4. Opioid trafficking
In August, FinCEN issued an advisory to alert financial institutions to illicit financial schemes involving opioid trafficking. Among the most prevalent types of trafficking is the movement of fentanyl and other synthetic opioids.
Fentanyl trafficking in the U.S. typically follows one of two pathways: direct purchase from China by U.S. individuals for personal consumption or domestic distribution, or cross-border trafficking of fentanyl from Mexico by transnational criminal organizations and small criminal networks, FinCEN reports.
Opioid trafficking funding mechanisms include purchases from a foreign source of supply using MSBs, financial institution transfers, or online payment processors; purchases from a foreign source of supply using convertible virtual currency; purchases from a U.S. source of supply using an MSB, online payment processor, CVC, or person-to-person sales; and other money-laundering mechanisms associated with procurement and distribution.
Red flags of opioid trafficking include:
“No single red flag signals suspicious activity conclusively,” Moss says. “Credit unions should also consider the surrounding facts and circumstances, such as the member’s previous account activity and whether he or she exhibits other red-flag indicators before determining whether a transaction is suspicious.”
5. Cannabis banking
While nearly three dozen states have legalized marijuana in some form, federal law still lists it as a Schedule 1 narcotic.
“Financial institutions are pivotal in any ongoing discussions because marijuana businesses need access to financial services,” Kelly says. “This issue has become a public safety concern because where there’s a lot of cash, there’s a threat of crime and violence.”
Even credit unions that don’t operate in states with legalized marijuana or those that decide not to serve marijuana-related businesses aren’t immune from compliance issues related to the drug, she adds. They still should develop policies that define such businesses, as well as whether to include ancillary businesses.
“Some businesses may not touch the plant but provide services that support marijuana dispensaries,” Kelly says. “These might include irrigation or packaging businesses. If you accept these ancillary businesses as members, you’re likely accepting money from marijuana-related businesses into your credit union.”
Additionally, credit unions that serve marijuana-related business must also define the types of businesses they will serve, she adds.
6. OFAC guidance
The Office of Foreign Assets Control (OFAC) published “A Framework for OFAC Compliance Commitments” in 2019 to provide guidance on the essential components of an effective sanctions compliance program.
These components include management commitment, risk assessment, internal controls, testing and auditing, and training.
The guidance outlines how OFAC may incorporate these components into its evaluation of apparent violations and resolution of investigations resulting in settlements.
The guidance also identifies some root causes of apparent violations, including:
“Credit unions also need an effective OFAC training program, a formal escalation process, and the consistent application of OFAC policies and procedures across the entire organization,” Moss says.
7. Human trafficking
This disturbing crime enslaves more than 40 million people across the world, 71% of whom are women and children, according to research developed by the International Labour Organization and the Walk Free Foundation.
“Because this industry generates $32 billion a year, this money has to flow through financial institutions,” Kelly says. “Consequently, credit unions can play a critical role in combatting this human suffering.”
Traffickers are turning to payment tools that allow them to remain anonymous, such as prepaid cards and cryptocurrency. “Some activity also comes through credit cards,” Kelly adds.
But traffickers have to intersect with legitimate industries at some point.
“They need financial institutions to store their earnings; they need buses or trucks to move their victims; and they need hotel rooms, which are integral in the operations of some sex traffickers,” Kelly says.
Although financial institutions must delete copies of identification (ID) after online account opening, a provision of Senate Bill 2155 allows for the storage and retention of copied IDs to: