of scam
were age 60 or older.”
billion.
• People ages 50 to 59 led fewer reports,
74,460, but suffered larger losses, US$1.26
billion.
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• People aged 60 and older led 92,371
The FBI’s Recovery Asset Team in 2011
reports with even steeper losses, $1.68
assisted in freezing over US$328 million in
billion. A caveat: That’s a larg r
funds for victims who were directed by
demographic group, since it takes in people
criminals to make transfers to U.S. accounts
who are in their 60s, 70s, 80s and older, so
under fraudulent pretences.
it’s not an apples-to-apples comparison with
the middle-aged adults.”
Another FBI publication on cybercrime
focussed on BEC scams87, which revealed
“The FBI Internet Crime Complaint Centre was
that, “based on the nancial data, Asian
created 22 years ago, in May 2 00. Since its
banks located in China and Hong Kong
start it has elded more than 6.5 million
remain the primary destinations of fraudulent
complaints.
funds; however, nancial institutions in the
Other report highlights
• BEC schemes, for the fourth consecutive
year, had the largest dollar losses — more
than US$2.4 billion — among the various
cybercrime categories. These scams target
businesses, not individuals. For example, an
entity might be asked to conduct a wire
transfer of funds under a false pretence,
with the loot owing to a crook.
• Con dence scams — a category that takes in
United Kingdom, Mexico and Turkey have
also been identi ed recently as prominent
destinations.”
6.5.2 NMLRA 2022: According to the
NMLRA 2022, “The Department of the
Treasury is publishing [this report] during a
transformative time for crime with increasing
cybercrime complaints from the public
exceeding US$4.1 billion in 2020, a
proliferation of ransomware attacks holding
hostage sensitive information and demanding
romance scams — accounted for the third-
payment from U.S. citizens and businesses,
highest losses to victims. Overall reports of
and a growing overdose crisis that has killed
con dence scams numbered 24,299, with
over 100,000 citizens in a one-year period,
$956 million in victim losses.
quadrupling over the last decade, largely
• Cryptocurrency was a feature in 34,202
complaints. Worryingly, digital currency
losses grew nearly sevenfold to US$1.6
billion, from US$246 million in 2020. The
spike came even though complaints slipped
to 34,202 in 2021 from 35,229 a year
earlier.”
driven by synthetic opioids like fentanyl. The
United States is particularly vulnerable to all
forms of illicit nance because of the size of
the U.S. nancial system and the centrality of
the U.S. dollar in the payment infrastructure
supporting global trade. Criminals and
professional money launderers continue to
use a wide variety of methods and
techniques, including traditional ones, to
place, move, and attempt to conceal illicit
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actors. Among other critical infrastructure
use of cash to the purchase of luxury or high-
targets, these actors target nancial
value goods, to the ever-evolving world of
institutions’ websites, systems, and employees
virtual assets and related service providers,
to steal customer and commercial credentials
including decentralised nance and the
and proprietary information, defraud
growing use of anonymity-enhancement
technologies”.
“Fraud dwarfs all other proceed-generating
crimes that are laundered in or through the
United States. The exploitation of data, mainly
personal identi able information that is
stolen, hacked, or compromised, remains one
of the most common methods fraudsters,
launderers, and other criminals use to set up
bank accounts and conceal fraudulent activity.
Drug traf cking, cybercrime, human
traf cking and smuggling, and corruption also
generate signi cant volumes of illicit
proceeds within the United States or through
the U.S. nancial sector”.
institutions and their customers, and disrupt
business functions”.
“The FBI’s IC3 in 2020 received 791,790
complaints from the public citing suspected
criminal activity facilitated by the internet,
representing an increase of more than 69%
from the previous year. Self-reported losses
exceeded US$4.1 billion, although complaints
received by IC3 are likely only a fraction of the
cybercrime occurring in the United States.
Law enforcement and supervisory
assessments, as well as reports from nancial
institutions, con rm the assessment that
cybercrime is a larger and growing share of
the overall money laundering threat in the
“Incidents of cybercrime have signi cantly
increased since the 2018 NMLRA, particularly
as cybercriminals and malicious foreign state
actors have taken advantage of the COVID-19
United States. Ransomware attacks, in
particular, have seen signi cant growth in
scale and sophistication over the past few
years”.
pandemic through phishing schemes and
6.5.3 Ransomware: According to the
exploitation of remote applications to conduct
NMLRA 2022 also points out that, “The
ransomware attacks and BEC fraud. Other
severity and sophistication of ransomware
cybercriminal groups have deployed malware
attacks have risen throughout the pandemic.
to harvest data, which they have monetised
through online marketplaces or direct
exploitation. Cybercrime presents a
signi cant illicit nance threat: The size, reach,
speed, and accessibility of the U.S. nancial
system make U.S. nancial institutions
attractive targets to traditional criminals,
cybercriminals, terrorists, and foreign state
Ransomware is a national security priority and
an area of signi cant concern to the U.S.
government in terms of potential loss of life,
nancial impact, and critical infrastructure
vulnerability. FinCEN analysis of suspicious
activity report (SAR) data found a 42%
increase in ransomware-related SARs in the
rst six months of 2021 compared to all of
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proceeds. These range from the traditional
2020. Ransomware actors have increasingly
actors have demanded payment in
targeted larger enterprises to demand larger
anonymity-enhanced cryptocurrencies
payouts, with the median average
(AECs), requiring an additional fee for
ransomware-related payment amount based
payment in bitcoin or only accepting payment
on SAR analysis of US$100,000; the majority
in bitcoin after negotiation. SAR data also
of payments from the same analysis were
under US$250,000.
Cybercriminals often use remote desktop
protocol endpoints and phishing campaigns
to harvest credentials or otherwise gain
access to a victim’s computer network.
Ransomware actors have also shared
resources, such as exploit kits, or formed
partnerships with other cybercriminals to
enhance the effectiveness of their attacks.
Some ransomware developers sell access to
their malware to af liates in a “ransomwareas-a-service” model, thereby decreasing the
barrier to entry and level of technical
indicates that virtual wallets associated with
top ransomware variants most commonly
send funds to virtual asset service providers
(VASPs), in particular exchanges. The same
data indicates that threat actors use foreign
virtual asset service providers for ransomwarerelated deposits, which frequently have weak
or nonexistent AML/CFT controls, before the
perpetrator launders and cashes out the
funds. To further obfuscate the laundering of
ransomware proceeds, threat actors avoid
using the same wallet addresses and use
chain hopping, mixing services, and
decentralised exchanges.
expertise required to conduct ransomware
Ransomware attacks also frequently stem from
attacks. In addition, ransomware actors
jurisdictions with elevated sanctions risk.
increasingly employ double extortion tactics,
Notably a number of ransomware networks
where criminals steal con dential data before
have been linked to sanctioned groups or
encrypting it and threaten to publish the data
jurisdictions with high sanctions risks,
if the victim does not pay the ransom.
including Russia, Democratic People’s
During the pandemic, attacks on small
municipalities and healthcare institutions have
become more common, likely based on an
expectation that the need to resume
operations, in particular during a pandemic,
may make hospitals more likely to pay a
ransom. Criminals often require ransomwarerelated extortion payments to be made in
virtual assets, frequently in bitcoin. FinCEN
SAR analysis indicates that some ransomware
Republic of Korea, and Iran.
For example, in December 2019, OFAC
designated Evil Corp, the Russia-based
cybercriminal organisation responsible for the
development and distribution of the Dridex
malware, as well as core cyber operators,
multiple businesses associated with a group
member, and nancial facilitators used by the
group. Ransomware payments may therefore
not only fund activities that harm U.S.national
security but also risk violating OFAC
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The DOJ also seized $6.1 million in funds
noti cation to and coordination with the
traceable to alleged ransom payments
government to be a “mitigating factor” in
received by one of the individuals. In parallel
enforcement actions associated with
with the arrest of the Ukrainian national in
ransomware payments.
Poland, interviews and searches were carried
TCOs are often the perpetrators of
ransomware crimes, leveraging global
infrastructure and money laundering networks
to carry out their attacks. The U.S. government
is pursuing a focused, integrated effort to
counter ransomware, including working with
the private sector to modernise their cyber
defences and with international partners to
address the global nature of the threat.
out in multiple countries. OFAC also
designated the two individuals for their part in
perpetuating ransomware incidents against
the UnitedStates. Simultaneously, OFAC
designated a virtual asset service provider
(VASP), and its associated support network,
for facilitating nancial transactions for
ransomware actors, an action which built
upon OFAC’s rst sanctions designation of a
VASP in September 2021. Latvia and Estonia
For example, in January 2021 ,the DOJ and
also took action against the VASP and its
international law enforcement partners
associated support network”.
coordinated global action to disrupt a
sophisticated form of ransomware known as
NetWalker.
According to a FINCEN report on
Ransomeware Trends in Bank Secrecy Act
Data Between January 2021 and June
The action included charges against a
202188, “FinCEN analysis of ransomware-
Canadian national in relation to NetWalker
related SARs led during the rst half of 2021
ransomware attacks in which tens of millions
indicates that ransomware is an increasing
of dollars were allegedly obtained, the seizure
threat to the U.S. nancial sector, businesses,
of approximately $454,530 in virtual assets
and the public.
from ransom payments, and the disablement
of a darknet hidden service used to
communicate with NetWalker ransomware
victims.
The number of ransomware-related SARs led
monthly has grown rapidly, with 635 SARs
led and 458 transactions reported between
1 January 2021 and 30 June 2021 (“the
Additionally, in November 2021, the DOJ
review period”), up 30% from the total of 487
announced that it had charged a Ukrainian
SARs led for the entire 2020 calendar year.
national and a Russian national with accessing
The total value of suspicious activity reported
internal computer networks of several victim
in ransomware-related SARs during the rst
companies and deploying ransomware.
six months of 2021 was US$590 million, which
exceeds the value reported for the entirety of
2020 ($416 million)”.
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regulations. OFAC considers victims’
FinCEN’s analysis of ransomware-related SARs
highlights average ransomware payment amounts,
top ransomware variants, and insights from
FinCEN’s blockchain analysis – 🇺🇸
Average Monthly Suspicious Amount of Ransomware
Transactions
According to data generated from ransomware-related SARs, the mean
average total monthly suspicious amount of ransomware transactions was
$66.4 million and the median average was $45 million. FinCEN identi ed
bitcoin (BTC) as the most common ransomware-related payment method in
reported transactions.
Top Ransomware Variants
Ransomware actors develop their own versions of ransomware, known as
“variants,” and these versions are given new names based on a change to
software or to denote a particular threat actor behind the malware. FinCEN
identi ed 68 ransomware variants reported in SAR data for transactions
during the review period. The most commonly reported variants were
REvil/Sodinokibi, Conti, DarkSide, Avaddon, and Phobos.
Insights from Blockchain Analysis
FinCEN identi ed and analyzed 177 unique convertible virtual currency
(CVC) wallet addresses used for ransomware-related payments
associated with the 10 most commonly reported ransomware variants in
SARs during the review period.
Based on blockchain analysis of identi able transactions with the 177 CVC
wallet addresses, FinCEN identi ed approximately $5.2 billion in outgoing
BTC transactions potentially tied to ransomware payments.
5. Mixing Services are Prevalent in 2021
FinCEN observed an increased use of mixing services in SARs. Mixers are
websites or software designed to conceal or obfuscate the source or owner
of CVC. Mixers may have obligations as money transmitters under the BSA.
Mixing is done either as a general privacy measure or for covering up the
movement of funds obtained from theft, darknet markets, or other illicit
sources.
According to a May 2020 report by Crystal Blockchain, there was a
•
rapid growth in the amount of BTC sent from darknet entities to
mixers in Q1 2020.
According to Chainalysis’ mid-year report on ransomware, mixing
•
services are still a preferred destination for illicit funds behind
centralized exchanges.
FinCEN’s analysis of the 10 most common ransomware variants in
•
SAR data during the review period indicate use of mixers varies by
variant.
6. Decentralized Exchanges Likely Used to Convert Illicit
Proceeds
Ransomware-related payments are being converted to other types of CVCs
through decentralized exchanges or other DeFi applications. Some DeFi
applications allow for automated peer-to-peer transactions without the
need for an account or custodial relationship. FinCEN analysis of
transactions on the BTC blockchain identi ed ransomware-related funds
sent indirectly to addresses associated with open protocols for use on DeFi
applications. Sixty-four SARs that report a ransomware-related payment
did not identify a speci c CVC. While there are thousands of CVCs in the
market, the SAR data only noted attackers requested BTC and XMR as
methods for ransomeware-related payment during the observed timeframe.
Source: https://www. ncen.gov/sites/default/ les/2021-10/
Financial%20Trend%20Analysis_Ransomware%20508%20FINAL.pdf
6.5.4 Business Email Compromise: The
NMLRA 2022 states that, “BEC schemes,
FinCEN Identi ed Ransomware Money Laundering
Typologies
1. Threat Actors Increasingly Request Payments in AECs
FinCEN’s analysis of ransomware-related SARs found ransomware-related
payments are often initially requested in BTC, though threat actors may
request payments in AECs, most commonly XMR. FinCEN observed a 10
to 20 percent surcharge or discount for victims paying in BTC, and, on
some occasions, threat actors exclusively requested payment in XMR.
2. Threat Actors Avoided Reusing Wallet Addresses
After receiving illicit funds from a victim, ransomware actors layered funds
through multiple wallet addresses and avoided reusing wallet addresses for
each attack, according to SAR data. Threat actors laundered the payments
from each ransomware event separately, to minimize consolidation into
single wallet addresses.
3. Centralized CVC Exchanges are Preferred Cash-out
Points
Threat actors identi ed from SARs primarily use foreign centralized
exchanges for ransomware-related deposits, including exchanges
incorporated in high-risk jurisdictions that may have
opaque ownership structures or that may have inadequate AML/CFT
compliance standards.
This observation is also corroborated by commercial blockchain analytic
companies that note the use of exchanges incorporated in jurisdictions that
may not enforce know your customer (KYC) requirements or require the
reporting of suspicious transactions.Non-compliant centralized exchanges
are possibly a key step in the layering and obfuscation process of
laundering funds from CVC to at currency.
4. “Chain Hopping” is Used to Obfuscate Financial Trails on
Blockchains
Illicit actors often engage in the practice of “chain hopping” to obfuscate
the origin of their funds. Chain hopping refers to the practice of converting
one CVC into a di erent CVC at least once before moving the funds to
another service or platform. This practice allows threat actors to convert
illicit BTC proceeds into an AEC like XMR at CVC exchanges or services.
Threat actors can then transfer the converted funds to large CVC services
and MSBs with lax compliance programs.
which are considered cyber-enabled fraud,
accounted for US$1.8 billion in losses in
2020, over 40% of all victim losses from
cybercrime for the year, according to IC3
estimates. Cybercriminals have increasingly
exploited the COVID-19 pandemic by using
BEC schemes, particularly targeting
municipalities and the healthcare industry
supply chain. In addition, the FBI has
witnessed a rise in BEC schemes targeting the
real estate, entertainment, and commercial
food sectors. For example, remote closings for
real estate were widespread during the
pandemic, and BEC scammers can generate
signi cant illicit proceeds when they convince
those buying real estate to wire down
payments to illegitimate accounts. The USSS
recently reported intercepting a potential
US$21 million real estate BEC scheme and
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can traf c the harvested data through
to the real estate sector.
marketplaces that specialise in the sale of
In BEC schemes, criminals use compromised
or spoofed accounts, often those actually or
purportedly belonging to company
leadership, vendors, or lawyers, to target
employees with access to a company’s
nances to induce them to transfer funds to
bank accounts thought to belong to trusted
partners. During the pandemic, criminals have
exploited pandemic-related changes in
business operations, the high demand for
compromised debit and credit cards, PII,
nancial and banking information, and other
contraband. For example, the criminal
organisation FIN7 used malware and other
tools to breach the computer networks of
businesses in all 50 U.S. states in addition to
international victims, stealing more than 20
million customer card records from over
6,500 individual point-of-sale terminals at
more than 3,600 separate business locations.
critical pandemic-related supplies, and
Criminals, like those associated with FIN7, can
remote work operations to convince victims to
traf c harvested data through marketplaces
make payments. Criminals have often made
that specialise in the sale of compromised
last-minute and urgent demands for a change
debit and credit cards, PII, nancial and
in recipient account information and the
banking information, and other contraband.
timeline for payment. Additionally, IC3
Such marketplaces may be established by
observed an increase in schemes in which
other cybercriminals using turnkey online
BEC criminals used stolen identities to set up
storefront design and hosting platforms. For
bank accounts, into which they received funds
example, in May 2021, a Russian national was
from BEC schemes. The criminals then
sentenced to months in custody for his role as
exchanged the funds into virtual assets”.
the administrator of an online platform that
6.5.5 Compromise and sale of nancial
information: “Some cybercriminal groups
develop and deploy malware to harvest and
monetise nancial data on an industrial scale
from businesses around the world. Some
groups use botnets, or networks of
compromised computers that can include
hundreds of devices, which they can
command and control to launch attacks
against a large number of computers at once
to extract information, including banking
passwords and login credentials. Criminals
catered to cyber criminals by virtually selling
items such as stolen credit card information,
other personal information, and services to be
used for criminal activity. The platform as of
March 2020 had approximately 3,000 shops
with sales exceeding $17million. Purchasers
of harvested data may attempt to use
credentials and other PII to access victims’
accounts at nancial institutions to conduct
unauthorised nancial transactions, create
synthetic identi es, or commit identity theft,
among other crimes. Based on victim reports
regarding one online marketplace disrupted
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warns of a sharp rise in BEC incidents speci c
through international law enforcement
communications, and physical security and
cooperation in June 2021, stolen login
resilience, in turn helping to ensure a secure
credentials sold over the marketplace were
and resilient infrastructure for the American
used to cause over $200 million in losses in
people… Established in 2018, CISA was
the United States”.
created to work across public and private
In 2021, The 6th annual Norton Cyber Safety
business by engaging with government,
Insights Report89 found that in the past 12
industry, academic, and international
months:
partners”.
• Over USD$38 billion was lost by
In a July 2021 statement the White House
sectors, challenging traditional ways of doing
Americans from cybercrime:
advised92 on a number of initiatives in
• Nearly 108 million Americans experienced
to the People’s Republic of China” – including
relation to the “Irresponsible State Behaviour
cybercrime; and
but not limited to:
• More than 719 million hours were lost with
• “An unprecedented group of allies and
Americans spending an average of almost
partners – including the European Union,
7 hours to resolve the issues created.
the United Kingdom, and NATO – are
In May 2022, the President signed the Better
Cybercrime Metrics Act into law to beef up
various aspects of the country’s cyber
defences90. “The new law establishes
requirements to improve the collection of
data related to cybercrime and cyber-enabled
crime”. It will reportedly, “improve how the
federal government tracks, measures,
analyses, and prosecutes cybercrime” and
joining the United States in exposing and
criticising the PRC’s malicious cyber
activities;
• Exposing the People’s Republic of China’s
(PRC’s) use of criminal contract hackers to
conduct unsanctioned cyber operations
globally, including for their own personal
pro t.
• As announced in April, the U.S.
“will allow U.S. law enforcement agencies to
Government conducted cyber operations
better identify cyberthreats, prevent attacks,
and pursued proactive network defence
and take on the challenge of cybercrime”.
actions to prevent systems compromised
“The Cybersecurity and Infrastructure Security
Agency (CISA)91 leads the national effort to
understand, manage, and reduce risk to our
cyber and physical infrastructure. We connect
our stakeholders in industry and government
through the Exchange Server
vulnerabilities from being used for
ransomware attacks or other malicious
purposes.
• The U.S. Government announced and
to each other and to resources, analyses, and
operated under a new model for cyber
tools to help them build their own cyber,
incident response by including private
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an increase in the use of virtual assets to pay
Coordination Group (UCG) to address the
for online drugs or to launder the proceeds of
Exchange Server vulnerabilities.
drug traf cking, fraud, and cybercrime,
• The National Security Agency, the
Cybersecurity and Infrastructure Agency,
including ransomware attacks (see previous
sections on threats), as well as other criminal
and the Federal Bureau of Investigation
activity, including sanctions evasion”.
released a cybersecurity advisory to detail
“Law enforcement has also observed
additional PRC state-sponsored cyber
criminals, including drug dealers and credit
techniques used to target U.S. and allied
networks, including those used when
targeting the Exchange Server
vulnerabilities.
card fraud schemers, using virtual asset
kiosks, sometimes referred to as bitcoin
ATMs.”
• The Administration is implementing
Virtual Asset – Case studies 🇺🇸
President Biden’s Executive Order to
1
In June 2021, a Texas-based man known as “Doctor Bitcoin” pled guilty to
illegally operating a cash-to-virtual asset conversion business. In just one
scheme spanning almost one year, he conducted 37 transactions with a
customer whose money stemmed from a Nigerian lottery scam, converting
between $550,000 and $1.5 million to virtual assets. Doctor Bitcoin promised
not to get involved in the details of this customer’s business dealings, advised
on how to circumvent nancial institution reporting requirements by keeping
deposits under $9,500, collected fees for his services, and failed to verify the
source of cash. He also registered as a marketing agency so his customers
could describe the payments as marketing consulting fees to avoid suspicious
activity ling requirements. The defendant admitted he was not licensed to
engage in the business of transmitting money within the states where he
practiced, nor was he registered as a money transmitting business with
Treasury.
2
In August 2021, FinCEN and the CFTC announced a $100 million civil money
penalty (CMP) assessed against Bitcoin Mercantile Exchange, or “BitMEX,” a
purportedly “o shore” VASP. The platform, located in the Seychelles, was found
to permit U.S. customers onto its platform despite claims to the contrary.
Ultimately, it was found that BitMEX failed to register with the CFTC and to
wilfully violate its U.S. AML obligations under the BSA.222 BitMEX’s owners
have also been indicted on charges of wilfully failing to establish, implement,
and maintain an adequate AML program.
3
In May 2021, Kais Mohammad was sentenced for operating Herocoin, an illegal
virtual asset MSB that exchanged up to $25 million, including on behalf of
criminals, through in-person transactions and a network of bitcoin ATM- type
kiosks. As part of his business, he o ered bitcoin-cash exchange services,
charging commissions of up to 25 percent, signi cantly above the prevailing
market rate; processed virtual assets deposited into the machines; supplied the
machines with cash that customers would withdraw; and maintained the server
software that operated the machines. Mohammad intentionally failed to register
his company with FinCEN and consciously chose not to develop and maintain
an e ective AML program, le required CTRs, conduct due diligence on
customers, and le required SARs – In 2021, OFAC entered into a $507,000
settlement agreement with a U.S. virtual asset payment service provider for
processing virtual asset transactions between the company’s customers and
persons located in sanctioned jurisdictions. While the company’s sanctions
compliance controls included screening its direct customers and merchants in
the United States and elsewhere for a potential nexus to sanctions, the
company failed to screen available information about the individuals who used
its payment processing platform to buy products from those merchants.
Speci cally, prior to e ecting transactions, the company received information
about some of the buyers, such as names, addresses, telephone numbers,
email addresses, and, at times, IP addresses
4
In October 2020, FinCEN assessed a $60 million CMP against Larry Harmon,
the owner and operator of Helix, a virtual asset mixer, or tumbler, for operating
as an unregistered MSB, failure to implement an AML program, and failure to
le SARs from 2014 to 2020. FinCEN’s investigation revealed that from June
2014 through December 2017, Helix conducted over 1.2 million transactions for
its customers while failing to collect and verify customer names, addresses, and
other identi ers on these transactions and was associated with virtual asset
wallet addresses that sent or received over $311 million. Coin Ninja, which
operated as an unregistered MSB, was operated in the same manner as Helix
and failed to register with FinCEN. In2 021, Harmon pleaded guilty to a money
laundering conspiracy arising from his operation of Helix, admitting that he
conspired with darknet vendors to launder bitcoin generated through drug
tra cking and other illegal activities
improve the nation’s cybersecurity and
protect Federal government networks.”
The brie ng note concluded that: “By
exposing the PRC’s malicious activity, we are
continuing the Administration’s efforts to
inform and empower system owners and
operators to act. We call on private sector
companies to follow the Federal
government’s lead and take ambitious
measures to augment and align cybersecurity
investments with the goal of minimising future
incidents”.
6.5.6 Virtual Assets: The NMLRA 2022
reported that “These transactions may also be
transferred across jurisdictional boundaries
and may be anonymous. VASPs doing
business wholly or in substantial part in the
United States qualify as money transmitters…
While the use of virtual assets for money
laundering remains far below that of at
currency and more traditional methods, …
U.S. law enforcement agencies have detected
Source: 2022 NMLRA
“Another growing trend is criminals’ use of
anonymity-enhancement technologies, such
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companies in the Cyber Uni ed
as enhanced cryptography or operation on an
billion in 2020, while online shopping
opaque blockchain, in the virtual asset sector.
accounted for about US$392 million in
These are assets, such as AECs, or services,
reported losses from consumers—up from
such as mixers or tumblers, that help criminals
US$246 million in 2020.
hide the movement or origin of funds,
creating additional obstacles for investigators.
Anonymity-enhancement technologies create
challenges for investigators attempting to
trace illicit proceeds. For example, some
virtual assets and VASPs operate on public,
transparent blockchains, where
pseudonymous user and transaction
information can be viewed and sometimes
paired with other pieces of information that
can enable regulators and law enforcement to
Overall the FTC aggregated data from
consumers and from others which estimated
overall that more than 5.7 million reports
were received in 2021, including the fraud
reports detailed above, as well as identity
theft reports and complaints related to other
consumer issues, such as problems with
credit bureaus and banks and lenders. In
2021, there were nearly 1.4 million reports
of identity theft received by the FTC93.
identify transaction participants. However, law
Whilst reported losses from cybercrime are
enforcement has observed illicit actors
on the rise, it is also estimated that most loses
showing an interest in the use of virtual assets
go unreported so that underlying gures are
and services speci cally designed to obscure
potentially much higher.
transactional activity and limit transparency,
such as AECs, mixers, and tumblers.”
6.5.8 Other Estimates: According to a
study, produced by Javelin Strategy &
6.5.7 Federal Trade Commission (FTC): FTC
Research94 in 2021 nearly 42 million
data shows consumers reported losing more
Americans were victims of identity fraud in
than US$5.8 billion to fraud in 2021, an
2021, costing consumers US$52 billion in
increase of more than 70% over the previous
total losses. The individual cost of identity
year. The FTC received fraud reports from
fraud also grew in 2021, with the average per-
more than 2.8 million consumers last year,
victim loss from traditional identity fraud rising
with the most commonly reported category
by US$201, to US$1,551. According to the
once again being imposter scams, followed
study, victims spent an average of 9 hours
by online shopping scams. Prizes,
resolving their identity fraud issues. In many
sweepstakes, and lotteries; internet services;
respects due to the pandemic, criminals had
and business and job opportunities rounded
plenty of opportunities to harvest their
out the top ve fraud categories.
victims’ personally identi able information
Of the losses reported by consumers, more
than US$2.3 billion of losses reported were
due to imposter scams—up from US$1.2
(PII) as people spent more time online.
Thieves were especially eager to capitalise on
the billions of dollars in stimulus funds that
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In May 2021, President Biden announced98
impact payments last year. Javelin de nes
that the US, “must improve its efforts to
traditional identity fraud as “the unauthorised
identify, deter, protect against, detect, and
use of some portion of another’s personal
respond to these actions and actors,” and,
information to achieve illicit nancial gain.”
“that protecting our Nation from malicious
Many victims of this type of identity fraud may
cyber actors requires the Federal
never nd out how or when their personal
Government to partner with the private
information was compromised.
sector.” He also stated that, “incremental
A Study published by the Centre for Strategic
and International Studies95 in 2013 estimated
that cybercrime creates a US$100 billion
annual loss to the U.S. economy, and as many
as 508,000 lost jobs as a result. More recent
studies estimate much larger amounts.
improvements will not give us the security we
need….it is the policy of my Administration
that the prevention, detection, assessment,
and remediation of cyber incidents is a top
priority and essential to national and
economic security. The Federal Government
must lead by example. All Federal
Notwithstanding these losses, the USA is
Information Systems should meet or exceed
ranked 1st globally, with a score of 100 with
the standards and requirements for
of relative strength being “Legal,
cybersecurity set forth in and issued pursuant
Organisational, Cooperative, and Capacity
to this order.”
Development Measures” in the 2020 Global
Cybersecurity Index (GCI) report96.
In May 2022, President Biden signed into law
the Better Cybercrime Metrics Act99, which is
6.5.9 Cybercrime Prevention Strategy: The
an important measure to improve various
US response to combatting cybercrime falls
aspects of the country’s cyber defences. The
within a broader priority to ensure overall
new law establishes requirements to improve
improvements in cybersecurity. A
the collection of data related to cybercrime
Cybersecurity Strategy was launched in 2018
and cyber-enabled crime. In particular, it will
during the Trump Administration with
improve how the federal government tracks,
Homeland Security announcing that, “the
measures, analyses, and prosecutes
strategy provides a framework to execute our
cybercrime. By starting the process of
cybersecurity responsibilities during the next
building an effective system to track
ve years to keep pace with the evolving
cybercrime incidents the legislation will allow
cyber risk landscape by reducing
U.S. law enforcement agencies to better
vulnerabilities and building resilience;
identify cyberthreats, prevent attacks, and
countering malicious actors in cyberspace;
take on the challenge of cybercrime.
responding to incidents; and making the
cyber ecosystem more secure and resilient97”.
In March 2022, President Biden published100
an Executive Order on Ensuring Responsible
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many people received as federal economic
Development of Digital Assets, stating that,
the future. The United States must ensure
“we must mitigate the illicit nance and
appropriate controls and accountability for
national security risks posed by misuse of
current and future digital assets systems to
digital assets. Digital assets may pose
promote high standards for transparency,
signi cant illicit nance risks, including money
privacy, and security — including through
laundering, cybercrime and ransomware,
regulatory, governance, and technological
narcotics and human traf cking, and terrorism
measures — that counter illicit activities and
and proliferation nancing. Digital assets may
preserve or enhance the ef cacy of our
also be used as a tool to circumvent United
national security tools. When digital assets
States and foreign nancial sanctions regimes
are abused or used in illicit ways, or
and other tools and authorities. Further, while
undermine national security, it is in the
the United States has been a leader in setting
national interest to take actions to mitigate
international standards for the regulation and
these illicit nance and national security risks
supervision of digital assets for anti money
through regulation, oversight, law
laundering and countering the nancing of
enforcement action, or use of other United
terrorism (AML/CFT), poor or nonexistent
States Government authorities. We must
implementation of those standards in some
reinforce United States leadership in the
jurisdictions abroad can present signi cant
global nancial system and in technological
illicit nancing risks for the United States and
and economic competitiveness, including
global nancial systems. Illicit actors,
through the responsible development of
including the perpetrators of ransomware
payment innovations and digital assets. The
incidents and other cybercrime, often launder
United States has an interest in ensuring that
and cash out of their illicit proceeds using
it remains at the forefront of responsible
digital asset service providers in jurisdictions
development and design of digital assets and
that have not yet effectively implemented the
the technology that underpins new forms of
international standards set by the inter-
payments and capital ows in the
governmental Financial Action Task Force
international nancial system., particularly in
(FATF). The continued availability of service
setting standards that promote: democratic
providers in jurisdictions where international
values; the rule of law; privacy; the protection
AML/CFT standards are not effectively
of consumers, investors, and businesses; and
implemented enables nancial activity
interoperability with digital platforms, legacy
without illicit nance controls. Growth in
architecture, and international payment
decentralised nancial ecosystems, peer-to-
systems. The United States derives signi cant
peer payment activity, and obscured
economic and national security bene ts from
blockchain ledgers without controls to
the central role that the United States dollar
mitigate illicit nance could also present
and United States nancial institutions and
additional market and national security risks in
markets play in the global nancial system.
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Continued United States leadership in the
have special divisions dedicated to
global nancial system will sustain United
combating cyber crime101.
States nancial power and promote United
States economic interests.”
For more details on the US Fraud Prevention
Strategy, see Section 6.4.7 above which was
US Homeland Security is the lead agency
announce by President Biden at his March
tackling cybercrime, together with the FBI.
2022 State of the Union Address102.
and the Secret Service. According to HSI, as
Americans become more reliant on modern
technology, they also become more
vulnerable to cyberattacks such as corporate
security breaches, spear phishing, and social
media fraud. Complementary cybersecurity
and law enforcement capabilities are critical
to safeguarding and securing cyberspace.
Law enforcement performs an essential role
in achieving our nation’s cybersecurity
objectives by investigating a wide range of
cyber crimes, from theft and fraud to child
exploitation, and apprehending and
prosecuting those responsible. The
6.5.10 Cybercrime Potential Red Flags:
See BSA/AML Exam Manual – Appendix F ML/
TF Red Flags which include examples of
potentially suspicious activities, or “red ags”
for both ML & TF, which includes potential
cybercrime red ags103. FinCEN issued an
advisory to alert FI to potential indicators of
cybercrime and cyber-enabled crime
observed during the COVID-19 pandemic,
including potential red ag indicators in July
2020104 and on Ransomware in October
2020105 and in November 2021106. FATF also
published red ags on Virtual Assets107.
Department of Homeland Security (DHS)
6.5.11 Estimated Proceeds: Based on FBI
works with other federal agencies to conduct
reports (at least as far as reported crime is
high-impact criminal investigations to disrupt
concerned) estimates of proceeds in 2021 for
and defeat cyber criminals, prioritise the
cybercrime was US$6.9 billion, of which,
recruitment and training of technical experts,
BEC at US$2.4 billion, Con dence scams at
develop standardised methods, and broadly
US$956 million in victim losses &
share cyber response best practices and
Cryptocurrency losses grew to US$1.6
tools. Criminal investigators and network
billion in 2020 & with asset freezing of
security experts with deep understanding of
US$328 million.
the technologies malicious actors are using
and the speci c vulnerabilities they are
targeting work to effectively respond to and
investigate cyber incidents. DHS components
such as the U.S. Secret Service and U.S.
Immigration and Customs Enforcement (ICE)
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In this Section 6.6 the threat from human
of victims, as well as earnings from the
traf cking, which is one of the US National
exploitation of victims.
Priorities (albeit combined and included with
human smuggling when these are different
important crimes) is assessed & summarised.
In the United States, human traf cking occurs
in a broad range of industries, including,
hospitality, agriculture, janitorial services,
6.6 Human Traf cking: “Human traf cking is
construction, restaurants, care for persons
a stain on our society’s conscience and an
with disabilities, salon services, massage
affront to the ideals that form the basis of our
parlours, retail, fairs and carnivals, peddling
national strength: liberty, justice, equality, and
and begging, childcare, domestic work, and
opportunity. This abhorrent crime targets the
drug smuggling and distribution. Illicit
most vulnerable in society and exploits them
proceeds from human traf cking can be paid
and their labor—stealing away their God-given
or transferred in cash, electronic funds
rights, freedom, and dignity. At the same time,
transfers/remittance systems, credit card
it erodes the safety of our communities, the
transactions, payment apps, or virtual assets”.
security of our borders, the strength of our
Sex traf cking may be perpetuated and
economy, and the rule of law.” – President
facilitated through online platforms by TCOs.”
Biden December 2021108.
6.6.2 US TIP: The U.S. is categorised as a Tier
6.6.1 Human Traf cking – NMLRA 2022:
1 Country in the US Traf cking in Persons
According to the NMLRA 2022, “In 2020, a
Report 2022109..
total of 11,193 situations of human traf cking
were identi ed through the U.S.National
Human Traf cking Hotline, and globally, an
estimated 24.9 million people are subjected
to human traf cking, generating an estimated
US$150 billion in illicit pro ts annually.
Financial activity from human traf cking
activities can intersect with the regulated
nancial system at any point during the
In the 2021 TIP Report it states that, “human
recruitment, transportation, and exploitation
traf ckers exploit domestic and foreign
stages. The illicit proceeds from human
national victims in the United States, and
traf cking can include income associated with
traf ckers exploit victims from the United
logistics, such as housing and transportation
States abroad. Human traf cking cases have
been reported in all 50 states, the District of
Columbia, and U.S. territories. Individuals who
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Section 6.6 – Human Trafficking -!🇺🇸
entered the United States with and without
by a family member, guardian, or intimate
legal status have been identi ed as traf cking
partner. Some U.S. citizens engage in
victims. Victims originate from almost every
extraterritorial child sexual exploitation and
region of the world; the top three countries of
abuse in foreign countries.”
origin of victims identi ed by federally funded
providers in FY 2021 were the United States,
Mexico, and Honduras. Human traf cking
patterns in the United States continued to
re ect the living legacy of the systemic racism
and colonisation globalised during the
6.6.3 Human Traf cking – 2021 OC Index:
According to the 2021 OC Index, human
traf cking is the next highest rated crime
(5.5/10) after drugs and arms traf cking and
is rated the same as wildlife traf cking.
transatlantic slave trade through chattel
The 2021 OC Index stated that “The US has
slavery and regional practices of Indigenous
one of the largest human traf cking markets
dispossession. Traf ckers often target those
worldwide in absolute terms. Forced labour
who experience compounding forms of
primarily occurs in the construction, domestic
discrimination (such as discrimination
service, beauty and agricultural sectors, while
because of one’s racial or ethnic group,
sex traf cking largely applies to escort
gender identity, disability, or sexual
services, pornography and outdoor
orientation), experience violence (such as
solicitation. Most victims are from the US,
intimate partner or domestic violence), or
Mexico and the Philippines, and perpetrators
interact with government-run programs (such
are usually members of organised networks.
as the criminal justice system, runaway and
The market targets vulnerable groups,
homeless youth services, foster or institutional
including children in the child-welfare and
care, and the immigration enforcement
juvenile-justice systems, homeless youth,
system). Traf ckers compel victims to engage
unaccompanied non-citizen children without
in commercial sex and to work in both legal
lawful immigration status, drug users, lesbian,
and illicit industries and sectors, including in
gay, bisexual, transgender, intersex and queer
hospitality, traveling sales crews, agriculture,
individuals, victims with disabilities, Native
janitorial services, construction, landscaping,
American women and girls, and migrant
restaurants, factories and manufacturing, care
labourers. Although it may be too early to
for persons with disabilities, salon services,
ascertain the full impact of COVID-19 on
massage parlours, retail, fairs and carnivals,
human traf cking, vulnerability to both sexual
peddling and begging, drug smuggling and
and labour exploitation increased
distribution, religious institutions, child care,
considerably amid the pandemic as people
and domestic work. Traf ckers continued to
spent more time online (in particular children
increasingly use social media platforms to
unable to attend school) and as the economic
recruit and advertise victims. NGOs reported
damage caused by lockdown restrictions took
increasingly seeing cases of human traf cking
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According to a leading US Anti child
situations”.
traf cking NGO, ECPAT-USA113, of an
6.6.4 Human Traf cking – 2018 Global
Slavery Index: According to the 2018 Global
Slavery
Index110, the
USA has a fairly low
incidence of human traf cking, with 1.26 in
1,000, estimating victims at approximately
estimated 4.8 million people globally in
“forced sexual exploitation,” over 1 million of
those are children. In the US gures for a
number of States reveal signi cant
populations for example: in a study
published in 2016, it was estimated that there
403,000, ranking the USA 5th best out of 27
were approximately 79,000 minor and youth
countries assessed in the Americas. GSI gives
victims of sex traf cking in Texas & the same
the USA a government response of “BBB”,
year 2,480 children and youth were identi ed
equal to Argentina and Chile. It is also the
self-reported or determined to be sexually
number 1 destination for imports of at risk
exploited in New York City. Furthermore,
products tied to human traf cking/forced
nearly 26,500 runaways were reported to the
labor estimated at US$144 billion out of an
National Centre for Missing and Exploited
estimated US$354 billion imported by G20
Children in 2020. 1 in 6 were likely victims of
countries (Laptops, computers & mobile
child sex traf cking.
phones, garments, sh, cocoa, sugarcane).
6.6.7 The National Child Exploitation
6.6.5 Other Estimates: Other estimates:
from 2010 suggest that the US has the third
highest number of people being sexually
exploited as prostitutes at approx 1 million,
after Russia and China. It is estimated that this
raises approx US$14.6 billion111.
6.6.6 Child Sexual Exploitation: The
CDC112
reports that child sexual abuse is a
signi cant adverse childhood experience and
a public health problem. Although estimates
vary across studies, the research shows that:
about 1 in 4 girls and 1 in 13 boys in the
United States experience child sexual abuse,
that someone known and trusted by the child
or child’s family members, perpetrates 91%
of child sexual abuse; and that the total
lifetime economic burden of child sexual
abuse in the US in 2015 was estimated to be
at least US$9.3 billion.
Threat Assessment 2016: The 2010 National
Strategy was the rst national assessment by
the federal government of the risks posed by
child exploitation was carried out. The 2016
assessment114 is based on a comprehensive
survey of more than 1,000 investigators, law
enforcement managers, prosecutors,
analysts, victim service providers, and DOJ
grant recipients. The survey focused on
changes to the child sexual exploitation
threat since the previous assessment and
potential threats over the next ve years. Key
ndings of the threat assessment in the ve
main areas of child exploitation are as
follows:
6.6.7.1 Child Pornography
• “Globalisation: Child pornography cases
frequently involve offenders or evidence
located abroad, which complicates, delays,
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its toll on workers in already precarious
or thwarts successful investigation and
prosecution.
• Mobile devices: Mobile devices can be
used to photograph or lm a child being
sexually abused, access child pornography
stored in remote locations, and stream
video of child sexual abuse
• Encryption: Readily available, easy-to-use,
often built-in encryption thwarts the
collection and analysis of critical evidence in
child sexual exploitation cases. Even with
proper legal process, law enforcement often
is unable to obtain the evidence on an
encrypted device, allowing an offender to
escape justice.
• The Dark Internet: Networks of
• Evolving means of exploitation: Mobile
devices have fundamentally changed the
way offenders can abuse children. Apps on
these devices can be used to target, recruit
or groom, and coerce children to engage in
sexual activity.
• Large number of victims: easily targeted.
Offenders are adept at tricking and/or
coercing children who are online and
typically do so in large numbers.”
6.6.7.3 Child Sex Traf cking
• “The impact of the Internet: Websites like
Backpage.com have emerged as a primary
vehicle for the advertisement of children to
engage in prostitution. At the same time,
offenders are using social networking sites
technologies and platforms can obfuscate
as a tool to identify and recruit underage
traditional IP addresses and make it highly
victims.
dif cult to identify offenders. This anonymity
emboldens users to commit more
egregious offences than are seen on
traditional Internet platforms.
• Offender Communities: In closed and
highly protected online spaces, online
communities dedicated to the sexual abuse
of children have proliferated. Hand-picked
members normalise each other’s sexual
interest in children and encourage each
other to act on their deviant sexual
interests.”
6.6.7.2 Sextortion and Live-Streaming of
Child Sexual Abuse.
• “Evolving threats: Novel methods of child
• Gangs: In addition to, or instead of, the
drug trade, gang members have begun to
prostitute children as a means to derive
revenue.
• Concentrated spikes in criminal activity:
Major public events, such as championship
or all-star sporting events or national
conferences, can be venues for child sex
traf cking such that offenders will transport
children to those events to meet the
demand.
• Offender danger: Unlike other child sex
offenders, child sex traf ckers typically have
extensive criminal histories for a variety of
violent offences.”
sex abuse, such as sextortion, continue to
emerge in the online context.
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manufacturing, mining and utilities, 6% is
• “Exploitation of systemic vulnerabilities:
U.S. citizens, often with seemingly
legitimate reasons for travel, seek sex with
children in countries with high levels of
poverty, large populations of at-risk youth,
legalised prostitution, and/or fewer law
enforcement resources.
from agriculture, including forestry and
shing, 5% is saved annually by private
households that employ domestic workers
under conditions of forced labor & 0.5% is
from Illegal Organ Traf cking, including
kidneys, livers, hearts, lungs and pancreas.
6.6.10 UNODC Study on Child Sexual
• Sex Offender. Registry Violation:
Online Exploitation: The UNODC estimates
Deliberate evasion: Sex offenders who fail
around two million global consumers
to register are often trying to evade their
generating around US$250 million a year
registration obligations so that they can
globally117. There are no available estimates
offend again.”
for the USA.
6.6.8 HSI Child Exploitation Investigations
6.6.11 Child Exploitation Prevention
Unit (CEIU): The CEIU identi ed and/or
Strategy: The National Strategy for Child
rescued 1,177 child victims in child
exploitation investigations in FY 2021. During
this same period, CEIU arrested 3,776
individuals for crimes involving the sexual
exploitation of children and helped to secure
more than 1,500 convictions. Since its
establishment in 2011, the CEIU has
identi ed and/or rescued more than 9,000
child victims of sexual exploitation115.
6.6.9 The International Labor
Organisation (ILO) 2015: The ILO
Exploitation Prevention and Interdiction
Strategy, rst published in 2010 and updated
in 2016118, identi ed innovative ways in which
the federal government and its partners can
address child exploitation and reaf rms the
Department of Justice’s and its
partners’ “unwavering commitment to
ensuring that all children in America are able
to reach their potential in a nation that
protects them from violence and abuse.”
2015116
reported that in 2015 annual pro ts globally
from victims amounted to an estimated
US$150 billion (based on an estimated 24.9
million people who subjected to human
traf cking) averages at US$16,000 per
person. The ILO estimates the most pro table
activity being sexual exploitation at
US$21,800 per victim. Of the US$150
billion it is estimated that: 66% is from
commercial sex, 22% is from construction,
6.6.12 Human Traf cking Prevention
Strategy: An updated version of the US
National Action Plan to Combat Human
Traf cking, originally released in 2020, was
published in December 2021119. A message
from President Biden stated that, “My
Administration is committed to keeping the
ght to end human traf cking at the forefront
of our national security agenda. Any form of
traf cking in people—from forced labor to sex
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6.6.7.4 Child Sex Tourism:
traf cking—must not be tolerated, in the
Traf cking in Persons has issued Red ags for
United States or anywhere around the world,”
human traf cking124 in 2018.
and, “its focus on the foundational pillars of
the U.S. and global anti-traf cking efforts—
prevention, protection, prosecution, and
partnership—remains unchanged.”
Canada’s FIU together with leading FIs have
produced useful potential red ags125 on
child sexual online exploitation as well as
more generally on the laundering of illicit
proceeds from human traf cking for sexual
exploitation126.
For a detailed Intelligence Brie ng including
potential red ags see Financial Crime
News127.
6.6.13 Potential Red Flags for Human
Traf cking including Child Sexual
Exploitation: FinCEN issued an advisory in
2014 which includes potential red ags on
human traf cking120. This Advisory bene ted
from the work of the Bankers Alliance that has
since produced Potential Red ags for all
regions121. A supplemental Advisory was
issued in 2020. An ICE Homeland Security
also issued red ags122 as well as additional
awareness for both human traf cking and
human smuggling123. The US State
Department Of ce to Monitor and Combat
6.6.14 Estimated Proceeds: These
estimates from the ILO above are expected to
be higher in advanced and more prosperous
economies. Based on 403,000 exploited
victims, estimated proceeds of US$6.5
billion could be generated, with US$4.3
billion from sexual exploitation, US$1.8
billion from forced labor and US$500
million domestic servitude.
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Section 6.7 – Human Smuggling -!🇺🇸
In this Section 6.7 the threat from human
6.7.2 Human Smuggling – OC Index 2021:
smuggling, which is one of the US National
According to the 2021 OC Index, human
Priorities is assessed and summarised (albeit
smuggling is the next highest rated
combined and included with human
organised crime (4.5/10) after drugs, arms,
traf cking when these are different important
wildlife, and human traf cking. The report
crimes).
stated that “Human smuggling into the US is
The US-Mexico border is 2,000 miles long
and has 10 border states, which represent a
combined population of more than 10 million
people. It is one of the worlds hotspots when
it comes to human smuggling from Mexico,
Central and South America into the US.
consolidated along the south-west border,
involving domestic and foreign criminal
networks, as well as state-embedded actors.
Individuals from Mexico, Honduras,
Guatemala and El Salvador are increasingly
the focus of Mexican smuggling operations
into the US, sometimes resulting in fatalities.
6.7.1 Human Smuggling – NMLRA 2022:
Criminal organisations charge smuggling
According to the NMLRA 2022 “A 2019
networks that pass through smuggling
RAND report prepared for the DHS estimates
corridors. Payments are also received by
that the smuggling of unlawful migrants from
corrupt low-level of cials, including Mexican
the Northern Triangle region of Central
police, migration of cers and US border-
America—Guatemala, Honduras, and El
patrol agents. Notably, there is little evidence
Salvador—to the United States generated
of drug-traf cking organisations engaging in
between US$200 million and US$2.3 billion
human smuggling. While the COVID-19
for human smugglers in 2017. The wide range
pandemic caused some initial disruptions to
in estimated amounts re ects the uncertainty
smuggling networks at the Mexico border,
of underlying estimates related to unlawful
migrant ows, the use of smugglers, and
smuggling fees. The report also found that the
illegal business of human smuggling includes
independent operators, ad hoc groups, loose
networks, and some more formally structured
networks, such as TCOs. TCOs that maintain
there is little evidence to suggest a major
decline in the human smuggling market
throughout 2020 on the whole. On the
contrary, if unemployment rates in common
source countries rise due to the pandemic, it
is likely that human smuggling will increase in
volume in the near future”.
control over drug smuggling territory pro t
6.7.3 UNODC Report 2018: The UNODC
from this illegal activity by charging
Global Study on Smuggling of Migrants
smuggling organisations a fee or tax to pass
2018128, describe 30 major smuggling routes,
through their territories”.
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with the North America via the Southern
authorities in 2015. Assuming an
border the most lucrative.
apprehension rate of 56% at the US border,
Of 370,000 Central American migrants
approx 16,000 attempts can be estimated.
attempting to enter the US in 2016, only 11%
About 12,000 migrants and refugees from
successfully made it through, with the rest
Asia, Africa and the Middle East were
interdicted by either US (56%) or Mexican
apprehended by the US authorities in 2014,
authorities (33%). Fees are estimated at
and10,000 in 2015. Assuming an
US$2,000 to Mexico and another US$5,000
apprehension rate of 56% at the US border,
from there into the US. A similar number of
approx 25,000 attempts can be estimated.
Mexican migrants are estimated at around
Smuggling fees to reach the US for Asian
300,000 for 2015, paying a smuggling fee of
migrants range around US$15,000.
around US$5,000 to attempt to gain access to
the US. There is no reason to believe that
Mexicans are more or less likely to be
detected than Central American smuggled
migrants.
Pro le of Migrants: “Mostly migrants from
Central America and Mexico. Signi cant
numbers of unaccompanied migrant children
– mainly boys – from the main origin
countries.”
Human Cost: “A variety of risks, including
death, extortion, kidnapping, traf cking in
persons, sexual violence, arbitrary arrest and
incarceration, torture and environmental
exposure.”
Pro le of smugglers: “Throughout the
continent, most smugglers operate on a small
scale within their communities and abroad
mainly by mobilising personal connections.
The vast majority has no criminal background.
Large and violent criminal groups seem not to
be involved in the actual smuggling, however
bene ting from it by imposing a ‘tax’ on the
migrants passage.”
Organisation: “Thousands of small-scale,
About 8,000 migrants and refugees from
South America were apprehended by the US
community-based smugglers who are
informally networked and provide services
locally, and on occasion, partner with other
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through Mexico overland, often via Mexico
countries. On the northward route, in
City.
particular, also some larger smuggling
organisations.”
On the Mexican side of the United States Mexico border there are multiple crossing
“The northward route – with the United States
points. The city of Tijuana – in Mexico’s far
as the nal destination – tends to be travelled
north-western corner – has historically been a
primarily by Central Americans and
point of both regular and irregular crossings
decreasing numbers of Mexican citizens.
into the area around San Diego in California.
Migrants along this route travel mostly by land
The area surrounding the city of Nogales in
and air, and to a lesser degree by sea. While
the Mexican state of Sonora (across the
in the past, individual migrants might have
border from the identically named town in the
crossed the United States-Mexico border
state of Arizona in the United States) is known
irregularly on their own, following the
for the presence of rural communities
signi cant build-up in security along the
occasionally providing support to the
border, such crossings have largely
irregular border crossing. The cities of
disappeared. Migrants now routinely seek the
Matamoros, Reynosa and Nuevo Laredo in
assistance of smugglers.
the Mexican state of Tamaulipas are also
Survey data quoted in a study carried out for
the US Of ce of Immigration Statistics in 2010
indicated that 95% of rst-time crossers used
smugglers in 2006.
A key smuggling hub in the journeys of
Central Americans is the region along
Mexico’s borders with Guatemala and, to a
lesser extent, Belize. Migrants contact
smugglers and make arrangements for their
journey in different cities on different sides of
the borders. The jungle-like settings that
separate Mexico from Central America
provide a porous territory that can be crossed
on foot, by boat or by motor vehicle. Once in
the Mexican cities of Tapachula or Tenosique
in Chiapas state or Chetumal in Quintana
Roo, migrants continue their way northwards
reported to be transit areas for smuggling
organisations facilitating border crossings for
Central and South American migrants into the
United States.
The northward route poses a number of risks
for smuggled migrants. The number of
fatalities is high, according to data from the
IOM Missing Migrants Project. The reported
gures for Central America and United States
– Mexico border are minimum gures, not
only because of the general risk of
underreporting of migrant deaths, but also
because deaths relevant to this route could
be reported under Caribbean or South
America in the IOM data set. 2016 (573
deaths) appears to have been a year with
particularly high numbers of fatalities; the
data for 2017 (338 deaths) up to October
indicate a declining trend.
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smugglers or groups with contacts in other
Mexico’s National Commission for Human
involvement in alien smuggling resulting in
Rights reported that at least 198 cases
death. If convicted, he could face life in
involving nearly 10,000 kidnapped migrants
prison or even the death penalty. Zamorano,
took place between September 2008 and
from Houston Texas, abandoned his truck on
February 2009, whereas in 2016, the
a semi rural road near Interstate Highway 35
Commission reported that there were some
and tried to ee. 3 others were charged.
3,800 cases involving nearly 4,800 victims.
Another Texan and 2 Mexicans. The truck had
This criminal practice has primarily targeted
migrants from Central and South America
traveling along this [Mexican] route.”
passed through a Border Patrol checkpoint
outside of Laredo on I-35, but was not
inspected at the checkpoint “because the
Border Patrol does not have the resources to
The U.S. Customs and Border Protection
be able to inspect all of the trucks.”
reported 557 migrant deaths along the
Apparently the smugglers covered the
southwestern border for the last scal year,
migrants with steak seasoning to disguise
which ended on Sept. 30 2021. Other
their smell. Border Patrol agents routinely use
organisations like the International
dogs to check vehicles passing through
Organisation for Migration, which is a part of
checkpoints near the border. It’s believed the
the United Nations, has the death toll at 650,
driver left the truck after it had mechanical
its highest count since the organisation
problems. A worker from a nearby business
started counting in 2014129.
found the migrants after hearing cries for
6.7,4 Case Example: In June 2022, in a
help and called police.
harrowing reminder of the risks migrants are
6.7.5 RAND Research Human Smuggling &
taking to enter the US, authorities discovered
Associated Revenues Report 2019: The
an abandoned tractor-trailer in San Antonio
Rand Report131 commissioned by and for US
that contained the bodies of 46 dead
Homeland Security studied Human
migrants — another ve died after being
Smuggling from the Northern Triangle (NT) of
transported to local hospitals130. This was the
Central America to the US. Main ndings
single deadliest example of loss of life from
support in large part the UNODC ndings
migrant smuggling in the US. More than 60
above. The ndings are summarised as
migrants had been huddled in a big truck,
follows:
without water or air conditioning, in heat that
reached 100 degrees. Victims included 27
Mexicans, 14 Hondurans, 7 Guatemalans and
2 Salvadorans, with 40 male and 13 female
The driver of the truck, Homero Zamorano Jr.,
45, was arrested and charged with
• “Many of the actors engaged in human
smuggling do not appear to meet the
statutory de nition of a TCO.
• At one end of the range, migrants can opt
for “all-inclusive” or “end-to-end”
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arrangements, in which migrants pay a large
other smuggling organisations during the
fee to a network that arranges all their travel
migrants’ journey, and coordinate some or
—and may even send a representative to
all the migrants’ travel from their source
travel with them—that can amount to upward
country to their nal destination.
of US$10,000 or cheaper pay as go.
• The ow of unlawful migrants from the NT to
• Transportation: Transport migrants from
one location to another along the route
the US in 2017 could have ranged from
north using conveyances that range from
about 218,000 to about 345,000.
taxis to charter buses and tractor-trailers.
• About one-quarter to two-thirds of unlawful
• Logistics/stash houses: Provide logistical
migrants from the NT might have hired
support, often in the form of lodging or
smugglers
“stash houses” where migrants can take
• Revenues from smuggling migrants from El
Salvador, Guatemala & Honduras combined
shelter for a few days or even a few weeks.
• Fraudulent documents: Provide unlawful
could have ranged from a total of about
migrants with fraudulent documents,
US$200 million to about US$2.3 billion in
including Mexican visas, national identity
2017, with individual costs estimates
cards, or birth certi cates, to facilitate their
ranging from US$4,000 to US$12,000.
travel through Mexico, create synthetic
• 50% to 75% of migrants smuggled have to
pay drug traf cking TCOs for passage
families, or avoid detention.
• Foot guides/coyotes/polleros: Guide
through areas controlled by them and that
migrants seeking to avoid detection while
the payment gures ranged from US$300 to
entering the US—generally single adults—
US$700, which could generate about
across the border between ports of entry in
US$30 million to US$180 million in 2017.
order to circumvent border security.”
“Smugglers typically ll a number of roles,
6.7.6 Department of Homeland Security:
whether they are working as independent
According to HSI132 at the US southern
operators or as part of a group or network.
border, a new trend has been taking shape in
Depending on the sophistication of the
2022. About 40% of border crossers are now
operation, individuals or small groups of
from countries outside of Mexico, Guatemala,
people (sometimes referred to as a cell by law
Honduras and El Salvador. More than 6
enforcement) can ll these roles. Below is a
million Venezuelan refugees and migrants
brief description of the key roles:
have ed the country. Nicaraguans have also
• Facilitation/coordination: Identify and
recruit migrants, collect up-front fees, pay
increasingly been migrating, as well as
Haitians who had moved to the region years
ago.
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A “Sting Operation,” led by the Department
mile border and get the Mexicans to pay for
of Homeland Security, has so far yielded
it, the border has instead a mix of controls to
around 20,000 “disruption actions” that
prevent and detect illegal migration and to
include arrests and prosecutions, seizures of
make the work of the migrant smugglers
property and criminal investigations,
more dif cult. In May 2022, Homeland
according to the department. In the last eight
Security Secretary Alejandro Mayorkas
weeks, nearly 2,000 smugglers have been
announced134 the deployment of hundreds
arrested, marking a 600% increase in law
of personnel throughout Latin America and a
enforcement actions taken against such
multi-million-dollar investment to counter
actors compared to efforts in previous years,
illegal human smuggling, as well as those
DHS said. The latest operation builds upon
attempting to cross legally, or to claim
previous initiatives by the Biden
asylum. He stated that, “we have brought an
administration to go after smugglers who
all-of-government effort to attack the
migrants often depend on as they make their
smuggling organisations. It’s not just
way to the US-Mexico border. Last spring,
Homeland Security Investigations, it’s not just
DHS also announced an effort to crack down
US Customs and Border Protection. But we’re
on criminal smuggling organisations,
working very carefully with the Federal Bureau
alongside federal partners.
of Investigation, a number of agencies within
6.7.7 US Sentencing Commission: The
United States Sentencing Commission133
compiles smuggling statistics for the
determination of sentencing guidelines. In
2016 (1 October 2015 – 30 September 2016),
more than 2,400 migrant smuggling
offenders were sentenced, although the
trend has declined since 2008. Almost half of
the cases came from the Southern District of
Texas alone, and 94% of the cases were
heard in courts in districts situated along the
border with Mexico.
the Department of Justice, and, of course, our
partners in Mexico.” He said “I think it’s scale
and scope; it’s tactics and strategy. It’s really
unprecedented,” According to HSI, the US
has surged over 1,300 personnel throughout
the Western Hemisphere and invested over
US$50 million. DHS also set up a new
intelligence gathering and law enforcement
unit to monitor the movement of migrants
and helped stand up a task force, led by the
Justice Department, to investigate and
prosecute human smuggling and traf cking
networks.
6.7.8 Human Smuggling Prevention
Strategy: The illegal migration across the
Southern border has long been an issue for
all US administrations since the 1970s. Whilst
former President Trump famously claimed he
would build a wall across the entire 2,000
At the Ninth Summit of the Americas, which
was hosted by the United States in Los
Angeles, the gathering of nearly two dozen
heads of states from the Western Hemisphere
focused on stabilising the region and
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investing in it to, in part, stem the ow
2014 which includes potential red ags on
migration – an issue that has dogged US
human traf cking and human smuggling135.
presidents, for years. An agreement, dubbed
ICE Homeland Security Investigations and
the Los Angeles declaration, was signed by
Customs Enforcement also issued red ags136
20 Western Hemisphere nations. The
as well as additional awareness and red ags
agreement “is centred around responsibility
for both human traf cking and human
sharing and economic support for countries
smuggling137.
that have been most impacted by refugee
and migration ows. Governments are
expected to commit to expanding temporary
worker programs, bolstering legal pathways
like refugee resettlement and family
reuni cation, providing support to countries
hosting large migrant populations, and
cracking down on human smuggling
networks.” President Biden said, “No nation
should bear this responsibility alone.” The
President also asserted, “it was on “every
country” to maintain orderly and human
migration process” and “We need to halt the
dangerous and unlawful ways that people are
migrating,” he continued. “Unlawful migration
is not acceptable” and, “If you prey on
desperate and vulnerable migrants for pro t,
we are coming for you.” The US announced
US$314 million in new federal funding for
“stabilisation efforts in the Americas,”
according to a White House factsheet.
Leading up to the Summit of the Americas,
administration of cials repeatedly stressed
the need to support countries in the region
who are hosting migrants and refugees,
especially Venezuelans who have ed their
origin country in large numbers.
6.7.10 Estimated Proceeds: According to
the UNODC138 in 2010, around 2.5-3 million
migrants are smuggled from Latin America to
the US every year, generating US$6.6 billion
for smugglers. In their 2018 study, UNODC
describe 30 major smuggling routes, with the
North America via the Southern border the
most lucrative at US$3.7-US$4.2 billion
(2016) with 735,000 – 820,000 people
smuggled a year, with 370,000 from Central
America. The Study included examples of
smuggling fees levied including the fee of
US$5,000 from Mexico to the USA via a land
crossing in 2013 and US$7,000 from Central
America139. According to estimates from a
2018 Rand Study (see above), and referenced
in the NMLRA 2022 – revenues from
smuggling migrants from El Salvador,
Guatemala, & Honduras, combined could
have ranged from a total of about US$200
million to a total of about US$2.3 billion in
2017, with individual costs estimates ranging
from US$4,000 to US$12,000. Also that 50%
to 75% of migrants smuggled have to pay
drug traf cking TCOs for passage through
areas controlled by them and that the
payment gures ranged from US$300 to
6.7.9 Potential Red Flags for Human
US$700, which could generate about US$30
Smuggling: FinCEN issued an advisory in
million to US$180 million in 2017.
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In this Section 6.8, the threat from
Security Council Resolutions (UNSCRs or
proliferation nance, which is one of the US
resolutions). Recommendation 2 requires
National Priorities is assessed and
countries to put in place effective national
summarised. This section is largely based on
cooperation and, where appropriate,
information from the FATF & the National
coordination mechanisms to combat the
Proliferation Finance Risk Assessment 2022
nancing of proliferation of weapons of mass
(NPFRA 2022)140, and other sources such as
destruction (WMD).
from the Proliferation Index.
Immediate Outcome 11 and certain elements
6.8.1 FATF 2018 Guidance on Counter
Proliferation Financing: The 2018 Guidance,
de nes “Proliferation Financing” as: “the act
of providing funds or nancial services which
of Immediate Outcome 1 relate to national
cooperation and coordination aim to
measure how effective countries are
implementing these Recommendations.
are used, in whole or in part, for the
manufacture, acquisition, possession,
development, export, trans-shipment,
brokering, transport, transfer, stockpiling or
use of nuclear, chemical or biological
weapons and their means of delivery and
related materials (including both technologies
and dual use goods used for non-legitimate
purposes), in contravention of national laws
or, where applicable, international
obligations”.
The report further adds that: “PF facilitates
the movement and development of
proliferation-sensitive items and can
contribute to global instability and potentially
catastrophic loss of life if weapons of mass
destruction (WMD) are developed and
6.8.2 NPFRA 2022: Key Threat Takeaways:
deployed”.
“Readers of the 2018 NPFRA may note that
Recommendation 7 of the FATF Standards
requires countries to implement proliferation
nancing-related Targeted Financial
Sanctions (TFS) made under United Nations
the threat actors that pose the most signi cant
PF threats to the United States remain
unchanged in the 2021 assessment. The
steady nature of the threat should not suggest
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Section 6.8 – Proliferation Finance – 🇺🇸
remain vulnerable to malign actors seeking to
to conduct their activities. While many
generate revenues and transfer funds in
methodologies remain tried-and- true, some
support of illicit conduct through
threats, like the DPRK, are increasing their
gatekeepers, front or shell companies,
focus on the virtual asset sector to generate
exchange houses, or the illicit exploitation of
funds and move resources. Additionally, the
international trade.”
United States is increasingly concerned about
Chinese and Russian military modernisation.
While neither country engages in the same
The main countries of concern are DPRK, Iran,
Russia, China, Syria & Pakistan.
revenue-generating activity as
16.8.2.1 DPRK: The DPRK constitutes the
comprehensively sanctioned jurisdictions,
most complex PF threat globally and to the
including Iran and the DPRK, China and
United States speci cally. It continues to
Russia are seeking U.S. original technology
operate sophisticated sanctions evasion
they cannot produce on their own, often
schemes to raise revenue, which contributes
adopt similar methodologies.
directly to advancing its nuclear ballistic
The principal threat of proliferation nancing
missiles capabilities.
arises from proliferation support networks.
According to analysis by the US, all organs of
These networks of individuals and entities,
the DPRK prioritise these activities, from
such as trade brokers and front companies,
intelligence agencies operating sophisticated
seek to exploit the U.S. nancial system to
cyber hacking capabilities targeting private
move funds that will be used either: (1) to
companies and governments alike to DPRK
acquire weapons of mass destruction or
diplomats using their legal presence in third
delivery systems or their components or (2) in
countries to act as overseas banking
the furtherance or development of state-
representatives and revenue generators for
sponsored weapons programs, including the
the regime.
evasion of United Nations or U.S. sanctions.
Global correspondent banking is a principal
vulnerability and driver of proliferation
nancing risk within the United States due to
its central role in processing U.S. dollar
transactions, which comprise a substantial
proportion of cross-border trade.
According to the 2021 Annual Threat
Assessment of the U.S. Intelligence
Community, “North Korea will be a WMD
threat for the foreseeable future, because Kim
[Jong-un] remains strongly committed to the
country’s nuclear weapons, the country is
actively engaged in ballistic missile research
Actors engaged in the proliferation of
and development, and Pyongyang’s Chemical
weapons of mass destruction have developed
& Biological warfare (CBW) efforts persist.
sophisticated and diverse strategies to
DPRK leader Kim [Jong-un] has declared that
nance their programs. Covered institutions
this country would never give up its nuclear
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that these actors are using the same methods
weapons so long as the United States
While this advisory is focussed on one aspect
maintains its “hostile policy” and that “the
of the DPRK’s weapons program, the tactics
development of nuclear weapons be pushed
are found across its wider procurement and
forward without interruption. The reach of
sanctions evasion schemes.
DPRK activity is global, but as previously
referenced, it most often indirectly implicates
the U.S. nancial system through U.S. nancial
These methods include the following:
• Extensive overseas networks of agents,
institutions’ correspondent banking
including DPRK diplomats, who can arrange
relationships with foreign nancial institutions
transactions on behalf of the government;
that hold accounts of entities linked to the
DPRK, or through commercial transactions
where U.S. manufacturers ultimately export to
entities linked to the DPRK.
The UN Panel of Experts’ reporting from 2021
con rms that the DPRK remains committed to
using international banking connections to
further its WMD development. The September
2021 report concluded that the DPRK had
seen“no appreciable decline” in its access to
global nancial institutions. This conclusion
echoed ndings from the March 2021 report
of the UN Panel of Experts that “the
Democratic People’s Republic of Korea
• Use of third-country nationals and
companies, many of whom wittingly
participate in these schemes or have
compliance failures that allow exploitation
by DPRK proliferation networks;
• Obscuring the end-user of their purchases
through mislabeling goods or consolidating
and repackaging shipments for ultimate
delivery to the DPRK, with China remaining
a commonly used location for
transshipment across its land border or via
ship-to-ship transfer;
• Procuring goods that are not listed on
continues to access international nancial
relevant export control lists but would
systems […] The illicit revenue generated from
otherwise be subject to “catch- all” controls.
sanctions evasion activities and laundered
through these networks both directly and
indirectly supports the country’s WMD and
ballistic missile programs.”
The DPRK’s malicious cyber activities are an
important source of revenue generation for its
military budget. In April 2020, the
Departments of State, the Treasury, Homeland
“For example, in September 2020, the
Security, and Justice published a DPRK Cyber
Department of State, the Treasury, and
Threat Advisory which highlighted the DPRK’s
Commerce published the North Korea
malicious cyber activities and how the DPRK
Ballistic Missile Procurement Advisory,
has targeted nancial institutions and other
highlighting the deceptive techniques that
private sector actors to ful l foreign policy
are the hallmarks of Pyongyang’s PF schemes.
ends. These include (1) disrupting critical
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remaining participants to provide tangible
regime, (3) engaging in cyber-enabled
economic bene ts in order for Iran not to
nancial theft and money laundering, and (4)
engage in further violations. Perceptions of
compromising computers and network
increasing international hostility to Iran , the
systems to generate virtual assets (a
in uence of the pre Islamic Revolution Guard
technique known as “cryptojacking”). DPRK
Corps (IRGC), a designated WMD proliferator,
state-sponsored cyber actors are subordinate
and domestic hardliners, including Iran’s new
to the Reconnaissance General Bureau (RGB),
president, have also contributed to the
the DPRK’s main intelligence agency and a
rationale for an expanded Iranian enrichment
UN and U.S. designated entity. In addition to
program.
providing regulatory guidance in line with the
FATF Standards, this advisory highlights
resources for nancial institutions to better
understand the technical exploits and threats
used by the DPRK.”
An integral part of monitoring these
developments is investigating the extent to
which Iran continues to engage in sanction
evasion schemes to raise revenue and
procure goods for these military capabilities.
6.8.2.2 Iran: “The United States remains
Iranian entities continue to engage in illicit oil
concerned that Iran still seeks WMD
exports to raise revenue, some of which may
capabilities that would further threaten
contribute to spending on augmenting the
regional stability in the Middle East. The Biden
country’s military capabilities. This spending
Administration’s commitment to pursuing a
derived from signi cant and complex
return to mutual compliance with the Joint
schemes US LEA attributes to the IRGC. For
Comprehensive Plan of Action (JCPOA), also
example, the United States led a forfeiture
known as the Iran nuclear deal, does not
complaint in February 2021, alleging that all
diminish the focus on proliferation-related
oil aboard a Liberian- agged vessel, the
activity of Iranian entities and individuals. The
motor tanker (M/T) Achilleas, was subject to
United States also prioritised these efforts
forfeiture based on U.S. terrorism forfeiture
while it was still a participant in the JCPOA.
laws. The complaint alleged a scheme
The proliferation threat from Iran is most
acutely underscored by Tehran’s potential
nuclear “breakout capacity” by enrichment of
weapons-grade uranium, married with
signi cant ballistic missile capabilities.
involving multiple entities af liated with Iran’s
IRGC and the IRGC-Qods Force (IRGC-QF) to
ship Iranian oil to a customer abroad covertly.
The documents alleged that pro ts from oil
sales support the IRGC’s full range of
nefarious activities, including the proliferation
Since the United States ceased participation
of WMD, support for terrorism, and a variety
in the JCPOA in 2018, Iran has tested the
of human rights abuses, at home and abroad.
limits of the nuclear deal, pressuring the
Iran’s exploitation of the maritime sector is a
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infrastructure, (2) targeting those critical of the
individuals and entities pursuant to EOs13382
which administers and enforces U.S.
and 13949.43. In November 2020, OFAC
economic and trade sanctions programs,
targeted a network of companies that
published a shipping advisory that
supported an Iranian military rm subordinate
highlighted the risk that those transacting with
to Iran’s Ministry of Defence & Armed Forces
the Iranian shipping or petroleum sectors may
Logistics.
ultimately be providing support to the IRGC,
noting speci cally the IRGC’s involvement in
terrorism and WMD proliferation. In May
2020, the Department of the Treasury and
State and the United States Coast Guard
The companies had sought electronic
components with military applications from
China and the United Arab Emirates (UAE),
including goods that were of U.S. origin.
released a Sanctions Advisory for the
In a December 2020 action, OFAC
Maritime Industry, Energy, and Metals Sectors,
designated an Iranian entity, the Shahid
and Related Communities, which provided
Meisami Group, and its director for
the industry with advice on preventing illicit
conducting chemical weapons research,
nance threats in key sectors, including the
shipping sector.
including testing and production of chemical
agents, on behalf of Iran’s. Conventional
The United States continues to enforce
relevant prohibitions to disrupt Iranian illicit
nancial activity. For instance, most recently,
military.”
6.8.2.3 China & Russia: “Since 2018, the
United States has signi cantly increased its
in July 2021, the Department of Commerce
scrutiny of technological developments
added four individuals and companies
undertaken by China and Russia. This focus
located in Lebanon and Iran to the Entity for
includes the blending of military and civilian
their involvement in the export of U.S. origin
research spheres and military modernisation
goods to Iran without obtaining the
efforts that may use U.S. origin inputs. China’s
appropriate licenses. Since the 2018 NPFRA,
Military Civil Fusion is a national strategy to
the Departments of State and Treasury have
augment its military capabilities by
also imposed sanctions on dozens of entities
eliminating the barriers between China’s
with links to Iran’s uranium enrichment or
civilian research and development efforts and
ballistic missile development activities. On
those of military and defence industrial
September 21, 2020, the Departments of
sectors. Russia similarly has prioritised
State, the Treasury, and Commerce
military modernisation to counter perceived
announced the widest-ranging set of
US superiority in both conventional and
sanctions and export control restrictions on
nuclear weapons. The 2018 NPFRA
Iran’s nuclear, missile, and conventional arms
summarised the threat from Chinese and
activities, including the designations of 31
Russian PF as largely limited to procurement-
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priority concern. In September 2019, OFAC
China, Cuba, Russia, and Venezuela, as well as
goods and technologies, rather than
those more generally supporting
sanctions-evasion schemes necessary to
unauthorised WMD programs, including
nance and move funds on behalf of
certain types of weapons delivery systems,
weapons programs in states that are already
production facilities, and maintenance, repair,
recognised nuclear weapons powers. Even on
or overhaul.”
the procurement front, there are relatively few
publicly reported cases of these threat actors
seeking to exploit the United States to nance
WMD-related programs, versus other types of
industrial espionage or traf cking in goods
with broader military applications.49
6.8.2.3.1 China: “Since the publication of
the 2018 NPFRA, the U.S. government
continues to take an all-tools approach to
protecting U.S. national security from Chinese
attempts to acquire U.S.-origin goods,
technology, and expertise across a variety of
Chinese and Russian military modernisation is
economic sectors. The Department of the
being built partially through the illegal
Treasury, as the gatekeeper for the U.S.
acquisition of U.S.-origin goods and
nancial system, seeks to promote a
technology. Unlike the DPRK and Iran, China
transparent nancial system and open
and Russia are existing signi cant military
investment environment while protecting U.S.
powers and NPT nuclear weapons states with
national security interests and countering the
sophisticated indigenous production,
exploitation of our nancial system and
research, and development capacities. They
economy by strategic adversaries.
do not need to engage in the same revenuegenerating activity that violates U.S. sanctions
as the DPRK and Iran. China and Russia can
largely produce WMD and delivery systems
on their own but seek out certain U.S.-origin
goods.
From a PF perspective, China represents a
distinct threat as compared to Iran or the
DPRK because it does not face a
comprehensive U.S. embargo & remains
among the US’ largest trading partners.
However, it is a near-peer U.S. competitor that
The Vulnerabilities and Risks section
has used instruments of its national power to
highlights relevant examples where this
acquire U.S.-origin goods or technology with
activity implicates U.S. nancial institutions or
important military applications, including, but
other private sector rms.
not limited to, WMD.
As part of U.S. scrutiny of these activities, in
For the purposes of the NPFRA, cases are
January 2021, the Department of Commerce
highlighted where the U.S. nancial system
announced new controls on U.S. technology
may see a transaction chain linked to
and speci c activities undertaken by U.S.
procurement of WMD-related goods that
persons that support military end-users in
bene ts China’s military development,
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based schemes designed to acquire sensitive
including drawing U.S. rms into violations of
international norms surrounding the use of
export controls.”
WMD has profound implications for the
6.8.2.3.2 Russia: “Russian procurement
schemes exist to obtain speci c components,
including proliferation-sensitive items from
prospect of other countries building this
capability, the United States has not hesitated
to pursue targeted actions.”
U.S. manufacturers subject to export controls.
6.8.2.4 Syria: “As detailed in the 2018
In addition to sanctions designations imposed
NPFRA, the United States maintains a robust
by the Departments of State and the Treasury,
sanctions program against the Bashar al-
the Department of Commerce has also
Assad regime in Syria for its conduct in the
placed Russian and third-country rms
Syrian civil war, including its well-documented
supporting Russia’s activities on the Entity List.
use of chemical weapons, which stands in
In March 2021, the Department of Commerce
violation of longstanding global norms. In
added 14 parties from Russia, Germany, and
April 2021, the Conference of the States
Switzerland to the Entity List for their support
Parties to the Chemical Weapons Convention
of Russia’s chemical weapons program. It
(CWC) adopted a decision to suspend Syria’s
followed up on this action again in July 2021,
voting rights at the Organisation for the
adding Russian entities that were seeking U.S.
Prohibition of Chemical Weapons (OPCW),
origin electronic components for likely use by
the implementing body of the CWC,
Russia’s military. The Vulnerabilities and Risk
stemming from the Assad regime’s
section discusses show these threats use front
possession and use of chemical weapons in
companies, transshipment hubs, and other
violation of its obligations under the CWC.
obfuscation methods.
This decision followed an April 2020 report of
Additionally, Russia’s documented use of
chemical weapons to target regime
opponents is a concern. However, these
activities do not present the same PF threat
with respect to U.S. entities because the
the OPCW’s Investigation and Identi cation
Team that there were “reasonable grounds” to
determine the Assad regime used chlorine
and sarin in three separate March 2017
attacks.
weapons do not require U.S. origin inputs to
The United States considers the use of
develop and deploy, or exploitation of the
chemical weapons and the Assad regime’s
U.S. nancial system. Nonetheless, the United
lack of responsiveness to the OPCW as a
States has used multiple sanctions authorities,
threat because it is in the United States’
including those under the Chemical and
interest to protect the global norm against
Biological Weapons Control and Warfare
their use. In December 2019, Congress
Elimination Act of 1991 (CBW Act), to target
passed new legislation, the Caesar Syria
Russian entities involved in these activities.
Civilian Protection Act of 2019, to further
Because Russia’s willingness to erode
target the nancial networks that support the
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Assad regime. The 2018 NPFRA included
safeguards, and the United States and other
example of procurement schemes designed
NPT parties are prohibited by the treaty from
to obtain specialised equipment for Syria,
supporting these activities in any way.
including for entities like the Syrian Scienti c
Pakistan’s threat perception of India drives its
Studies and Research Centre, in violation of
development of nuclear weapons and
both U.S. sanctions and export controls. As
advanced missile capabilities.
the U.S. sanctions authorities targeting Syria
have expanded, there has been increased
attention on those who deal directly with the
Assad family, the government of Syria, and
the many state-owned or -controlled
enterprises that ultimately support Assad. The
United States continues to enforce sanctions
against international entities that seek to
To ful l its stated military planning and
deterrence requirements, Pakistan likely seeks
U.S. origin goods, technology, and expertise
to augment its existing nuclear and
conventional capabilities, including advanced
ballistic missiles, cruise missiles, and
unmanned aerial vehicles (UAVs).
provide the Assad regime with the resources
Due to these factors, Pakistan’s longstanding
to maintain its chemical weapons program.
procurement and diversion of sensitive items
This includes the Syrian government’s efforts
to these programs is of particular concern to
to use the international nancial system. In
the United States. In 2019, the Department of
June 2019, for example, OFAC designated
Commerce published a due diligence guide
Samer Foz and his business network, which
for exporters that speci cally focused on
includes companies in the UAE and Lebanon.
Pakistan’s violations of US export controls.
In December 2021, OFAC designated two
Syrian military of cial’s for their involvement in
chemical weapons attacks against Syrian
civilians. As with Iran, Syria was the subject of
a maritime related sanctions advisory, in
March 2019. The Department of Commerce
has also added several individuals and
companies, including those based in Lebanon
and Syria, to the Entity List for seeking U.S.
origin goods on behalf of Syria’s WMD
program.”
The guide recommends steps for
manufacturers to apply scrutiny to new or
unfamiliar customers, particularly those who
are arranging shipment for their orders
through freight forwarders or whose listed
address for an end-user matches the address
of a company on the Entity List. The guide
highlighted how individuals and entities in
third countries, like Saudi Arabia and the UAE,
have attempted to procure goods for ultimate
delivery to Pakistan. The Department of
6.8.2.5 Pakistan: “Pakistan has a nuclear
Commerce followed up on these actions with
weapons program, but it is not a party to the
additions to its Entity List for companies or
NPT. Therefore, large portions of its nuclear
other entities that support Pakistan’s unsafe
activities are not under international
guarded nuclear or missile activities. For
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6.8.2.7 Proliferation Finance
entities and individuals operating in China
Vulnerabilities: “Proliferation networks
and Pakistan for contributions to Pakistan’s
generally hide their activities behind front or
unsafeguarded nuclear activities or ballistic
shell companies. They rely on the multiple
missile program.”
nodes in an international commercial or
6.8.2.6 Non-State Actors and WMD
Proliferation: “The United States remains
concerned about the prospect of a non-state
actor, particularly a terrorist organisation,
obtaining WMD capabilities, as there remains
a high degree of interest by these
organisations in using chemical or biological
weapons again U.S. interest abroad and
potentially the U.S. homeland.
In 2018, the United States released a
comprehensive National Strategy for
Countering WMD Terrorism to
• Update the country’s efforts to deny
nancial transaction implicating uneven AML/
CFT/CPF regimes. Networks exploit the
geographical distance between the buyer and
seller to increase the ease with which they can
obscure end-users or destinations for goods,
especially across multiple jurisdictions.
For the United States, the size of the U.S.
nancial system, its centrality in the payment
infrastructure supporting global trade, and its
production of proliferation-sensitive
technology make it structurally vulnerable to
the nancing of proliferation. For other
jurisdictions, their vulnerabilities could be
found in their geographic proximity to a
terrorists’ access to WMD and related
proliferating state, their status as a
materials;
transshipment hub, or their access to certain
• Target terrorist groups that may try to
acquire these capabilities (including
natural resources useful to the needs of a
WMD program.
technical experts and facilitators who may
For the private sector, these vulnerabilities
be af liated with or supporting terrorist
may stem from the products and services a
groups)
particular company offers that are useful to a
• Strengthen defences at home and abroad
against the use of a WMD.
proliferation network, compliance
de ciencies, or a lack of awareness of the
global proliferation supply chain and the role
The 2018 National Strategy for Countering
they may play within it. In the PF context,
WMD Terrorism noted that the most well-
these private sector entities include
documented use of a WMD by a terrorist
manufacturers of dual-use goods or those
group remains ISIS’s use of sulphur mustard,
involved in the trade of commodities that
chlorine, and other toxic industrial chemicals
proliferating states exploit for revenue-raising
in Syria.”
activities.
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example, in November 2021, it added 16
to access needed correspondent banking
becomes one of state budgets directed to
relationships with globally signi cant nancial
illegal acquisitions through their procurement
institutions. These front or shell companies
networks for prohibited end-users involved in
present themselves as innocuous trading
WMD development. While a WMD program
rms, hiding in plain sight amid a larger
engaged in export control violations may be
global ocean of small and medium
constituted through funds from a nation-state
enterprises;
budget, for those nation-states under
comprehensive sanctions, that state budget
may need to be supplemented by a variety of
illicit activity.
• The exploitation of the maritime sector to
transport goods needed as inputs for
proliferation programs and revenuegenerating activity (including the trade of
Often, a great deal of PF activity resembles
important global commodities like oil and
legitimate commercial trade, and it is very
coal); and
dif cult in many instances for even the most
sophisticated nancial institution or other
private sector actor to identify this activity.”
• The embrace of the digital economy, incl
malicious cyber activity and misuse of virtual
assets, especially as new market entrants may
6.8.3 Vulnerabilities of the U.S. Financial
operate in jurisdictions without strong AML/
System and Economy to Illicit Financial
CFT regulation and supervision for virtual
Activity: “While there may be examples of
assets, may not yet be fully aware of their
proliferation networks exploiting several types
AML/CFT obligations in their jurisdiction as
of vulnerabilities of the U.S. nancial system
required by the FATF, or may prioritise growth
and economy, the most signi cant PF
over compliance with AML/CFT obligations.
vulnerabilities stem from the ease with which
these relationships can use opaque corporate
entities to engage with the U.S. nancial
system (largely indirectly via correspondent
banking networks involving U.S. banks). These
networks aim to use opaque corporate
entities to conduct seemingly legitimate
commercial activity, which is ultimately for the
bene t of WMD programs.
These networks generally work across three of
the most signi cant vulnerabilities:
Misuse of Legal Entities – Key Takeaways – 🇺🇸
✅ PF networks rely on corporate secrecy to facilitate their illicit access to
global banking services. This activity implicates the U.S. nancial system
through the misuse of correspondent banking relationships.
✅ Front and shell companies serve as an important part of the infrastructure
for disguising transactions designed to evade sanctions, procure proliferationrelated goods, or both.
✅ The misuse of these entities is compounded by many jurisdictions’ failing to
collect bene cial ownership information for legal entities e ectively and on a
timely and accurate basis.
✅ Lack of access to bene cial ownership information for corporate entities
established in the United States or abroad continues to be a signi cant
vulnerability for the United States in the deterrence, disruption, and
investigation of a variety of nancial crimes, including the nancing of WMD
proliferation.
Source: NPFRA 2022
6.8.3.1 Misuse of legal entities: While there
may be examples of proliferation networks
• The misuse of legal entities, as proliferation
exploiting several types of vulnerabilities of
networks create opaque corporate structures
the U.S. nancial system and economy, the
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In the context of export controls, the issue
6.8.3.3 Undermining the Digital Economy
the ease with which these relationships can
& Embracing New Digital Technology:
use opaque corporate entities to engage with
There is no evidence that a proliferation
the U.S. nancial system (largely indirectly via
network has used a virtual asset to procure a
correspondent banking networks involving
speci c proliferation- sensitive good or
U.S. banks). These networks aim to use
technology as an input to a WMD or ballistic
opaque corporate entities to conduct
missile program. However, virtual assets play
seemingly legitimate commercial activity,
an essential role in revenue generation and
which is ultimately for the bene t of WMD
moving assets across borders. States and
programs.”
groups that are involved in exploiting the
digital economy for sanctions evasion have
Exploitation of Maritime Sector – Key Takeaways – 🇺🇸
The maritime sector remains a necessary part of the infrastructure of PF
networks.
✅
Shipping and related services are necessary for the procurement of
proliferation-related goods, and for those countries subject to comprehensive
sanctions, the illicit import-export of commodities requires the use of vessels
and associated methods (vessel identity laundering, ag-hopping, and AIS
manipulation) for obscuring their activities from relevant authorities.
✅
Financial institutions, as well as other rms operating in the maritime sector,
should be aware of U.S. laws and regulations targeting proliferation-related
activity, including the BSA and OFAC sanctions, as well as these and other
deceptive measures highlighted in relevant U.S. government and other
guidance.
✅
As the 2018 NPFRA noted, some of these activities may also attempt to
exploit trade nance instruments. Those engaged in trade nance activities
should also consult the trade nance section of the FATF PF Risk Assessment
Guidance and FATF Guidance on Trade-Based Money Laundering.
✅
Source: NPFRA 2022
6.8.3.2 Exploitation of the Maritime
Sector: Proliferation networks exploit the
entire global commercial supply chain to
evade detection and nance the acquisition
of controlled material. Shipping companies
and vessels feature prominently in sanctions
evasion and export control violation
activities,102 and this use of the maritime
sector is abetted by the use of front and shell
companies. As documented in the March
2020 global maritime advisory, Iran, Syria, and
the DPRK falsify documents, re ag vessels,
and switch of automatic identi cation systems
used existing virtual assets, like bitcoin, Ether,
XRP, and Litecoin, among others, and many
have developed or are trying to develop
central bank digital currencies (CBDCs), or
virtual assets backed by the state (such as
Venezuela’s petro), to aid in sanctions evasion.
Hackers af liated with or linked to the DPRK
have conducted a broad range of criminal
cyber activity to “further the strategic and
nancial interest of the DPRK government and
its leader Kim Jong-un.” In many cases, the
activities directly target U.S. individuals and
companies (including, but not limited to,
nancial institutions). In April 2020, the
Departments of State, Homeland Security, and
the Treasury, along with the FBI, released
Guidance on the North Korean Cyber Threat
to provide a comprehensive resource on how
cyber actors linked to the DPRK threaten both
“traditional” nancial institutions as well as
new nancial technology companies,
especially VASPs.
(AIS) to avoid being discovered in the process
While this activity poses a threat to U.S.-based
of illicitly transferring goods.
VASPs, the risk is perhaps highest for VASPs
operating in jurisdictions with weak AML/CFT/
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most signi cant PF vulnerabilities stem from
FATF’s Second 12-Month Review of the
Revised FATF Standards on Virtual Assets and
Virtual Asset Service Providers is that, while
there has been progress in applying the FATF
Countries that score low on the Peddling Peril Index
(2021/2022) – 🇺🇸
The PPI measures the e ectiveness of strategic trade controls using a set of criteria relating to a
country’s existing laws, regulations, procedures, practices, international obligations, and actions.
Its fundamental purpose is to identify in a measurable manner the relative strengths and
weaknesses of national strategic trade control systems throughout the world. Only countries that
score lower than the value in the FCN Rating Scorecard are captured below.
Standards to this sector, many jurisdictions do
Tier 1
(Tier One in the PPI includes those nations that can supply, at least partially but
signi cantly, the wherewithal to make nuclear weapons, other WMD, or the
means to deliver them)
not have operational AML/CFT regimes for
Ukraine (615)🇺🇦 , Monaco (566)🇲🇨 , China (554)🇨🇳 , Russia (553)🇷🇺 , Belarus (526)🇧🇾 , Pakistan
VASPs. This is especially true for jurisdictions
that are not full FATF members. The FATF
review paid. Particular attention to challenges
around the implementation of the travel rule,
underscoring how cross-border transfers
present an obstacle to preventing illicit
(457)🇵🇰 , Iran (-9), DPRK (-172)🇰🇵
Tier 2
(Tier Two includes countries of transshipment concern)
Niger (419)🇳🇪 , Kuwait (407)🇰🇼 , Nicaragua (403)🇳🇮 , Egypt (395)🇪🇬 , Columbia (392)🇨🇴 ,
Ecuador (373)🇪🇨 , Vietnam (358)🇻🇳 , Oman (316)🇴🇲 , Venezuela (309)🇻🇪 , Laos (305)🇱🇦 , Iraq
(266) 🇮🇶 , Uganda (255)🇺🇬 , Lebanon (212)🇱🇧 , Afghanistan (138)🇦🇫 , Libya (119)🇱🇾 , Syria (75)🇸🇾
Tier 3
(Tier Three includes the remainder of the countries )
Madagascar (352)🇲🇬 , Bolivia (344)🇧🇴 , Congo (337)🇨🇬 , Guinea (335)🇬🇳 , Marshall Islands (334)
🇲🇭 , Mozambique (332)🇲🇿 , Belize (329)🇧🇿 , Cambodia (320)🇰🇭 , Djibouti (319)🇩🇯 , SaoTome &
Principe (317)🇸🇹 , Guyana ( 316)🇬🇾 , Kosovo (313)🇽🇰 , Turkmenistan (312)🇹🇲 , Comoros (302)
nancial activity.
🇰🇲 , Rwanda (296)🇷🇼 , Holy See (294)🇻🇦 , Chad (292)🇹🇩 , Gambia (290)🇬🇲 , Kiribati (287)🇰🇮 ,
Mauritania (278)🇲🇷 , Palau (278)🇵🇼 , Liberia (267)🇱🇷 , Burundi (249)🇧🇮 , Guinea-Bissau (239)🇬🇼 ,
Niue (238)🇳🇺 , Zimbabwe (233)🇿🇼 , Micronesia (226)🇫🇲 , CAR (223)🇨🇫 , DRC (212)🇨🇩 , Myanmar
(209)🇲🇲 , Tuvalu (168)🇹🇻 , Haiti (168)🇭🇹 , Equatorial Guinea (168)🇬🇶 , Sudan (163)🇸🇩 , Palestine
Undermining the Digital Economy & Embracing New Digital Technology:
– Key Takeaways 🇺🇸
(122)🇵🇸 , Eritrea (95)🇪🇷 , Somalia (-16)🇸🇴 , Yemen (- 26)🇾🇪 , South Sudan (-33)🇸🇸
Source: https://isis-online.org/uploads/isis-reports/documents/ThePeddlingPerilIndex2021_POD_wCover.pdf
While the principal risk arising from proliferation networks remains in the
traditional infrastructure of global banking, particular threats, especially the
DPRK, nd digital platforms increasingly attractive for generating, storing,
and moving value.
✅
6.8.5 Countering Proliferation Finance
Many of these threats also nd malicious cyber activity against global
banking to be highly lucrative and will seek to exploit weak security
protocols in the nancial sector.
Strategy: The US strategy to combat PF
Instilling a culture of compliance and building a robust cybersecurity
regulatory perimeter in both the traditional nancial sector as well as the
virtual assets sector will continue to be a U.S. government priority, as it
would aid in the prevention and detection of a variety of illicit nancial
activity that directly supports WMD proliferation.
Embargoes, which for more details see
✅
✅
Source: NPFRA 2022
6.8.4 Proliferation Index (PPI): The PPI
rates the USA as a Tier 1 (with 1 being the
best out of 3 Tiers) & within a rating/controls
includes the use of Sanctions and
Section 7 and implementing an effective
AML/CTF programme which for more details
see Section 7 and Sections 9 & 10.
6.8.6 Potential PF Red Flags: Potential red
ags for Proliferation Finance have been
score of 1,019/1,300 & at 29/135.
published by FATF141.
The highest risk countries are the Ukraine
6.8.7 Estimated Proceeds: No available
(615), Monaco (566), China (554), Russia
(553), Belarus (526), Pakistan (457), Iran (-9) &
information.
DPRK (-172) as the highest Tier 1 countries.
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CPF controls. One of the key ndings of the
A special focus in this Section 6.9 is on
transactions associated with wildlife traf cking
wildlife crimes, which include, wildlife
given the importance of the U.S. dollar and
traf cking fauna (animals & sh) & ora
(plants & trees), illegal mining & illegal waste
nancial system to international trade and
nance, the dif culty of identifying underlying
traf cking.
illicit connections, and a lack of nancial
According to United Nations Environmental
broadly, environmental crimes144 threaten
Programme (“UNEP”) & Interpol in their
Report: The rise of Environmental Crime, A
growing threat to natural resources,
development and security,142 published in
2016, “The world is being dredged of it’s
intelligence on these types of crimes. More
biodiversity, accelerate climate change,
perpetuate forced labor, and increase risks for
the spread of zoonotic diseases, which have
national security implications.”
natural resources with much of what we rely
“The FATF recently noted that it is concerned
on for our livelihoods at risk from a new
about the lack of focus on the nancial
Crime, Environmental Crime”.
aspects of wildlife crimes145.”
6.9.1 Wildlife Traf cking: Whilst wildlife
“While the United States is at the
traf cking is not included in the 2021 FinCEN
Priorities, it was subsequently included in the
NMLRA 2022 under “Special Focus”.
6.9.1.1 US END Presidential Task Force
2021: “Wildlife traf cking remains a serious
transnational crime that threatens security,
economic prosperity, the rule of law, longstanding conservation efforts, and human
health.” The END Act if 2016 (see later) and
Presidential Order in 2017, “called for a
comprehensive and decisive approach to
dismantle organised crime syndicates and
speci cally recognised the connection
between wildlife traf cking and transnational
criminal
organisations143”.
international forefront of using law
enforcement authorities to disrupt the
nancing of wildlife traf cking, the crime
persists as a threat to the U.S. nancial system.
As the U.S. Fish and Wildlife Service has
acknowledged, the United States is a major
source and destination country for the illegal
wildlife trade146.”
“The number of wildlife traf cking related
SARs led annually increased year over year
between January 2018 and October 2021,
with a total of 212 SARs led in this period.
SARs show that illicit nancial activity related
to potential wildlife traf cking is usually
identi ed because of its connection to public
6.9.2 NMLRA 2022: Wildlife Traf cking:
According to the NMLRA 2022, “US FIs are
vulnerable to unwittingly processing
or already known traf cking activity or
because of a law enforcement referral related
to wildlife traf cking.”
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Section 6.9 – Special Focus – Wildlife Trafficking (& Green Crimes) – 🇺🇸
one ton of pangolin scales, and multiple intact
defendants were charged and convicted in
rhinoceros horns147.
dozens of wildlife traf cking cases in U.S.
courts. The three dozen wildlife traf cking
cases reviewed for this report, with total
criminal proceeds exceeding $30 million over
a period of two and a half years, represent a
snapshot of the illegal wildlife trade in the
United States. Several cases focused on
turtles being shipped both to and from East
Asia. Recently, a foreign national was
sentenced for money laundering linked to
nancing a traf cking network that smuggled
at least 1,500 protected turtles valued at more
than US$2 million. The nanciers sent money
via online money transmitters, credit cards, or
Because the nancial sector is less familiar
with money laundering typologies in wildlife
traf cking, and because of the dif culty in
distinguishing nancial transactions in illegal
trade from large-scale legal trade, most
criminal investigations in wildlife traf cking
cases are the result of proactive law
enforcement actions, rather than a follow-up
to receiving nancial intelligence. It is dif cult
to estimate the full scale of proceeds
generated from this crime without more
consistent nancial reporting from the private
and public sector.”
bank transfers to the United States to
6.9.3 Wildlife Traf cking – OC Index 2021:
purchase turtles from sellers advertising on
According to the 2021 OC Index, wildlife
social media or reptile trade websites. Other
traf cking (animals) was scored at 5.5/10
wildlife cases involved smugglers facilitating
equal with human traf cking and just behind
the movement of illicit wildlife products and
drug traf cking at 6.5/10 & arms traf cking at
wildlife across the US Mexico border. In many
6/10. Wildlife traf cking (timber and plants)
instances, wildlife traf ckers have used the
was scored at only 2.5/10.
guise of legitimate businesses, including sales
facilitated by online platforms, to sell illicit
products and intermingle the proceeds with
licit ones. The wildlife traf cking investigations
with the largest amount of criminal proceeds,
and the most likely to include money
laundering components, involve defendants
who are also af liated with criminals or TCOs
smuggling drugs, such as cocaine and heroin.
A recent ongoing investigation involved
criminals who conspired to conduct large
transactions via ocean freight, offering the
buyer more than two tons of elephant ivory,
Also in the OC Index it stated that, “with
regard to fauna, illegal imports include ivory,
rhino horn, narwhal tusk, shark ns, turtles and
reptiles. Additionally, the US is the main
market for species illegally harvested in Latin
America, including parrots, reptiles, molluscs,
monkeys and frogs. Domestic wildlife crimes
target mountain lions, bobcats, rattlesnakes
and paddle sh eggs. A large percentage of
wildlife products entering the US with
documentation have laundered or illegal
origins. The number of US Fish and Wildlife
Service enforcement of cers has not kept
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Between 2019 and 2021, numerous
performers”. Japan has the 12th highest
specimens arrive, there is no comprehensive
(worst) score.
federal or state agency to supervise, inspect
and stop domestic trade”.
6.9.5 Wildlife Trade – Fishing – Oceana:
According to a Oceana151, “Across the globe,
6.9.4 Wildlife Traf cking – FCN
IUU shing depletes marine resources,
Intelligence Brie ng 2019: THE FCN
destroys habitats and is explicitly linked to
Intelligence Brie ng 2019148, provides a
forced labor and human rights abuses. While
comprehensive summary of the global
the federal government has taken some steps
problem of wildlife traf cking and includes
to combat these problems in the past, an
potential red ags.
estimated US$2.4 billion worth of seafood
derived from IUU shing was imported into
the U.S. in 2019 alone…IUU shing costs the
global seafood industry as much as US$26
billion to $50 billion annually. In the United
States, up to 90% of the sh consumed is
imported, with up to 32% of wild-caught
seafood imports being products of illegal or
unreported shing. IUU shing can include
shing without authorisation, ignoring catch
6.9.5 Illegal Fishing – FCN Intelligence
limits, operating in closed areas, targeting
Brie ng 2019: This FCN Intelligence
protected wildlife, and shing with prohibited
Brie ng
2019149
provides a comprehensive
gear. These illicit activities can destroy
summary of the global problem of illegal
essential habitats, severely deplete sh
shing and includes potential Red ags.
populations, and threaten global food
6.9.6 Wildlife Traf cking – Fishing – IUU
Fishing Index 2021: According to the 2021
IUU Fishing Index, the USA was ranked
27/152 with an overall score of 2.51/5 (world
security. These actions not only contribute to
over shing, but also give bad actors an unfair
advantage over honest shermen that play by
the rules”.
average score of 2.33/5 – lower scores being
6.9.7 Wildlife Trade – Fishing – Oceana: In
better)150. The
an April 2022 Fact Sheet, Oceana152 stated
Index commented that “When
considering prevalence, ve countries – South
that more action was needed to ban Russian
Korea, Seychelles, the USA, Senegal and Saint
seafood from being imported into the US due
Vincent & the Grenadines – entered the list of
to weak US regulations. There was also a
worst-performing countries in 2021 for the
concern that some countries are facilitating
rst time, with China, Taiwan, Vietnam,
Russian shing activities and port visits.
Thailand and Ecuador remaining in the worst
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pace with traf cking, and once illegal
“In 2021, the United States imported over
crab comprises 17% of seafood imports from
US$1.2 billion worth of Russian seafood.
Russia by volume and 35% by value.
During the month of January 2022, the United
States imported more than US$171 million
worth of Russian seafood, which is almost
twice the amount compared to January 2021.
• The U.S. ban on Russian seafood imports is
unlikely to have the intended effects of
keeping Russian seafood out of the U.S.
market. Because 82% of Russian seafood
• With the crisis unfolding in Ukraine, almost
imports to the United States are not required
every sector of the global economy has
to submit catch documentation or be traced
pushed economic sanctions on Russia, and
back to their point of capture, this presents an
seafood is no exception. In the United States,
opportunity for Russian seafood products to
President Biden issued an executive order on
enter the U.S. market in violation of President
March 11, 2022 banning the import of
Biden’s executive order.
Russian seafood and other goods.
• The Russian seafood ban is nearly
• To enforce this ban, traceability of seafood
impossible to enforce without requiring all
and transparency of shing are needed to
seafood imports to be covered under SIMP,
ensure that the ban is truly effective so
meaning they need catch documentation
Russian seafood does not slip through
and to be traced back to the farm or shing
regulatory loopholes.
vessel, through the entire supply chain from
• The Seafood Import Monitoring Program
(SIMP) requires seafood at risk of illegal,
net to the U.S. border.
• Russia can easily evade the ban due to the
unreported, and unregulated (IUU) shing
lack of seafood traceability requirements.
and seafood fraud to have catch
The United States Country of Origin
documentation and traceability to the point of
Labelling rule, allows Russian-caught
import. This program currently only applies to
seafood to be labeled “product of China”
13 species groups, amounting to about 40%
once it is sent there for processing. The
of the seafood imported into the United
foreign processing of seafood enables
States.
Russia to mask the country of origin,
• According to the National Oceanic and
Atmospheric Administration’s U.S. Trade in
Fisheries Products Data from 2021, only two
species imported from Russia to the United
allowing Russian-caught seafood to
continue to enter the United States, despite
the ban.
• This loophole limits traceability in the
States are covered by SIMP out of 71 seafood
seafood supply chain and makes it dif cult
products. The two products covered by SIMP
to know the true origin of seafood imports”.
are red king crab (Paralithodes camtschaticus)
and Atlantic cod (Gadus morhua). Red king
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• More than 1,000 shing vessels are agged to Russia worldwide. These vessels are primarily
trawlers, but Russian shing vessels also use longlines, pot and traps, and gillnets.
• Russian vessels appeared to sh* nearly 5 million hours within their own EEZ from 20192021. They also have an active distant-water eet on the high seas, where Russian vessels
appeared to sh for more than 250,000 hours in areas beyond the national jurisdiction of other
nations.
• Several countries allow Russian shing vessels to operate in their national waters. In
Norwegian waters, Russian vessels shed a total of over 550,000 hours in a three-year period.
Russian vessels also appeared to sh in the waters of Japan (283,992 hours), Denmark
(54,432 hours), and Mauritania (33,211 hours).
• Russia also heavily shed the waters of Ukraine, primarily around the Crimean Peninsula, for
more than 70,000 hours during this same three-year period.
• Between 2019 and 2021, there were 158 instances in which a refrigerated cargo ship, or
“reefer,” encountered both Russian and non-Russian shing vessels on the same voyage.
Transshipment, or the meeting of vessels at sea to transfer sh, fuel, or supplies, enables
shing vessels to remain at sea for longer periods of time and sh farther from shore. While
transshipment can be legal, it can also facilitate the laundering of illegal seafood products.
• These reefers are not always inspected upon arrival to port and can be exempt from providing
catch documentation, which hinders seafood traceability and transparency. Reefers that only
transshipped with Russian shing vessels entered ports in Naknek, USA (94 visits); Busan,
South Korea (33 visits); Bjornoya, Svalbard (27 visits); Hanasaki, Japan (20 visits);
Kirkenes, Norway (19 visits); and Bellsund, Svalbard (13 visits) between 2019 and 2021.
• The IUU Fishing Index ranks nations based on how e ectively they combat IUU shing and
how exposed their waters are to these illicit practices. Currently Russia ranks #2 out of 152
nations for poor performance on IUU shing issues. Russia was formerly ranked #4 out of 152
indicating that their behavior has worsened since 2019. Their score was primarily a ected by
the number of their distant-water shing vessels and whether any vessels are included on IUU
lists, as well as not being a contracting party or cooperating non-contracting party to any
regional sheries management organizations in which their vessels sh.
Top Ports Visited by Russian Fishing Vessels (2019-2021) – 🇺🇸
• Russian vessels (both shing and non- shing) visited ports in 144 countries, and Russian
shing vessels visited 50 di erent countries between 2019 and 2021.
• Outside of Russian ports, Russian- agged shing vessels primarily entered ports in South
Korea and Norway. There were nearly 2,000 instances of Russian shing vessels entering the
ports of Busan and Donghae in South Korea. Busan was the most popular non-Russian port
for Russian shing vessels from 2019-2021. In Norway, there were over 1,900 port visits,
primarily in Kirkenes, Tromso, and Batsfjord. Russian vessels also visited ports in Crimea:
Sevastapol, and Kerch (over 1,600 visits). Other ports popular with Russian shing vessels
include Hanasaki, Japan (431 visits), Bellsund, Svalbard (385 visits), and Toftir, Faroe
Islands (375 visits).
• Since the invasion of Ukraine, there has been little change to the ports Russian vessels are
entering, with vessels still primarily visiting the same ports from the past 3 years.
• Currently none of these frequently visited countries have explicitly banned port access or
shing by Russian vessels.
Source:https://usa.oceana.org/wp-content/uploads/sites/4/Russia-Fishing-Analysis_byOceana.pdf
timber, that rate is as high as 90%. The United
States imports timber from countries around
the world, with the majority arriving from
Sweden, Canada, and China. The
Environmental Investigation Agency, a D.C.
based nonpro t recognised for its expertise
and action on environmental issues, reports
that China is the world’s largest importer of
illegal timber, serving as a processing centre
for illegal shipments from Africa, Asia, and
elsewhere before arriving at a nal
destination”.
“As the most pro table natural resource crime
on the planet and the third most pro table
transnational crime behind counterfeiting and
drug traf cking, illegal logging is an attractive
nancial prospect for criminals and those left
nancially destitute because of the pandemic
6.9.8 Wildlife Trade – Flora – OC Index
or other geo-political factors. Generating
2021: The OCI 2021 states that ora crimes
between US$52 and US$157 billion dollars
(timber and plants) was scored at only 2.5/10.
annually, the illegal timber industry attracts all
Nevertheless it stated that, “the US is the main
sorts of criminal organisations willing to
source, destination and transit hub for illegal
destroy any obstacle standing in the way of a
ora and fauna in the region. The US exports
protected species such as Pachypodium and
Guaiacum, and plays a concerning role as a
hub for the trading of the endangered
Aquilaria tree species native to South-eastern
Asia. Although illegal logging is not
widespread, the US is a large importer from
regions with high illegal logging rates”.
pro t, even at the expense of the global
good”.
6.9.10 US Customs & Border Protection
(CBP): According CBP153, of cers and
agriculture specialists inspect and detain
timber shipments across all 328 ports of entry
to ensure compliance with conventions and
statutes. “While “traf cking plants” may sound
6.9.9 Global Financial Integrity (GFI):
harmless, illegal logging is not a victimless
According to the Global Financial Integrity
crime. The illegal timber trade is soaked with
Report, Transnational Crime and the
blood, nancing violent con ict, and
Developing World, “between 10 and 30% of
providing a cover for other crimes, such as
globally traded timber is illegal. For tropical
drug traf cking, money laundering, illegal
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A Snapshot of Russian Fishing Activities (2019 – 2021) – 🇺🇸
mining, wildlife traf cking, and forced labor.
concluded that “Illegal gold mining presents
“Ignoring the effects of illegal logging and
a direct threat to U.S. national security
timber traf cking could result in life-
interests. TCOs use illegally mined gold to
threatening consequences, causing great
launder billions of dollars in revenue from
misfortune to economies, wildlife, and
other criminal activities through the United
humans, …Yet, it ies quietly under the radar
States, harming our legitimate businesses and
in many countries due to a lack of regulation
exploiting our nancial system for illicit gain.
or high-level corruption, despite how
Illegal gold mining feeds corruption and
common it is in many parts of the world”.
insecurity, presenting serious governance
6.9.11 Illegal Mining: The OCI 2021 states
that Illegal Mining crimes (non renewable
resources crimes) was scored at 4.5/10.
According to the 2021 OC Index, “Illicitly
extracted gold, often transiting Miami on
small planes, constitutes part of a larger
illegal mining market in Mexico, Colombia,
Venezuela, Peru and Guyana for silver,
copper, coltan, iron, coal, emeralds and
uranium. Illegal gold is legalised with falsi ed
paperwork and then sold to US or
international re neries selling gold bars to
US-based multinational corporations. Since
gold bullion is classi ed as a commodity,
challenges for our partners. Our collaboration
with Peru and Colombia is essential to
disrupting these criminal networks, reducing
human traf cking, decreasing environmental
and health impacts of illegal mining, and
preventing illegally mined gold from entering
the United States.… We must do more to
identify nancial and money-laundering
networks, and the ow of controlled mining
inputs and heavy equipment used in gold
mining. Illuminating the methods and
processes used to facilitate illegal mining and
traf cking of illegally mined gold will help us
intensify our efforts to combat this scourge”.
once imported, treasury department reporting
6.9.13 Illegal Waste Traf cking – GITOC:
requirements and customs duties do not
According to GITOC’s Plastic for Pro t
apply, hampering anti-money laundering
report155, “illicit plastic waste might stop at
efforts. Lastly, as organised criminal groups in
intermediate locations before reaching the
Mexico have diversi ed, stolen fuel has
intended destination. This is done to conceal
skyrocketed over the past decade, an
the real ports of origin and destination of a
important proportion of which is sold in the
particular cargo. Hong Kong has a major free
US (in addition to fuel stolen domestically by
port and represents a popular stop along the
criminal gangs in the US itself)”.
route. Its misuse became so common that
6.9.12 Illegal Mining – US National
Security and International Human Rights:
In a 2021 Illicit Mining: Threats to US National
Security and International Human Rights154 it
Mediterranean Shipping, the world’s secondlargest shipping company, stopped accepting
plastic-waste containers from Hong Kong as
of June 2019. Indonesia, Malaysia and the
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Philippines have all condemned Hong Kong
some Focus Countries.” These are:
for allowing the transit of illegal waste
Bangladesh, Brazil, Burma, Cambodia,
directed to their countries. A quarter of US
Cameroon, Democratic Republic of the
plastic exports transit through its port”.
Congo, Gabon, Hong Kong, India,
Indonesia, Kenya, Laos, Madagascar,
Most common routes for illicit waste from the United States connecting
Europe, North America, Asia and Africa – 🇺🇸
Destination
Notes
Malaysia, Mexico, Mozambique, Nigeria,
China, Philippines , Republic of the Congo,
South Africa, Tanzania, Thailand, Togo,
India via
Indonesia
India has been used as an alternative destination for unwanted US waste that
Indonesia intended to return to origin
Indonesia via
Hong Kong
Despite the lack of o cial data, it is believed that ‘lots’ of US plastic is illicitly
shipped to Indonesia and, starting in 2019, the latter has become more vocal
with its complaints and determined to repatriate unwanted waste. Large
amounts of re-exported waste are diverted to third countries.
Malaysia via
Hong Kong
There is no o cial comprehensive US data recording the new destinations of
US plastic waste following the introduction of the Chinese ban. However, the
state of California accounts for nearly a third of all US exports to non-OECD
countries & this is the main origin of illicit waste into Malaysia (which became
number one destination after the introduction of the import ban in China).
Thailand
Thailand saw the largest increase of imports immediately following the
introduction of China’s import ban. 90% of plastics transit through the deepwater port of Laem Chabang.
The
Phillipines
In the post-National Sword era, exports to the Philippines grew exponentially,
especially from Japan and the US.
but that there are serious concerns that
Cambodia
Multiple seizures of illegal plastic waste were recorded at Sihanoukville port in
2019. A Cambodia-based Chinese company was deemed responsible for
importing the cargoes from the US and Canada.
either high-level or systemic government
Ghana
The ports of Tema and Accra and the inland city of Kumasi are hubs for illicit
plastic waste. Ghana has long been a recipient of e-waste and there are
suspicions that illicit plastic waste is exported to Ghana mixed with e-waste.
Uganda, United Arab Emirates, Vietnam,
Zimbabwe.
• “Countries of Concern” are those where
not all parts of the foreign government are
or have been involved in wildlife traf cking,
involvement has occurred. These countries
are: Cambodia, Cameroon, Democratic
Republic of the Congo,Laos, Madagascar,
Source: TBC
6.9.14 Countries of Concern: A number of
countries are highlighted below.
6.9.14.1 US END 2021Countries: Under the
Nigeria.
6.9.14.2 Other Countries: Countries
highlighted in more detail are set out below:
authorities provided by the US END Act 2016
6.9.14.2.1 China: China plays an outsized
(see later) certain foreign countries have
role in environmental crimes, in particular
been identi ed as “Focus Countries” and
illegal wildlife – animals, sh and timber.
“Countries of Concern”, and updated
China is a major importer of Illegal timber
annually by the US END Taskforce156.
and demand for Illegal wildlife products such
• “Focus Countries” in 2021 had been
previously listed and continue to be a
“major source of wildlife traf cking products
or their derivatives, a major transit point of
wildlife traf cking products or their
derivatives, or a major consumer of wildlife
as ivory and rhino horn, pangolin as well as a
major facilitator and importer of illegal
unreported and unregulated shing, such as
shark n, via its huge deep sea shing eet,
heavily subsidised by the Chinese
Government.
traf cking products,” and “designation
6.9.14,2.2 Japan: According to the 2021
appears to have contributed to increased
OC Index, “Japan is also exposed to ows
attention to combating wildlife traf cking in
from criminal fauna markets. It has one of the
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world’s largest markets for the ivory trade,
the former Russian Prime Minister, Dmitry
which operates legally and in the open. Many
Medvedev, at between 10 – 20% of the total
criminal actors use Japan to engage in so-
volume of logging and by the Russian
called ivory laundering, whereby ivory is
Prosecutor General’s Of ce (2013) at nearly
fraudulently declared as legal. At the same
50%. In 2021, wood represented 1.06% of
time, however, there is evidence that the
Russian exports valued at US$5 billion158.
market for ivory is in decline. There is also a
Most exports (approx 60%) go to China, then
signi cant demand for exotic pets on the
onward to international markets159, including
Japanese market, and trade in threatened
to the US.
species – including slow lorises, otters, owls
and pythons – is known to occur. Illegal pet
markets in Japan are mainly supplied by
Thailand, mainland China, Indonesia and
Hong Kong. There are multiple risks
associated with illegal, unreported and
unregulated (IUU) shing in Japan on both
the demand and supply side of the consumer
market. Domestic shermen sh illegally in
Japanese waters and then export their illicit
catch, but sh caught illegally abroad is also
imported into Japan. Japan is the world’s
largest consumer of high-value sh, such as
blue n tuna. Combined with lax traceability
requirements, this appetite for seafood makes
Japan vulnerable to importing large amounts
of IUU seafood”.
Russia is the world’s 3rd largest producer of
wild caught sheries. Its waters are also one
of the world’s largest, containing waters in the
Arctic & North Paci c Ocean including one of
the most productive shing grounds in the
world, the Bering Sea. In 2021, sh products
represented 0.72% of Russian exports valued
at US$3.5 billion160. Estimates for IUU shing
of at 10% of the legal catch is very
reasonable, which would be valued at
US$350 million. Research has identi ed the
Russian shing sector as high-risk for illegal,
unreported, and unregulated shing, labour
exploitation and modern slavery161.
According to the Illegal Unreported and
Unregulated Fishing Index (IUU) 2021, Russia
has the 2nd highest (worst) score at 3.06/5
6.9.14.2.3 Russia: Russia is also associated
behind China at 3.93/5162 out of 151
with many illicit trades such as
assessed countries. Fishing highlighted as
“environmental” or “green crimes” including
susceptible to IUU shing includes the king
illegal logging, shing, wildlife and mining.
crab catch from Russian waters163 much of
For example Russia possesses a quarter of
which is exported to the US. In 2021, the US
the world’s timber reserves, valued in 2013 as
alone imported 48,867 metric tons of
much as US$28 trillion. By comparison, the
seafood from Russia, worth US$1.2 billion (€1
country’s oil and gas reserves were valued at
billion), with frozen snow crab and frozen red
US$19 trillion and US$7 trillion,
king crab accounting for over US$900
respectively157. Illegal logging is estimated by
million164.
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traded wildlife; and building international
the April 2022 Fact Sheet, from Oceana165 set
cooperation, commitment, and public-private
out at Section 6.9.6 above.
partnerships169.
6.9.15.1 Combatting Illegal Wildlife
Traf cking: Recognising the urgent need for
a coordinated response to tackle IWT, the
United States issued the National Strategy to
Combat Wildlife Traf cking in 2014166. This
strategy sets forth a whole-of-government
approach that focuses on three key
objectives to stop illegal wildlife trade –
strengthening enforcement, reducing
demand for illegally traded wildlife, and
expanding international cooperation. The
National Strategy was further reinforced by
the Eliminate, Neutralize, and Disrupt (END)
Wildlife Traf cking Act, passed in 2016167,
calling for a comprehensive and decisive
approach to dismantle organised crime
syndicates, including those associated with
wildlife traf cking.
6.9.15.2 Combatting Illegal Fishing: In a
White House Fact Sheet published170 in June
The Eliminate, Neutralise, and Disrupt
2022, stated that “Distant water shing
Wildlife Traf cking Act creates a Presidential
vessels, which engage in industrial-scale
Task Force on Wildlife Traf cking, (bringing
shing operations on the high seas and in
together 17 federal departments and
waters under other states’ jurisdictions, can be
agencies to the “National Strategy”), the co-
signi cant perpetrators of IUU shing and
chairs of which include the Secretary of the
related harmful shing practices. IUU shing
Interior and the Attorney General.
often involves forced labor, human traf cking,
A HSI Report published in 2021, titled, the
Illegal Traf cking of Wildlife and Other
Natural Resources168 reports on HSI activity
and seizures and commits, through its
collaboration with interagency partners, to
build on tackling 3 objectives: strengthening
enforcement; reducing demand for illegally
and other crimes and human rights abuses.
Left unchecked, IUU shing and associated
labor abuses undermine U.S. economic
competitiveness, national security, sheries
sustainability, and the livelihoods and human
rights of shers around the world and will
exacerbate the environmental and
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For more on concerns on Russian shing see
ML & TF, which includes potential wildlife
Two speci c actions that will be take are:
traf cking red ags171.
•
“The United States, the UK, and Canada
The FCN Intelligence Brie ng on Wildlife
will launch an IUU Fishing Action Alliance
Traf cking 2019172 provides a comprehensive
aimed at increasing ambition and
summary of the global problem of wildlife
momentum in the ght against IUU
traf cking and includes potential Red ags,
shing, including a pledge to take urgent
action to improve the monitoring, control,
and surveillance of sheries, increase
transparency in shing eets and in the
seafood market, and build new
partnerships that will hold bad actors
accountable; and
•
and the FCN illegal Fishing Intelligence
Brie ng does the same for illegal shing.
The FATF173 Money Laundering and the
Illegal Wildlife Trade, June 2020, also
includes potential Red ags.
The Egmont Group of Financial Intelligence
The U.S. Interagency Working Group on
Illegal, Unreported, and Unregulated
Fishing, comprising 21 Federal agencies,
Units, Financial Analysis Cases 2014-2020
also contains examples of wildlife traf cking
case studies174.
will release its National Five-Year Strategy
6.9.17 Estimated Proceeds: Taken in
for Combating Illegal, Unreported, and
aggregate crimes covering timber, animals,
Unregulated Fishing (2022-2026) by the
mining, shing and waste dumping globally
end of July. The strategy prioritises the
amounted, according to UNEP & Interpol to
Working Group’s efforts to combat IUU
around US$70-213 billion pre 2014 and
shing, curtail the global trade of IUU sh
updated to an estimated US91-259 billion175
and sh products, and promote global
for 2016, or US$84.5 – 253.3 billion176 by GFI
maritime security, while working in
whose numbers, unlike UNEP Interpol do not
partnership with other governments and
include waste disposal. The Illicit trade in
authorities, the seafood industry,
wildlife is estimated at 10%-20% of the legal
academia, and non-governmental
trade. As the US represents about 20% of the
stakeholders. The United States will
worlds GDP, applying this gure would
engage with priority partners, including
provide an estimate for possible criminal
Ecuador, Panama, Senegal, Taiwan, and
proceeds of US$8.5 billion – US$25.3
Vietnam”.
billion or US$17 – US$56 billion involving
6.9.16 Potential Red Flags: See BSA/AML
the US.
Exam Manual – Appendix F ML/TF Red Flags
which include examples of potentially
suspicious activities, or “red ags” for both
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socioeconomic effects of climate change”.
The following threats were not included in
the US National Priorities in 2021, but
nevertheless may still present additional
threats to particular institutions:
6.10 Arms Traf cking: Quoting ATF sources,
CAP177, a lobby group, reported on its
website that “Gun traf cking in the United
States is a major problem. According to ATF
Reports, more than 600,000 crime guns that
were traced from 2010 to 2020 originated
from out of the state they were recovered in,
meaning that they were likely traf cked.
Moreover, there are signs that gun traf cking
within the country has increased. In addition
to rearms traf cked across state lines, there
is concern about the rise of short time-tocrime guns (STCGs), rearms that are
purchased and used to perpetrate a crime
within a relatively short period of time—usually
within six months or less. STCGs are major
indicators of the existence of gun traf cking
schemes.
• 380K – Number of rearms stolen every year
from private owners”;
• 19,000+ – gun homicides occurred in the
USA during 2020 (35% increase from 2019);
• 37,000 0 approximate number of people
injured with a gun during an assault;
• 832,000+ crime involved the use of a
rearm from 2019 to 2020.
6.10.1 Organised Crime Index: Arms
traf cking is the highest rated organised
crime (6.5/10) alongside drugs according to
the 2021 OC Index 2021, “The US is the
world’s biggest exporter of arms, and is a
source and destination for dif cult-topurchase rearms, including machine guns.
The civilian right to bear arms is
constitutionally protected in the US and
ownership is widespread. The legal purchase
of guns is relatively easy in some states; these
are then transported, resold or traf cked to
states or countries with stricter gun-control
• 600K+ – Number of guns that originated
laws. Despite the liberal gun laws that make
from out of the state they were recovered in
access to rearms relatively easy, the US
from 2010 to 2020;
nevertheless hosts a signi cant black market
• 90% – The percentage increase of short
time-to-crime guns (STCGs) recovered after
a crime from 2019 to 2020;
• 3% – Percentage of the 2,000 gun dealer
for weapons. Moreover, US foreign trade and
support often takes the form of military and
arms-related support, furthering global
dissemination. Most rearms seized and
traded in Mexico are purchased in south-west
violations reported from 2015 to 2017 that
US border states, and the US is also the
resulted in a license revocation;
biggest source of illegal foreign guns in
Brazil. Weapons legally and illegally exported
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Section 6 Continued – Additional Threats – 🇺🇸
“TCOs use rearms, ammunition, and
drug traf ckers and terrorist organisations,
explosives to protect their traf cking routes,
fuelling con ict, shootings, suicides,
drug processing locations, geographic drug
homicides, as well as drive-by, law
traf cking areas, and illicit pro ts. According
enforcement, unintentional and mass
to DOJ, DHS, and State reports, TCOs have
shootings. Growing distrust of US law
orchestrated sophisticated attacks on Mexican
enforcement has also led to increased gun
security forces, with increasing use of .50
violence”.
caliber ri es, modi ed fully automatic ri es,
6.10.2 Arms Traf cking from the US and
across the Region – Media Reports:
According to a 2021 US Government Audit
Of ce Report178, “US sourced rearms into
Mexico is a national security threat, as it
facilitates the illegal drug trade and has been
linked to organised crime. The Department of
Justice’s Bureau of Alcohol, Tobacco, Firearms
and Explosives (ATF) found that 70% of
rearms reported to have been recovered in
and belt- fed machine guns to counter
Mexican security forces. According to State
reporting, in March 2018, a TCO ambushed
Mexican security units in three locations in
Nuevo Laredo, using at least 15 vehicles—
many with improvised armour and a .50
caliber gun capable of piercing the Mexican
units’ armoured vehicles.”
“In February 2020, the U.S. government
issued national guidance emphasising the
Mexico from 2014 through 2018 and
importance of disrupting the ow of rearms
submitted for tracing were U.S. sourced.”
to these organisations. Yet an estimated
“According to U.S. and Mexican of cials, TCOs
are interested in obtaining .50-caliber ri es
because these ri es are powerful enough to
200,000 US sourced rearms continue to be
traf cked into Mexico each year, despite US
agencies’ efforts to address this problem.”
disable a vehicle engine and penetrate
In an article in the Guardian179 in April 2021,
vehicle or personal armour, posing a
“An iron river of illegal guns ows from the US
signi cant threat to Mexican security forces.
to Mexico, Central America, and across the
The Bureau of Alcohol, Tobacco, Firearms &
hemisphere, helping make the Americas the
Explosives (ATF) of cials noted that these
world’s most homicidal region, with 47 of the
ri es are not regulated differently than other
world’s 50 most murderous cities. Thousands
ri es and can be purchased in retail stores.
ee violence in the Northern Triangle of
ATF reported that .50 caliber ri es account for
Central America – Honduras, El Salvador and
about 0.5% of weapons recovered in Mexico
Guatemala – and seek asylum in the US,
& traced to the United States that were
adding to the pressure of undocumented
recovered within 3 years of initial purchase.
migrants….Between 2007 and 2019, more
than 179,000 rearms were captured in
Mexico and ve Central American countries
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from the US are obtained by armed gangs,
and traced to gun shops and gun factories in
of guns con scated and used as murder
the United States. Mexico’s foreign ministry
weapons in The Bahamas can be traced back
believes this is the tip of the iceberg, and
to American manufacturers and gun shops,
estimates that more than two million guns
according to of cial gures”.
crossed the Rio Grande over the last decade.
The weapons originate in the legal US gun
market – the biggest in the world by far, with
393 million rearms in civilian hands,
according to the last count. They then cross
into a parallel black market through four main
methods: a private sale loophole; straw
buyers (people with clean records paid to buy
guns); theft from gun shops; and the sale of
parts to make un-serialised weapons, or
“ghost guns”.
In a April 2019 special report from the
Con ict Awareness Projects (CAP) titled
“Follow the Guns”, reported181 that it had
“uncovered evidence that an international
gunrunning network funnelled thousands of
high-caliber hunting ri es from Europe and
the U.S. to poaching kingpins in southern
Africa, touching off a massive poaching crisis.
Poachers have killed 8,000 rhinos over the last
10 years, nearly two every day….Acting as a
criminal enterprise, the gunrunning network
Traf ckers take these guns from states with
operated over ve countries and three
looser laws, such as Virginia and Georgia, to
continents….the Rhino Ri e Syndicate and
cities with stricter laws, including Washington
pieced together how they hatched a world-
and New York, which are suffering from sharp
wide conspiracy to equip poaching teams in
increases in gun violence. They also smuggle
Mozambique and South Africa with CZ ri es
them south to Mexico, over the 2,000-mile
manufactured in the Czech Republic. Some of
border, hidden in cars and trucks.
these ri es were intended for the American
In Florida, smugglers stash rearms in cargo
ships that sail across the Caribbean and far
beyond. “You go to a shipper and you drop
off a box and you say what’s in there,
‘household goods.’ They don’t care,” said
Steve Barborini, a former agent for the Bureau
of Alcohol, Tobacco, Firearms and Explosives,
or ATF. For US guns, this is a common route to
Honduras.
market and bore a roll mark reading, “CZUSA, Kansas City, KS.” These ri es were
designed and marketed to kill big game, and
they have wreaked devastation across Kruger
National Park, home to the largest
concentration of rhinos in the world….The
Rhino Ri e Syndicate obtained the CZ ri es
from the arms manufacturer en masse and
then distributed them among poachers on the
ground by establishing a well-coordinated
Also in a Reuters article180, the Prime Minister
traf cking network and two dedicated
of The Bahamas reportedly said that the USA
international gun supply chains. Members of
needs to do more to control the illegal ow
these supply chains actively aided and
of weapons to The Bahamas. “More than 90%
abetted rhino poaching efforts through a
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6.11 Counterfeiting/Fake Goods: Whilst all
facilitation of ri e sales, the traf cking and
manner of goods are smuggled, the most
illicit distribution of ri es, and other forms of
important are people (see Section 10.12
nancial and logistical assistance. Acting in
above), cash (see Section 10 below) &
concert, the members of the Rhino Ri e
cigarettes. This also includes fake or
Syndicate also operated as a criminal racket,
counterfeit goods, including medicines &
protecting and covering for one another, and
currency.
relying upon corruption and bribery to ensure
the success of their criminal enterprise, all
while downstream clients perpetuated crossborder wildlife crimes on a catastrophic scale.
Members of the gunrunning network
included business elites, government of cials,
police, safari operators, arms dealers,
middlemen, and local “poaching bosses.”
6.11.1 Counterfeit/Fake Goods – Trends in
Trade & Pirated Goods Report 2019, by
the EUIPO & OECD (TPG Report):
According to the TPG Report 2019185 3.3% of
world trade in 2016 was estimated to be
made up from trade in counterfeit goods.
Whilst the US is estimated as having a low
propensity to export counterfeit products
6.10.3 Combatting Arms Traf cking:
with a score of 0.131/1 (2016) with export
According to a White House Brief, In June
trade to the rest of the world, it nevertheless
2021 President Biden announced a ve-part
is expected to be involved in signi cant
comprehensive strategy182 to tackle the
counterfeit imports. This compares with
persistent spike in gun crime cities across the
other countries that have similar rates like
country have experienced since the start of
Canada 0.137, Mexico 0.144, France 0.129,
the pandemic. In February 2022,
UK 0.152. Countries with the highest scores
President Biden Announced More Actions to
are from China and Hong Kong at maximum
Reduce Gun Crime And Calls on Congress to
score of 1/1. Other high scores: Bangladesh
Fund Community Policing and Community
(0.813), Cambodia (0.556), Djibouti (0.733),
Violence Intervention183.
Egypt (0.665) Jordan (0.405), Honduras
6.10.4 Arms Traf cking Potential Red
Flags: See BSA/AML Exam Manual Appendix F ML/TF Red Flags which include
examples of potentially suspicious activities,
or “red ags” for both ML & TF, which
(0.438), India (0.708), Malaysia (0.390),
Mauritania (0.744), Morocco (0.989), Pakistan
(0.952), Qatar (0.429) , Senegal (0.361), Sri
Lanka (0.399), Syria (0.549), Turkey (0.943),
UAE (0.995) & Uruguay (0.853).
includes potential arms traf cking red
ags184.
6.10.5 Estimated Proceeds: No available
information.
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combination of direct ri e sales, the
“Illicit trade in fake goods is a major challenge
registered in the United States, followed by
in an innovation-driven global economy. It has
France (16.6%), Italy (15.1%), Switzerland
a negative impact on the sales and pro ts of
(11.2%) and Germany (9.3%) (see Figure 3.5).
affected rms, as well as broader adverse
These are exactly the same top ve
effects on the economy as well as public
economies most impacted by counterfeiting
health, safety and security. Organised criminal
and piracy as described in OECD-EUIPO
groups are seen as playing an increasingly
(2016) for the 2011-13 period… but it should
important role in these activities, using pro ts
be noted that the United States’ share has
from counterfeiting and piracy operations to
signi cantly increased (+5 percentage points)
fund other illegal activities. Counterfeiters
between the two periods.”
operate swiftly in the globalised economy,
misusing free trade zones, taking advantage
of many legitimate trade facilitation
mechanisms and thriving in economies with
weak governance standards”.
According to the US Customs and Border
Protection, in their Intellectual Property Rights
Annual Statistics Report 2020186, 26,593
seizures were reported valued at
(Manufacturers Recommended Sales Price) of
The TPG Report “identi es several important
transit points for trade in counterfeits,
including Hong Kong (China), Singapore and
the United Arab Emirates, which are handling
trade in counterfeit goods in all the analysed
product categories. Fake goods arrive in large
US$1.3 billion.
Main goods seized are Watches & Jewellery
(33%), Handbags & Wallets (22%), Consumer
Electronics (12%), Wearing Apparel/
Accessories (12%).
quantities in containers and are sent further in
small parcels by post or courier services. In
addition, there are some important regional
transit points. For example, several Middle
Eastern economies (e.g. Saudi Arabia, the
United Arab Emirates and Yemen) are
important transit points for sending fake
goods to Africa. Four transit points – Albania,
Egypt, Morocco and Ukraine – are of
particular signi cance for redistributing fakes
Main countries where seizures originate are
destined for the EU. Finally, Panama is an
led by China (50.5%), Hong Kong (32.8%),
important transit point for fakes on their way
Turkey (2.4%), Vietnam (2%) & South Korea
to the United States”.
(1.9%).
“Almost 24% of the total value of seized
products refers to IP rights of holders
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and in circulation globally, according to data
provided by the US Secret Service. About 60
percent of that is in the US$20 bill in the US
itself, while the US$100 bill is the most
common overseas187. By 2019 the total
amount of US currency in circulation had
grown to US$1.7 trillion188.
According to the 2020 United States Secret
Main modes of transport were express ( ight)
(45%), mail (7%), cargo (containers etc) (35%).
Service Report189, “in FY 2020, the Secret
Service seized more than US$505 million in
counterfeit currency across the globe,
preventing it from being used to defraud
businesses and individuals. This marked an
almost 40% increase from FY 2019 in
counterfeit currency seized”.
6.11.3 Counterfeit Pharmaceuticals: The
Enforcement actions taken in 2020 show a
USA featured in the EUIPO Report on Illicit
signi cant reduction in cases compared to
Trade in Counterfeit Pharmaceutical
2017, show arrests down from 457 to 203,
Products190 (EUIPO Counterfeit
Prosecutions from 288 to 125 and convictions
Pharmaceuticals Report). The report found
from 240 to 98.
that “China, Hong Kong, Singapore & India
are the main provenance economies for
counterfeit medicines. While China & India
are the primary producers of fake medicines,
the UAE, Singapore & Hong Kong serve as
transit economies. Other relevant transit
points for fake pharmaceuticals include
Yemen and Iran. From these locations, fake
pharmaceutical products may be shipped
anywhere in the world, although African
economies, Europe and the United States
6.11.2 Counterfeit Currency: For the US$
appear to be the main targets”.
there were approx US$1.2 trillion notes and
The EUIPO Counterfeit Pharmaceuticals
coins in circulation (2015), of which at least
Report Report is summarised191 in 2020 as
US$147 million was estimated as counterfeit
follows:
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•
“The trade of counterfeit pharmaceuticals
differentials have made cigarette smuggling
worldwide is estimated to be worth up to
both a national problem and, in some cases, a
€4 billion, with India and China identi ed
lucrative criminal enterprise. Commenting on
to be the largest producers of such
a 2019 reports from the Mackinac Centre for
products” for products seized by customs
Public Policy, the Tax Foundation stated that
covering the period of 2014-2016.
“While buying cigarettes in low-tax states and
selling in high-tax states is widespread in the
•
The medications most frequently traded
United States, other methods for evading
were antibiotics, lifestyle drugs and
federal, state, and local taxes are popular.
painkillers, while counterfeit cancer
One way that criminals grow their pro ts is by
treatment medication, diabetes treatment
avoiding the legal market completely. They
drugs, local anaesthetics, malaria
produce counterfeit cigarettes with the look
treatment drugs, HIV treatment drugs, and
and feel of legitimate brands and sell them
heart disease medication were also
with counterfeit tax stamps. Many of these
seized.
products are smuggled from China, with one
source estimating that Chinese counterfeiters
•
96% of all falsi ed pharmaceuticals seized
produce 400 billion cigarettes per year to
by customs of cials were being delivered
meet international demand.
by post or express courier.
•
India and China appear as the largest
producers of counterfeit pharmaceutical
products, which mostly target African
economies, Europe and the United States.
•
The most important transit points in the
fake pharmaceutical supply chain are
Singapore and Hong Kong, while other
relevant transit points include the United
Arab Emirates, Yemen and Iran”.
16.11.4 Cigarette Smuggling: According to
The Tax Foundation192, “a consequence of
high state cigarette excise tax rates has been
increased smuggling as people procure
Global focus on counterfeit cigarettes has
forced the criminals to innovate. A growing
global problem is the so-called illicit whites or
cheap whites. These products are produced
legally in low-tax jurisdictions, but often
intended for smuggling. Reports from this
year indicate that the Chinese tobacco
monopoly is playing a signi cant role in the
“illicit whites” tobacco markets in Central and
South America. Some of these activities spill
over into the United States, and just in 2020,
three men were arrested in Texas transporting
illicit cigarettes. They admitted intentions to
smuggle over 400 million cigarettes”.
Additional statistics provided include:
• “New York has the highest inbound
discounted packs from low-tax states and sell
smuggling activity, with an estimated 52.2
them in high-tax states. Growing cigarette tax
percent of cigarettes consumed in the state
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deriving from smuggled sources in 2019.
tackling illicit trade head-on so we can stop
New York is followed by California (43.4
pro ts going to illegal activities”.
percent of consumption smuggled),
Washington (42.6 percent), New Mexico
(37.2 percent), and Minnesota (35.2
percent);
• New Hampshire has the highest level of
6.11.5 Counterfeit or Fake Goods Combating Traf cking in Counterfeit and
Pirated Goods by Homeland Security
2020: According to a 2020 reports on
Combating Traf cking in Counterfeit and
outbound smuggling at 71.3 percent of
Pirated Goods by Homeland Security194, “The
consumption, likely due to its relatively low
rapid growth of e-commerce has
tax rates and proximity to high-tax states in
revolutionised the way goods are bought and
the northeastern United States. Following
sold, allowing for counterfeit and pirated
New Hampshire is Idaho (29 percent
goods to ood our borders and penetrate our
outbound smuggling), Virginia (29
communities and homes. Illicit goods
percent), Wyoming (23.1 percent), and
traf cked to American consumers by e-
North Dakota (18.3 percent); and
commerce platforms and online third-party
• New Hampshire has the highest level of
outbound smuggling at 71.3 percent of
consumption, likely due to its relatively low
tax rates and proximity to high-tax states in
the northeastern United States. Following
marketplaces threaten public health and
safety, as well as national security. This illicit
activity impacts American innovation and
erodes the competitiveness of U.S.
manufacturers and workers”.
New Hampshire is Idaho (29 percent
“The OECD reports international trade in
outbound smuggling), Virginia (29
counterfeit and pirated goods amounted to as
percent), Wyoming (23.1 percent), and
much as US$509 billion in 2016. This
North Dakota (18.3 percent)”.
represents a 3.3% increase from 2013 as a
According to BAT193, “Euromonitor
International estimates that approximately
400 billion cigarettes per year are smuggled,
manufactured illegally or counterfeited. Illicit
trade also cheats governments out of around
US$40 billion each year in taxes. This stolen
revenue is also being used to fund other
illegal activities. In addition, counterfeit
cigarettes are not manufactured to stringent
product health and safety standards. We are
proportion of world trade. From 2003 through
2018, seizures of infringing goods by the U.S.
Customs and Border Protection (CBP) and
U.S. Immigration and Customs Enforcement
(ICE) increased from 6,500 to 33,810 while
the domestic value of seized merchandise —
as measured by manufacturer’s suggested
retail price of the legitimate good (MSRP) —
increased from US$94 million in 2003 to
US$1.4 billion in 2018…. Counterfeit and
pirated products come from many economies,
with China appearing as the single largest
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producing market. These illegal products are
Yellen197. Whilst this tax gap is larger than the
frequently found in a range of industries, from
IRS’s of cial estimate of US$441 billion a
luxury items (e.g. fashion apparel or deluxe
year198, Charles Rettig, the agency’s
watches), via intermediary products (such as
commissioner, recently told Congress that
machines, spare parts or chemicals) to
number could be over US$1 trillion199.
consumer goods that have an impact on
personal health and safety (such as
pharmaceuticals, food and drink, medical
equipment, or toys)”.
6.12.1 Tax Justice Network: According to
the 2021 Tax Justice Network200, the United
States loses US$113.5 billion in tax every
year to global tax abuse, equivalent to 3.1%
6.11.6 Fake Goods Potential Red Flags:
of tax revenue (Tax Revenue : $4 trillion)
See BSA/AML Exam Manual – Appendix F ML/
equivalent to loss of US$352 per member of
TF Red Flags which include examples of
population. Of this, US$77 billion is lost to
potentially suspicious activities, or “red ags”
global tax abuse (mostly tax avoidance and
for both ML & TF, which includes potential
therefore not illegal) committed by
trade red ags195.
multinational corporations and US$37billion
See also Trade Based ML Risk Indicators
including potential Red ags by FATF &
Egmont Group in March 2021196.
6.11.7 Estimated Proceeds: Trade in pirated
goods if estimated at 3.3%, and if applied to
US imports of US$2.6 trillion (2019) would
generate US$86 billion. Seizures by US
is lost to global tax evasion committed by
private individuals. Trading partners most
responsible for vulnerability to tax abuse are
Japan, Cayman Islands and Luxembourg.
The USA is ranked 25th in the 2021 Tax
Justice Network’s Corporate Tax Haven Index
with a score of 47/100201.
authorities were valued at US$1.4 billion in
The USA is also ranked 1st/141 countries in
2020.
the Financial Secrecy Index 2022202, up one
Based on counterfeits seized at US borders in
2009, 79% came from mainland China.
Estimates of the cost to the US is between
US$225 – US$600 billion in 2016.
6.11.8 Tax Fraud/Tax Evasion: Tens of
millions of Americans duly pay the taxes they
owe, whist others seek to evade their taxes
which costs the U.S. government US$700
billion a year, or US$7 trillion over a decade,
from its 2020 ranking of 2nd, based on a
secrecy score of 67/100 and its share (5.74%)
of the global market for offshore nancial
services.
The US was estimated to be in icting US$20
billion in tax losses on third countries by
facilitating global tax abuse, by enabling
global private tax evasion, and being
responsible for 4.12% of global tax losses.
according to U.S. Treasury Secretary Janet
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We should also extend anti-money laundering
According to Transparency International US
rules to all the gatekeepers to our nancial
Of ce203, “the United States as the most
system. This means that the lawyers,
secretive nancial jurisdiction in the world, a
accountants, real estate professionals, and
fact that signi cantly complicates U.S. efforts
investment advisors need to know their
to root out global nancial corruption and
clients. They must ask the questions to identify
hold Russian oligarchs accountable for their
if the people behind the anonymous
dirty nancial dealings. The Index con rms a
companies they help create and assist are
worrying trend in the United States: despite
sanctioned Russian oligarchs or other corrupt
taking bold stances against illicit nance and
or criminal actors. Right now, there is no such
money laundering, the U.S. has moved to the
obligation.The transnational task force created
top of the Financial Secrecy Index. That isn’t a
to look for Russian assets should consider
prize the U.S. wants to claim for itself. The
how the cross-border communication and
combination of secrecy and size of our
information sharing can be continued beyond
nancial system puts the U.S. ahead of other
the current crisis and expanded to track all
notorious secrecy havens like the Cayman
illicit funds. In doing all this, lawmakers must
Islands and Switzerland. That’s a shameful
provide the funding to properly implement
distinction.
and enforce any new rules. Only with strong,
Over the past year, the U.S. has taken major
steps toward creating a more transparent and
accountable nancial sector, from passing a
landmark law to unmask anonymously owned
focused, comprehensive laws will our country
secure its nancial future from manipulation
by foreign kleptocrats and transnational
corruption”.
shell companies used to launder dirty money
6.12.3 Tax – US IRS: In June 2022 the IRS,
to stepping up funding for investigative tools
issued a news release204 warning taxpayers to
to go after criminal and corrupt actors. But
avoid being misled into using bogus tax
the positives don’t excuse the fact that much
avoidance strategies. The IRS Commissioner
more needs to be done, and our policymakers
commented that “These tax avoidance
cannot afford to deprioritise this critical front
strategies are promoted to unsuspecting folks
in the ght against global kleptocracy and
with too-good-to-be-true promises of
creeping authoritarianism.
reducing taxes or avoiding taxes altogether…
The report speci cally calls out the U.S. for a
lack of oversight of trusts which several
investigations have identi ed as vehicles for
money laundering. The U.S. should not allow
trusts to serve as nancial black boxes, ready
Taxpayers should not kid themselves into
believing they can hide income from the IRS.
The agency continues to focus on these deals,
and people who engage in them face steep
civil penalties or criminal charges”.
for exploitation by kleptocrats and criminals.
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6.12.2 Transparency International:
for billions in uncollected taxes. The gap
list to highlight the abusive schemes below
between taxes owed and taxes paid could
that can target average taxpayers. “These
grow if there’s no intervention, according to
consumer-focused scams can prey on any
the Treasury Department. As a result the
individual or organisation, steal sensitive
Biden’s Administration had proposed an
nancial information or money, and in some
US$79.6 billion investment in the IRS which
cases leave the taxpayer to clean up the legal
could bring in an additional US$700 billion
mess”. The rst “four abusive transactions
over 10 years. The IRS’s ability to secure taxes
involve charitable remainder annuity trusts,
from wealthy Americans has been eroded by
Maltese individual retirement arrangements,
a decade of budget cuts, with the IRS having
foreign captive insurance, and monetised
20,000 fewer staffers than it did in 2010207.
instalment sales”205.
The US Senate passed the In ation Reduction
The IRS also highlighted four other schemes
Act 2022, in August 2022, which provides for
that typically target high-net-worth
US$45.6 billion of the increased funds to be
individuals. ”Solicitations for investment in
allocated for enforcement, raising the
these schemes are generally more targeted
enforcement budget from US$68 billion to
than solicitations for widespread scams, such
US$111.7 billion.
as email scams, that can hit anyone”. They are:
•
•
•
red ags available from the Wolfsberg Group
and Improper Reporting of Digital Assets;
on tax evasion see guidance published in
High-income individuals who don’t le tax
2019208.
6.12.6 Estimated Proceeds: Estimates for
Abusive Syndicated Conservation
Easements; and
•
6.12.5 Potential Red Flags: For potential
Concealing Assets in Offshore Accounts
returns;
the amount of tax fraud and evasion affecting
the US is likely much larger than the total
amount of other illicit activity put together
Abusive Micro-Captive Insurance
and estimated at around 2% of GDP, with
Arrangements.
estimates for tax fraud and evasion at double
6.12.4 Combatting Tax Fraud/Tax Evasion:
A recent study from IRS206 researchers and
academics found that the top 1% of
Americans failed to report about one-quarter
of their income to the IRS. The research found
income underreporting was nearly twice as
high for the top 0.1%, which could account
that or 4% or more of 2021 GDP
representing at least US$840 billion (see
Section 5 above or at US$441 billion , or
US$700 billion or US$1 trillion a year,
according to the US Governments own
estimates.
6.13 Acquisitive Crimes: Whilst traditional
acquisitive crimes have been on the decrease
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The IRS also kicked off the 2022 Dirty Dozen
in many countries for the last 2 decades, they
U.S. is valued at between approximately
still represent an important source of criminal
US$30-37 billion215 (2007). This estimate
proceeds, despite the decline and rise in
includes other crimes like credit card fraud,
other forms of modern acquisitive crimes
gift card fraud, and price tag switching.
such as fraud, particularly via cybercrime.
6.13.1 Theft: 1,398 cases per 100,000 of
the population for theft (larceny) in 2020, a
decrease from the previous year, when the
larceny-theft rate stood at 1,569.2 cases per
100,000 – also down from a high of 3,228.8 in
1991 to 2,484.6 in 2001 to 1,974.1 in 2011209.
6.13.2 Robbery: 86.2 cases per 100,000
population in 2018 for robbery, down from
98.6 cases per 100,000 population in
2017.210
6.13.7 Virtual Currency Theft – In 2021,
criminals directly stole a record US$3.2
billion worth of cryptocurrency, according to
Chainalysis216, which is a vefold increase
from 2020, though schemes continue to
overshadow outright theft, enabling
scammers to lure US$7.8 billion worth of
cryptocurrency from unsuspecting victims.
6.13.8 Precious Metals & Stones Theft: In
2020, jewellery and precious metals worth
about US$838 million were stolen in the US.
Only about 3% of the total value of stolen
6.13.3 Burglary: 376.1 cases per 100,000
population in 2018 for burglary to 339.7
cases per 100,000 population in 2019.211
6.13.4 Motor Vehicle Crime: 219.4 cases
per 100,000 population in 2019 for private
motor vehicle theft, down from 228.9 cases
per 100,000 population in
2018212
& 810,400
jewellery and precious metals was recovered
in the same year.217
6.13.9 Currency & Bank Notes: In 2020,
currency & Bank notes worth US$1.245
billion were stolen in the US. Only about 3%
of the total value of currency & Bank notes
was recovered in the same year.218
vehicles stolen in 2020. According to the FBI
6.13.10 Antiquities Traf cking: The
though, “810,400 vehicles were stolen in
UNODC has reported that art and cultural
2020, up 11.8% from 2019, when 724,872
property theft globally may amount to
vehicles were stolen” and “Motor vehicle theft
between US$3.4 and US$6.3 billion.219
amounted to US$7.4 billion in losses in 2020
6.13.11 Combatting Acquisitive Crime:
alone”213.
President Biden announced new plans in July
6.13.5 Cargo Theft: According to the US FBI
estimates for the value of cargo theft losses in
the US are in excess of US$30 billion214.
2022 to tackle crime in a “Safer America
Plan” proposing a US$37 billion increase with
US$13 billion over the next ve years to hire
and train an additional 100,000 police
6.13.6 Organised Retail Theft: The US FBI,
of cers220, US$3 billion to help communities
also reported (based on industry experts) the
clear court backlogs and set up task forces to
estimate for organised retail crimes in the
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6.15.1 Illegal Gambling: According to the
violence. The plan would also impose
DoJ224, “substantial numbers of Americans
tougher penalties for fentanyl traf cking amid
engage in illegal gambling activities,
an epidemic of drug overdoses. To tackle
particularly in urban areas. Illegal gambling
organised retail theft, the plan calls on
offers bene ts through its recreational
Congress to pass legislation to require online
component and its provision of many
marketplaces like Amazon to verify third-party
individuals who are of cially listed as being
sellers’ information, and to impose liability on
unemployed. However, illegal gambling also
online marketplaces for the sale of stolen
provides money for the underworld activities
goods on their platforms. President Biden’s
of crime syndicates, leads to some police
plan also establishes a US$15 billion grant
corruption, and can lead directly to other
program called Accelerating Justice System
types of crime. The ve major types of illegal
Reform that cities and states could use over
gambling are sports betting with bookmakers,
the next 10 years to pursue strategies to
horse betting with bookmakers, sports parlay
prevent violent crime and to ease the burden
cards, numbers, and illegal casinos.”
on police by identifying non-violent situations
that may merit a public-health response.
Illegal gambling has been found to cheat
customers on payouts, cheat the US
6.13.12 Potential Red Flags: See BSA/AML
government by not paying taxes on pro ts,
Exam Manual – Appendix F ML/TF Red Flags
and using illicit pro ts to support other forms
which include examples of potentially
of organised crime activity225.
suspicious activities, or “red ags” for both
ML & TF, which includes potential acquisitive
Crime red ags221.
By illustration, a May 2022 indictment226 of
individuals on charges including drug
traf cking, the attempted extortion and
6.13.13 Estimated Proceeds: Estimates for
subsequent robbery of a small business,
the amount of Acquisitive Crime are
bribery of a police of cer and operating
approximately US$70 billion, based on the
illegal casinos. The case involves, a string of
estimates in this section.
illegal casinos in Santa Ana California.
6.14 Murders: The US homicide rate is 6.5
cases per 100,000 population in 2020
(21,570 murders), up from 5.1 cases per
100,000 population in 2019 (16,669
murders)222. 4.1 cases per 100,000
population in 2020 for homicides by
rearms, up from 3.2 cases per 100,000
population in 2019223.
“The number of illegal gambling dens has
exploded during the pandemic, dramatically
impacting the quality of life. These illicit
businesses are a breeding ground for drug
traf cking, violence and even police
corruption. “Illegal gambling locations create
an increase in violent crime, adversely impact
the quality of life of our communities, and
cause disruption to our neighbourhoods and
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share intelligence, to help reduce gun
our law-abiding business partners. “The
6.15.2 Potential Red Flags: See BSA/AML
defendants outed the law and used
Exam Manual – Appendix F ML/TF Red Flags
enforcers with rival gangs to get victims to
which include examples of potentially
comply through the use of intimidation and
suspicious activities, or “red ags” for both
violence in order to further their illicit network
ML & TF, which includes potential illegal
and generate pro ts.”
gambling red ags227.
The illegal gambling business allegedly
6.15.3 Estimated Proceeds: There are no
generated thousands of dollars in pro ts on a
estimates for the amount of illegal gambling.
daily basis. A police of cer was also bribed
approximately US$128,000 in an effort to
protect his illicit casinos from law
enforcement intervention.
6.16.1 Kidnapping for Ransom: Despite
global trends suggesting likely increases in
kidnap for ransom228, in the US it is extremely
rare, particularly for adults. Child abduction
Casinos and other gambling establishments
cases or parental kidnapping, where one
ca; also be used to launder criminal funds.
parent hides, takes or holds a child without
This has been highlighted in the NMLRA
the knowledge or consent of another parent
2022 (See Part 2 Section 9.2.13.4 below). It
or guardian, is much more common. In 2010,
states that, “criminal prosecutions and
the US Department of Justice reported
enforcement actions show that illicit proceeds
200,000 cases of parental kidnapping, which
earned from drug traf cking, illegal gambling,
included both domestic and international
and fraud are placed in casinos directly as
abductions. The federal government
cash. According to the DEA, casinos remain a
estimated about 50,000 people reported
popular way for launderers to obfuscate their
missing in 2001 who were younger than 18.
drug proceeds because of their high volume
Only about 100 cases per year can be
of currency transactions. A trend that law
classi ed as abductions by strangers.
enforcement has seen is “chip walking.” For
According to the State Department, between
example, in multiple jurisdictions, one target
2008 and 2017 an average of about 1,100
frequently gambled at a casino with cash from
children were abducted from the U.S. to a
sex traf cking . The target took large sums of
foreign country. In 2017, 345 resulted in the
casino chips and left the casino in one city
department opening an international
and drove to a casino in another city to play
kidnapping case229 Fewer than 350 people
with those chips. The target did not cash out
under the age of 21 have been abducted by
but left the casino again with large sums of
strangers in the United States per year
chips he handed of to a second target at the
between 2010–2017230.
casino.”
6.16.2 Kidnapping for Ransom by
Terrorists: In relation to terrorism, the NTFRA
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disseminating false or misleading information
through kidnapping for ransom, looting, and
or by undertaking distorting or misleading
the extortion of local businesses, including
behaviour. Manipulators and abuses have
payments from drug traf ckers operating in
included regulated nancial institutions, but
ISIS-controlled strongholds…. In Africa,
more often rogue employees, as well as likely
extortion and kidnapping for ransom remain
or unregulated ones, including hedge funds
key sources of funding for ISIS, but recent
and in particular of concern or boiler rooms.
reports also indicate that revenues from the
extortion of artisanal gold mining-related
activities is increasing. Virtual assets are
being sent directly to ISIS supporters located
in northern Syria, often to Idlib, or indirectly
via Turkey, where ISIS is able to access them at
virtual asset trading platforms”.
6.16.3 Potential Red Flags: See BSA/AML
Both boiler room operators and other rogues
will use common schemes and techniques to
make money, as did Stratton Oakmont using
pump and dump schemes involving penny
stocks, depicted in the movie the Wolf of Wall
Street. Unlike in the movie, Stratton Oakmont
was not a regulated FI that went rogue but a
rogue out t from the start.
Exam Manual – Appendix F ML/TF Red Flags
which include examples of potentially
Most Common Market Abuse Techniques
suspicious activities, or “red ags” for both
ML & TF, which includes potential kidnap for
ransom red ags231.
6.16.4 Estimated Proceeds: There are no
available estimates for the amount of
proceeds for kidnap for ransom, though
amounts are expected to be small.
6.17 Market Abuse: Market abuse is both a
theft and a nancial fraud. The victims are all
those market participants that play by the
rules, investing honestly. The abuser when he
manipulates cheats every other participant
and offends the principles of the markets that
honest participants rely upon.
Market abuse is the practice of interfering in
the market by manipulating transactions,
using manipulating and or ctitious devices,
Insider Dealing
Abusive Rate Fixings/Intimidation/
Coordination
Abusive Short Selling
Abusive Squeezes/Cornering/
Warehousing
Bear Raids/Short & Distort/Trash &
Cash/
Banging/Marking the Close/Marking
the Open/Portfolio Pumping
Front Running/Parallel Trading/
Piggybacking/Tailgating
Painting the Tape/Ping Orders
Late Trading/Market Timing
Large & Unusual Orders
Layering/Spoo ng
Rumouring/Pu ng
Quote Stu ung
Pump & Dump/Hack Pump & Dump/
Ramping/Scalping
Wash Trades/Circular Trading/Pre
Arranged Trading/Soft Dollar Arr
Source: Red Alert
6.17.1 Potential Red Flags: See Red Alert
which include detailed examples of
potentially suspicious activities, or “red
ags”232.
6.17.2 Estimated Proceeds: There are no
available estimates for the amount of market
abuse
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2022, found that “ISIS has generated revenue
Section 7 – Sanctions & Embargoes – 🇺🇸
In this Section 7, the focus is on US Sanctions
Additional programmes are set out below:
and Embargoes.
7.1 Sanctions & Embargoes: There are no
comprehensive foreign sanctions & or
embargoes targeted towards the USA. There
have been sanctions levied in response to the
imposition of US trade sanctions, including
by China, Canada & the EU. There have also
been limited retaliation by Russia following
sanctions imposed on it by the US, including
targeting high ranking US persons233.
7.2 US Sanctions: The US has numerous
sanctions programmes234, which can be
7.3.Proliferation Finance: According to the
either comprehensive or selective, using the
NPFRA 2022, “The DPRK, followed by Iran,
blocking of assets & trade restrictions to
continue to pose the most signi cant
accomplish foreign policy & national security
proliferation nance risks. Since 2018, China
goals. These include targeting particularly
and to a lesser extent, Russia have expanded
Iran, Syria, N Korea, Cuba, Venezuela & Russia
their efforts to illegally acquire US origin
(including invaded Ukrainian Territory &
goods. PF networks continue to miss you and
Belarus & includes nancial crime related
relationships and establish multiple front and
targets, including proliferation, terrorism,
shell companies to the Sellotape nancial
drugs & TOC. The most important are:
activity in the trade. They continue to generate
signi cant revenue from the maritime sector,
in violation of international and US. These
networks also increasingly exploiting the
digital economy, including through the
systematic mining and trading of virtual and
the hacking of virtual service providers.”
For more see Section 6.13 Special Focus
Proliferation Finance and later in this section
on DPRK and Iran.
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in 1999, which created the Specially
President, Congress, the State Department,
Designated Narcotics Traf cking Kingpin
and the Treasury, acting through the Of ce of
(SDNTK) sanctions program to authorise the
Foreign Assets Control (OFAC), imposed
sanctioning of foreign nationals operating
economic and trade sanctions against
outside of USA jurisdiction. At their height in
terrorist groups, those who provide them
2010, there were 350 listings of transnational
material support, and those who transact with
crime persons, which has since fallen to less
them, in order to safeguard the U.S. economy
around 30 by November 2021237, largely due
and to prevent acts of terror. These OFAC-
to successful delistings following changes in
administered counter terrorism sanctions
behaviour, or other successful actions against
include various executive orders and federal
such persons.
regulations. These actions were taken under
former President George W. Bush in light of
the 9/11 terrorist attacks, and included only a
one page list of designated persons. The list
today runs to roughly 35 pages of names and
entities that have been designated, as
persons who the U.S. Government has
reasonable cause to believe that are terrorists
or supporters of terrorism235.
The US State Department maintains and
publishes a list of almost 70 Foreign Terrorist
Organisations which includes ISIS, Al Qaeda,
Hamas and Hezbollah236. See Section 8 for
In a Centre for New American Security paper,
titled “Sanctions by the Numbers:
Transnational Crime and Drug Traf cking” by
Jason Bartlett and Megan Ophel238, the
expansion of US sanctions programmes to
target broader nancial crime targets is
explained.
“In 2011, under former President Obama’s
administration, additional authorities were
used to sanction Transnational Criminal
Organisations (TCO) including members and
those who offer material support to,
more details.
transnational criminal organisations. As a
7.5 Financial Crime – Drug Traf cking &
drug traf ckers to those involved in any
Transnational Organised Crime: In 1995,
former U.S. President Bill Clinton created the
rst counternarcotics sanctions program—
Specially Designated Narcotics Traf ckers
(SDNT)—to combat the rise of cocaine
traf cking into the US, targeting Colombia’s
Cali Cartel. Following the success of the
SDNT sanctions program another
programme – the Foreign Narcotics Kingpin
Designation Act (Kingpin Act) came into force
result, sanctions went beyond sanctioning
criminal activity. While the rst term of the
Obama administration saw more than 1,500
transnational crime–related sanctions—
averaging 234 sanctions per year—the Trump
administration averaged 81 sanctions per
year and reached a total of just 323 new
designations by the end of 2020.
The use of transnational crime–related
designations during Obama’s time in of ce
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7.4 Terrorism & Terrorism Finance: The
(1,789) was more than ve times greater than
relations during the U.S.-China trade war,
during Trump’s (323), making it one of the
Chinese of cials accused the Trump
only sanctions programs more actively used
administration of using the fentanyl issue as a
under the Obama administration than the
“political weapon” to advance its own agenda.
Trump administration. (U.S. Treasury Of ce of
However, the Trump administration achieved
Foreign Asset Control).
a major breakthrough in 2019 when Beijing
Treasury has imposed transnational crime–
related sanctions on individuals and entities
spanning 68 countries, but has focused efforts
in Colombia (670), Mexico (666), Panama
(155), Guatemala (60), Peru (40), and
Venezuela (39) due to high levels of drug
dealing by transnational crime groups in
these countries.
Colombia (670) and Mexico (666) continue to
serve as epicenters for drug traf cking into
the United States and account for roughly 60
percent of total transnational crime–related
designations (2,155). In both countries,
Washington has implemented
counternarcotics sanctions in close
coordination with local governments—the U.S.
embassies in Bogotá and Mexico City host the
only permanent OFAC attachés.
agreed to designate all fentanyl-like drugs as
controlled substances, banning their
manufacture and sale. Questions remain on
whether China will be able and willing to
enforce these restrictions as Beijing has not
cooperated with Washington in extraditing
indicted Chinese nationals to American law
enforcement.
The Biden administration has currently issued
40 transnational crime–related sanctions
within its rst year, signalling an intent to
incorporate sanctions within its global
counternarcotics strategy as the designations
target persons in Mexico (21), Pakistan (6),
Colombia (5), Qatar (5), Bahrain (1), Palestine
(1), and Saudi Arabia (1). Biden outlined his
political intentions to combat transnational
crime in a letter239 to the Speaker of the
House of Representatives in July 2021 stating
Under the Trump administration, designations
that transnational criminal organisations
on Chinese nationals distributing Chinese-
continue to pose an “extraordinary threat to
manufactured fentanyl became a major focus
the national security, foreign policy, and
of drug-related sanctions programs. Noting
economy of the United States.” The U.S.
that since 2013 China has been the primary
government will likely continue to leverage
source of fentanyl in the United States, the
the Kingpin Act and relevant counter-narcotic-
Trump administration expanded existing
traf cking authorities within its overall
Obama-era sanctions on Chinese nationals
counternarcotics strategy to synergies
with the goal of pressuring Beijing to deal
cooperation between U.S. agencies and
more seriously with the growing drug
global law enforcement agencies, as seen in
problem. Amid the deterioration of diplomatic
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the global distribution of transnational crime–
signi cant threat and a more comprehensive
related designations.”
response. These are Iran, Syria, North Korea,
7.6 Magnitsky Sanctions: The “Global
Magnitsky Human Rights Accountability Act”
became law in 2016240, named after the
Russian tax lawyer killed by extra judicial
killing by Russian Government Agents. It
Venezuela, Cuba and more recently Russia
(& Belarus). China is also included in this
Section 7 more to distinguish the existing
more limited, but nevertheless growing
sanctions imposed.
enables sanctions against persons involved in
7.7.1 Iran: USA sanctions were imposed on
gross violations of human rights against
Iran, following the Iranian Revolution in 1979,
individuals who either seek “to expose illegal
which started with the seizure of the
activity carried out by government of cials” or
American Embassy in Tehran in which USA
“to obtain, exercise, defend, or promote
diplomats were held hostage. While those
internationally recognised human rights and
original sanctions were lifted in 1981, new
freedoms, such as the freedoms of religion,
sanctions have been imposed since in
expression, association, and
response to Iran’s actions in the
assembly, and the rights to a fair
Persian Gulf, in order to combat
trial and democratic elections;” or
Iran’s State support for terror, in
“government of cials or senior
particular of Hezbollah in
associates of such of cials who
Lebanon and Hamas and
are engaged in or responsible for
Palestine Islamic Jihad in Gaza
acts of signi cant corruption.
(groups designated by the US as
Individuals who have acted as
terrorist organisation), and its
agents of or on behalf of human
undeclared nuclear weapons
rights abusers or who have materially assisted
corrupt of cials can also be sanctioned.”
programme242.
There is limited trade between the US and
In 2017, the Trump Administration built upon
Iran. The USA exports to Iran was US$39.36
these Obama-era policies by including
million during 2021, according to the United
“corruption” and “the transfer or the
Nations COMTRADE database on
facilitation of the transfer of the proceeds of
international trade, with the highest value of
corruption” as a basis for sanctions
exports being US$24.84 million for optical,
designations241.
photo, technical, medical apparatus, and
7.7 Key Countries of Concern: Whilst USA
Sanctions target persons in over 60 countries,
there are a number of countries that have
been targeted that represent the most
US$5.34 million for miscellaneous chemical
products243. United States imports from Iran
was US$1.29 million during 2021, with
US$434.54K for printed books, newspapers,
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pictures, and US$421.39K machinery, nuclear
database on international trade, with the
reactors, boilers244.
highest value of US$317.35K for oil seed,
7.7.2 Syria: Sanctions against Syria were rst
imposed in 2004, following former President
Bush’s inclusion of Syria in the “axis of evil”
speech at the end of 2002. Syria was decreed
as counterproductive to USA interests in the
region and labeled a state sponsor of
terrorism245. The justi cation given was:
Syria’s alleged pursuit of weapons of mass
oleagic fruits, seed, fruits and US$284K for
optical, photo, technical, medical
apparatus.246 United States imports from
Syria was US$10.09M during 2021, with the
highest amounts being US$2.24M for coffee,
tea, mate and spices and US$1.39M for stone,
plaster, cement, asbestos, mica or similar
materials247.
destruction, its continued military occupation
7.7.3 North Korea: Since 2006, the UN
of Lebanon, efforts by the Assad regime to
Security Council has passed nearly a dozen
hinder the stabilisation of Iraq & the aiding of
resolutions sanctioning North Korea for
armed organisations such as Hezbollah and
developing nuclear weapons and related
Hamas. Since then sanctions have been
activities. The United States and other
added following the Syrian government’s
countries have also imposed unilateral
alleged involvement in the 2005
sanctions. The sanctions ban the trade of
assassination of Lebanese Prime Minister
weapons and military equipment, freeze the
Ra k Hariri and alleged complicity in allowing
assets of people involved in the nuclear
foreign ghters safe passage to Iraq. More
program, and restrict scienti c cooperation,
recently, the increasingly brutal civil war in
among other actions. Sanctions have though
Syria and allegations of war crimes
not yet pressured North Korea to
committed by government forces, pushed
denuclearise248.
the Obama administration to signi cantly
broaden the scope of sanctions. These
expansions are multifaceted and include the
In respect of US-North Korea relations249:
•
“The USA does not have formal diplomatic
banning of numerous nancial transactions
relations with North Korea. Since the
and the entry of Syrian funds into the United
1990s, the DPRK Mission to the UN has
States. Furthermore, these Syria sanctions
served as a channel for diplomatic
have also levied considerable restrictions on
communications between the U.S. and
Americans seeking to invest in and do
North Korea. Sweden currently serves as
business with Syria, though there are
the U.S. protecting power in Pyongyang;
exceptions.
•
About 28,500 U.S. military personnel are
As a result, trade is very limited. US exports
currently stationed in South Korea, which
to Syria was just US$1.19M during 2021,
is a treaty ally of the United States. The
according to the United Nations COMTRADE
presence of U.S. troops in South Korea, as
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Korea’s nuclear program, illicit activities,
has been frequently denounced by North
and human rights record. In 2017, there
Korea.
were no reported exports from North
The U.S. and North Korea have brokered
multiple agreements concerning the
•
North Korea were negligible”.
7.7.4 Cuba: USA sanctions against Cuba
including the 1994 Agreed Framework,
were imposed rst on the sale of arms to
several agreements achieved during the
Cuba in 1958, during the Batista regime, but
2003-2009 Six Party Talks, and the 2012
later in 1960 after the Cuban Revolution
“Leap Day Deal”. However, these
brought Fidel Castro to power after Cuba
agreements have all subsequently fallen
nationalised the US-owned Cuban oil
apart;
re neries without compensation. The USA
The U.S. was a major food aid donor to
also contributed a substantial amount of
energy assistance related to the Agreed
Framework and Six Party Talks. The U.S.
has not provided any signi cant aid to
North Korea since 2009, although private
U.S. humanitarian groups continue to
operate in the country; changed header,
ag and spacing on table below
placed an embargo on exports to Cuba
except for food and medicine but in 1962,
the embargo was extended to include almost
all exports. The UN General Assembly has
passed a resolution every year since 1992
demanding the end of the USA economic
embargo on Cuba, with the USA and Israel
being the only nations to consistently vote
against the resolutions250. Sanctions on Cuba
are amongst the toughest of all USA
sanctions, which for 60 years have
Summary of Items Under Import, Export or Sale Restrictions
nevertheless failed to force a change in or by
by USA in Relation to North Korea – 🇺🇸
the Cuban leadership. Whilst attempts were
Aviation fuel, rocket fuel
Luxury goods*
Coal
Petroleum, crude oil
Condensates and natural gas liquids
Copper, nickel, silver
Rare earth minerals
Earth, stone, wood
Seafood, shing rights
Electrical equipment
Statues
Food and agricultural products
Helicopters
Textiles, fabrics
Industrial machinery
Transport vehicles
Iron, steel
Vessels.
Lead, ore
•
Korea to the U.S. and American exports to
North’s nuclear weapons program,
North Korea during the 1990s famine, and
made, in particular by the Obama
Administration, to ease some restrictions, for
example travel to Cuba, these were reversed
by the Trump administration. Even the Biden
administration has added to the existing
sanctions, with new targeted sanctions on
Cuba’s police force and on two of Cuba’s
leaders, in response to the 2021 Cuban
U.S. trade with North Korea is heavily
restricted, and the U.S. has imposed a
variety of sanctions related to North
protests.
As a result trade remains limited, with imports
from Cuba just US$2.9 million during 2021251.
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•
well as U.S.- ROK joint military exercises,
The highest values were for works of art,
prices due to the Ukraine con ict, sanctions
collectors’ pieces and antiques and US$10
on Russian banks have hurt its ability to
million for unspeci ed commodities. The US
access assets stored in those entities253.
exported Goods worth US$323.46M during
Whilst President Maduro himself is not
2021252. The highest values were
directly sanctioned, many of the elite are,
US$279.29M for meat and edible offal and
including the country’s attorney general and
US$12.66M for oil seed, oleagic fruits, grain,
the head of the penitentiary system, and
seed, fruits.
more than 140 entities, among them
7.7.5 Venezuela: Sanctions against
Venezuela were imposed by the US rst in
2003 due to Venezuela’s lack of cooperation
on antidrugs and in 2006, as Venezuela was
not seen as “cooperating fully with US States
anti-terrorism efforts”. This resulted in the
Venezuela’s Central Bank. Perhaps as
important though is that Maduro himself is
under indictment in the US, accused of
conspiring “to ood the United States with
cocaine” and use the drug trade as a
“weapon against America”254.
prohibition of all USA commercial arms sales
US imports from Venezuela was US$326.94M
to Venezuela and in 2008, and the USA
during 2021255. The highest values were
sanctioned a number of Venezuelan entities
US$68.06M for meat, sh and seafood
involved in supporting terrorism nance
preparations, and US$62.93M for sh,
through their af liation and support for
crustaceans, molluscs, aquatics invertebrates.
Lebanon’s Hezbollah. After recognising Juan
US exports to Venezuela was US$1.65B
Guaidó, president of the democratically
during 2021256. The highest values were
elected, opposition-led National Assembly, as
US$323.20M for electrical, electronic
interim president, the Trump Administration
equipment and US$286.37M cereals.
further tightened sanctions on Venezuela’s
state oil company (Petróleos de Venezuela,
S.A., or PdVSA), the Central Bank, and
government, in order to pressure Maduro to
leave power.
7.7.6 Russia (& Belarus): Since February
2022, and in response to Russia’s further
invasion of Ukraine, the USA has taken
several signi cant sanctions actions related to
the Russian nancial services sector including
As of May 23, 2022, the Treasury Department
against: Russian persons operating
had imposed sanctions on roughly 166
correspondent or payable-through account
Venezuelan, or Venezuelan- connected
and payment processing; expanding
individuals, and the State Department had
sovereign debt prohibitions to apply to new
revoked the visas of more than 1,000
issuances in the secondary market;
individuals and their families. Despite these
prohibitions related to new debt and equity
actions, Maduro remains rmly in power.
for certain Russian entities; and a prohibition
While Venezuela is bene tting from high oil
on transactions involving certain Russian
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decreased to US$89.05M in April from
Bank of the Russian Federation. Sanctions
US$101.06M in March of 2022261.
were also imposed on President Vladimir
Putin, and Minister of Foreign Affairs Sergei
Lavrov.In a related action, OFAC designated
numerous Russian elites and their family
members, Russian intelligence-directed
disinformation outlets and defence related
rms, and some Belarusian persons,
including nancial institutions, due to Belarus’
support for, and facilitation of, the invasion.
7.7.7 China: The US government has
sanctioned in part elements of the Chinese
government, key members of the Chinese
Communist Party and certain companies
linked to the Peoples Liberation Army, as well
as others connected to human rights abuses.
From its inception in its modern form, the US
imposed arms embargoes on China in 1949
until 1972, and then re-imposed an arms
In March 2022, FinCEN257 issued an alert
embargo following the Tiananmen Square
“advising all nancial institutions to be vigilant
massacre. More recently, sanctions have been
against potential efforts to evade the
imposed on certain government of cials and
expansive sanctions and other U.S.-imposed
companies (seen as complicit by the USA) in
restrictions implemented in connection with
connection with human rights abuses against
the Russian Federation’s further invasion of
the people of Tibet, the Uyger peoples in
Ukraine.” FinCEN also included a number of
Xianjiang and in Hong Kong. The USA has
“red ags to assist in identifying potential
also banned more than 70 Chinese
sanctions evasion activity. For more details
companies including equipment from
see Appendix 2.
Huawei and ZTE being used by the USA
United States exports to Russia was US$6.39B
during 2021. The highest values were
US$1.12B for machinery, nuclear reactors,
boilers, US$1.10B for aircraft spacecraft and
US$1.04B for vehicles other than railway,
tramway258. United States imports from Russia
was US$30.76B during 2021. The highest
values were US$18.12B for mineral fuels, oils,
federal government, due to security
concerns, and due to alleged trading with
Iran. In June 2022, the USA targeted 5 Hong
Kong companies for providing support to
Russia’s military, and warned China not to
support Russia in evading USA sanctions, that
were imposed following Russia’s invasion of
Ukraine.
distillation products, US$ 2.98B for pearls,
7.8 Embassies: The USA has embassies in
precious stones, metals, coins, and US$2.77B
Syria, Russia, Cuba, and Venezuela. Cuba and
for iron and steel259. Imports from Russia in
Iran and Syria have embassies in the USA262.
the United States decreased to US$2082.70M
in April from US$2746.27M in March of
2022260 and exports to Russia in the US
7.9 OFAC Lists: There are 72 names listed on
OFAC’s SDN list (59 entities, 12 individuals
and 1 aircraft), with US addresses.263
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government entities, including the Central
7.10 Sanctions Fines & Penalties: This
technological innovations such as digital
century (from 2001) there were 21 material
currencies and new methods of hiding cross-
(over US$10 million) US sanctions nes
border transactions. An audit also examined
against FIs amounting to US$16.8 billion &1
resources of 13 USA agencies that are
sanction ne in the UK. USA nes represent
involved in sanctions implementation,
99.9% of total sanctions related nes,
including OFAC.
followed by UK (US$27 million)264.
Fines & penalties were levied against nonUSA banks, with the majority in number
against UK banks (6) and Dutch banks (4),
and in value against French banks (US$9.7
billion) followed by the UK (US$2.6 billion)265.
As a result, the Biden Administration is
proposing to increase the budget of the USA
governments Financial Intelligence Unit (see
Section 10 below) and it’s sanctions units,
including OFAC.
7.12 Sanctions Strategy: The USA Treasury
published a new Sanctions Review in
December, 2021266, considering how to
modernise the USA approach and address
the challenges it faces.
7.13 Sanctions Potential Red Flags:
Potential red ags for Proliferation Finance
7.11 Sanctions Audits: The United States
has implemented dozens of sanctions
programs to counteract activities that
threaten USA national interests. Recent audits
of USA sanctions policy, found that Treasury
including OFAC needed to adapt and
modernise its underlying operational
architecture to meet the emerging challenges
that could potentially reduce the ef cacy of
sanctions, including cybercrimes,
have been published by FATF267. See BSA/
AML Exam Manual268 & Appendix 2 below for
FinCEN related advisory and materials.
7.14 Estimated Proceeds: Sanctions are
political tools to change behaviour, but
increasingly they are being used to target
criminality that generates signi cant nancial
proceeds. For estimated nancial proceeds
from underlying criminal activity see Part 1,
Section 6.
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Section 8 – Terrorism & Terrorism Finance – 🇺🇸
In this Section 8, the focus is on terrorism
unnamed foreign terrorist organisation. The
threats and terrorism nance.
assailant was also the subject of
8.1.1 Global Terrorism Index 2022: The
USA is ranked 28/138 (increasing 1 position
counterterrorism investigations from 2010 to
2013.
since 2020) with Canada falling in ranking
Over the past decade in the US there has
from 56 to 48. The USA has “medium” impact
been a shift away from religiously motivated
rating, with a score of 4.961/10,000 in the
terrorism towards politically motivated
2022 Global Terrorism Index269.
terrorism. Since 2007, there have been 84
attacks in the US which IEP attributes to
politically motivated groups and individuals,
compared to 19 attacks attributed to
religiously motivated groups. The shift from
religious to political terrorism has also been
mirrored by a shift away from terrorism
af liated with speci c groups, towards
individuals and groups who are driven by a
According to the Index, “The US recorded a
speci c ideology, but are not formally
signi cant improvement in the impact of
af liated with an organised group. Of the 161
terrorism in 2021, recording its lowest GTI
attacks recorded between 2007 and 2021,
score since 2015. In 2021, there were seven
just 19 were af liated with a speci c terrorist
attacks and three deaths in the US, a decline
group”.
in terrorism incidents when compared to the
nine attacks and two deaths in 2020. Notably,
the riots on Capitol Hill in January 2021 have
not been classi ed as a terrorist act. This
marks the lowest number of terror attacks in
the US since 2015. Of the seven attacks, none
were attributed to any known terrorist group.
This includes the assailant responsible for the
only terror-related death in the region in
2021, who killed a taxi driver before driving to
a police station and attacking of cers in the
8.1.2 Deaths and Injuries: 8.1.2 Deaths
and Injuries: Attacks from terrorists have
killed more than 300 to end 2017 (266
between 2013-17) since 2001, which saw
more than 3,000 killed, the largest loss of
American lives in one day on 9th September,
2001 and since the battle of Antietam on
September 17th 1862, with 3,650 dead
(2,100 Union troops; 1,550 Confederate
troops) in the American Civil War270.
building. The assailant was shot dead by
8.2 FinCENs National Priorities: The 2021
police, who believe they were inspired by an
FinCEN priorities for covered entities include
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Terrorism nance, split into international and
terrorism threat and assessed that RMVEs and
domestic Terrorism.
militia violent extremists present the most
8.2.1 International Terrorism: “The most
common type of international terrorism
activity in the United States involves
individuals who knowingly provide funds to
overseas terrorists, terrorist groups, or their
supporters abroad. Most terrorist groups still
primarily rely on banks, money services
businesses, and cash couriers to transfer
funds, though some more regularly seek
small- dollar donations in digital assets.
lethal DVE threats. RMVEs use or threaten to
use force or violence in furtherance of
ideological agendas derived from bias—often
related to race or ethnicity—against given
population groups. They purport to use both
political and religious justi cations to support
racially or ethnically based ideological
objectives and criminal activities, and have
used or threatened acts of violence to
promote their agendas. Militia violent
extremists use or threaten to use force or
Disrupting terrorist networks, such as those
violence in furtherance of an anti-
supporting Al Qaeda and Hizballah, and
government or anti-authority violent extremist
preventing an ISIS resurgence are vitally
ideology, including opposition to abuses of
important for the security of the United States
power by the government.
and its allies.35 Rather than fund complex
attacks, ISIS and Al Qaeda now rely more on
Assessment of the Domestic Violent Extremism Threat – June 2021 🇺🇸
self- radicalised individuals and homegrown
The Intelligence Community (IC) assesses that domestic violent extremists (DVEs) who are
motivated by a range of ideologies and galvanized by recent political and societal events in
the United States pose an elevated threat to the Homeland in 2021. Enduring DVE
motivations pertaining to biases against minority populations and perceived government
overreach will almost certainly continue to drive DVE radicalization and mobilization to
violence. Newer sociopolitical developments–such as narratives of fraud in the recent
general election, the emboldening impact of the violent breach of the U.S. Capitol,
conditions related to the COVID–19 pandemic, and conspiracy theories promoting violence–
will almost certainly spur some DVEs to try to engage in violence this year.
violent extremists who carry out relatively lowcost and unsophisticated but deadly attacks
using knives, rearms, improvised explosive
devices, or automobiles. In addition, U.S.
1
The IC assesses that lone o enders or small cells of DVEs adhering to a diverse
set of violent extremist ideologies are more likely to carry out violent attacks in the
Homeland than organizations that allegedly advocate a DVE ideology. DVE
attackers often radicalize independently by consuming violent extremist material
online and mobilize without direction from a violent extremist organization, making
detection and disruption di cult.
2
The IC assesses that racially or ethnically motivated violent extremists (RMVEs)
and militia violent extremists (MVEs) present the most lethal DVE threats, with
RMVEs most likely to conduct mass–casualty attacks against civilians and MVEs
typically targeting law enforcement and government personnel and facilities. The
IC assesses that the MVE threat increased last year and that it will almost certainly
continue to be elevated throughout 2021 because of contentious sociopolitical
factors that motivate MVEs to commit violence.
3
The IC assesses that U.S. RMVEs who promote the superiority of the
white race are the DVE actors with the most persistent and concerning
transnational connections because individuals with similar ideological beliefs exist
outside of the United States and these RMVEs frequently communicate with and
seek to in uence each other. We assess that a small number of US RMVEs have
traveled abroad to network with like–minded individuals.
4
The IC assesses that DVEs exploit a variety of popular social media platforms,
smaller websites with targeted audiences, and encrypted chat applications to
recruit new adherents, plan and rally support for inperson actions, and disseminate
materials that contribute to radicalization and mobilization to violence.
5
The IC assesses that several factors could increase the likelihood or lethality of
DVE attacks in 2021 and beyond, including escalating support from persons in the
United States or abroad, growing perceptions of government overreach related to
legal or policy changes and disruptions, and high–pro le attacks spurring follow–
on attacks and innovations in targeting and attack tactics.
6
DVE lone o enders will continue to pose signi cant detection and disruption
challenges because of their capacity for independent radicalization to violence,
ability to mobilize discretely, and access to rearms.
authorities have identi ed U.S.-based
individuals who raise and send money to
support violence overseas or who travel to
Iraq and Syria as foreign terrorist ghters.”
8.2,2 Domestic Terrorism: “DVEs are
individuals based and operating primarily
within the territorial jurisdiction of the United
States who seek to further their ideological
goals wholly or in part through unlawful acts
of force or violence. The intelligence and law
enforcement communities conducted a
comprehensive assessment of the domestic
Source: https://www.whitehouse.gov/wp-content/uploads/2021/06/National-Strategyfor-Countering-Domestic-Terrorism.pdf
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terrorists’ name without formal training or
targets like civilians, law enforcement and the
support (including nancial support).
military, symbols or members of the U.S.
government, houses of worship, retail
locations, and mass public gatherings. DVEs’
selection of these types of targets, in addition
to the insular nature of DVEs’ radicalisation
and mobilisation to violence and their limited
discussions with others, challenges law
enforcement to detect and disrupt the
activities of DVEs before they occur.”
8.3 National Terrorist Financing Risk
Assessment 2022 (NTFRA 2022):
According to the NTFRA 2022, “Funds moved
from U.S.-based supporters to facilitators
outside of the United States working on
behalf of ISIS, AQ, and Hizbollah remain the
most common form of TF in the United States
and this assessment focuses on these three
For those individuals acting alone and for
foreign terrorist threats. However, the
more organised terrorist networks, there are
territorial defeat of ISIS in Iraq and Syria has
many ways to fund their activity. Contributions
affected the ways in which they provide
from individual supporters, including under
nancial support. Supporters of these groups
the guise of charitable work, continue to
are adapting to new technologies that can
provide a stable stream of revenue, and new
better obscure nancial activities, while also
technologies make it easier to anonymously
decentralising their operational structure to
raise funds through global crowdfunding
minimise the visible ow of funds
programs. As the COVID-19 pandemic
Additionally, the growing threat posed by
DVEs has led to an increasing focus (and
reporting) on nancial activity associated with
unlawful acts of force or violence by
individuals and associated networks or
movements involved in domestic violent
extremism. Both domestic and foreign
terrorist threats also seek to motivate
continues, these new payment technologies
and systems have become a necessity rather
than a convenience. Globally, proceeds
generated from criminal activities such as
corruption, extortion, drug and arms
traf cking, and kidnapping for ransom remain
a leading source of revenue for both terrorists
and terrorist organisation’s writ large.
individuals willing to launch an attack in the
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Some DVEs have focused on accessible
hawaladars, where they are subsequently sent
was common form of nancial support from
to the camp. To solicit donations, ISIS
U.S. based individuals continues to be the
supporters in these camps often use various
transfer of small samples (hundred to tens of
social media platforms and disguise their
thousands of dollars) to facilitators outside of
appeal as humanitarian aid. In Africa,
the US working on behalf of ISIS and it’s
extortion and kidnapping for ransom remain
af liates, Al Qaeda and it’s af liates and
key sources of funding for ISIS, but recent
Hezbollah. The 2020 NTFRA analyses for the
reports also indicate that revenues from the
rst time the funding methods that support
extortion of artisanal gold mining-related
domestic violent extremists (DVE). While
activities is increasing. Virtual Assets are being
many DVE attacks are self funded,DVE
sent directly to ISIS supporters located in
networks may raise funds through solicitations
northern Syria, often to Idlib, or indirectly via
to supporters, commercial ventures, or
Turkey, where ISIS is able to access them at
criminal activity.”
virtual asset trading platforms.
8.3.1 Islamic State of Iraq and Syria (ISIS):
In addition to revenue generated from its illicit
“ISIS is best characterised as a global network
nancial activities, as of late 2020, ISIS also
of loosely organised branches and cells with
had access to an estimated US$25-50 million
varying nancial activities coordinated under
in cash reserves dispersed across Iraq and
a central nancial system that funds the core
Syria. Reserves have primarily come from the
network and redistributes funds to less
sale of oil, the “taxation” of local populations
wealthy af liates or global regions that it sees
under ISIS’s former territorial control in Iraq
as a priority.
and Syria, and cash seizures, such as ISIS’s
In Iraq and Syria, ISIS has generated revenue
through kidnapping for ransom, looting, and
the extortion of local businesses, including
payments from drug traf ckers operating in
ISIS-controlled strongholds. The group also
leverages their support network within
refugee camps, such as al-Hawl in Northern
Syria and others, to receive donations from
supporters in the international community.
External donations to refugee camps come
into the region through various means – such
as money remitters and virtual asset service
providers (VASPs) – and then exit the
regulated nancial system as cash via
2014 theft of hundreds of millions in cash
reserves from Iraqi banks in Mosul. ISIS’s
largest expenditures are the salaries it pays
ghters and payments to families of
imprisoned or deceased ghters. In Syria and
Iraq, ISIS primarily spends its funds on salaries
and stipends for its members (including
families of deceased ghters) and on
supporting operational activities (e.g., food,
clothing, arms, training, and propaganda).
ISIS also continues to use networks of couriers
to smuggle cash between and among Iraq,
Syria, and Turkey. To transfer funds outside the
region, the group also relies on nancial
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With respect to foreign terrorist groups, that
between US persons and known ISIS
often located in regional nancial and
supporters.
logistical hubs, such as Turkey and the United
Arab Emirates (UAE).
The infrequency or inconsistency and small
dollar amounts of these donations and the
In the United States, nancial activity involving
indirect relationship between U.S.-based ISIS
ISIS continues to primarily involve individual
supporters and ISIS operatives remain the
ISIS supporters who use their personal
biggest challenge for nancial institutions to
savings either to fund a would-be ghter’s
detect this activity proactively.
travel to con ict zones or to send funds to
nancial facilitators who consolidate and then
forward these funds to foreign shell
companies or individual ISIS operatives
outside the con ict zone, who are often
unbeknownst to the relevant nancial
institutions. In these instances, most funds
have been generated from legal activity or
sources such as accessing credit, personal
savings, or selling assets, although a few have
involved generating funds from criminal
activity (most of which was nonviolent).
Along with raising relatively small amounts of
funds from U.S.-based supporters, ISIS
nancial facilitators are looking for ways to
move funds raised in the US to shell
companies around the world. This system
creates layers between U.S.-based supporters
and ISIS, allowing the transactions to
circumvent monitoring by nancial
institutions. U.S. authorities have identi ed
instances where ISIS operatives route
transactions through complicit individuals,
and in some instances shell companies and
While ISIS remains the foreign terrorist group
other legal entities, to avoid detection. They
most frequently involved in TF activity in the
also channel nancial activity through
United States, there has been a signi cant
neighbouring localities (as ISIS operates in
reduction in the number of U.S. persons
regions with limited access to the
traveling overseas to join ISIS in Iraq and
international nancial system). This leaves US
Syria.
nancial institutions at risk of unwittingly
To move funds, some reports indicate that
U.S.-based ISIS supporters collect and
consolidate donations within the United
States and then transfer funds outside of the
United States using unwitting money services
businesses (MSBs) rather than unwitting
banks. ISIS’s use of virtual assets remains
limited, as do direct nancial exchanges
enabling TF, either directly or through their
correspondent relationships. US authorities
continue to identify complicit foreign money
remitters and exchange houses that have
assisted ISIS in accessing the international
nancial system. For example, in May 2021,
Treasury designated Turkey-based Al-Fay
Company, two of its managers, and another
Turkey-based MSB operator for facilitating ISIS
funds transfers. In September and November
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facilitation networks that use money remitters
a separate Turkey-based AQ nancial
Turkey- and Syria-based MSBs & their
facilitator, Hasan al-Shaban, who was
operators for providing nancial support to
designated by Treasury in July 2021.
ISIS.
AQ also leverages seemingly licit business
As of late 2021, Turkish authorities announced
activity to support its nancial activities. Prior
asset freezes against ISIS nancial facilitators,
to his arrest by Australian authorities on
who were designated by the US between
terrorism-related charges, AQ nancial
2019 and 2021, but the practical impact of
facilitator Ahmed Luqman Talib conducted
Turkish actions is largely unclear. Additionally,
nancial transactions in several countries,
as noted in the 2018 NTFRA, ISIS supporters
including dealing in gemstones, allowing him
may transfer funds through foreign nancial
to move funds and individuals internationally
institutions that are not subject to the same or
for the bene t of AQ. Talib conducted
similar regulatory requirements as U.S. FIs,
business around the world, including,
and thus do not have in place effective AML/
Brazil,Colombia, Sri Lanka, Tanzania, Turkey,
CFT processes or controls.”
and the Gulf.
8.3.2 Al Qaida (AQ): “Unregistered money
Some AQ facilitators have also set up front or
remitters remain one of AQs most prevalent
sham charities or solicited donations under
means to transfer funds. AQ continues to
the guise of charitable causes and are
exploit access to the regulated nancial
continuing to explore raising and moving
system to support its ongoing terrorist
funds in virtual assets. In August 2020, DOJ
activities. Like ISIS, AQ has sought out non-
announced the dismantling of a cyber
U.S. nancial institutions that are subject to
enabled AQ nancing campaign largely
less rigorous regulatory oversight and used
based out of Syria.
them to transfer funds. For example, a
September 2021 Treasury designation
identi ed a network of Turkey-based AQ
nancial facilitators who moved funds,
including via couriers, to militants in con ict
zones, such as Syria, as well as to AQ
leadership. This network facilitated electronic
and cash transfers and provided funds to the
families of imprisoned AQ members. Turkish
authorities have yet to announce any
disruptive actions against this AQ network,
AQ and the af liated groups operated a
bitcoin ML network using Telegram channels
and other social media platforms to solicit
virtual asset donations. In some instances they
purported to act as charities when, in fact they
were openly and explicitly soliciting funds for
violent terrorist attacks. One solicitation on
behalf of Al Sadaqah (“charity” in Arabic)
sought virtual asset donations to equip
terrorists in Syria with weapons.
although in November 2021, the Turkish
government ordered an asset freeze targeting
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2019, Treasury designated a range of other
Within the United States, AQ’s nancial
obfuscation techniques, layering transactions
footprint involves funds sent by individual
to conceal their actions.
supporters or through charitable front
In late 2020, French authorities prosecuted
eight people for their alleged involvement in
organisations to AQ operatives or facilitators
overseas.
a complex scheme nancing Islamic
In July 2020, an individual was arrested for
extremists, including AQ in Syria through the
attempting to provide material support to AQ.
use of virtual assets.
The individual allegedly gave a purported AQ
Active since 2019, the network was thought to
have supplied hundreds of thousands of
Euros via the scheme, based mainly on the
purchase in France of virtual asset vouchers,
details of which were transferred by secure
messaging to jihadis in Syria, who could then
retrieve the money through virtual asset
trading platforms. In 2021, AQ also published
about a bounty offer for the killing of police
of cers with the reward to be pain in bitcoin.
While the activity in these cases did not occur
in the United States, it is representative of the
exploitation that may occur in the U.S.
nancial system.
member a $500 prepaid gift card to purchase
scopes for ri es that would be used by AQ
members to kill American soldiers. According
to the criminal complaint, the individual
decided to see if they could buy a card at a
local store in order to conceal their identity
(because buying one online requires the
disclosure of personal information). The
individual also purchased airline tickets for
personal travel to Afghanistan to join AQ.
In September 2019, an individual pleaded
guilty to concealing the nancing of terrorism.
According to the criminal complaint, the
individual instructed an undercover federal
employee on how to send money to ghters
AQ af liates operating in regions with weak
engaged in jihad in a manner that would
governance exploit control over territory to
avoid detection by law enforcement and
generate funds. These include AQ af liate
customer identi cation requirements
Jama’a Nusrat ul-Islam wa al-Muslimin, which
imposed by the money transmitter, such as
is active in West Africa; al-Shabaab in Somalia
using fake names and addresses when
and other east African countries; and formerly
conducting electronic money transfers.
AQ-aligned Hay’at Tahrir al-Sham (HTS), which
Subsequently, the individual introduced the
remains the predominant terrorist group in
undercover agent to a nancial facilitator who
northwestern Syria. HTS raises revenue from
could route money to AQ.”
taxation and levies and recently introduced
fees for building permits and increased taxes
imposed on telecommunications service
providers.
8.3.3 Hizbollah: “Hizbollah has long been
involved in conducting and directing a range
of military, terrorist, criminal, and other illicit
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These scheme operators used complicated
schemes around the world, including ML,
capability to target, both directly and
fraud, counterfeiting, narcotics traf cking, and
indirectly, U.S. interests inside Lebanon, in the
weapons procurement. For example, on April
Middle East, in other overseas locations, and—
11, 2019, Treasury designated prominent
to a lesser extent—in the United States. To
Hizbollah money launderer Kassem Chams
bolster its military and terrorist capabilities,
and his international ML network for moving
Hizballah maintains an international nancing
tens of millions of dollars a month in illicit
and procurement network, with front
narcotics proceeds on behalf of drug kingpins
companies around the world. Hizballah’s main
such as the Colombian criminal group, La
source of nancial support is Iran, which
O cina De Envigado, and using the pro ts to
provides hundreds of millions of dollars per
nance Hizbollah. ML networks like Cham’s
year. Hizbollah also receives nancial support
show that Hizbollah relies on nancial
from some members of Lebanese diaspora
facilitators who provide ML services to
communities. Along with banks, money
unrelated criminal organisations.
exchange houses and unregulated cashbased networks in South America have been
used to move money from Hizballah
supporters and facilitators in the Lebanese
diaspora community to support Hizballah’s
violent operations in Lebanon, Syria, and
elsewhere.
Additionally, on December 13, 2019, Treasury
designated prominent Hizballah money
launderers Nazem Said Ahmad and Saleh
Assi. As of late 2016, Ahmad was considered
a major Hizballah nancial donor who used
his family’s Africa-based diamond businesses
to launder money into Lebanon on behalf of
Hizballah nanciers and sympathisers also
take advantage of free trade zones and
countries with weak regulatory environments
to establish import-export companies and
execute complex trade-based ML schemes
that move money to China, the United States,
and elsewhere. Hizballah and suspected
Hizballah nanciers have operated businesses
in free trade zones for years, including the TriBorder Area of Argentina, Brazil, and
Hizballah Secretary General Hassan Nasrallah.
Assi and entities she controlled engaged in
tax evasion ML schemes in the DRC that
generated tens of millions of dollars per year,
a portion of which was transferred to U.S.designated Hizballah nancier Adham Husayn
Tabaja in Lebanon via bulk cash transfers or
laundered through entities associated with
Nazim Ahmad’s diamond business.
Paraguay; the Free Zone of Iquique in Chile;
Iran has reduced its nancial support to
and the Colon Free Trade Zone in Panama.
Hizballah, largely due to Iran’s ongoing
Hizbollah members, supporters, and
sympathisers are involved to varying degrees
in a broad range of large-scale criminal
economic dif culties and U.S.
sanctions,leaving the organisation nancially
strained and seeking alternative sources of
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activities globally. Hizballah maintains the
are more likely to send funds into the U.S. or
on the proceeds of illicit activity and
transit the U.S. nancial system for
pressuring Hizbollah-linked individuals and
transactions between a non-U.S. originator
entities to increase their revenues.
and recipient.”
Within the United States, Hizbollah supporters
8.3.4 Other Foreign Terrorist Groups:
continue to be nancially active, including
“Other foreign terrorist thr