FinCEN report reveals threat patterns and trends for financial institutions to monitor
The Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury (Treasury) published a Financial Trend Analysis (FTA Report) highlighting fentanyl-related illicit finance. The FTA Report follows two advisories released by FinCEN in 2019 and 2024 that discuss financial transaction types and red flags associated with fentanyl activity.
The FTA Report’s primary conclusion – that the US, Mexican, Chinese, and other foreign financial sectors serve as a potent and pervasive medium for the fentanyl supply chain – is not new. Nonetheless, the report underscores the urgency for banks and other businesses with ties to Latin America to review their exposure to this activity and update their compliance controls. This is especially relevant in light of recent developments, such as the announcement of Executive Order 14157 (discussed in our prior alert) ordering the “total elimination” of certain cartels and transnational criminal organizations, the subsequent designations of Latin American cartels and other persons facilitating fentanyl trade on their behalf as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs), and the powerful investigative and enforcement tools available to US law enforcement arising from these designations.
The FTA Report provides insight into the Trump Administration’s efforts and methods to combat the cartel-driven fentanyl trade. As Treasury Secretary Scott Bessent stated in recent remarks to the American Bankers Association, the intent behind these anti-money laundering (AML) and countering the financing of terrorism (CFT) policies is “to truly focus on national security priorities and higher-risk areas and explicitly permit financial institutions to de-prioritize lower risks.” The FTA Report is, therefore, a must-read for financial institutions in the US and Latin America seeking to navigate the heightened risk and enforcement environment.
In this alert, we offer a summary of the FTA Report and key takeaways for financial institutions.
The FTA Report
Based on more than 1,200 reports filed throughout 2024 by regulated financial institutions under the Bank Secrecy Act (BSA), the FTA Report analyzes trends and key elements across approximately $1.4 billion in suspicious transactions linked to fentanyl. The report finds, for example, that depository institutions and money services businesses (MSBs) in the US accounted for 57 and 32 percent of fentanyl-related BSA reports, respectively. Most domestic sales of fentanyl were cash or peer-to-peer (P2P) transfers. Methods to launder suspected fentanyl proceeds range from simple to complex, with some of the largest reported suspicious activity involving professional money laundering organizations and trade-based money laundering schemes.
The FTA Report notes that the fentanyl trade involves multiple foreign touchpoints, with Mexico and China playing significant roles in production and distribution. Regions controlled by the Sinaloa Cartel and the Cartel Jalisco Nueva Generacion (CJNG) were the top two Mexican regions identified in the BSA reports. FinCEN also determines that the same cartels use equipment and chemicals sourced from China to synthesize fentanyl. As discussed in our prior alert, in February 2025 (and consistent with Executive Order 14157), the Trump Administration designated the Sinaloa Cartel and CJNG, along with six other organizations, as FTOs under Section 219 of the Immigration and Nationality Act and as SDGTs under Executive Order 13224.
FTA Report findings
FinCEN’s analysis reveals numerous trends and red flag indicators of illicit fentanyl trade and related money laundering. The analysis also describes the types of information that US law enforcement will likely request from financial institutions and businesses to aid in tracking fentanyl-related transactions. Findings of the FTA Report especially relevant to financial institutions include the following:
- Fentanyl-related financial activity in the US falls heavily within certain geographic areas. Populous states having large urban areas, such as California, Florida, and New York, and border states like Arizona, are collection points for proceeds from the fentanyl trade. The prevalence of fentanyl activity along the US–Mexico border underscores the role of the international drug distribution network.
- Mexico and China are the top two foreign countries listed in subject address fields of fentanyl-related BSA reports. Illicit businesses in these two countries have developed intricate procurement methods for the fentanyl trade. Financial institutions are encouraged to be careful of financial schemes, such as shell companies, irregular transactions involving chemical companies, and sporadic periods of account inactivity, which may indicate that these businesses are being used to trade in fentanyl.
- E-commerce played a crucial role in the transfer of funds in fentanyl-related transactions. Many Chinese-based companies rely on e-commerce to facilitate procurement of fentanyl inputs, including specific types of piperidone and benzene. Specifically, chemical companies use Chemical Abstracts Service (CAS) numbers, which are unique numerical identifiers assigned to chemical substances, in payment instructions and invoices. Financial institutions must be aware of such potential identifiers in order to unmask the true nature of fentanyl transactions.
- In the US, most fentanyl transactions are conducted in cash and P2P transfers. Many P2P transfers are accompanied by references to “blues” and “ills” – euphemisms for fentanyl purchases. BSA reports also identified bitcoin payments in suspected darknet marketplace drug transactions.
- An array of money laundering schemes, ranging from simple to complex, are connected to the fentanyl trade. Simple schemes often include the direct return of illicit proceeds to Mexico through MSB funds transfers. These may have become more difficult to complete following FinCEN’s March 11, 2025 geographic targeting order, which lowered the threshold for certain MSBs along the US–Mexico border to submit currency transaction reports, as covered in our alert. Complex schemes include suspected professional money laundering organizations (PMLOs) – such as Chinese money laundering organizations – helping to move illicit fentanyl proceeds on behalf of the cartels. BSA filers also reported potential trade-based money laundering (TBML) activity involving electronics, such as cellular phones, and vaping devices.
Key takeaways
- The Trump Administration will rely on BSA-subject financial institutions to aid its mission to combat fentanyl-based crime. The FTA Report stresses the importance of BSA reporting in providing critical information to FinCEN and law enforcement agencies. There will likely be a concerted effort by FinCEN – and US law enforcement more broadly – to coordinate with financial institutions to observe patterns and gain insight about fentanyl-related financial activities. Therefore, financial institutions are encouraged to provide timely and accurate BSA reporting to FinCEN, as well as respond to FinCEN requests for information that may be related to fentanyl investigations.
- Financial institutions, particularly those in Mexico and elsewhere in Latin America, are encouraged to review all compliance measures to ensure protection against the pervasive risks posed by fentanyl-related illicit finance. Financial institutions should account for the involvement of Mexican and Latin American cartels and China-based chemical suppliers and money launderers in the fentanyl trade, as well as the use of front companies, money mules, and US-based intermediaries. Financial institutions should understand alternative sources of precursor chemicals to fentanyl, as well as the role of illegal online pharmacies in selling counterfeit opioid pills that could potentially contain fentanyl.
- Financial institutions are encouraged to use technology and data analytics to enhance their transaction monitoring and detection capabilities, especially with regard to identifying transaction descriptors, payment patterns, and other red flags. As the FTA Report describes, these red flags include electronic payment methods like P2P transfers and virtual currency transactions, which are often used by fentanyl traffickers and money launderers. Financial institutions are also encouraged to monitor online activity, such as advertisements on e-commerce platforms, product listings on websites, and pointed language guaranteeing customs clearance, that may indicate precursor chemical sales or fentanyl trafficking.
- Although not necessarily BSA-regulated themselves, Latin American financial institutions that rely on US correspondent banks to process US dollar-denominated transactions may consider:
- Updating their compliance controls based on the FTA Report and related FinCEN advisories, including by increasing their visibility into the conduct of both their customers and their customers’ customers. This will mitigate the risk of being de-banked by US financial institutions.
- Improving and modernizing their compliance controls, which will help non-US banks mitigate their exposure to criminal liability under the material support for terrorism statute (18 USC 2399B) for providing support to FTOs or SDGTs. Such criminal material support could include providing financial services or processing specific transactions. Such liability can be triggered by a single transaction through a US correspondent bank.
- Anticipating more frequent and potentially more aggressive engagement with US regulators and law enforcement by reviewing their law enforcement engagement, investigations and escalation policies and procedures. USA PATRIOT Act subpoenas, which can be served directly on non-US banks without following the procedures under any applicable Mutual Legal Assistance Treaty, may be more forthcoming in the current environment.
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