FORT LAUDERDALE, Fla. (11/17/15)--Because many types of illicit activity result in illegally obtained currency, criminals often get creative in disguising the origin of their ill-gotten gains. That’s where Homeland Security Investigations (HSI), the investigative arm of the U.S. Department of Homeland Security, comes in.
John Toban, assistant special agent in charge of the Miami HSI, spoke at the CUNA/National Association of State Credit Union Supervisors Bank Secrecy Act conference Monday. During his presentation, Toban explained how trade-based money laundering works, and pointed out some red flags for financial institutions to be wary of.
“In the past two years, HSI has expended 3.4 million investigative hours on financial investigations resulting in the seizure of over $2.3 billion in currency and monetary instruments,” Toban said.
The Financial Action Task Force, an inter-governmental body dedicated to anti-money laundering, defined trade-based money laundering as “the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origin.”
Red flags for financial institutions include:
Toban pointed to a recent HSI investigation, dubbed the “Black Market Peso Exchange,” as an example. As a result of the Colombian government restricting access to foreign currencies, many Colombian exporters turned to the black market.
The process begins when a drug-trafficking organization sells drugs in the United States for dollars, then peso exchange brokers in Colombia buy U.S. drug dollars at a discount. Those dollars are sold to businessmen in Colombia who need dollars to buy U.S. goods for export.
Then the peso exchange broker in Colombia arranges for U.S. currency to be transferred to U.S. exporters for the purchase of wholesale products such as electronics. The U.S. wholesale exporter receives U.S. dollars via cash, check, money order or third-party wire transfer, then the wholesale products are shipped to Colombia.
The Colombian restrictions were lifted decades ago, but the Black Market Peso Exchange continues to this day. The U.S. Treasury’s Financial Crimes Enforcement Network issued a Geographic Targeting Order in April for small electronics exporters in South Florida to combat this.
(Editor’s note: For more coverage of CUNA’s BSA Compliance Conference, see the following stories in today’s issue: BSA Conference: FinCEN enforcement designed to educate, not just punish; BSA Conference: Exploring benefits, pitfalls of remote deposit capture; BSA Conference: Well-defined AML program essential for small FIs; and, BSA Conference: Self-assessment crucial for strong cybersecurity.)