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Financial Crime Threat Assessment

October 24, 2022

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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.

Page 2 of 247

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.

Page 3 of 247

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

Page 4 of 247

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.

Page 5 of 247

“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

Non Compliant

Partially Compliant

Largely Compliant / Compliant

<50 >50 – <75 >75

“CC” “C” “D”

“CCC”

“AAA” “AA” “A” “BBB” “BB” “B”

<50 >50 – <75 >75

Tier 3

Tier 2 & T2 Watchlist

Tier 1

>60

>40 – 60

<40

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

>1%

>0.75% – 1%

<0.75%

<0.33 >0.33- 0.66

>0.66

<40

40 – 59

60 – 100

<0 – -2.5 0-1 >1 -2.5

>55

38 – 55

<38

Little of No Enforcement

Limited/Moderate Enforcement

Active Emforcement

Tier 1

Tier 2

Tier 3

<40 Between 40 – 70 >70

Included

N/A

Not Included

O – 59.9 Mostly Unfree/
Repressed

60 – 69.9 Moderately Free

70 – 100 MostlyFree/Free

Included

N/A

Not Included

6-7

<6 11 >5%

>2% – 5%

<2% 11 No N/A Yes 12 >1 million

>50,000 – 1 million

<U50,000

<1% of est criminal proceeds >1% – 5% of est criminal
proceeds

>5% of est criminal proceeds

>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

N/A

Yes

N.A.

<40 40 – 60 >60

>2.4

2 – 2.4

< 1.5% of GDP >1.5% – 2% of GDP

over 2% of GDP

Yes Red Card

Yes Yellow Card

<50 50-70 >70

Focus Countries

N/A

Not Included

Included

N/A

Not Included

>0.3

>0.2 – 0.3

<0.2

<50 using FCN Scoring Model Between 50 – 75 using FCN Scoring Model >75 using FCN Scoring Model

>1,500

>783 – 1,500

<783

<50 using FCN Scoring Model Between 50 – 75 using FCN Scoring Model >75 using FCN Scoring Model

Listed Red

Listed Amber

Listed Green / Unlisted

<50 using FCN Scoring Model Between 50 – 75 using FCN Scoring Model >75 using FCN Scoring Model

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

<50 using FCN Scoring Model Between 50 – 75 using FCN Scoring Model >75 using FCN Scoring Model

>80 – 120

>60 – 80

<60

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

Page 10 of 247

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

Page 12 of 247

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.

Page 13 of 247

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,

Page 14 of 247

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);

Page 15 of 247

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

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

Page 17 of 247

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%

Page 18 of 247

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

ffi

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

Page 20 of 247

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

Page 21 of 247

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,

Page 22 of 247

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

Page 23 of 247

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)

ffi

Page 24 of 247

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

Page 25 of 247

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

Page 26 of 247

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

Page 27 of 247

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

Page 28 of 247

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.

Page 29 of 247

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

Page 30 of 247

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

Page 31 of 247

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

ffi

Page 32 of 247

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

Page 33 of 247

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.

Page 34 of 247

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

Page 35 of 247

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

Page 36 of 247

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

Page 37 of 247

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

Page 38 of 247

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,

Page 39 of 247

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

Page 40 of 247

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

Page 41 of 247

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

Page 43 of 247

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

Page 44 of 247

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

Page 45 of 247

•

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;

Page 46 of 247

•

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.”

Page 47 of 247

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,

Page 48 of 247

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

Page 49 of 247

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

Page 50 of 247

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.

Page 51 of 247

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

Page 52 of 247

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.

Page 53 of 247

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

Page 54 of 247

•

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

Page 56 of 247

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

Page 57 of 247

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.

Page 58 of 247

• 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

Page 59 of 247

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

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.

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.

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

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

Page 67 of 247

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

Page 68 of 247

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.

‑

Page 69 of 247

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)

Page 70 of 247

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

Page 72 of 247

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,

Page 73 of 247

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.

Page 74 of 247

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

Page 75 of 247

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.

Page 76 of 247

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”.

Page 77 of 247

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

Page 78 of 247

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.

Page 79 of 247

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”

Page 80 of 247

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

Page 82 of 247

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

Page 84 of 247

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

Page 86 of 247

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

Page 87 of 247

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,

Page 89 of 247

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

Page 90 of 247

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

Page 91 of 247

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.

Page 92 of 247

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

Page 93 of 247

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/

Page 94 of 247

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.

Page 95 of 247

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.”

Page 96 of 247

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

Page 97 of 247

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

Page 98 of 247

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

Page 99 of 247

• 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

ffi

Page 102 of 247

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.

Page 103 of 247

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

Page 104 of 247

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

Page 105 of 247

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

Page 106 of 247

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

Page 107 of 247

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

Page 108 of 247

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.

Page 109 of 247

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

Page 110 of 247

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:

Page 111 of 247

•

“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

Page 112 of 247

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

Page 113 of 247

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

Page 114 of 247

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.

Page 115 of 247

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

Page 116 of 247

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

Page 117 of 247

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

Page 118 of 247

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

Page 119 of 247

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

ffi

Page 120 of 247

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.

Page 121 of 247

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

Page 122 of 247

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

Page 123 of 247

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,

Page 124 of 247

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

Page 125 of 247

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.

Page 126 of 247

•

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

Page 127 of 247

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

Page 128 of 247

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.

Page 129 of 247

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

Page 130 of 247

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.

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.

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.

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.

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.

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.

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

ffi

Page 131 of 247

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

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Financial Crime Threat Assessment

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