February 2024
2024 National Money
Laundering Risk
Assessment
Department of the Treasury
National Money Laundering Risk
Assessment (NMLRA)
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2024 ◆ National Money Laundering Risk Assessment
Table of Contents
EXECUTIVE SUMMARY ......................................................................... 1
INTRODUCTION ................................................................................... 3
SECTION I. THREATS ........................................................................... 5
Fraud .......................................................................................................... 5
1. Investment Fraud .........................................................................................................................6
2. Healthcare Fraud ..........................................................................................................................9
3. Update on COVID-19-Related Fraud ..............................................................................................11
4. Elder Financial Exploitation ..........................................................................................................12
5. Special Focus: Check Fraud .........................................................................................................15
6. Business Email Compromise (BEC) ...............................................................................................17
Drug Trafficking ......................................................................................... 18
1. Illicit Synthetic Opioids (including Fentanyl) and Heroin ..............................................................19
2. Priority DTO Threat Actors ...........................................................................................................21
Cybercrime .................................................................................................. 23
1. Ransomware ................................................................................................................................23
2. Malware .......................................................................................................................................25
Professional Money Laundering ................................................................... 26
1. Money Mule Networks ..................................................................................................................27
2. Chinese Money Laundering Organizations and Networks ..............................................................29
3. Special Focus: Russian Money Laundering and Sanctions Evasion ...............................................31
Corruption .................................................................................................. 32
1. Foreign Corruption .......................................................................................................................33
2. Domestic Corruption ....................................................................................................................34
3. Special Focus: Unlawful Campaign Finance .................................................................................35
Human Trafficking & Human Smuggling ...................................................... 36
1. Human Traicking ........................................................................................................................36
2. Human Smuggling .......................................................................................................................39
Special Focus: Tax Crime ............................................................................. 40
Update on Wildlife Trafficking and other Nature Crimes ............................... 41
1. The Intersection of Nature Crimes with Other Threats ..................................................................41
SECTION II. VULNERABILITIES AND RISKS ............................................ 43
Cash ........................................................................................................... 43
1. Bulk Cash Smuggling ....................................................................................................................43
2. Cash Consolidation Cities .............................................................................................................44
3. Cash-Intensive Businesses and Front Companies ..........................................................................46
4. Funnel Accounts ...........................................................................................................................47
Financial Products and Services.................................................................... 48
1. Money Orders ...............................................................................................................................48
2024 ◆ National Money Laundering Risk Assessment
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2. Prepaid Cards ...............................................................................................................................49
3. Peer-to-Peer Payments .................................................................................................................51
Legal Entities and Arrangements .................................................................. 53
1. Legal Entities ................................................................................................................................53
2. Beneficial Ownership Information ................................................................................................54
3. Trusts ...........................................................................................................................................56
Virtual Assets .............................................................................................. 58
1. Inconsistent Compliance with Domestic Obligations ....................................................................59
2. Inconsistent Implementation of International AML/CFT Obligations .............................................62
3. Obfuscation Tools and Methods ....................................................................................................62
4. Mixing ..........................................................................................................................................63
5. Disintermediation ........................................................................................................................65
6. Special Focus: Decentralized Finance (DeFi) ...............................................................................65
AML/CFT Compliance Deficiencies ................................................................ 66
1. Banks ...........................................................................................................................................66
2. Money Services Businesses ...........................................................................................................70
3. Securities Broker-Dealers and Mutual Funds .................................................................................72
4. Complicit Professionals ...............................................................................................................74
Luxury and High-Value Goods ...................................................................... 75
1. Real Estate ...................................................................................................................................75
2. Precious Metals, Stones, and Jewels .............................................................................................78
3. Update on Art ...............................................................................................................................80
4. Automobiles .................................................................................................................................81
Casinos and Gaming .................................................................................... 82
1. Special Focus: Online Gaming ....................................................................................................84
Entities Not Fully Covered by AML/CFT Requirements.................................... 86
1. Investment Advisers ....................................................................................................................86
2. Third-Party Payment Processors...................................................................................................89
3. Attorneys .....................................................................................................................................91
4. Accountants .................................................................................................................................94
CONCLUSION ....................................................................................... 96
PARTICIPANTS .................................................................................... 97
METHODOLOGY ................................................................................... 98
TERMINOLOGY .................................................................................... 100
LIST OF ACRONYMS ............................................................................. 101
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2024 ◆ National Money Laundering Risk Assessment
EXECUTIVE SUMMARY
Money laundering enables criminal activity and is necessary to disguise ill-gotten gains. It facilitates
crime, distorts markets, and has a devastating economic and social impact on citizens. It also threatens
U.S. national security as money laundering allows drug traickers, fraudsters, human traicking
organizations, and corrupt oicials, to operate and expand their criminal enterprises.
The 2024 National Money Laundering Risk Assessment (NMLRA) examines the current money laundering
environment and identifies the ways in which criminals and other actors seek to launder funds. It aims to
inform the understanding of illicit finance risk by governmental and private sector actors, strengthen risk
mitigation strategies of financial institutions, and enhance policy deliberations by the U.S. government.
As this NMLRA discusses, criminals constantly develop and adopt new ways to launder illicit funds. Thus,
there is a need to constantly track and address evolving money laundering trends and methodologies.
This risk assessment reflects an evolving understanding of the key money laundering threats, including
crimes that generate illicit proceeds and criminal actors involved in the laundering process. The 2024
NMLRA highlights how both old and relatively new schemes and threat actors are adapting to maximize
profit from their criminal activities, including those related to check fraud, unlawful campaign finance,
tax crime and Russian money laundering. For example, criminals have employed novel means, such as
using telemedicine platforms and virtual asset investment scams, to carry out fraud schemes on a larger
scale. Further, Russian money laundering organizations use a vast global network of shell companies,
bank accounts, and trusts to launder funds or evade sanctions on behalf of others.
This evolution in coverage and understanding extends to long-standing and new money laundering
vulnerabilities, to include gaps and weaknesses in regulation and policy. Shell companies and the lack of
timely access to beneficial ownership information and, transparency for certain non-financed real estate
transactions, are distinct vulnerabilities in the U.S. anti-money laundering/ countering the financing of
terrorism (AML/CFT) system. The United States worked expeditiously to close these long-standing gaps.
The establishment of a beneficial ownership information registry housed at Treasury’s Financial Crimes
Enforcement Network (FinCEN) on January 1, 2024 will fundamentally enhance corporate transparency
and address the United States’ most significant and longstanding gap in its AML/CFT regime. Additionally,
FinCEN is draing regulations to address money laundering vulnerabilities in the residential real estate
sector.
Another concerning money laundering vulnerability is the lack of comprehensive AML/CFT regulations
for certain financial intermediaries, such as investment advisers, that may not be directly subject to
comprehensive AML/CFT regulations or generally examined for AML/CFT compliance. Treasury plans to
issue in the first quarter of 2024 an updated NPRM that would propose applying AML/CFT requirements
pursuant to the Bank Secrecy Act, including suspicious activity reporting obligations, to certain
investment advisers. Additionally, the 2024 NMLRA highlights a number of new financial services that
criminals seek to exploit, such as so-called “decentralized finance” (DeFi) and online gaming. Illicit
actors, including ransomware cybercriminals, thieves, scammers, and the Democratic People’s Republic
of Korea (DPRK) cyber actors, are now using DeFi services to transfer and launder their illicit proceeds.
In recent years, legal and technological developments have led to substantial growth in online gaming
activity in the United States. The anonymity aorded by online gaming and the size and rapid growth of
this sector now present unique money laundering risks.
2024 ◆ National Money Laundering Risk Assessment
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Over the last 50 years the United States has built a robust AML/CFT framework to address illicit finance
risk. The United States Department of the Treasury and its interagency partners continue to ensure that
the U.S. AML/CFT regime stays ahead of criminals who use existing and emerging techniques to launder
the profits of their crimes.
This risk assessment, along with the 2024 National Terrorist Financing and Proliferation Financing Risk
Assessments, serves as a prologue to the 2024 National Strategy to Combat Terrorist and Other Illicit
Financing (2024 Strategy). The 2024 Strategy provides a detailed roadmap of the actions that the United
States should take to further strengthen its AML/CFT regime and address both novel and lingering illicit
finance vulnerabilities.
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2024 ◆ National Money Laundering Risk Assessment
INTRODUCTION
This report identifies the most significant money laundering threats, vulnerabilities, and risks the United
States faces. With a gross domestic product (GDP) of 25 trillion dollars, the United States is the world’s
largest economy and is particularly susceptible to the laundering of illicit proceeds. This risk is also due to
the value, stability, and the centrality of the U.S. dollar in the global economy’s payment infrastructure.
Like 2022, this year’s risk assessment identifies the most significant money laundering crimes in the
United States are linked to fraud, drug traicking, cybercrime, human traicking, human smuggling, and
corruption. In addition, this report includes a “special focus” on risks that were not identified or fully
addressed in previous risk assessments.
Fraud remains the largest and most significant proceed-generating crime for which funds are laundered
in or through the United States. Criminals make billions of dollars annually by deceiving U.S. government
programs, private companies, and individuals into sending funds via a variety of methods where those
funds are ultimately unaccounted for, diverted, or stolen.
1
Investment fraud and healthcare fraud remain
the most prevalent proceeds-generating crimes.
The gravity of the illicit drug problem, particularly the use of fentanyl, represents a crisis for U.S. public
health and national security. Proceeds from illicit drug sales remain one of the main proceed-generating
oenses. Mexican drug traicking organizations (DTOs), particularly the Sinaloa Cartel and the Cartel
Jalisco Nueva Generación (CJNG), remain the most predominant and sophisticated DTOs active in the
United States, with consolidated control over drug corridors from Mexico and are heavily involved in the
traicking of fentanyl, methamphetamine, cocaine, heroin, and marijuana.
Corrupt oicials, both foreign and domestic, steal U.S. and foreign public funds and misappropriate
wealth from U.S. citizens and others. They generate illicit proceeds in the form of bribes, kickbacks, and
embezzled assets and launder them in the United States.
With respect to cybercrime, ransomware actors have increased the potency of their attacks over the last
few years and have exerted greater pressure on victims to extract payments. Further, cybercrime groups
linked to or receiving safe haven from Russia and the Democratic People’s Republic of Korea (DPRK) have
been responsible for an overwhelming share of recently identified ransomware-related incidents and
openly attacked U.S. organizations.
The prevalence of professional money laundering—by individuals, organizations, and networks that
launder for a fee or commission—continues to grow as a threat to the U.S. financial system. Chinese
Money Laundering Organizations (CMLOs) are now one of the key actors in professionally laundering
money within the United States and around the globe. Money mules are also a constant feature in the
movement of fraud or other illicitly earned proceeds.
While the United States has many legal, supervisory, and enforcement mitigation measures in place to
prevent, detect and stop money laundering, criminals seek to identify and exploit gaps these measures.
1 The potential loss from fraudulent scams and cyberattacks reported to the FBI in 2022 equaled $10.3 billion, which is assumed
to underrepresent actual loss based upon the voluntary nature of reporting to the FBI Internet Crime Center (IC3). See Federal
Bureau of Investigation (FBI), “2022 Internet Crime Report,” FBI Internet Crime Complaint Center, https://www.ic3.gov/Media/PDF/
AnnualReport/2022_IC3Report.pdf. See Figure 12.
2024 ◆ National Money Laundering Risk Assessment
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Some regulated financial institutions remain a money laundering vulnerability despite many having
adequate AML/CFT programs. Analysis of these vulnerabilities, including occasional AML/CFT compliance
deficiencies, is a key feature of this report.
Criminals and transnational criminal organizations (TCOs) continue to use cash to launder illicit proceeds
because it provides anonymity, stability, and is widely accepted. While bulk cash smuggling and the use
of cash-intensive businesses are historically favored laundering methods for many DTOs, criminals have
expanded the way they transport currency, including using new cities as cash consolidation points to
convert bills more expeditiously. They also charter private aircra to smuggle cash via less monitored
routes.
While the use of virtual assets for money laundering remains far below that of fiat currency, this
assessment provides a comprehensive update on existing and evolving trends in AML/CFT risks
associated with virtual assets, including inconsistent compliance with domestic laws and international
AML/CFT obligations, obfuscation tools and methods, mixing, disintermediation, and other aspects of
purported decentralized finance (DeFi).
This Report was prepared pursuant to Sections 261 and Section 262 of the Countering America’s
Adversaries Through Sanctions Act (PL 115-44)
as amended by Section 6506 of the FY22 National Defense
Authorization Act (NDAA) (P.L. 117-81). The 2024 NMLRA primarily relies on open-source reporting from
the Department of Justice (DOJ), the use of publicly available court documentation
2
, and consultations
with law enforcement agencies (LEAs).
3
The NMLRA also utilizes information from Bank Secrecy Act (BSA)
reporting, such as strategic analysis on suspicious activity reports (SARs) conducted by the Financial
Crimes Enforcement Network (FinCEN) as well as various types of enforcement actions taken by U.S.
regulatory agencies. (See Annex on Methodology for further information.)
2 The charges contained in an indictment are merely allegations. All defendants are presumed innocent until proven guilty beyond
a reasonable doubt in a court of law. Case examples will cite names of those only found guilty.
3 Information from LEAs will be cited as “according to law enforcement sources.”
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2024 ◆ National Money Laundering Risk Assessment
SECTION I. THREATS
In the context of the NMLRA, money laundering threats
4
are the predicate crimes that generate illicit
proceeds for laundering in, from, or through the United States. Money laundering threats also represent
criminal actors such as those engaged in professional money laundering (PML), and TCOs, including
DTOs.
5
Where reliable data exists, this section also discusses the proceeds of crimes generated abroad
(e.g., corruption) that are laundered through or in the United States. The findings related to money
laundering threats within this risk assessment align with the 2021 AML/CFT National Priorities issued by
the FinCEN.
6
This report identifies the top money laundering threats as fraud; drug traicking; cybercrime; corruption;
human traicking; human smuggling; and professional money laundering. This report also includes
special focus sections on the increased risk identified during the reporting period for check fraud; tax
crime; unlawful campaign finance; and Russian money laundering. The report also highlights a range of
relatively novel schemes. including call center fraud; virtual currency investment scams (more commonly
known as pig-butchering scams);
7
prescription drug diversion; and schemes involving electronic goods.
The report also provides an update on wildlife traicking and other nature crimes.
Fraud
Fraud,
8
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 volume of illicit proceeds,
generating billions of dollars annually. Fraud is a broad criminal activity that can be categorized in a
variety of ways: (1) by entity exploited (e.g., financial institution, government programs, or insurance
companies); (2) by victim (e.g., elders, investors, or taxpayers); or (3) by how it is perpetrated (e.g.,
identity the/fraud, business email compromise (BEC), account takeover, check fraud, loan fraud, wire
fraud, credit/debit card fraud, securities fraud, or cyber-enabled fraud).
9
There can be significant overlap
in these classifications and with other money laundering typologies such as the use of professional
money laundering organizations and money mules, which are addressed later in this report.
Investment scams and healthcare fraud continue to represent the highest proceeds-generating oenses.
This year’s report also highlights check fraud, which has seen a major rise in the last few years, as well as new
types of fraud involving the use of technology, such as telemedicine and virtual asset investment scams.
Fraud groups are oen well-organized, sophisticated, and can be cyber-enabled. They can use social
media, darknet forums, and encrypted messaging apps for communication, coordination, sales, and
recruitment of new criminal actors. The Fraud Section is designed not to focus on the predicate oense
4 See ANNEX on METHODOLOGY.
5 TCOs, to include DTOs, are identified as AML/CFT National Priorities.
6 FinCEN, “Anti-Money Laundering and Countering the Financing of Terrorism National Priorities”, (June 30, 2021), https://www.
fincen.gov/sites/default/files/shared/AML_CFT%20Priorities%20(June%2030%2C%202021).pdf.
7 FinCEN Alert, FIN-2023-Alert005, September 8, 2023
8 Fraud is identified as an AML/CFT National Priority.
9 The 2024 NMLRA has used recent work by the Financial Action Task Force to help classify cyber-enabled fraud. See: FATF, “Illicit
financial flows from Cyber-enabled Fraud”, (November 9, 2023), https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Illicit-
financial-flows-cyber-enabled-fraud.pdf.coredownload.inline.pdf.
2024 ◆ National Money Laundering Risk Assessment
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but to highlight how fraudsters target U.S. citizens and companies and abuse the U.S. financial sector to
launder illicit proceeds.
1. Investment Fraud
For the first time, investment schemes represented the highest aggregate reported dollar loss to victims,
replacing BEC as the costliest scheme reported to the Federal Bureau of Investigation’s (FBI’s) Internet
Crime Complaint Center (IC3). Based on an analysis by IC3, cyber-enabled investment fraud cost U.S.
citizens a staggering $3.3 billion in 2022 alone, representing a 127 percent surge from the previous year.
10
For 2022, the number of investment fraud complaints received ranked 6th when compared to other crime
types; however, investment fraud complaints represented the highest reported dollar loss by crime type.
Investment fraud complaints replaced BEC complaints as the highest aggregate reported dollar loss. BEC
had been the highest aggregate dollar loss since at least 2014.
Investment fraud refers to schemes where criminals provide false information so that the victim will
invest or transfer control of assets to the perpetrator.
11
This illicit activity includes types of securities
fraud. Once the perpetrator has control of the assets in investment fraud schemes, they divert funds
out of the investment vehicle. For the first time, investment schemes reported the highest financial loss
to victims, as measured by aggregate dollar value.
12
An estimated 10 percent of investors will become
victims of an investment fraud scheme at some point.
13
Although the increase in investment fraud is oen attributed to the recent growth in the number of retail
traders and price appreciation for securities and virtual assets from 2020 through 2022, the number of
reported schemes and average dollar amount lost per victim have both been increasing since at least
2018.
14
Social media influencers have contributed to and have facilitated investment fraud by using their
large audiences and fans’ rapport to solicit funds for investment fraud schemes.
15
One case involved
the unregistered oer and sale of crypto asset securities, the fraudulent manipulation of the secondary
market, and the orchestration of a scheme to pay celebrities to tout crypto asset securities without
disclosing their compensation.
16
More traditional types of investment fraud, including through real
estate, have remained stable over the years. In contrast, investment fraud involving virtual assets has
rapidly increased in both the number of victims and losses, rising 183 percent between 2021 and 2022.
3
Just as certain professions lend themselves to being used to facilitate certain types of schemes, each
scheme type targets a certain demographic, based on investment fraud typology from the FBI and
10 FBI, “Internet Crime Complaint Center Releases 2022 Statistics”, (March 22, 2023), https://www.fbi.gov/contact-us/field-oices/
springfield/news/internet-crime-complaint-center-releases-2022-statistics.
11 FBI, “Securities Fraud Awareness & Prevention Tips”, https://www.fbi.gov/stats-services/publications/securities-fraud.
12 FBI, “Internet Crime Report 2022” (March 2023), https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3Report.pdf.
13 Pension Research Council, “Understanding and Combating Investment Fraud”, (2016), https://pensionresearchcouncil.wharton.
upenn.edu/wp-content/uploads/2017/02/WP2016-19-Kieer-and-Mottola.pdf.
14 FBI, “Internet Crime Report 2020”, (March 2021), https://www.ic3.gov/Media/PDF/AnnualReport/2020_IC3Report.pdf.
15 SEC, “Investor Alerts and Bulletins Social Media and Investment Fraud – Investor Alert,” (August 29, 2022), https://www.sec.gov/
oiea/investor-alerts-and-bulletins/social-media-and-investment-fraud-investor-alert.
16 SEC, “SEC Charges Crypto Entrepreneur Justin Sun and his Companies for Fraud and Other Securities Law Violations”, (March 22,
2023), https://www.sec.gov/news/press-release/2023-59.
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2024 ◆ National Money Laundering Risk Assessment
Securities and Exchange Commission (SEC).
17
For example, high-yield investment schemes primarily
target elderly victims, age 65 or older, due to the victims’ larger investable assets and increased reliance
on investment income.
18
Criminals also oen target religious or ethnic communities, leveraging the built-
in trust found in these communities.
19
Once the criminal has identified a target or vulnerable population, initial contact typically involves
advertising potentially high rates of returns with minimal risk via an investment vehicle or strategy
that investors can only access through the criminal.
20
Once the funds have been transferred into the
investment vehicle controlled by the criminal, the criminals misappropriate the funds by transferring
them to personal or otherwise undisclosed bank accounts. Aer they divert the funds out of the
investment vehicle, the criminal typically uses them for purposes other than what they represented to
the investor, such as for personal uses or luxury purchases.
21
a) Ponzi Schemes
A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new
investors. Ponzi scheme organizers oen promise to invest your money and generate high returns with
little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to
pay those who invested earlier and may keep some for themselves. With little or no legitimate earnings,
Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit
new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.
Ponzi schemes are named aer Charles Ponzi, who duped investors in the 1920s with a postage stamp
speculation scheme.
22
If not identified early, losses to investors can expand exponentially as more individuals contribute money
to the pool of funds under the perpetrator’s control.
23
Ponzi schemes are not immediately apparent
to victims, allowing the schemes to operate for months or even years. Like most types of frauds, Ponzi
schemes have dierent variations and may exploit dierent types of investment, such as foreign
exchange trading. In one such scheme, a fraudster persuaded at least 700 victims to invest through
promissory notes and other means, causing victim losses exceeding $80 million.
24
Investigators are now
seeing the use of DeFi technology involving smart contracts to carry out traditional Ponzi and pyramid
schemes. Criminals will develop and deploy smart contracts that employ Ponzi-pyramid techniques.
17 FBI’s typology refers to the breakdown and subdivision of investment fraud as reported in “Internet Crime Report 2022”. SEC’s
typology refers to that provided on Investors.Gov.
18 SEC, “High Yield Investment Programs”, (March 2023), https://www.investor.gov/protect-your-investments/fraud/types-fraud/
high-yield-investment-programs.
19 SEC, “Ainity Frauds”, (June 2014), https://www.sec.gov/files/ia_ainityfraud.pdf.
20 DOJ, “Dearborn Resident Sentenced in Investment Fraud Scheme”, (May 4, 2022), https://www.justice.gov/usao-edmi/pr/dearborn-
resident-sentenced-investment-fraud-scheme#:~:text=DETROIT%20%2D%20Dearborn%20resident%20Ali%20Rameh,Ison..
21 Investment frauds dier greatly by scheme used. Based on analysis of DOJ cases, the most common narrative is what has been
reflected and discussed.
22 SEC, Types of Fraud, “Ponzi Scheme,” https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme.
23 DOJ, “DC Solar Owner Sentenced to Over 11 Years in Prison for Billion Dollar Ponzi Scheme” (June 28, 2022), https://www.
justice.gov/usao-edca/pr/dc-solar-owner-sentenced-over-11-years-prison-billion-dollar-ponzi-scheme#:~:text=—%20U.S.%20
District%20Judge%20John%20A,Talbert%20announced.
24 DOJ, “Jury Finds Sarasota Man Guilty Of Running $80 Million "Oasis" Forex Ponzi Scheme”, (May 5, 2022), https://www.justice.gov/
usao-mdfl/pr/jury-finds-sarasota-man-guilty-running-80-million-oasis-forex-ponzi-scheme.
2024 ◆ National Money Laundering Risk Assessment
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As soon as an investor places virtual assets into a smart contract, the smart contract automatically
diverts the investor’s funds to other investors, such that earlier investors are paid with funds from later
investors.
25
b) Virtual Asset Investment Schemes
Virtual asset investment schemes (VAIS) include a variety of traditional fraud fact patterns based on
misrepresentations concerning potential investment opportunities in virtual assets. Recently, U.S.
law enforcement is seeing a growing number of instances of fraud that are initiated when fraudsters
contact victims on social media, dating platforms, or text messages purportedly sent to the wrong
number. Scammers oen portray outreach as an “innocent” connection when it is a scripted, calculated
attempt designed to build rapport and gain trust with the victim. Eventually, these conversations lead to
discussions of investment opportunities, wherein victims are lured into investing virtual assets using fake
websites or applications that allow the scammers to manufacture fraudulent data about the investment.
The deception becomes apparent when victims attempt to cash out their investments, or when the
fraudster terminates communication with the victim. Unlike schemes involving wire transfers, where
some restoration of financial losses may occur if it is quickly reported, victims of VAIS are less likely to
recover their virtual asset losses because of the ability to rapidly transfer virtual assets across borders,
potential challenges in identifying virtual asset service providers (VASPs) involved in transfers and
relevant points of contact, and the fact that virtual asset transfers are typically irreversible.
26
Losses from VAIS accounted for nearly 75 percent of all internet-enabled investment fraud in 2022.
27
VAIS
oen target a younger demographic, with victims having a median age of between 30 and 49. Common
schemes of this type include pig butchering (see snapshot below) and some Ponzi scheme variations
(see above). While many of the methods used by these scammers are similar to those used by traditional
fraudsters, they oen take advantage of the publicity around virtual assets to victimize investors.
Pig Butchering
Pig butchering scams are investment scams involving virtual currency fraud. In “pig butchering”
schemes, the perpetrator develops an online relationship, sometimes romantic, with the victim. The
perpetrator entices the victim to “fatten” an account by transferring virtual assets into a virtual asset
wallet, usually on a fake virtual asset platform controlled by the perpetrator. Then, metaphorically,
“butcher” the victim or their accounts by taking the victim’s funds.
28
Aer gaining their victim’s trust – sometimes as soon as over a few days or as long as a few months –
scammers eventually introduce the idea of investing in virtual assets. The scammers then direct victims
25 DOJ, “Forsage Founders Indicted in $340M DeFi Crypto Scheme”, (February 22, 2023), https://www.justice.gov/opa/pr/
forsage-founders-indicted-340m-defi-crypto-scheme#:~:text=A percent20federal percent20grand percent20jury percent20in,
percent24340 percent20million percent20from percent20victim percent2Dinvestors.
26 FBI, “Consumers Intending to Invest with Cryptocurrency: Be Aware, Be Cautious and Be Educated”, (March 9, 2023), https://www.
fbi.gov/contact-us/field-oices/richmond/news/consumers-intending-to-invest-with-cryptocurrency-be-aware-be-cautious-
and-be-educated.
27 The VA amount for 2022 ($2.57 billion) was divided by the total for investment fraud claims for 2022 ($3.31 billion) to get 77.6
percent, see FBI, “2022 IC3 Report,” p.12. https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3Report.pdf.
28 DOJ, “Middlesex County Man Charged with Laundering $2.1 Million Obtained from Internet-Related Frauds”, (October 11,
2022), https://www.justice.gov/usao-nj/pr/middlesex-county-man-charged-laundering-21-million-obtained-internet-related-
frauds#:~:text=Okuonghae percent20laundered percent20at percent20least percent20 percent242.1,the percent20transfer
percent2C percent20whichever percent20is percent20greater.
9
2024 ◆ National Money Laundering Risk Assessment
to fake virtual asset investment platforms, controlled by the scammer or co-conspirators posing as
investment advisers or customer service representatives. Once victims make an initial “investment,” the
fake platforms are manipulated to show substantial gains. Sometimes, victims are allowed to withdraw
some of these initial “funds” to further engender trust in the scheme. It is not until a large investment is
made that victims find that they are unable to withdraw their funds. Even when a victim is denied access
to their funds, the fraud is oen not yet over. Scammers request additional payments for purported taxes
or fees, promising these payments will allow victims access to their accounts. Scammers oen continue
to steal from their victims and do not stop until they have deprived victims of any remaining savings. In
some cases, the criminals prompt victims to liquidate holdings in tax-advantaged accounts or take out
home equity lines of credit and second mortgages on their homes to fund purported investments.
29
Law enforcement has observed scammers then laundering the funds through several unhosted wallet
addresses or by exchanging virtual assets on dierent blockchains through cross-chain bridges, referred
to as chain hopping, before sending the funds to foreign-located VASPs. In some cases, these are nested
VASPs, smaller financial institutions that oer services to their customers through accounts and sub-
accounts at larger VASPs to benefit from the greater liquidity in larger VASPs. Scammers have also been
observed using VASPs in Southeast Asia to exchange virtual assets from victims for fiat currency. In
April 2023, the DOJ seized virtual assets worth an estimated $112 million linked to accounts that were
allegedly used to launder the proceeds of various virtual asset confidence scams.
30
Law enforcement
also identified cases in which VASPs identified and halted victim transfers; in such instances, the
scammers directed victims to send funds via wire transfers to foreign bank accounts associated with shell
companies or held by money mules associated with the scammers.
Some of the perpetrators of these scams may themselves be victims of separate crimes, including
human traicking. Pig butchering schemes are oen run by criminal networks, which oen place fake
job advertisements to attract young English-speaking people from Asian countries. These individuals are
then held, against their will, in secure compounds, generally in Asia, where they are forced (oen under
threat of violence) to scam people throughout the globe.
31
2. Healthcare Fraud
Healthcare fraud continues to generate significant proceeds and victimize government programs as
well as private entities. In fiscal year 2022, health care fraud remained a leading source of False Claims
Act settlements and judgments.
32
Accordingly, the DOJ and federal law enforcement agencies devote
significant resources to combating this type of fraud, including through the development of a “strike
force” model of investigative and prosecutorial resources. In Fiscal Year (FY) 2022, the U.S. Sentencing
Commission received 431 cases of healthcare fraud, and 90 percent of all healthcare oenders were
U.S. citizens.
33
Schemes oen involve hundreds of millions, if not billions, of dollars generated through
29 FinCEN, “FinCEN Alert on Prevalent Virtual Currency Investment Scam Commonly Known as “Pig Butchering” (FIN-2023-Alert005)”,
(September 8, 2023), https://www.fincen.gov/sites/default/files/shared/FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf.
30 DOJ, “Justice Department Seizes Over $112M in Funds Linked to Cryptocurrency Investment Schemes”, (April 3, 2023), https://
www.justice.gov/opa/pr/justice-department-seizes-over-112m-funds-linked-cryptocurrency-investment-schemes.
31 HSI, “Special Edition Cornerstone Newsletter, HSI and ACAMS Alert: “Pig Butchering”, (April 2023), https://www.ice.gov/doclib/
cornerstone/pdf/cornerstoneACAMS_SpecialIssue40_Apr21_2023.pdf.
32 DOJ “False Claims Act Settlements and Judgments Exceed $2 Billion in Fiscal Year 2022”, (February 7, 2023), https://www.justice.
gov/opa/pr/false-claims-act-settlements-and-judgments-exceed-2-billion-fiscal-year-2022.
33 USSC, “Health Care Fraud”, (August 2023), https://www.ussc.gov/sites/default/files/pdf/research-and-publications/quick-facts/
Health_Care_Fraud_FY22.pdf.
2024 ◆ National Money Laundering Risk Assessment
10
fraudulent activity and run the gamut from corporate fraud, bribery, and kickbacks, to activity resulting
in the illicit distribution and diversion of narcotics. These large-scale fraud schemes increase healthcare
costs, waste limited resources, and cause an increased risk of mortality.
34
Investigators and prosecutors
have employed innovative methods to target particularly egregious activity, given the complexity of these
schemes.
35
One of the most common types of fraud perpetrated against Medicare, Medicaid, and other Federal
healthcare programs involves filing false claims for reimbursement.
36
Groups ranging from large networks
to small groups are actively filing false claims to generate funds. One recent case saw Francisco Patino,
M.D., convicted of fraud and money laundering, among other charges, for his role in running a scheme
that required patients to receive unnecessary medical treatment and prescriptions of dangerous and
unnecessary addictive opioids. Patino and a handful of co-conspirators submitted over $250 million
in false and fraudulent claims to Medicare,
37
Medicaid,
38
and other health insurance programs for
unnecessary medical treatment.
39
Another example of healthcare fraud includes the use of fake medical
supply companies to fraudulently bill Medicare, Medicaid, and private healthcare insurers to generate
hundreds of thousands of dollars in illicit proceeds.
40
Fraudsters are oen repeat money laundering oenders. For example, Carlos Alberto Padron pleaded
guilty to money laundering involving two separate money laundering conspiracies while on supervised
release from a prior federal prison sentence. During 2022, Padron laundered $249,901 in Medicare fraud
proceeds related to two fraudulent durable medical equipment (DME)
41
companies. Padron and his co-
conspirator picked up nearly $229,920 in cash in parking lots aer they laundered the money. During
2021, Pardon also laundered $2,185,392 in Medicare fraud proceeds related to two other DME companies.
Padron was involved in managing the nominee owner of those two companies and received some of the
approximately $260,000 in withdrawals of Medicare fraud proceeds from the nominee owner.
42
34 CMS, “Exploring Fraud, Waste, and Abuse within Telehealth”, https://www.cms.gov/files/document/hfpp-white-paper-exploring-
fraud-waste-abuse-within-telehealth.pdf-0.
35 DOJ, Health Care Fraud Unit Website (accessed 11/1/23), https://www.justice.gov/criminal-fraud/health-care-fraud-unit.
36 HHS, “Semiannual Report to Congress”, (Spring 2023), https://oig.hhs.gov/reports-and-publications/semiannual/index.asp.
37 Medicare is Government health insurance for people 65 or older. See What is Medicare, https://www.medicare.gov/what-
medicare-covers/your-medicare-coverage-choices/whats-medicare.
38 All states, the District of Columbia, and the U.S. territories have Medicaid programs designed to provide health coverage for low-
income people. Although the Federal government establishes certain parameters for all states to follow, each state administers
their Medicaid program dierently, resulting in variations in Medicaid coverage across the country. See Medicaid Program History,
https://www.medicaid.gov/about-us/program-history/index.html.
39 DOJ, “Doctor Sentenced for Role in Illegally Distributing 6.6 Million Opioid Pills and Submitting $250 Million in False Billings”,
(January 1, 2023), https://www.justice.gov/opa/pr/doctor-sentenced-role-illegally-distributing-66-million-opioid-pills-and-
submitting-250.
40 DOJ, “Woman Convicted of Laundering Over $750,000 from Health Care Fraud Scheme”, (May 13, 2022,) https://www.justice.gov/
opa/pr/woman-convicted-laundering-over-750000-health-care-fraud-scheme#:~:text=According percent20to percent20court
percent20documents percent20and, percent2C percent20to percent20her percent20co percent2Dconspirators.
41 Durable medical equipment (DME) is defined as equipment and supplies ordered by a health care provider for everyday or
extended use. Coverage for DME may include oxygen equipment, wheelchairs, crutches or blood testing strips for diabetics.
42 DOJ, “Repeat Oender Sentenced to a total of 90 Months in Prison for Money Laundering of Medicare Fraud Proceeds”,
(September 20, 2023), https://www.justice.gov/usao-sdfl/pr/repeat-oender-sentenced-total-90-months-prison-money-
laundering-medicare-fraud.
11
2024 ◆ National Money Laundering Risk Assessment
a) Telemedicine Fraud
Recent adjudicated law enforcement cases and court documentation indicate an increase in fraudulent
activity related to telemedicine. For example, a 2023 Nationwide Healthcare Fraud Enforcement Action
resulted in criminal charges against telemedicine platform owners, laboratory owners, DME providers,
hospice operators, and pharmacists, with losses totaling approximately 1.1 billion U.S. dollars (USD).
43
This corresponds to the increase in telemedicine visits due to the COVID-19 pandemic when many
patients stopped in-person visits with medical providers. One indictment demonstrates how one
doctor allegedly signed prescriptions and order forms via telemedicine services for DME that were not
medically necessary. The defendant based the submission of the claims based solely on short telephone
conversations with beneficiaries they had not physically examined and evaluated and that were induced,
in part, by the payments of bribes and kickbacks the doctor received from telemedicine companies.
The doctor and others submitted or caused the submission of approximately $10 million in false and
fraudulent claims to Medicare, resulting in the payout of more than $4 million.
44
In another case, an individual was criminally charged for their role in a scheme in which they invested in
a pharmacy. The defendant operated a call center where telemarketers persuaded Medicare beneficiaries
to accept prescriptions for expensive medications that the beneficiaries neither needed nor wanted. The
individual allegedly obtained signed prescriptions by paying kickbacks to two telemedicine companies.
Through two companies the individual controlled, the individual was paid kickbacks from the pharmacy
he invested in and other pharmacies In the network in exchange for supplying signed prescriptions for
the medications.
45
3. Update on COVID-19-Related Fraud
As indicated in the 2022 NMLRA, the COVID-19 pandemic accelerated online financial activity, leading
to increased fraud risk for online financial services and an overall spike in activity related to healthcare,
bank, elder, and government benefit fraud schemes with a connection to COVID-19. Since March 2020,
Congress provided over $4.6 trillion to help the nation respond to and recover from the COVID-19
pandemic. The public health crisis, economic instability, and increased flow of federal funds associated
with the pandemic increased pressures on federal agency operations and presented opportunities for
individuals to commit fraud. The COVID-19 pandemic saw an increase in the number of fraud-related
charges, including schemes by individuals and large, complex syndicates. Many individuals and entities
facing fraud-related charges in cases involving COVID-19 relief programs have already been found guilty
of criminal violations or were found liable for civil violations. For example, the DOJ has brought federal
fraud-related charges against at least 2,191 individuals or entities in cases involving federal COVID-19
relief programs, consumer scams, and other types of fraud as of June 30, 2023.
46
43 DOJ, “National Enforcement Action Results in 78 Individuals Charged for $2.5B in Health Care Fraud,” (June 28, 2023), https://
www.justice.gov/opa/pr/national-enforcement-action-results-78-individuals-charged-25b-health-care-fraud.
44 DOJ, “Physician Indicted in $10 Million Telemedicine Health Care Fraud Scheme”, (April 21, 2022), https://www.justice.gov/usao-
edny/pr/physician-indicted-10-million-telemedicine-health-care-fraud-scheme.
45 DOJ, “DOJ Announces Nationwide Coordinated Law Enforcement Action to Combat Health Care Fraud and Opioid Abuse”, case
summaries, January 28, 2023, https://www.justice.gov/criminal-fraud/health-care-fraud-unit/2023-national-hcf-case-summaries.
46 Government Accounting Oice (GAO), “COVID-19: Insights from Fraud Schemes and Federal Response Eorts”, GAO-24-106353,
(November 2023), https://www.gao.gov/assets/d106353.pdf.
2024 ◆ National Money Laundering Risk Assessment
12
While in-person healthcare and financial activity has resumed, a significant amount of healthcare and
commerce is still conducted virtually, leaving ample opportunity for online criminal activity. The number
of individuals or entities facing fraud charges related to COVID-19 relief programs has grown since March
2020 and will likely continue to increase as these cases take time to develop. For example, an individual
charged in an indictment in 2022 may not receive a trial until 2023, and if found guilty, the sentencing
may occur in 2024 or later. As of August 2022, the statute of limitations has been extended to 10 years to
prosecute individuals who committed Paycheck Protection Program (PPP) and Economic Injury Disaster
Loan (EIDL)-related fraud. Many of these cases continue to demonstrate the magnitude of proceeds
generated from COVID-related fraud.
FinCEN has issued a number of COVID-19-Related Advisories and Alerts during 2020-2023.
47
For example,
in November 2023, FinCEN and IRS-CI issued a joint alert regarding the Employee Retention Credit (ERC)
to highlight its significance (323 investigations involving more than $2.8 billion of potentially fraudulent
ERC claims in 2020-2023) and the existence of “ERC mills” that are perpetrating the fraud.
48
A wide array of COVID-19-related fraud cases demonstrate money laundering schemes. The leader of one
such scheme, Seattle-Paradise Williams, pleaded guilty to wire fraud and money laundering charges.
Williams personally received more than $2 million in fraudulent proceeds and spent the money on
extravagant expenses such as luxury cars, lavish trips, cosmetic surgery, jewelry, and designer goods.
Upon receipt of the illegal funds, Williams and her associates methodically laundered the funds through
cash withdrawals, wire transfers, and expensive personal purchases. Williams also received more than
$1.2 million in kickback payments from her associates for facilitating the fraudulent submissions.
49
In
another case, a real estate broker, Chad Wade, pleaded guilty to wire fraud and money laundering and
bankruptcy fraud, and entered into a $4 million civil settlement for submitting false information to obtain
COVID-19 loans and using those proceeds to purchase high-end real estate and luxury items.
50
4. Elder Financial Exploitation
Elder financial exploitation (EFE) —also referred to as elder fraud—is a growing money laundering threat
linked to more than $3 billion of reported financial losses annually, with victims on average losing
$35,000.
51
EFE is defined as the illegal or improper use of an older adult’s funds, property, or assets.
52
Elder abuse, a broader category of illegal activity that includes EFE as well as physical and emotional
abuse, aects at least 10 percent of those age 65 or older in the United States according to the DOJ.
53
Several of FinCEN’s recent alerts and advisories, including a 2022 advisory on EFE, highlight that an
47 FinCEN, https://fincen.gov/coronavirus.
48 FinCEN, “FinCEN Alert on COVID-19 Employee Retention Credit Fraud,” FIN-2023-Alert007, (November 22, 2023), https://fincen.
gov/sites/default/files/shared/FinCEN_ERC_Fraud_Alert_FINAL508.pdf.
49 DOJ, “Leader of $6.8 Million Pandemic Fraud Scheme Pleads Guilty to Wire Fraud and Money Laundering Charges,” (December 11,
2023), https://www.justice.gov/usao-wdwa/pr/leader-68-million-pandemic-fraud-scheme-pleads-guilty-wire-fraud-and-money-
laundering.
50 DOJ, “Florida Real Estate Broker Agrees To Pay Over $4 Million To Resolve False Claims Act Allegations Relating To Fraudulent
Cares Act Loans”, (August 16, 2023), https://www.justice.gov/usao-ndfl/pr/florida-real-estate-broker-agrees-pay-over-4-million-
resolve-false-claims-act.
51 FBI, “Elder Fraud Report,” (2022), https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3ElderFraudReport.pdf.
52 CFPB and FinCEN, “Memorandum on EFE,” (August 30, 2017), https://www.fincen.gov/sites/default/files/2017-08/8-25-2017_
FINAL_CFPB percent2BTreasury percent2BFinCEN percent20Joint percent20Memo.pdf.
53 For more information on EFE, see DOJ, “About Elder Abuse,” https://www.justice.gov/elderjustice/about-elder-abuse.
13
2024 ◆ National Money Laundering Risk Assessment
increasing number of these schemes are now cyber-enabled.
54
According to the FBI, virtual asset-related
losses reported by older adults increased by 350 percent from 2021 to 2022.
55
Targets of EFE schemes are oen victimized aer having accumulated life savings in conjunction with
perceived or actual declining cognitive or physical abilities, decreased social interactions, increased
reliance on others for financial management and physical well-being, and potential unfamiliarity with
dierent technology.
56,57
Victims may be exploited for an extended period, are oen re-victimized, and are
subject to potential further loss due to compromised personally identifiable information (PII), which may
be sold on darknet marketplaces.
EFE schemes consist of two types of fraud: elder the and elder scams. With elder the, the perpetrator
typically has a preexisting relationship with the victim that the perpetrator exploits to steal assets,
funds, or income.
According to the FinCEN Advisory on Elder Financial Exploitation, 46 percent of elder
the cases are perpetrated by a family member.
58
Exploitation of legal guardianships, power of attorney
arrangements, and Ponzi schemes targeting older adults are common examples of elder the schemes.
In elder scams, the perpetrator is oen unknown to the victim.
59
These perpetrators are frequently
located outside of the United States and use cyber-enabled techniques. Scammers oen impersonate
government oicials, law enforcement oicers, customer support representatives (e.g., computer repair),
social media connections, and even family, friends, and other known persons to induce victims to send
money. Perpetrators attempt to create high-pressure situations to create urgency and take advantage of
their victim’s trust, emotions, or fear to solicit payments. Some elder scams involve online dating; these
are broadly referred to as “romance scams.”
60
Cases involving EFE oen utilize traditional money laundering techniques such as in-person cash pickups
from victims,
61
receiving cash or checks via the mail, use of shell and front companies, wire transfers,
54 FinCEN, “Advisory on Elder Financial Exploitation), (June 15, 2022), https://www.fincen.gov/sites/default/files/advisory/2022-06-15/
FinCEN percent20Advisory percent20Elder percent20Financial percent20Exploitation percent20FINAL percent20508.pdf; FinCEN,
“Advisory on Cybercrime and Cyber-Enabled Crime Exploiting the Coronavirus Disease 2019 (COVID-19) Pandemic”, (July 30, 2020),
https://www.fincen.gov/sites/default/files/advisory/2020-07-30/FinCEN percent20Advisory percent20Covid percent20Cybercrime
percent20508 percent20FINAL.pdf.
55 FBI, “Elder Fraud Report,” (2022), https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3ElderFraudReport.pdf. In 2022, the
FBI’s Internet Crime Complaint Center received almost 10,000 complaints from victims over the age of 60 involving the use of
some type of virtual asset, such as Bitcoin, Ethereum, Litecoin, or Ripple. Losses incurred by these victims totaled over $1 billion.
56 CFPB and FinCEN, Memorandum on EFE, supra Note 1. See also, FTC Older Consumers Report, supra Note 1.
57 DOJ, “Associate Attorney General Vanita Gupta Delivers Remarks at the Elder Justice Coordinating Council Meeting,” (Dec. 7, 2021),
https://www.justice.gov/opa/speech/associate-attorney-general-vanita-gupta-delivers-remarks-elder-justice-coordinating; DOJ,
“Statement of Attorney General Merrick B. Garland on World Elder Abuse Awareness Day,” (Jun. 15, 2021) https://www.justice.gov/opa/pr/
statement-attorney-general-merrick-b-garland-world-elder-abuse-awareness-day?utm_medium=email&utm_source=govdelivery.
58 FinCEN, “Advisory on Elder Financial Exploitation”, (June 15, 2022), https://www.fincen.gov/sites/default/files/advisory/2022-06-15/
FinCEN percent20Advisory percent20Elder percent20Financial percent20Exploitation percent20FINAL percent20508.pdf.
59 These include lottery phone scams, grandparent scams, romance scams, IRS or government imposter scams, and sham business
opportunities.
60 DOJ, “Woodbridge Money Launderer Sentenced for his Role in a Romance Fraud Scheme” (Mar. 11 2022) https://www.
justice.gov/usao-edva/pr/woodbridge-money-launderer-sentenced-his-role-romance-fraud-scheme#:~:text=Woodbridge
percent20Money percent20Launderer percent20Sentenced percent20for percent20his percent20Role percent20in percent20a
percent20Romance percent20Fraud percent20Scheme,-Friday percent2C percent20March percent2011&text=ALEXANDRIA
percent2C percent20Va.,scheme percent20against percent20mostly percent20elderly percent20victims.
61 DOJ, “Defendant in ‘Grandparent Scam’ Network Sentenced for RICO Conspiracy Targeting Elderly Americans,” (Aug. 17, 2022),
https://www.justice.gov/opa/pr/defendant-grandparent-scam-network-sentenced-rico-conspiracy-targeting-elderly-americans.
2024 ◆ National Money Laundering Risk Assessment
14
virtual assets, and laundering funds through multiple bank accounts, oen using fake PII,
62
and through
the use of money mules.
63
Call Center Fraud
Illegal call centers defraud thousands of victims each year and are responsible for over $1 billion in losses
to victims.
64
Call center fraud encompasses a variety of financial fraud typologies, but generally refers to
scams that illicit actors perpetrate over the phone from call centers located overseas. Call center fraud,
while not new, has proliferated rapidly in recent years and now includes timeshare fraud (see below). Call
center fraud overwhelmingly targets older adults, making it also a form of EFE.
65
According to the FBI, tech and customer support fraud reports were up 132 percent in 2022. In these
scams, fraudsters may pose as customer or tech support representatives from well-known companies
and claim that the victim’s account or computer has been compromised. They then may ask victims
to install desktop soware remotely (e.g., “trojan horses” or other types of malware) to allow them to
monitor activity, which then gives the fraudster complete control over the victim’s computer.
66
In government impersonation scams, the fraudster impersonates a law enforcement agent, Internal
Revenue Service (IRS) representative, or other government oicial. The scammers may also spoof
phone numbers or use fake credentials to appear legitimate. Scammers create various scenarios to elicit
payment, including that the victim has missed jury duty and must provide payment immediately to avoid
arrest or must provide personal information to renew a driver’s license, passport, or medical license.
67
These types of scams frequently emanate from call centers in South Asia, mainly India, and oen target
Americans.
68
In 2022, with the assistance of U.S. law enforcement, Indian law enforcement accomplished
multiple call center raids, disruptions, seizures, and arrests of the individuals alleged to be involved in
perpetrating these cyber-enabled financial crimes and global telemarketing frauds.
In recent years, organized crime groups such as CJNG have committed timeshare fraud using call centers
in Mexico.
69
The FBI, SEC, and U.S. Embassy in Mexico have all issued warnings in recent years about the
increasing prevalence of these types of call center-based scams aimed at Americans who own timeshares
62 DOJ, “Four Individuals Charged with Conspiring to Launder Money Obtained from Romance Scams” (Apr. 13, 2022), https://www.
justice.gov/usao-nj/pr/four-individuals-charged-conspiring-launder-money-obtained-romance-scams.
63 DOJ, “Two Californians Indicted in Multi-Million Dollar Tech-Support Scam Targeting Elderly Victims” (May 12, 2022), https://www.
justice.gov/usao-wdpa/pr/two-californians-indicted-multi-million-dollar-tech-support-scam-targeting-elderly.
64 FBI Annual Internet Crime Report 2022, https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3Report.pdf, p. 16.
65 Id.
66 FBI, “FBI Warns Public to Beware of Tech Support Scammers Targeting Financial Accounts Using Remote Desktop Soware”,
(October 18, 2023), https://www.fbi.gov/contact-us/field-oices/boston/news/press-releases/fbi-warns-public-to-beware-of-
tech-support-scammers-targeting-financial-accounts-using-remote-desktop-soware.https://www.fbi.gov/contact-us/field-
oices/boston/news/press-releases/fbi-warns-public-to-beware-of-tech-support-scammers-targeting-financial-accounts-using-
remote-desktop-soware
67 IC3, “FBI Warns of the Impersonation of Law Enforcement and Government Oicials” (March 07, 2022), https://www.ic3.gov/
Media/Y2022/PSA220307.
68 DOJ, “Multiple India-based call centers and their directors indicted for perpetuating phone scams aecting thousands of
Americans”, (February 3, 2022), https://www.justice.gov/usao-ndga/pr/multiple-india-based-call-centers-and-their-directors-
indicted-perpetuating-phone-scams.
69 Treasury, “Treasury Sanctions Fugitive, Others Linked to CJNG Timeshare Fraud Network,” (April 27, 2023), https://home.treasury.
gov/news/press-releases/jy1443.
15
2024 ◆ National Money Laundering Risk Assessment
in Mexico.
70
In these schemes, fraudsters may pose as travel or real estate agents, sales representatives,
or brokerage firms, and make unsolicited oers to owners of timeshare properties. If the timeshare
owner agrees, the scammer tells the victim to pay an “upfront fee” to facilitate or expedite the sale of
the property. Once this fee is paid, all communication by the scammer may cease, or they may demand
additional fees from the victim. Some victims reported that they were contacted by a fake “timeshare
fraud recovery company” that promised to assist victims in recovering their money and then asked for
additional fees for this service.
71
As with the prior call center fraud typologies noted, this kind of fraud
overwhelmingly aects retirees and older Americans.
5. Special Focus: Check Fraud
While the use of checks in the financial system has declined, check fraud over the last few years has
boomed due to the limited capability of financial institutions to verify the legitimacy of checks in a
timely manner, the lack of self-verification systems built into checks, the prevalence of remote capture
technology,
72
and the ability to directly access all funds within a specified account through a single
check.
73
The U.S. government continues to use checks, in addition to other payment options, to issue federal
payments, including for Medicare and Medicaid reimbursement and income tax refunds. However, the
use of paper checks by the U.S. government is declining overall both in terms of number of payments and
total value moved. However, checks remain a major monetary instrument, with check payments worth
$27.23 trillion in 2021, according to the 2022 Federal Reserve Payments Study.
74
For example, the average
dollar value per commercial check has been trending upward in recent years.
75
Check fraud refers to the illicit use of either paper or digital checks
76
to unlawfully gain money. Some
examples of check fraud include check washing,
77
counterfeit checks or “check kiting” (checks presented
based on fraudulent identification or are false checks drawn on valid account), and fraudulent checks
(either as a signature or endorsement). BSA reporting by financial institutions has documented the rapid
growth of check fraud.
78
The number of SARs relating to check fraud increased by 94 percent between
2021 and 2022 and 23 percent between 2020 and 2021.
70 U.S. Embassy Mexico, “Real Estates and Time Shares - Fraud Typology”, (May 3, 2023), https://mx.usembassy.gov/real-estate-and-
time-shares-fraud-typology/.
71 Id.
72 FDIC, “Remote Deposit Capture: A Primer,” (Updated: June 6, 2023), https://www.fdic.gov/regulations/examinations/supervisory/
insights/sisum09/sisummer2009-article02.html#:~:text=RDC percent20allows percent20financial percent20institution
percent20customers,instant percent20credit percent20to percent20their percent20account.
73 Federal Reserve Board (FRB) “The Federal Reserve Payments Study: 2022 Triennial Initial Data Release”, (Updated July 27, 2023),
https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm.
74 Id.
75 FRB, “Commercial Checks Collected through the Federal Reserve--Quarterly Data,” (update November 17, 2023), https://www.
federalreserve.gov/paymentsystems/check_commcheckcolqtr.htm.
76 Investopedia, “Check: What It Is, How Bank Checks Work, and How to Write One,” (Updated June 2, 2023), https://www.
investopedia.com/terms/c/check.asp.
77 USPIS, “Check Washing,” (Updated October 13, 2023), https://www.uspis.gov/news/scam-article/check-washing.
78 FinCEN, “FinCEN Alert on Nationwide Surge in Mail The-Related Check Fraud Schemes Targeting the U.S. Mail,” FIN-2023-
Alert003, (February 27, 2023), https://www.fincen.gov/sites/default/files/shared/FinCEN%20Alert%20Mail%20The-Related%20
Check%20Fraud%20FINAL%20508.pdf.
2024 ◆ National Money Laundering Risk Assessment
16
U.S. law enforcement has also observed an increase in check fraud activity, with fraudsters targeting
checks from businesses and checks with large dollar amounts due to a perception that the accounts the
checks draw from are well funded and the checks will not bounce, leading to large losses and unpaid bills
for victims.
There have been several criminal cases demonstrating money laundering activity involving check fraud.
A 2022 case related to a nationwide check kiting “bust out” scheme where bank accounts were opened
using a fake passport to receive checks from accounts with insuicient funds. Fraudsters then withdrew
those funds before the checks cleared.
79
Mail The-Related Check Fraud
Mail the-related check fraud refers to the fraudulent negotiation of checks stolen from the U.S. Mail.
80
According to discussions with U.S. law enforcement, there has been a notable spike in mail the in 2023, as
evidenced by a 139 percent increase in reports of high-volume mail the from mail receptacles over the past
four fiscal years. Due to a nationwide surge in mail the-related check fraud targeting the U.S. Mail,
FinCEN
issued an alert in collaboration with the United States Postal Inspection Service (USPIS) in February 2023
that identified trends, risks, typologies, and red flags of these schemes.
81
By issuing the mail the-related
check fraud alert, FinCEN sought to ensure that SARs filed by financial institutions appropriately identify
and report suspected check fraud schemes that may be linked to mail the in the United States.
According to FinCEN’s alert, aer a check is stolen from the mail, criminals will oen “wash” the checks,
which is altering them using acetone chemicals to remove the original ink applied by the check issuer.
82
The criminal then replaces the payee information with their own, a fraudulent identity (or that of a
money mule), or fraudulent business they control. They also frequently increase the dollar amount of the
check. Similarly, criminals engaged in mail the-related check fraud will oen take the information found
on the original victim’s check, such as routing and account numbers, and use those numbers to generate
additional checks. Criminal actors involved in mail the can also sell checks or PII stolen from the mail
over darknet marketplaces or on encrypted social media platforms such as Telegram.
83
Once the altered or counterfeit check has been deposited, criminals quickly withdraw cash or transfer the
funds via wire transfers to alternative accounts to obfuscate the individuals involved or the destination of
79 DOJ, “Korean National Sentenced to 7 Years and 9 Months in Prison for “Bust Out” Bank Fraud Scheme in Sacramento Area and
Elsewhere”, (November 10, 2022), https://www.justice.gov/usao-edca/pr/korean-national-sentenced-7-years-and-9-months-
prison-bust-out-bank-fraud-scheme#:~:text= percentE2 percent80 percent94 percent20Kyung percent20Min percent20Kong
percent2C percent2055 percent2C,Talbert percent20announced; DOJ, “Colorado Man Pleads Guilty to “Bust Out” Bank Fraud
Scheme in Sacramento Area and Elsewhere”, (July 14, 2022), https://www.justice.gov/usao-edca/pr/colorado-man-pleads-
guilty-bust-out-bank-fraud-scheme-sacramento-area-and-elsewhere#:~:text=Area percent20and percent20Elsewhere-,Colorado
percent20Man percent20Pleads percent20Guilty percent20to percent20 percentE2 percent80 percent9CBust percent20Out
percentE2 percent80 percent9D percent20Bank percent20Fraud percent20Scheme,in percent20Sacramento percent20Area
percent20and percent20Elsewhere&text=SACRAMENTO percent2C percent20Calif.,Talbert percent20announced.
80 Business checks may be more valuable because business accounts typically hold higher account balances, and these victims
take longer notice the fraud on average.
81 FinCEN, “FinCEN Alert on Nationwide Surge in Mail The-Related Check Fraud Schemes Targeting the U.S. Mail”, (February
7, 2023), https://www.fincen.gov/sites/default/files/shared/FinCEN percent20Alert percent20Mail percent20The-Related
percent20Check percent20Fraud percent20FINAL percent20508.pdf.
82 USPIS, “Check Washing” (updated October 13, 2023), https://www.uspis.gov/news/scam-article/check-washing.
83 For more information regarding Telegram, see SEC, “Telegram to Return $1.2 Billion to Investors and Pay $18.5 Million Penalty to
Settle SEC Charges,” (June 26, 2020), https://www.sec.gov/news/press-release/2020-146.
17
2024 ◆ National Money Laundering Risk Assessment
the funds. Additionally, the criminal may use the victim’s PII to continue to engage in check fraud, open
new bank accounts, or perpetrate credit card fraud.
For example, in October 2023, Ishmael Benreuben pleaded guilty to a conspiracy to deposit
approximately $760,000 in fraudulent checks into bank accounts across New York, New Jersey, and
Washington, D.C., and to fraudulently withdraw approximately $115,000. Between 2021 and 2022,
Benreuben stole checks from the mail, forged and altered them, deposited them into various bank
accounts, and then quickly withdrew the funds before the banks could void the checks or close the
accounts. Benreuben worked alongside 26 others who owned the bank accounts and received a portion
of the fraudulent funds.
84
To facilitate mail the-related fraud, criminals will oen use money mules, individuals who receive and
move criminal proceeds. Criminals can recruit mules in person or over social media. (See Section on
Money Mule Networks) Some criminals will oer the money mule a fee (e.g., a portion of a check’s value)
in exchange for using their bank account to clear the check.
85
The funds are then quickly transferred out
of the account before the checks are returned or flagged. Once this occurs, the mule who deposited the
checks is responsible for the stolen funds, and the financial institution will hold them accountable for the
missing or stolen funds.
Check fraud actors will also pay mules for access to their banking information, including debit card, bank
pin, and password. Aer receiving the information, the check fraud actor will access the mule accounts
to deposit checks and withdraw proceeds. Criminal actors prefer using these already established bank
accounts with demonstrated regular banking activity as said accounts generally have fewer checking
restrictions placed on them by financial institutions, allowing for a larger percent of the checks’ value to
be accessed immediately upon deposit.
6. Business Email Compromise (BEC)
In 2022, the FBI received 21,832 BEC complaints with adjusted losses totaling more than $2.7 billion,
which makes it a top money laundering threat in the United States. BEC is a scam that elicits fraudulent
payments or sensitive identifying information using compromised email accounts. Scammers may take
over a legitimate email address and use it to contact victims or create their own email address that is
nearly identical to a legitimate one and then contact victims.
These scams oen target businesses or individuals who regularly perform wire transfer payments to
send funds. The fraudsters may also compromise or spoof other forms of communication, such as phone
numbers and virtual meeting applications, social engineering, or other computer intrusion techniques.
These schemes aim to induce targets to transfer funds to bank accounts thought to belong to trusted
partners.
86
Further, in 2022, the FBI saw a slight increase in instances whereby criminal actors targeted victims’
investment accounts rather than traditional banking accounts. Additionally, the FBI noted increased
84 DOJ, “Mount Vernon Man Pleads Guilty To Elaborate Check Fraud Scheme”, (October 10, 2023), https://www.justice.gov/usao-
sdny/pr/mount-vernon-man-pleads-guilty-elaborate-check-fraud-scheme.
85 USPIS, “Check Fraud”, (updated May 1, 2019), https://www.uspis.gov/news/scam-article/check-fraud.
86 FinCEN, “Updated Advisory on Email Compromise Fraud Schemes Targeting Vulnerable Business Processes”, (July 16, 2019),
https://www.fincen.gov/sites/default/files/advisory/2019-07-16/Updated percent20BEC percent20Advisory percent20FINAL
percent20508.pdf.
2024 ◆ National Money Laundering Risk Assessment
18
instances where BEC perpetrators spoof legitimate business phone numbers to confirm fraudulent
banking details with victims.
87
Over the last several years, methodologies have evolved and now involve
the impersonation of more entities with greater levels of detail (e.g., vendors, lawyers, requests for
seeming legitimate paperwork like W-2 information), diverting payroll funds, targeting real estate
payments, and requests for large amounts of gi cards.
88
As noted in the 2022 NMLRA, BEC in the real
estate sector has become more prevalent, with individual homebuyers suering disproportionately from
these incidents.
In March 2023, FinCEN issued a Financial Trends Analysis on patterns and trends identified in BSA
data relating to BEC in the real estate sector in 2020 and 2021.
89
FinCEN found that the sector remains
a target for BEC attacks exploiting the high monetary values generally associated with real estate
transactions and the various communications between entities involved in the real estate closing process
(e.g., title companies, title agents, closing agents, and escrow companies, and other individuals and
entities involved in the title and closing processes). Perpetrators of BEC in the real estate sector may
obtain unauthorized access to networks and systems to misappropriate confidential and proprietary
information to increase the likelihood that their scam is successful.
Those involved in BEC scams oen use several traditional ML techniques to launder their illicit funds. For
example, fraudsters may establish a fake business whose name closely resembles that of a legitimate
company and then use unwitting money mules to establish bank accounts that will be used for the
layering process. Once a victim has sent the funds to a fake business, the manager of the fraud group will
work with others to transfer the funds from the mule accounts before they ultimately end up in accounts
under the group’s control. In other cases, the fraudsters may simply withdraw funds as cash or negotiable
instruments such as cashier’s checks or have mules make withdrawals on their behalf.
90
Drug Trafcking
The traicking of illicit drugs, and related money laundering remains a significant threat to U.S. public
health and national and economic security. TCOs, primarily based in Mexico but operating a global illicit
supply chain, engage in the traicking of a variety of drugs, including counterfeits, into the United States.
Since at least 2017, illicit fentanyl has been the largest driver of overdose deaths and the number one
counter-narcotics priority for the U.S. government. Illicit fentanyl is oen mixed with other illicit drugs
or pressed and sold as counterfeit versions of other substances (such as prescriptions or veterinary
medication).
Consistent with the 2022 NMLRA, criminal actors in the drug trade embrace several methods to launder
proceeds, including bulk cash smuggling (BCS), funnel accounts, structured money transfers, trade-
based money laundering (TBML), purchase of real estate and luxury items, and virtual assets. While
the laundering of drug traicking proceeds is predominantly cash-based, the use of virtual assets is
87 FBI, “2022 Internet Crime Report”, https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3Report.pdf.
88 FBI, “2022 Congressional Report on BEC and Real Estate Wire Fraud”, https://www.fbi.gov/file-repository/fy-2022-fbi-
congressional-report-business-email-compromise-and-real-estate-wire-fraud-111422.pdf/view.
89 FinCEN, “FinCEN Analysis of Business Email Compromise in the Real Estate Sector Reveals Threat Patterns and Trends,” (March 30,
2023), https://www.fincen.gov/news/news-releases/fincen-analysis-business-email-compromise-real-estate-sector-reveals-threat.
90 DOJ, “Carson Man Sentenced to More Than 11 Years in Prison for Role in International Conspiracy to Launder Money Taken from
Fraud Victims,” (February 27, 2023), https://www.justice.gov/usao-cdca/pr/carson-man-sentenced-more-11-years-prison-role-
international-conspiracy-launder-money.
19
2024 ◆ National Money Laundering Risk Assessment
a growing concern for U.S. law enforcement. Drug traickers are also turning to professional money
launderers to launder their ill-gotten proceeds. In particular, drug traickers use Chinese Money
Laundering Organizations (CMLOs),
91
which employ an informal value transfer system (IVTS) to move
value across borders without needing to use the U.S. financial system. CMLOs have come to dominate
money laundering services for some DTOs.
This section focuses on the major money laundering threats involving proceeds generated from the
traicking of illicit synthetic opioids, given that is the biggest narcotics-related challenge currently facing
the United States. The section also highlights prescription drug diversion and addresses the priority DTO
threat actors.
1. Illicit Synthetic Opioids (including Fentanyl) and Heroin
According to the Drug Enforcement Administration (DEA), the availability of fentanyl throughout the
United States has reached “unprecedented heights.”
92
Since 2019, Mexican TCOs predominately import
fentanyl precursor chemicals and related manufacturing equipment
93
by air and marine shipping from
the People’s Republic of China (PRC). This diversion of fentanyl precursor chemicals and manufacturing
equipment can also be facilitated by a loose network of brokers who identify buyers and sellers. Once
the precursor chemicals and manufacturing equipment are diverted to Mexico, cooks and chemists
associated with the TCOs fabricate illicit fentanyl into pill and powder form, sometimes mixed with other
illicit drugs or as counterfeit versions of pharmaceuticals (such as Vicodin).
In 2022, the DEA seized more than 58 million counterfeit pills containing fentanyl, and 13,000 pounds
of fentanyl powder, equating to nearly 400 million deadly doses of fentanyl.
94
Data from the Centers
for Disease Control and Prevention consistently cite that about 75 percent of all overdose deaths are
attributed to illicit synthetic opioids, particularly fentanyl and its analogues.
95
Given the global nature of DTOs, the proceeds of fentanyl sales in the United States will intersect many
jurisdictions. A January 2024 case denotes this reality. This case involved a Utah-based company that
was allegedly the laundering hub for multiple drug traicking organizations which laundered more
than $20 million of dollars via wire transfers from Utah to Mexico and Honduras. According to court
documents, the company served as a money-remitting business for fentanyl and other drug proceeds,
which the defendants then used to falsify wire transfer information to avoid detection.
96
91 See Section on CMLOs.
92
DEA, “Statement of Anne Milgram Administrator DEA, DOJ At a Hearing Entitled “Drug Enforcement Administration Oversight” Before the
House Subcommittee on Crime and Federal Government Surveillance”, (July 27, 2023, https://www.dea.gov/sites/default/files/2023-07/
Administrator percent20Written percent20SFR percent20July percent202023 percent20 percent28Final percent29.pdf.
93 To include pill presses, encapsulating machines, and die molds.
94 DEA, “Statement of Anne Milgram Administrator DEA, DOJ At a Hearing Entitled “Drug Enforcement Administration Oversight”
Before the House Subcommittee on Crime and Federal Government Surveillance”, (July 27, 2023, https://www.dea.gov/sites/
default/files/2023-07/Administrator percent20Written percent20SFR percent20July percent202023 percent20 percent28Final
percent29.pdf.
95 CDC, “Drug Overdose Deaths Remained High in 2021” (update August 22, 2023), https://www.cdc.gov/drugoverdose/deaths/
index.html#:~:text=Opioids percent20were percent20involved percent20in percent2080 percent2C411,and percent20without
percent20synthetic percent20opioid percent20involvement.
96 DOJ, “24 Defendants, including a Utah Business Owner, Accused of Running a Drug and Money Laundering Operation from Utah
to Mexico and Honduras,” (January 8, 2024), https://www.justice.gov/usao-ut/pr/24-defendants-including-utah-business-owner-
accused-running-drug-and-money-laundering.
2024 ◆ National Money Laundering Risk Assessment
20
In the first criminal charges against China-based chemical manufacturing companies and nationals of
the PRC for traicking fentanyl precursor chemicals into the United States, the DOJ announced the arrest
of two individuals and the unsealing of three indictments charging China-based companies and their
employees with crimes related to fentanyl production, distribution, and sales resulting from precursor
chemicals. One of the indictments also charges defendants with money laundering oenses.
97
According
to the allegations contained in the indictment and other court filings, a chemical manufacturer based
in the city of Wuhan, China, exported vast quantities of the precursor chemicals used to manufacture
fentanyl and its analogues. This manufacturer has openly advertised online its shipment of fentanyl
precursor chemicals to the United States and to Mexico, where drug cartels operate clandestine
laboratories, synthesize finished fentanyl at scale, and distribute the deadly fentanyl into and throughout
the United States. According to court documents, the defendants took payment for the shipments in
virtual assets.
98
In May 2023, the DOJ’s Joint Criminal Opioid and Darknet Enforcement team and international partners
announced the results of Operation SpecTor, which included 288 arrests.
99
One investigation that was
part of Operation SpecTor resulted in a May 2022 indictment of two defendants charging them with
conspiracy to distribute and possess with intent to distribute fentanyl and methamphetamine and
with conspiracy to launder money.
100
According to court documents, the defendants operated vendor
accounts on darknet marketplaces, through which they sold tens of thousands of counterfeit oxycodone
pills containing fentanyl in exchange for virtual assets. One defendant deposited into his wallet at a
virtual asset exchange
101
approximately $800,000 worth of bitcoin that originated from purchases made
on his and the co-defendant’s darknet vendor accounts. One defendant converted some part of those
bitcoin holdings into fiat currency.
In October 2023, the DOJ unsealed a series of indictments against another set of PRC-based chemical
companies similarly engaged in the illicit shipment of precursor chemicals.
102
In addition to accepting
virtual assets as payment, according to the charging documents, the defendants also used wire transfers
and a U.S.-based money services business (MSB) to process transactions.
97 DOJ, “Justice Department Announces Charges Against China-Based Chemical Manufacturing Companies and Arrests of
Executives in Fentanyl Manufacturing”, (June 23, 2023), https://www.justice.gov/opa/pr/justice-department-announces-charges-
against-china-based-chemical-manufacturing-companies.
98 DOJ, SDNY, U.S. v. Hubei Amarvel, case 23 cr 302, https://www.justice.gov/d9/2023-06/sdny_unsealed_2023.06.22_amarvel_
biotech_indictment_stamped_redacted.pdf.
99 DOJ, “Largest International Operation Against Darknet Traicking of Fentanyl and Opioids Results in Record Arrests and Seizures”,
(May 2, 2023), https://www.justice.gov/opa/pr/largest-international-operation-against-darknet-traicking-fentanyl-and-opioids-
results.
100 DOJ, “Sacramento Grand Jury Indicts Riverside County Man and Woman for Fentanyl Distribution and Money Laundering
Conspiracy”, (May 12, 2022), https://www.justice.gov/usao-edca/pr/sacramento-grand-jury-indicts-riverside-county-man-and-
woman-fentanyl-distribution-and.
101 The use of the term “exchange” in this assessment does not indicate registration as such or any legal status of any such
platform. This definition is for the purpose of the risk assessment and should not be interpreted as a regulatory definition under
the BSA or other relevant regulatory regimes.
102 DOJ, “Justice Department Announces Eight Indictments Against China-Based Chemical Manufacturing Companies and
Employees,” (October 3, 2023), https://www.justice.gov/opa/pr/justice-department-announces-eight-indictments-against-
china-based-chemical-manufacturing.
21
2024 ◆ National Money Laundering Risk Assessment
SNAPSHOT: Prescription Drug Diversion
While illicit production of synthetic opioids remains a significant concern, U.S. law enforcement
also prioritizes the investigation of medical professionals (or those representing themselves as
such) who divert controlled substances from legitimate medical supply. Many of these oenses are
associated with other predicates for money laundering, such as healthcare fraud.
In March 2023, 14 defendants were sentenced for their respective roles in a variety of crimes
stemming from a wide-ranging racketeering conspiracy involving diversion of prescription drugs,
money laundering, mail and wire fraud, and additional crimes.
103
According to the government’s
filings, prescription drugs were procured illicitly at below-market value and then were resold and
re-introduced into the market as legitimate drugs at near-market prices. Illicit procurement can
involve stealing drugs from manufacturers; buying drugs from patients with prescriptions at below-
market prices (the patients’ costs are oset or reduced by insurance, including Medicare); buying
drugs using false prescriptions and straw patients, usually with the aid of a corrupt doctor (again,
with the costs oset or reduced by insurance); and purchasing drugs from a manufacturer at a
discounted price through fraud (e.g., falsely claiming a charitable or similar discount).
2. Priority DTO Threat Actors
The illicit financial activities of DTOs pose risks to banks, money services businesses, and other entities,
such as real estate agents and attorneys. DTOs have also made use of VASPs.
104
a) Sinaloa and CJNG (Mexico)
According to its 2023 Annual Threat Assessment, the U.S. intelligence community cited Mexico-based
TCOs as the dominant producers and suppliers of various illicit drugs destined for the domestic U.S.
market.
105
Mexican TCOs, particularly the Sinaloa Cartel and the CJNG remain the most predominant and
sophisticated groups overseeing the transportation and distribution routes from Mexico to the United
States. According to the DEA, these two cartels, as well as their associates, facilitators, and brokers,
operate in all 50 U.S. states and over 50 countries around the world. Both groups have consolidated
control over drug corridors from Mexico and are heavily involved in the traicking of fentanyl,
methamphetamine, cocaine, heroin, and marijuana. Both have a history of establishing drug traicking
hubs, strong criminal partnerships, and using violence and corruption to gain control over the territory
where they operate.
106
According to the DOJ, the Sinaloa Cartel operates as an ailiation of drug traickers and money
launderers who obtain precursor chemicals, mainly from suppliers in China, for the manufacture of
103 DOJ, “Judgment Entered Against Fourteen Defendants In Case Dismantling Nationwide Racketeering Conspiracy”, (March 30,
2023), https://www.justice.gov/usao-ndca/pr/judgment-entered-against-fourteen-defendants-case-dismantling-nationwide-
racketeering.
104 DTO Activity as a national AML/CFT priority.
105 DNI, “Annual Threat Assessment of the U.S. Intelligence Community”, (February 6, 2023), https://www.dni.gov/files/ODNI/
documents/assessments/ATA-2023-Unclassified-Report.pdf.
106 Europol-DEA, “Complexities and Convenances in the International Drug Trade: The involvement of Mexican criminal actors in the EU
drug market”, (December 5, 2022), https://www.dea.gov/sites/default/files/2022-12/Europol_DEA_Joint_Report_Final.pdf, pg. 3.
2024 ◆ National Money Laundering Risk Assessment
22
synthetic drugs in Mexico. The Sinaloa Cartel will then traic those drugs into the United States and
collect, launder, and transfer the illicit proceeds back to Mexico. Once led by Joaquin Guzman Loera,
aka El Chapo, and Ismael Zambada Garcia, aka El Mayo, the Sinaloa Cartel’s members and associates,
allegedly including the sons of Guzman Loera (collectively known as Los Chapitos), smuggled significant
quantities of illicit drugs through Mexico and into the United States.
107
In April 2023, the DOJ announced charges against several leaders of the Sinaloa Cartel, including the
sons of incarcerated former Sinaloa leader Guzman Loera.
108
According to court documents, Los Chapitos
leveraged several methods for laundering proceeds from fentanyl and other illicit drug sales, using
various methods long used by the Sinaloa cartel and similar Mexican TCOs such as BCS, domestic and
oshore bank accounts, shell companies, real estate, TBML, and virtual assets.
109
As explained further in the Los Chapitos indictment, two of the defendants allegedly conspired to
repatriate the value of drug proceeds through smuggling mobile phones as part of a TBML scheme. As
part of the scheme, one defendant allegedly purchased U.S. dollars in bulk from Mexico-based Sinaloa
Cartel traickers at a discount in exchange for Mexican pesos, which represents the proceeds of cartel-
linked fentanyl sales in the United States. The defendant directed U.S.-based couriers to collect drug
proceeds in specific U.S. cities, which they then used to purchase cellphones in bulk. The defendant then
smuggled the phones into Mexico to sell at an inflated price. (See CMLO section for further information on
schemes involving electronics).
A two-year Organized Crime Drug Enforcement Task Forces (OCDETF) investigation dismantled a
sophisticated money laundering organization linked to the Sinaloa Cartel. The investigation led to the
indictment of 12 people, the seizure of over $17 million in cash and bank accounts, and the rescue of two
extortion victims. The organization allegedly used shell companies incorporated in Wyoming to launder
millions of dollars in cash belonging to the cartel. The leader of the organization was Enrique Daan
Esparragoza Rosas, a Mexican national based in Sinaloa, who received requests from top cartel leaders
like Ismael “El Mayo” Zambada and Joaquin “Chapo” Guzman. One of the defendants, Cristian Amaya
Nava, admitted that he extorted two victims to repay a drug debt and laundered over $2.4 million for the
cartel. Amaya Nava was sentenced to 60 months in prison.
110
b) Clan del Golfo (Colombia)
During the assessment period, Clan del Golfo (CDG), a Colombia-based TCO and paramilitary organization,
remained a significant producer and traicker of cocaine destined for U.S. drug markets and earned a
significant amount of proceeds in U.S. dollars. According to the DOJ, CDG is one of the most violent and
powerful criminal organizations in Colombia, and it is one of the largest distributors of cocaine in the world.
With as many as 6,000 members, the CDG exercises military control over vast amounts of territory in the
Urabá region of Antioquia, Colombia, one of the most lucrative drug traicking areas within Colombia due
to its proximity to the Colombia-Panama border and the Caribbean and Pacific coasts.
107 DOJ, “Justice Department Announces Charges Against Sinaloa Cartel’s Global Operation”, (April 14, 2023,) https://www.justice.
gov/opa/pr/justice-department-announces-charges-against-sinaloa-cartel-s-global-operation.
108 Ibid.
109 DOJ, SDNY, USA v. Ivan Archivaldo Guzman, case we CR 203, https://www.justice.gov/d9/press-releases/
attachments/2023/04/14/u.s._v._salazar_et_al_indictment_2.pdf.
110 DOJ, “Sophisticated Sinaloa Cartel Money Laundering Organization Dismantled”, April 11, 2023, https://www.justice.gov/usao-
sdca/pr/sophisticated-sinaloa-cartel-money-laundering-organization-dismantled.
23
2024 ◆ National Money Laundering Risk Assessment
The CDG funds its operations primarily through drug traicking. It imposes a so-called “tax” on any
drug traickers operating in territories under its control, charging fees for every kilogram of cocaine
manufactured, stored, or transported through areas controlled by the organization. The CDG also directly
exports cocaine and coordinates the production, purchase, and transfer of weekly and bi-weekly multi-
ton shipments of cocaine from Colombia into Central America and Mexico for ultimate importation to the
United States.
Cybercrime
For this report, Cybercrime
111
is defined as criminal activity that targets or uses computers under one
network for the purpose of harm, oen putting critical infrastructure at risk. It is distinct from cyber-
enabled fraud, such as BEC.
1. Ransomware
Ransomware criminals and related payments continue to pose a potent threat to U.S. national security,
our infrastructure, and our economy according to FBI reporting.
112
The number of ransomware attacks
and the amount paid in ransoms is estimated to have decreased in 2022 before rebounding in 2023.
For example, FinCEN identified 1,215 ransomware-related incidents reporting approximately $655.98
million in ransomware-related payments during 2022, compared to 1,410 ransomware-related incidents
reporting roughly $1.12 billion in payments during 2021.
Ransomware actors have increased the potency of their attacks and exerted greater pressure on victims
to pay. These actors also share resources or form partnerships with other cybercriminals to enhance the
eectiveness of their attacks. Some ransomware groups use a “ransomware-as-a-service” model. This
is a subscription-based model where administrators create an easy-to-use interface and then recruit
ailiates to deploy attacks. Ailiates of these groups identify targets and deploy malicious soware, and
then share a percentage of each ransom payment. Ailiates oen use specialized teams for various steps
in the ransomware process, including the laundering process. In other cases, ailiates can purchase data
from other cyber criminals on darknet markets to gain unauthorized access to a victim’s system.
Ransomware actors will oen target entities that they assess are more likely to pay a ransom, focusing
the attack on the victim’s most sensitive data. Attackers may also use multiple forms of extortion.
Ransomware actors may pressure victims or a family member to pay a ransom, for example, by stealing
confidential data and threatening to publish the data. However, law enforcement identified that
ransomware groups have learned that they can extract ransoms by only stealing data and forgoing
encryption, which is oen the first step of traditional ransomware attacks.
Ransomware criminals mainly demand payments in virtual assets and direct victims to send ransom
payments to specified virtual asset wallet addresses.
113
These addresses can be held at a VASP.
114
Ransomware criminals may also use accounts belonging to money mules
115
or unhosted wallets.
111 Cybercrime is identified as an AML/CFT National Priority.
112 FBI, “Internet Crime Report”, (March 2022), https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3Report.pdf.
113 FATF, “Countering Ransomware Financing”, (March 14, 2023), https://www.fatf-gafi.org/en/publications/Methodsandtrends/
countering-ransomware-financing.html.
114 See Virtual Assets Section.
115 See Money Mule Networks Section.
2024 ◆ National Money Laundering Risk Assessment
24
Ransomware criminals use various tools and methods, such as mixers or chain hopping, to hinder the
ability of financial institutions or competent authorities to trace or attribute transactions. These criminals
will use VASPs with weak AML/CFT controls, to exchange their illicit proceeds for fiat currency.
116
For
example, in January 2023, under section 9714(a) of the Combating Russian Money Laundering Act,
as amended by section 6106(b) of the NDAA for Fiscal Year 2022, FinCEN identified the VASP Bitzlato
Limited (Bitzlato) as a “primary money laundering concern” in connection with Russian illicit finance, in
part for its facilitation of illicit transactions for Russian ransomware actors. This order prohibits certain
transmittals of funds involving Bitzlato by any covered financial institution.
117
According to the DOJ, which concurrently announced charges against a Bitzlato senior executive for
operating an unlicensed money transmitting business, Bitzlato allegedly received more than $15 million
in ransomware proceeds.
118
Bitzlato allegedly became a haven for criminal proceeds and funds intended
for use in criminal activity because of deficient AML/CFT controls. In other instances, ransomware
proceeds have been converted into Chinese Renminbi (RMB) or sent to China-based money launderers.
119
Ransomware attacks continue to frequently stem from jurisdictions with elevated sanctions risk or with
ties to sanctioned persons, including Russia, the DPRK, and Iran.
120
Russia is a haven for ransomware
actors, enabling cybercriminals to engage openly in ransomware attacks against U.S. organizations.
121
According to FinCEN analysis, 75 percent of ransomware-related incidents reported between July and
December 2021 were linked to Russia, its proxies, or persons acting on its behalf. Additionally, the
FBI reports that DPRK state-sponsored actors have deployed Maui ransomware against healthcare
organizations to disrupt access to electronic health records.
122
The Oice of Foreign Assets Control (OFAC)
has also designated several entities responsible for perpetrating ransomware attacks, VASPs responsible
for laundering ransomware payments, and cybercriminal groups responsible for developing and
distributing ransomware, such as Evil Corp.
123
The DOJ has also worked to prosecute individuals guilty of laundering the proceeds of ransomware
attacks, including Bitzlato referenced above. Additionally, in February 2023, Denis Mihaqlovic Dubnikov,
116 See Virtual Assets Section, jurisdictional arbitrage.
117 FinCEN, “FinCEN Identifies Virtual Currency Exchange Bitzlato as a “Primary Money Laundering Concern” in Connection with
Russian Illicit Finance”, (January 18, 2023), https://www.fincen.gov/news/news-releases/fincen-identifies-virtual-currency-
exchange-bitzlato-primary-money-laundering.
118 DOJ, “Founder and Majority Owner of Bitzlato, a Cryptocurrency Exchange, Charged with Unlicensed Money Transmitting”,
(January 18, 2023), https://www.justice.gov/usao-edny/pr/founder-and-majority-owner-bitzlato-cryptocurrency-exchange-
charged-unlicensed-money.
119 DOJ, “Justice Department Seizes and Forfeits Approximately $500,000 from North Korean Ransomware Actors and their
Conspirators”, (July 19, 2022), https://www.justice.gov/opa/pr/justice-department-seizes-and-forfeits-approximately-500000-
north-korean-ransomware-actors.
120 Treasury, “Treasury Sanctions IRGC-Ailiated Cyber Actors for Roles in Ransomware Activity,” ( September 14, 2022), https://
home.treasury.gov/news/press-releases/jy0948; DOJ, “Three Iranian Nationals Charged With Engaging In Computer Intrusions
And Ransomware-Style Extortion Against U.S. Critical Infrastructure Providers,” (September 14, 2022), https://www.justice.gov/
usao-nj/pr/three-iranian-nationals-charged-engaging-computer-intrusions-and-ransomware-style.
121 Treasury, “Treasury Sanctions Russian Ransomware Actor Complicit in Attacks on Police and U.S. Critical Infrastructure”, (May
16, 2023), https://home.treasury.gov/news/press-releases/jy1486.
122 CISA, “North Korean State-Sponsored Cyber Actors Use Maui Ransomware to Target the Healthcare and Public Health Sector”,
(July 7, 2022), https://www.cisa.gov/news-events/cybersecurity-advisories/aa22-187a.
123 Treasury, “Treasury Sanctions Evil Corp, the Russia-Based Cybercriminal Group Behind Dridex Malware”, (December 5, 2019),
https://home.treasury.gov/news/press-releases/sm845.
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2024 ◆ National Money Laundering Risk Assessment
a Russian virtual asset money launderer, pleaded guilty to one count of conspiracy to commit money
laundering. Dubnikov and his co-conspirators laundered the proceeds of Ryuk ransomware attacks
on individuals and organizations throughout the United States and abroad. Aer receiving ransom
payments, Ryuk actors, including Dubnikov, engaged in international financial transactions to conceal
the nature, source, location, ownership, and control of the ransom proceeds.
124
2. Malware
Ransomware actors and other cybercriminals oen use malware to commit their crimes. Malware refers
to soware or code intended to damage or disable a computer or computer systems or destroy data.
Malware can enable criminals’ computer access to steal credentials, alter account information, and
conduct fraudulent transactions. Criminals oen deliver malware to victims through phishing emails,
malicious websites and downloads (e.g., via illicit streaming and digital privacy sites), domain name
system hijacking, and fraudulent mobile applications. Law enforcement identified that cybercriminal
groups using malware oen take advantage of highly specialized, repurposing tools already installed
on a victim’s environment to gain access to their system for malicious purposes. Because these existing
programs and tools can be used by a victim’s legitimate network administrator, the malicious use of the
tools can be more diicult to detect than traditional malware.
Cybercriminal groups continue to develop and sell malware via darknet markets and online forums,
while others use the malware to harvest and monetize financial data and other PII on an industrial scale.
Criminals can traic the harvested data, such as banking passwords and login credentials, through
marketplaces that specialize in the sale of compromised or stolen personal, financial, and banking
information. Malicious actors can use this data to initiate unauthorized transfers from compromised
bank accounts or to preform social engineering attacks against victims whose data was stolen.
Law enforcement has observed that cybercriminal groups using malware oen launder funds using
similar methods as ransomware actors. For example, in April 2023, the FBI announced a coordinated
international operation against Genesis Market, a criminal online marketplace that advertised and sold
packages of account access credentials that had been stolen from malware and infected computers
around the world.
125
Since its inception in March 2018, Genesis Market has oered access to data stolen
from over 1.5 million compromised computers worldwide containing over 80 million account access
credentials. Genesis Market sold device “fingerprints,” unique combinations of device identifiers and
browser cookies that may be used to circumvent anti-fraud detection systems used by many websites.
The combination of stolen access credentials, fingerprints, and cookies allowed purchasers to assume
the victim’s identity by tricking third-party websites into thinking the Genesis Market user was the actual
owner of the account. OFAC concurrently designated Genesis Market as a specially designated national
(SDN) under its cyber-related sanctions program.
126
Additionally, in March 2023, the DOJ charged the founder of BreachForums for creating and administering
124 DOJ, “Russian Cryptocurrency Money Launderer Pleads Guilty”, (February 7, 2023), https://www.justice.gov/usao-or/pr/russian-
cryptocurrency-money-launderer-pleads-guilty.
125 DOJ, “Criminal Marketplace Disrupted in International Cyber Operation”, (April 5, 2023), https://www.justice.gov/opa/pr/
criminal-marketplace-disrupted-international-cyber-operation.
126 Treasury, “Treasury Sanctions Illicit Marketplace Genesis Market”, (April 5, 2023), https://home.treasury.gov/news/press-
releases/jy1388.
2024 ◆ National Money Laundering Risk Assessment
26
a major hacking forum and marketplace for cybercriminals.
127
The founder allegedly operated
BreachForums as a marketplace for cybercriminals to buy, sell, and trade hacked or stolen data, harming
millions of U.S. citizens and hundreds of U.S. and foreign companies, organizations, and government
agencies. According to the complaint, the platform oered stolen data such as bank account information,
social security numbers, other PII, hacking tools, breached databases, and account login information for
compromised online accounts with service providers and merchants.
Professional Money Laundering
Professional money laundering encompasses individuals, organizations, and networks involved in third-
party laundering for a fee or commission.
128
Although typically associated with laundering narcotics
proceeds, many money laundering organizations (MLOs) do not discriminate among sources of the dirty
money, laundering the proceeds from a variety of crimes, sometimes concurrently. This topic was first
included in the 2022 NMLRA and we are continuing to focus on this key threat enabler, exploring in more
depth those MLOs not previously covered. Therefore, this section will address new and emerging actors
including PML services used by kleptocrats when trying to extract assets from the United States, the
connected predicate oenses, and common methodologies.
There has been an increased use of professional enablers who facilitate the money laundering process
by further obfuscating the source of the funds, such as through a network of shell, front and legitimate
companies or the provision of supporting documentation. As noted in the Drug Traicking Section, PML
methods oen involve using TBML techniques. For example, in Mexico, professional enablers include
“factureros,” whose sole job is to create false invoicing and billing for seemingly legitimate services
never rendered and used to further obfuscate the money trail. A relevant case involves Ghacham Inc., a
clothing wholesaler fined for customs fraud and violating U.S. drug traicking sanctions. The company
pleaded guilty in December 2022 to one count of conspiracy to pass false and fraudulent papers through
a customhouse and one count of conspiracy to engage in any transaction or dealing in properties of
a specially designated narcotics traicker. Ghacham Inc. was ordered to pay financial penalties and
ordered to create and maintain an AML/CFT compliance and ethics program.
129
As noted earlier, drug cartels commonly employ MLOs. One 2022 OCDETF investigation involved a Tampa-
based MLO responsible for laundering more than $21.5 million in drug proceeds. Spread out over 400
transactions, this MLO
received the cash proceeds and then used the cash to purchase cashier’s checks,
visiting several banks in the same day to avoid suspicion. The couple purchased the cashier’s checks
themselves, on behalf of businesses they created, and recruited additional individuals to do so as well.
According to the DOJ, the checks “were then remitted to various other individual and business accounts
to receive, disguise, conceal, and distribute the drug traicking proceeds.”
130
127 DOJ, “United States v. Conor Brian Fitzpatrick”, (March 15, 2023), https://www.justice.gov/usao-edva/united-states-v-conor-
brian-fitzpatrick.
128 PML can be categorized as (1) individuals, (2) groups or (3) networks. See FATF, Professional Money Laundering, pp. 12-13, (2018),
https://www.fatf-gafi.org/en/publications/Methodsandtrends/Professional-money-laundering.html.
129 ICE, “HSI Los Angeles investigation ends with clothing wholesaler fined for customs fraud and violating U.S. drug traicking
sanctions,”(December 13, 2023), https://www.ice.gov/news/releases/hsi-los-angeles-investigation-ends-clothing-wholesaler-
fined-customs-fraud-and.
130 DOJ, “Tampa Couple Sentenced In Multimillion Dollar Money Laundering Scheme”, (October 24, 2022), https://www.justice.gov/
usao-mdfl/pr/tampa-couple-sentenced-multimillion-dollar-money-laundering-scheme.
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2024 ◆ National Money Laundering Risk Assessment
Another example of a professional launderer is Djonibek Rahmankulov, who was convicted of committing
bank fraud as well as laundering the proceeds of fraud and hacking schemes. Rahmankulov was
described as “laundering money for a living” for receiving proceeds from hacked bank accounts, COVID
fraud, and Medicare and Medicaid fraud. Rahmankulov operated a network of shell companies and bank
accounts and funded an unlicensed money transmitting business that illegally moved money to and
from multiple countries, including Iran.
131
This reflects a broader trend in which MLOs have established
unlicensed Money Service Businesses (MSBs) to facilitate their schemes.
1. Money Mule Networks
The role of money mules in facilitating cyber-enabled frauds and scams have been highlighted in both
the 2018 and 2022 NMLRAs and this year’s report is placing a special focus on these networks as a
category of PMLs. Money mules are recruited by MLOs and are used to transfer value, either by laundering
stolen money or physically transporting goods or other merchandise. Money mules may be witting
or unwitting participants and are oen recruited by criminals via job advertisements for ‘transaction
managers’ or through online social media interactions. Money mule recruiters or directors are referred
to as mule herders.
132
Money mules provide critical services to fraud syndicates by receiving money from
fraud victims and forwarding the fraud proceeds to the perpetrators (many of whom are based overseas).
Some individuals first interact with herders as victims and may be unaware that their activity is
furthering criminal activity. For example, these unwitting mules oen have trust in the actual existence
of their romance or job position. Other mules continue to operate aer they have been warned by bank
employees that they were involved in fraudulent activity or even aer U.S. law enforcement informs them
of their role in the criminal activity. These may be witting mules who are motivated by financial gain or
an unwillingness to acknowledge their role. For example, one alleged mule opened 11 bank accounts at
seven separate financial institutions and law enforcement informed that person that they were moving
fraud proceeds between various bank accounts. Despite this warning, the alleged mule continued to
receive more than $1.8 million into various bank accounts. These funds came directly from fraud victims
who were deceived into sending the funds to bank accounts controlled by the alleged mule, rather than
to the victims’ intended recipients. Aer receiving this money, the alleged mule quickly withdrew or
transferred it to various individuals or entities, including converting the funds into virtual assets.
133
In addition to moving fraudulent proceeds, complicit mules are also used to create shell companies
to open business bank accounts that can be used as part of the laundering process.
134
These complicit
mules may advertise their services as a money mule (e.g., on darknet marketplaces), to include what
actions they oer (e.g., recruiting other mules-see below) and at what prices. These mules are also
131 DOJ, “Queens Man Sentenced To 121 Months In Prison For Laundering Millions Of Dollars Of Fraud And Hacking Schemes And
Committing Bank Fraud”, (March 17, 2023), https://www.justice.gov/usao-sdny/pr/queens-man-sentenced-121-months-prison-
laundering-millions-dollars-fraud-and-hacking#:~:text=Damian percent20Williams percent2C percent20the percent20United
percent20States,Business percent20Administration percent20loan percent20fraud percent2C percent20as.
132 FBI, "Money Mules: Don’t Be a Mule: Awareness Can Prevent Crime,” https://www.fbi.gov/how-we-can-help-you/scams-and-
safety/common-scams-and-crimes/money-mules.
133 DOJ, “Westminster Woman Charged in Federal Indictment Alleging She Acted as ‘Money Mule’ Who Laundered Funds for
Cybercriminals”, (February 16, 2023), https://www.justice.gov/usao-cdca/pr/westminster-woman-charged-federal-indictment-
alleging-she-acted-money-mule-who.
134 DOJ, “Rhode Island Man Arrested and Charged with Laundering More than $35 Million in Fraud Proceeds and Obstruction of
Justice”, (February 23, 2023), https://www.justice.gov/usao-ma/pr/rhode-island-man-arrested-and-charged-laundering-more-
35-million-fraud-proceeds-and.
2024 ◆ National Money Laundering Risk Assessment
28
motivated by financial gain but oen are loyal to a known criminal group. Mule networks are also
involved in IVTS described in the previous section. The illicit couriers will move the funds that are raised
via fraud to a location which will facilitate the sale of the proceeds as part of IVTS transactions.
Managers and recruiters of money mule networks will recruit money mules to provide their PII
in connection with the incorporation of sham businesses under the money mules’ names. Under
the instruction of these herders, money mules open bank accounts under the names of the sham
corporations. Mule networks are oen used to facilitate BEC scams (see previous section on BEC scams)
and other on-line scams. For example, when the victims of these scams comply with the fraudulent
wiring instructions, the money is quickly debited or transferred out of the bank account created under
the mule’s name but that the herder ultimately controls. Money is quickly transferred out via in-person
and Automatic Teller Machine (ATM) withdrawals, debit card purchases oen in thousands of dollars, or
via wire from the bogus bank accounts to foreign bank accounts controlled by conspirators.
135
Some criminal networks also utilize online forums, including online classifieds and Darknet forums,
to advertise for and recruit cyber actors to establish sophisticated money laundering networks. For
example, herders advertise their cash-out services to cyber actors in online forums and communicate
with these actors on various messaging applications. Aer negotiating a portion of the cyber actors’
stolen funds as fee for their services, the herders direct their money mules to transfer funds from victim
accounts in the United States to drop accounts domestically and abroad.
136
These groups use several techniques to recruit new mules to receive and transmit fraud proceeds. Victims
may be asked to receive money or checks mailed to them or sent to their bank account for someone
they have met over the phone or online. Victims may be asked to open a bank or cryptocurrency account
at someone else’s direction. Fraudsters will lie to persuade victims to help them. They may falsely tell
victims that they are helping them get a lottery prize, initiate a purported romantic relationship, pretend
to oer them a job, present an opportunity to invest in a business venture, or oer the chance to help in
a charitable eort. In addition, according to law enforcement sources, the use of virtual businesses (e.g.,
check depositing service) has the potential to be abused by having third-party deposit checks to funnel
accounts on behalf of the criminals.
International students are particularly vulnerable to being recruited as money mules for a variety of
reasons, including the allure of quick and easy money.
137
Mules are oen targeted using social media,
including messaging apps such as WeChat. Students may be told that they are providing money
transmission services for other students, or that they are servicing unbanked Chinese citizens residing in
the United States. They are asked to open bank accounts or tasked with collecting and depositing cash
into banks on behalf of the CMLO. Some mules may even be asked to travel into or out of the United
States carrying bulk cash or transport high value luxury items to China.
135 DOJ, “Recruiter and Director of Money Mule Sentenced to Two Years in Prison for Participation in Business Email Compromise
Scheme”, (March 24, 2023), https://www.justice.gov/usao-nj/pr/recruiter-and-director-money-mule-sentenced-two-years-
prison-participation-business.
136 DOJ, “Ukrainian Nationals Plead Guilty to Financial Crimes”, (July 12, 2022), https://www.justice.gov/usao-ndtx/pr/ukrainian-
nationals-plead-guilty-financial-crimes#:~:text=Viktor percent20Vorontsov percent2C percent2040 percent2C percent20and
percent20Zlata,wire percent20fraud percent2C percent20and percent20bank percent20fraud.
137 Barclays, “Barclays warns of 23 per cent surge in student money mules,” (October 2, 2023), https://home.barclays/news/press-
releases/2023/10/barclays-warns-of-23-per-cent-surge-in-student-money-mules/.
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2024 ◆ National Money Laundering Risk Assessment
2. Chinese Money Laundering Organizations and Networks
CMLOs were addressed as a special focus topic in the 2022 NMLRA.
138
Since that time, law enforcement
has reported that CMLOs have become more prevalent and are now one of the key actors laundering
money professionally in the United States and around the globe.
139
CMLOs continue to work with other
international MLOs, such as Colombian peso brokers, and are able to penetrate their competitor’s
markets given their lower fees and rapid pay-out options. This capability is due to their eective use of
near real-time mirror transactions osetting transfers of money which can handle large amounts of cash,
overcome currency controls, and provide the rapid repatriation of proceeds. In addition, CMLOs have
been known to oer to absorb losses due to providing guarantees on any funds delivered. By charging
low fees and providing these guarantees, CMLOs are becoming one of the most significant money
laundering threat actors facing the U.S. financial system.
CMLOs, like other types of MLOs, are not typically involved in the underlying crimes which generate
proceeds (e.g., drugs, human smuggling, and fraud) and operate in a very compartmentalized fashion.
However, CMLOs are oen associated with larger TCOs engaged in a wide array of criminal activity.
Additionally, the CMLO cells will sometimes engage in low-level criminal activity to facilitate funds
movement as part of their laundering scheme, including through the use of counterfeit identification
or employing insiders to open bank or casino accounts. What makes these CMLOs eective is that
they are insular and oen decentralized, making them diicult to penetrate. They rely on a variety of
interpersonal relationships working together to facilitate dierent aspects of the laundering cycle.
According to law enforcement and open-source reporting, there appear to be a high number of CMLO
members who originate from or have close ties to the Fujian Province in China.
140
While CMLOs provide money laundering services for TCOs, their primary objective is to acquire and
subsequently sell USD (and other foreign currencies) using IVTS schemes to Chinese nationals seeking to
evade the Chinese government’s currency controls.
141
CMLOs operating in the United States increasingly
need access to significant amounts of USD to satisfy the demand for IVTS services by Chinese nationals.
This is how they make most of their profits, setting them apart from other professional MLOs. Since the
use of large sums of cash in the United States is uncommon and raises flags, CMLOs regularly source
the USD they need from TCOs operating throughout the United States. This has created a symbiotic
relationship between the two with each possessing what the other needs - CMLOs have a supercharged
demand for USD, while TCOs need their ill-gotten gains laundered.
For example, CMLOs enable Mexican cartels to seamlessly exchange USD derived from the sale of
narcotics for Mexican pesos.
142
Once the CMLO retrieves the criminal cash in the United States, a
138 Treasury, “National Money Laundering Risk Assessment”, (February 2022), see pp.23-24.
139 HSI, “HSI, Australian Federal Police and partners, announce takedown of multi-million dollar Chinese money laundering
syndicate,” (October 26, 2023), https://www.ice.gov/news/releases/hsi-australian-federal-police-and-partners-announce-
takedown-multi-million-dollar.
140 ProPublica, “Outlaw Alliance: How China and Chinese Mafias Overseas Protect Each Other’s Interests”, (July 12, 2023), https://
www.propublica.org/article/how-beijing-chinese-mafia-europe-protect-interests.
141 In 2017, the Chinese State Administration of Foreign Exchange capped foreign exchange transfers at $50,000. See ICE,
Cornerstone Report Issue #48, “Chinese Money Laundering Organizations (CMLOs) - Use of Counterfeit Chinese Passports,”
(January 2, 2024), https://content.govdelivery.com/bulletins/gd/USDHSICE-37f16?wgt_ref=USDHSICE_WIDGET_217.
142 ICE, Cornerstone Report Issue #45, “Chinese Money Laundering,” (October 5, 2023), https://content.govdelivery.com/bulletins/
gd/USDHSICE-3714ed3?wgt_ref=USDHSICE_WIDGET_217.
2024 ◆ National Money Laundering Risk Assessment
30
comparable sum of Mexican pesos is then released – almost immediately and with nearly non-existent
commission rates – to the cartel in Mexico using IVTS schemes (e.g., mirror transactions). Dirty dollars
remain in the United States, where at least in part, they are broken down into smaller amounts and
deposited into U.S. bank accounts opened by money mules, which sometimes involve international
students. This method, known as “smurfing,” allows the cartels to avoid the risk and cost associated
with attempting to smuggle bulk cash across our southern border. The CMLO then sells USD to Chinese
nationals for a profit, who, in some instances, use the USDs to purchase real estate or even to pay college
tuition expenses.
Unlike other MLOs, which transfer proceeds into and out of the country, a significant amount of the
money laundered by CMLOs stays in the United States. Traditionally, CMLOs purchase criminal proceeds
in U.S. cities for a nominal fee, transfer the equivalent value of foreign currency to drug traickers’ foreign
bank accounts and then “sell” the drug proceeds at a substantially higher rate to Chinese nationals
seeking to avoid China’s currency controls. These organizations also exploit China’s “one country, two
systems” policy by using the more liberal banking system in Hong Kong to establish USD bank accounts
to facilitate their schemes. These exchange transactions are not independent (e.g., one-for-one) and
oen involve multiple individuals using multiple currencies. In an example of a scheme involving both
IVTS and TBML methods, the CMLOs will receive RMB from Chinese customers who get USD in exchange,
and they sell the RMBs to Mexican customers who need it to buy goods. The RMB (equivalent to the
amount retrieved in the United States) is then transferred to the account of a CMLO associate in China
and then used to fund the purchase of goods for export to source countries such as Mexico. Those goods
are sold in Mexico to complete the IVTS scheme. The use of “o-the-books”, or informal transactions,
allows the CMLO to avoid U.S. reporting requirements and China’s currency controls while also hiding the
nature and source of the illicit funds being transferred.
SNAPSHOT: Schemes Involving Electronic Goods
A money laundering scheme used by CMLOs involves the procurement of high-value electronics
(e.g., smart phones, tablets, etc.) using illicit proceeds derived from drug traicking, fraud and
other criminal activities. Oen, these electronics are fraudulently obtained. In some instances,
the CMLOs will purchase these goods using stolen or fraudulent gi cards. The smart phones and
other high-value electronics are subsequently exported from the United States to Hong Kong,
China, Dubai, and other overseas locations where they are resold for a substantial profit. In an
OCDETF investigation, tens of millions of dollars’ worth of electronic devices were exported from
the United States using this scheme. In another example, a registered owner of an electronics and
restaurant supply business used their businesses to run a large-scale money laundering and money
transmitting operation that involved the laundering of drug proceeds and proceeds from stolen
or fraudulent gi cards.
143
These schemes permit CMLOs to significantly profit from the criminal
proceeds they purchase.
143 DOJ, “Eight Indicted in Money Laundering Ring”, (July 29, 2022), https://www.justice.gov/usao-ma/pr/eight-indicted-
money-laundering-ring#:~:text=BOSTON percent20 percentE2 percent80 percent93 percent20Eight percent20individuals
percent20have percent20been,used percent20stolen percent20and percent2For percent20fraudulent; Also see United States
District Court (USDC), District of Massachusetts, U.S. v. ZANG, Case 1:22-cr-10185.
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2024 ◆ National Money Laundering Risk Assessment
3. Special Focus: Russian Money Laundering and Sanctions Evasion
Professional money laundering linked to Russia is a significant threat to the national security of
the United States because it conceals and facilitates illicit activity on the part of oligarchs and the
government of Russia, enables the Kremlin’s damaging foreign policy goals, and undermines U.S.
national interests.
144
Russian eorts to evade sanctions present a similar threat; the act of circumventing
or otherwise avoiding sanctions adversely impacts the United States’ ability to disrupt, deter, and
prevent actions that undermine U.S. national security and the U.S. financial system.
145
There have been
several recent FinCEN and U.S. Department of Commerce’s Bureau of Industry and Security (BIS) alerts on
Russian sanctions and export control evasion.
146
Russian and Russia-linked actors, especially oligarchs, involved in money laundering and sanctions
evasion activity maintain vast global networks of shell companies, bank accounts, trusts, and other
means of hiding and moving funds abroad, including the United States.
147
Notably, these vast networks
intentionally span multiple jurisdictions and enable these bad actors to maintain control, obfuscate their
ill-gotten gains and assist the Kremlin in its illicit financial activities abroad.
Russian money laundering and sanctions violation activity may involve professional facilitators
and enablers who leverage their position in the international financial system to help SDNs. Recent
criminal indictments indicate that lawyers may be especially helpful to designated persons, given
their professional stature as well as financial tools such as Interest on Lawyers’ Trust Accounts (IOLTAs)
which can be misused to legitimize payments and draw scrutiny away from designated persons or other
facilitators.
148
Investment advisers, trust and company service providers (TCSPs), and other financial
proxies and intermediaries may also assist sanctioned Russian actors in accessing their funds, including
through the U.S. financial system.
149
Finally, the Russian government has directed its intelligence services
to set up complex transnational evasion networks abroad, leveraging front companies to funnel money
while attempting to maintain a lawful appearance. Russian actors have sought to exploit and abuse
144 Treasury, “NDAA Russia Illicit Finance Report”, (March 2023), https://home.treasury.gov/system/files/136/Treasury-NDAA-Ru-
IFR-508.pdf.
145 Treasury, “The Treasury 2021 Sanctions Review”, (October 2021), https://home.treasury.gov/system/files/136/Treasury-2021-
sanctions-review.pdf.
146 FinCEN, “FinCEN Advises Increased Vigilance for Potential Russian Sanctions Evasion Attempts,” (March 7, 2022), https://www.
fincen.gov/sites/default/files/2022-03/FinCEN%20Alert%20Russian%20Sanctions%20Evasion%20FINAL%20508.pdf, FinCEN,
“Supplemental Alert: FinCEN and the U.S. Department of Commerce’s Bureau of Industry and Security Urge Continued Vigilance
for Potential Russian Export Control Evasion Attempts,” (May 19, 2023), https://www.fincen.gov/sites/default/files/shared/
FinCEN%20and%20BIS%20Joint%20Alert%20_FINAL_508C.pdf; FinCEN, “FinCEN Alert on Potential U.S. Commercial Real Estate
Investments by Sanctioned Russian Elites, Oligarchs, and Their Proxies,” (January 25, 2023), https://fincen.gov/sites/default/
files/shared/FinCEN%20Alert%20Real%20Estate%20FINAL%20508_1-25-23%20FINAL%20FINAL.pdf.
147 FinCEN, “Trends in Bank Secrecy Act Data: Financial Activity by Russian Oligarchs in 2022”, https://www.fincen.gov/sites/default/
files/2022-12/Financial percent20Trend percent20Analysis_Russian percent20Oligarchs percent20FTA percent20_Final.pdf.
148 DOJ, “New York Attorney Pleads Guilty To Conspiring To Commit Money Laundering To Promote Sanctions Violations By
Associate Of Sanctioned Russian Oligarch”, (April 25, 2023), https://www.justice.gov/usao-sdny/pr/new-york-attorney-pleads-
guilty-conspiring-commit-money-laundering-promote-sanctions.
149 FinCEN Alert, FIN-2023-Alert002, FinCEN Alert on Potential U.S. Commercial Real Estate Investments by Sanctioned Russian Elites,
Oligarchs, and Their Proxies, p.4 (Jan. 25, 2023). In addition, on September 19, 2023, the SEC announced charges against Concord
Management LLC and its owner and principal, Michael Matlin, for operating as unregistered investment advisers to their only
client—a wealthy former Russian oicial widely regarded as having political connections to the Russian Federation. SEC, Press
Release 2023-186, SEC Charges New York Firm Concord Management and Owner with Acting as Unregistered Investment Advisers to
Billionaire Former Russian Oicial (Sep. 19, 2023).
2024 ◆ National Money Laundering Risk Assessment
32
otherwise legitimate economic relationships in third countries such as Türkiye, Singapore, the United
Arab Emirates, Armenia, Kyrgyzstan, Uzbekistan, PRC, and others to violate U.S. restrictions.
In May of 2022, OFAC identified accounting, trust and corporate formation, and management consulting
as categories of services prohibited from sale or export from the United States to Russia, highlighting the
role that TCSPs and similar companies play in assisting wealthy Russians and Russian companies with
setting up shell companies and hiding their assets.
150
In 2022 and 2023, FinCEN and the BIS issued two
joint alerts for financial institutions on Russian sanctions evasion, providing key information on evasion
red flags and illicit activity typologies, including Russia’s increasing use of traditional money laundering
tactics such as the use of corporate vehicles, shell companies, new company formations, nominee
directors, and non-routine foreign exchange transactions.
151
Enhanced U.S. visibility into the financial
networks of Russian proliferators, shell companies, and fronts has predicated new investigations and
bolstered existing ones, resulting in detentions and seizures of unauthorized exports. In addition, the
Russian Elites, Proxies, and Oligarchs (REPO) Task Force has assessed that financial institutions and other
entities’ compliance with both sanctions and anti-money laundering regulations have helped identify
and immobilize assets subject to sanctions.
Corruption
152
Corruption involves the abuse of power for private gain by public oicials exploiting positions of power
and public trust and by private individuals or entities aiming to improperly secure influence, enrichment,
or preferential treatment. Corrupt politically exposed persons (PEPs)
153
embezzle public funds, receive
bribes and kickbacks, and misappropriate wealth. In contrast, corrupt private entities may improperly
seek to control government decision-making in the form of improperly awarded concessions or
contracts.
154
PEPs should not be confused with the term “senior foreign political figure” as defined under
the BSA private banking regulation, a subset of PEPs. PEPs may present a higher risk for foreign public
corruption than other customers, due to their potential access to and influence over public assets.
155
The
term PEPs also refers to the immediate family members or close associates of individuals holding public
functions, reflecting corrupt actors’ regular use of third-party individuals and “proxies” in laundering
150 U.S. Department of the Treasury, “U.S. Treasury Takes Sweeping Action Against Russia’s War Eorts, (May 8, 2022), https://home.
treasury.gov/news/press-releases/jy0771.
151 FinCEN, “FinCEN and the Bureau of Industry and Security (BIS) Issue Joint Notice and New Key Term for Reporting Evasion of
U.S. Export Controls Globally,” (November 06, 2023), https://www.fincen.gov/news/news-releases/fincen-and-bureau-industry-
and-security-bis-issue-joint-notice-and-new-key-term; FinCEN, “FinCEN and the U.S. Department of Commerce’s Bureau
of Industry and Security Urge Increased Vigilance for Potential Russian and Belarusian Export Control Evasion Attempts,”
FIN-2022-Alert003, (June 28, 2022), https://www.fincen.gov/sites/default/files/2022-06/FinCEN percent20and percent20Bis
percent20Joint percent20Alert percent20FINAL.pdf.
152 The U.S. Strategy on Countering Corruption (2021), National Strategy for Combating Terrorist and Other Illicit Financing (2022),
and AML/CFT National Priorities identify countering corruption as a priority for the United States.
153 Foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family
members and close associates, See “Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who
May Be Considered Politically Exposed Persons”, (August 21, 2020), https://www.fincen.gov/sites/default/files/shared/PEP
percent20Interagency percent20Statement_FINAL percent20508.pdf.
154 The White house, “United States Strategy on Countering Corruption,” (December 2021), p.6., https://www.whitehouse.gov/wp-
content/uploads/2021/12/United-States-Strategy-on-Countering-Corruption.pdf.
155 FFIEC, “Politically Exposed Persons,” (November 2021), https://www.iec.gov/press/PDF/Politically-Exposed-Persons.pdf.
33
2024 ◆ National Money Laundering Risk Assessment
illicit proceeds.
156
Banks must apply a risk-based approach to customer due diligence (CDD) in developing
the risk profiles of their customers, including PEPs. They are required to establish and maintain written
procedures reasonably designed to identify and verify beneficial owners of legal entity customers.
157
These activities generate illicit proceeds, oen taking the form of bribes, kickbacks, embezzled or
misappropriated assets, or funds received as part of improperly awarded concessions or contracts.
These illicit proceeds may be laundered, stored, or moved through the U.S. financial system. Money
laundering methods commonly associated with corruption and kleptocracy include the misuse of legal
entities and oshore financial accounts; the purchase of real estate, luxury goods, and other high-
value assets (including yachts, aircra, and art); the misuse of certain professions and sectors, such as
investment advisers, lawyers, and trust and company service providers; and the reliance on MLOs.
158
Law
enforcement also reports an increasing number of corruption-related cases involving the use of digital
assets, though the overall number of these cases remains small relative to corruption involving fiat
currency.
159
Corruption results in considerable costs to society depriving governments of essential resources,
weakening the business environment, eroding good governance and the rule of law, inhibiting equity
and economic growth, and exacerbating other threats like organized crime and drug traicking.
160
Consequently, in 2021 President Joseph Biden established the fight against corruption as a core U.S.
national security interest.
161
These money laundering risks relate to both domestic and foreign corruption. In the United States, some
government oicials at the local, state, tribal, and federal levels may engage in corrupt practices. Foreign
actors also launder the proceeds of corruption through the movement or investment of funds in the U.S.
economy and financial system. Given the size and stability of the U.S. financial system, the United States
remains a significant money laundering destination for the proceeds of corruption. Further, U.S. eorts
to combat corruption in the past few years have led to an increased focus and fuller understanding of the
problem as illustrated in the many typology examples below.
1. Foreign Corruption
Money laundering tied to foreign corruption primarily involves payments to foreign oicials to obtain or
retain business, as well as the use of the U.S. financial system to launder the proceeds of corruption. The
156 FinCEN, “FinCEN Alert on Real Estate, Luxury Goods, and Other High-Value Assets Involving Russian Elites, Oligarchs,
and their Family Members,” (March 16, 2022), https://www.fincen.gov/sites/default/files/2022-03/FinCEN percent20Alert
percent20Russian percent20Elites percent20High percent20Value percent20Assets_508 percent20FINAL.pdf.
157 “Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed
Persons,” (August 21, 2020), https://www.fincen.gov/sites/default/files/shared/PEP%20Interagency%20Statement_FINAL%20508.pdf.
158 FinCEN, “Advisory on Kleptocracy and Foreign Public Corruption,” (April 2022), https://www.fincen.gov/sites/default/files/
advisory/2022-04-14/FinCEN percent20Advisory percent20Corruption percent20FINAL percent20508.pdf.
159 DOJ, “Bankman-Fried Charged in an Eight-Count Indictment with Fraud, Money Laundering, and Campaign Finance Oenses”,
(December 13, 2022), https://www.justice.gov/usao-sdny/pr/united-states-attorney-announces-charges-against-x-founder-
samuel-bankman-fried.
160 The White house, “United States Strategy on Countering Corruption,” (December 2021), p.6., https://www.whitehouse.gov/wp-
content/uploads/2021/12/United-States-Strategy-on-Countering-Corruption.pdf.
161 The White House, “Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest,”
(June 3, 2021), https://www.whitehouse.gov/briefing-room/presidential-actions/2021/06/03/memorandum-on-establishing-the-fight-
against-corruption-as-a-core-united-states-national-security-interest/. Corruption is a national AML/CFT priority.
2024 ◆ National Money Laundering Risk Assessment
34
United States is being used to hide the proceeds of foreign oenses given the size and stability of our financial
sector. U.S. law enforcement regularly investigates and prosecutes illicit activities involving extortion, bribery,
and misappropriation or embezzlement of public assets by or for the benefit of a public foreign oicial where
the U.S. financial system and markets are misused to disguise or shelter illicit proceeds.
As described in FinCEN’s 2022 Advisory on Kleptocracy and Foreign Public Corruption, corruption can
occur at any level of government and commonly involves the use of shell companies and oshore
financial accounts to move its proceeds; the purchase of real estate, luxury goods, and other high-value
assets; long-term government contracts or procurement processes; transactions with state-owned
companies, public institutions, or embassies; and exploitation of natural resources or commodities.
162
Foreign corruption cases involve a range of predicate crimes and money laundering techniques. In April
2023 a federal jury convicted Claudia Patricia Díaz Guillen, the former National Treasurer of Venezuela,
and her husband, Adrian José Velásquez, for their roles in an international currency exchange scheme.
163
The scheme involved accepting more than $100 million in bribes, using BCS, oshore shell companies,
wire transfers from Swiss bank accounts to accounts in Southern Florida, and purchasing high-value
luxury goods in Florida.
164
In another case in 2022, the DOJ filed a civil forfeiture complaint alleging that
an Armenian businessperson purchased a high-value mansion in Los Angeles with bribes in excess of $20
million for a former high-ranking Armenian public oicial and his family in exchange for favorable tax
treatment.
165
In 2023, a defendant pleaded guilty to laundering funds embezzled from the health oice
of the Embassy of Kuwait in Washington, DC. The scheme involved the creation of shell companies with
names meant to mimic actual U.S. healthcare providers and the submission of more than $1.5 million in
fraudulent invoices to the Embassy’s health oice.
166
2. Domestic Corruption
Domestic corruption cases most oen involve bribery and subsequent eorts to launder or disguise
bribes paid to, solicited by, or received by U.S. public oicials. Other prosecutable oenses commonly
associated with domestic corruption, such as the misappropriation or embezzlement of public assets,
fraud (especially relating to contracting and procurement), election and campaign finance crimes, the
solicitation or receiving of kickbacks, and tax evasion, also remain risks.
167
These activities occur at the
federal, state, local, and tribal levels, and have involved a range of individuals, including law enforcement
162 FinCEN, “Advisory on Kleptocracy and Foreign Public Corruption,” (April 2022), https://www.fincen.gov/sites/default/files/
advisory/2022-04-14/FinCEN percent20Advisory percent20Corruption percent20FINAL percent20508.pdf.
163 DOJ, “Former Venezuelan National Treasurer and Husband Sentenced in Money Laundering and International Bribery Scheme,”
(December 15, 2022), https://www.justice.gov/opa/pr/former-venezuelan-national-treasurer-and-her-husband-sentenced-
money-laundering-and.
164 See Southern District of Florida, USA vs. Raul Gorrin Belisario Claudia Patricia Diaz Guillen, andAdrian Jose Velasquez Figueroa,
Case 18-cr-80160, superseding indictment.
165 DOJ, “Justice Department Seeks Forfeiture of Los Angeles Mega-Mansion Purchased with Proceeds of Armenian Corruption
Scheme,” (May 5, 2022), https://www.justice.gov/opa/pr/justice-department-seeks-forfeiture-los-angeles-mega-mansion-
purchased-proceeds-armenian.
166 DOJ, “Former Fugitive Pleads Guilty to Laundering Money Embezzled from Kuwaiti Embassy,” (May 16, 2023), https://www.
justice.gov/opa/pr/former-fugitive-pleads-guilty-laundering-money-embezzled-kuwaiti-embassy; DOJ, “Defendant Returned by
Egypt to the United States to Face Charges for Alleged Scheme to Defraud the Kuwaiti Embassy,” (December 23, 2021), https://
www.justice.gov/opa/pr/defendant-returned-egypt-united-states-face-charges-alleged-scheme-defraud-kuwaiti-embassy.
167 DOJ, “Report to Congress on the Activities and Operations of the Public Integrity Section for 2021,” (2021), https://www.justice.
gov/criminal-pin/file/1548051/download; DOJ, “Former Puerto Rico Legislator Sentenced for Bribery and Kickback Scheme,”
(September 7, 2022), https://www.justice.gov/opa/pr/former-puerto-rico-legislator-sentenced-bribery-and-kickback-scheme.
35
2024 ◆ National Money Laundering Risk Assessment
oicers, political consultants and campaign employees, contractors, oicials engaged in procurement,
elected leaders, and members of the judiciary.
168
Money laundering activity has been a key component of many domestic corruption cases. For example,
a March 2022 case involved Alderman Ricardo Munoz, a former elected city oicial sentenced on federal
wire fraud and money laundering charges for using money from a political fund to pay for personal
expenses.
169
While serving in oice, Munoz used money from a political action committee to pay a
relative’s college tuition and other personal expenses, and sought to conceal this fraud scheme by
making materially false representations to the State elections board.
170
In another 2022 case, a former
elected State Representative and an associated sta member were charged with the from programs
receiving federal funds, engaging in bribery and kickbacks concerning programs receiving federal funds,
honest services wire fraud, and conspiracy to commit money laundering.
171
It is alleged that the two
individuals sought State funds by using a fictitious name and submitting sham invoices to the State from
companies the two individuals owned.
172
3. Special Focus: Unlawful Campaign Finance
Over the past ten years, here have been numerous instances of money laundering occurring in and
around domestic political campaigns for federal, state, and local oice. When domestic and foreign
actors carry out these activities, it undermines the integrity of democratic processes in the United States,
erodes institutions, and may aord corrupt or illicit actors unfair political advantages.
173
Domestic and
foreign actors have engaged in money laundering to leverage campaign funds for personal use and to
obfuscate campaign fundraising eorts (oen to conceal the identity of donors or to obstruct campaign
finance disclosures). These activities may be perpetrated by political candidates and their campaigns,
foreign governments seeking strategic gain, or political supporters aiming to bypass campaign finance
law, among others.
Campaign finance-related money laundering may involve a range of techniques, depending on the kind
of illicit actors perpetrating the scheme and their respective political, financial, or strategic objectives.
Recent cases and law enforcement reports suggest that campaign invoices, business and consulting
contracts, donations to nonprofits, and standard business transactions are common methods through
which illicit actors carry out campaign finance fraud.
168 DOJ, “Military Contractors Convicted for $7 Million Procurement Fraud Scheme,” (March 29, 2023), https://www.justice.gov/
opa/pr/military-contractors-convicted-7-million-procurement-fraud-scheme; DOJ, “Former Judge Arrested for Bribery and
Obstruction of Justice,” (January 5, 2023), DOJ, “Former Arkansas State Senator Sentenced for Bribery and Tax Fraud,” (February
3, 2023), https://www.justice.gov/opa/pr/former-arkansas-state-senator-sentenced-bribery-and-tax-fraud; https://www.justice.
gov/opa/pr/former-judge-arrested-bribery-and-obstruction-justice.
169 USAO, “Former City of Chicago Alderman Sentenced to More Than a Year in Federal Prison for Using Political Funds To Pay
Personal Expenses,” (March 17, 2022), https://www.justice.gov/usao-ndil/pr/former-city-chicago-alderman-sentenced-more-
year-federal-prison-using-political-funds.
170 Id.
171 DOJ, “Tennessee State Representative and Former Chief of Sta Charged with Bribery and Kickback Conspiracy,” (August 23,
2022), https://www.justice.gov/opa/pr/tennessee-state-representative-and-former-chief-sta-charged-bribery-and-kickback-
conspiracy.
172 Id.
173 The White House, “United States Strategy on Countering Corruption,” (December 2021), p.7, https://www.whitehouse.gov/wp-
content/uploads/2021/12/United-States-Strategy-on-Countering-Corruption.pdf.
2024 ◆ National Money Laundering Risk Assessment
36
In 2023, Jessie R. Benton was convicted for his role in funneling illegal foreign campaign contributions
from a Russian national to a 2016 U.S. presidential campaign.
174
The scheme entailed Benton’s political
firm creating a fake invoice for consulting services, the Russian national wiring $100,000 to the firm,
and Benton acting as a straw donor by contributing $25,000 to the campaign.
175
The campaign then
unwittingly filed reports with the Federal Election Commission inaccurately reporting the U.S. individual,
instead of the Russian national, as the source of the funds.
176
In July 2022, two U.S. citizens were charged with money laundering conspiracy, among other oenses, for
a scheme in which they allegedly acted as “straw donors” for foreign nationals to unlawfully contribute
to political campaigns.
177
The two individuals allegedly received funds from foreign nationals and
gave $600,000 to political campaigns in their own names in violation of Federal Election Commission
regulations.
178
Human Trafcking & Human Smuggling
Human traicking and human smuggling networks pose a serious criminal threat with devastating
human consequences.
179
Human traickers jeopardize the fundamental human right to personal
freedom as criminals seek to profit from forced labor or sexual servitude. Human smugglers frequently
place migrants in grave danger in the service of extreme profits. While human traicking and human
smuggling are distinct crimes, individuals who are smuggled are also vulnerable to becoming victims of
human traicking and other serious crimes.
Both crimes generate large profits that may be laundered through the U.S. financial systems. Human
traicking and human smuggling criminal networks use a variety of mechanisms to move illicit proceeds
generated by these two crimes, expanding their profits and threatening the integrity of the U.S. financial
system. They employ purchases of real estate, wire transfers, credit cards, and bulk cash transfers,
among others. Increasingly, virtual assets have facilitated both types of criminal activities.
1. Human Traicking
Human traicking is a financially motivated crime whereby traickers exploit victims by compelling or
coercing them to perform labor or services or engage in commercial sex. Human traicking victims in the
United States may be U.S. citizens, foreign nationals who have lawful immigration status, or individuals
who are unlawfully present. Victims of human traicking may likewise come from any socioeconomic
group, though significant risk factors may include recent migration, substance use, mental health
174 DOJ, “Political Consultant Convicted for Scheme Involving Foreign Campaign Contribution to 2016 Presidential Campaign,”
(November 17, 2022), https://www.justice.gov/opa/pr/political-consultant-convicted-scheme-involving-illegal-foreign-
campaign-contribution-2016.
175 Id.
176 Id.
177 DOJ, “Oyster Bay Residents Charged with $27 Million Investment Fraud Scheme and Selling Foreign Nationals Access to
Prominent U.S. Politicians,” (July 18, 2022), https://www.justice.gov/usao-edny/pr/oyster-bay-residents-charged-27-million-
investment-fraud-scheme-and-selling-foreign.
178 Id.
179 Human traicking and human smuggling are identified as an AML/CFT National Priority.
37
2024 ◆ National Money Laundering Risk Assessment
concerns, or involvement with the child welfare system or youth homelessness.
180
Sex traicking is oen
facilitated through online social media platforms.
181
Beyond its enormous human costs, human traicking is one of the most profitable crimes and predicate
oenses for money laundering.
182
While an underreported crime, between January 1, 2020 and August
31, 2022, a total of 26,872 situations of human traicking were reported to the U.S. National Human
Traicking Hotline involving 42,887 likely victims.
183
An estimated 30 million people are subjected to
human traicking across the world.
184
Estimates suggest that human traicking generates more than
$150 billion in global illicit profits annually.
185
Financial activity from human traicking can intersect with the regulated financial system at any
point during the recruitment, transportation, and exploitation stages. Transactions related to human
traicking can include payments associated with the transport and housing of victims; the collection of
proceeds generated by the exploitation of traicking victims; and the movement of proceeds.
186
TCOs
may make financial investments to facilitate human traicking-related activities, such as investing in real
estate, bars, restaurants, or other businesses to conceal their traicking-related activities.
187
Companies
that appear legitimate may be used to launder money to support human traicking.
Illicit proceeds from human traicking can be paid or transferred in cash, electronic funds transfers/
180
National Human Traicking Hotline, “Human Traicking: Who is Vulnerable?” https://humantraickinghotline.org/en/human-
traicking#:~:text=Who percent20is percent20Vulnerable percent3F,a percent20runaway percent20or percent20homeless percent20youth
.
181 DOJ, “Kansas Man Convicted for Sex Traicking in Oklahoma”, (August 3, 2023), https://www.justice.gov/usao-ndok/pr/kansas-
man-convicted-sex-traicking-oklahoma; DOJ, “Jamestown Woman Pleads Guilty To Her Role In Sex Traicking Conspiracy”,
(August 17, 2023) https://www.justice.gov/usao-wdny/pr/jamestown-woman-pleads-guilty-her-role-sex-traicking-conspiracy;
DOJ, “Marion County Man Convicted of Human Traicking,” (August 23, 2023), https://www.justice.gov/usao-edtx/pr/marion-
county-man-convicted-human-traicking.
182 State, Treasury, “Report to Congress on An Analysis of Anti-Money Laundering Eorts Related to Human traicking”, (October 7, 2020),
https://www.state.gov/report-to-congress-on-an-analysis-of-anti-money-laundering-eorts-related-to-human-traicking/.
183 Polaris, “The Typology of Modern Slavery”, (August 30, 2023), https://polarisproject.org/the-typology-of-modern-slavery/
184 DHS, “Countering Human Traicking: A Year in Review”, (January 2023), https://www.dhs.gov/sites/default/
files/2023-05/23_0131_CCHT_year-in-review_revised-23_0509.pdf; Department of State, “About Human Traicking,” https://
www.state.gov/humantraicking-about-human-traicking/#:~:text=With%20an%20estimated%2027.6%20million,them%20
for%20their%20own%20profit.
185 The White House, “FACT SHEET: The National Action Plan to Combat Human Traicking (NAP)” (December 3, 2021), https://www.
whitehouse.gov/briefing-room/statements-releases/2021/12/03/fact-sheet-the-national-action-plan-to-combat-human-traicking-
nap/#:~:text=December percent2003 percent2C percent202021-,FACT percent20SHEET percent3A percent20The percent20National
percent20Action,to percent20Combat percent20Human percent20Traicking percent20(NAP)&text=Globally percent2C percent20an
percent20estimated percent2025 percent20million,billion percent20annually percent20in percent20illicit percent20profits. The actual
value of proceeds from human traicking is likely to be much higher. In 2014, an International Labour Oice study found that forced
labor generates approximately $150 billion in proceeds annually. Since that time, the number of persons understood to be victims of
human traicking has increased by nearly 50 percent. International Labour Oice, 2014, Profits and Poverty: The Economics of Forced
Labour, https://www.ilo.org/wcmsp5/groups/public/---ed_norm/---declaration/documents/publication/wcms_243391.pdf, page 13.
186 FinCEN, “Supplemental Advisory on Identifying and Reporting Human Traicking and Related Activity”, FIN2020-A008, (October
15, 2020,) https://www.fincen.gov/sites/default/files/advisory/2020-10-15/Advisory percent20Human percent20Traicking
percent20508 percent20FINAL_0.pdf; FinCEN, “Advisory Guidance Recognizing Activity that May be Associated with Human
Smuggling and Human Traicking”, FIN2014-A008, (September 11, 2014), https://www.fincen.gov/sites/default/files/advisory/
FIN-2014-A008.pdf; FinCEN, “FinCEN Alert on Huma Smuggling along the Southwest Border of the United States”, FIN2023-
Alert001, (January 13, 2023), https://www.fincen.gov/sites/default/files/shared/FinCEN percent20Alert percent20Human
percent20Smuggling percent20FINAL_508.pdf.
187 FinCEN, “Supplemental Advisory on Identifying and Reporting Human Traicking and Related Activity”, FIN2020-A008, (October
15, 2020,) https://www.fincen.gov/sites/default/files/advisory/2020-10-15/Advisory percent20Human percent20Traicking
percent20508 percent20FINAL_0.pdf.
2024 ◆ National Money Laundering Risk Assessment
38
remittance systems, credit card transactions, payment apps, or virtual assets.
In the United States, human traicking occurs in a broad range of industries, including hospitality,
agriculture, healthcare, manufacturing, commercial cleaning services, construction, peddling and
begging, food service industries, beauty salon services, domestic work, fairs and carnivals, escort
services, illicit massage, and health and beauty services.
188
The DOJ regularly prosecutes money laundering with predicate human traicking oenses.
189
For
example, a TCO conspired to make money by compelling hundreds of women from Thailand to engage
in commercial sex acts in various cities across the United States. The DOJ pursued prosecutions
against the TCO that have resulted in 37 convictions.
190
Sumalee Intarathong pleaded guilty to her role
as a visa broker for the TCO, which controlled victims until they could repay an exorbitant “bondage
debt” of between $40,000 and $60,000.
191
The TCO dealt primarily in cash and engaged in rampant and
sophisticated money laundering to promote and conceal illegal profits. The TCO generated profits in
the United States and then used funnel accounts, third-party money launderers, and BCS to transport
proceeds. To evade detection, the traicking organization paid flight attendants to keep quiet and, in
some limited instances, to transport bulk cash in their own luggage. Transactions related to the human
traicking scheme in the United States were made using prepaid credit cards and virtual assets.
192
The TCO moved tens of millions of dollars in illegal proceeds from the United States to Thailand and
elsewhere.
In another case, Peter Griin, a retired San Diego Police Department vice detective, owned a network
of illicit massage businesses (IMBs) in Southern California and Arizona. Through the course of Griin’s
criminal operation, he established several bank accounts for his IMBs, which Griin and his co-
conspirators regularly used to collect payments for the commercial sex services they instructed women
to perform inside the businesses. Griin then used these accounts to pay for online commercial sex
advertisements and other business expenses. On three separate occasions, Griin knowingly used the
bank accounts associated with his illicit and illegal businesses to purchase a Cartier watch and a car and
issued a cashier’s check payable to one of his codefendants. Griin was sentenced on October 13, 2023,
to 33 months in custody.
193
188 Polaris, “The Typology of Modern Slavery”, (August 30, 2023), https://polarisproject.org/the-typology-of-modern-slavery/.
189 See Sec. II.E of Attorney Generals' Annual Report to Congress on U.S. Government Activities to Combat Traicking in Persons (FY2021),
available at Attorney General’s Annual Report to Congress on U.S. Government Activities to Combat Traicking in Persons, Fiscal
Year 2021 (justice.gov).
190 DOJ, “Thai Woman Pleads Guilty to Her Role in International Sex Traicking Conspiracy”, (November 29, 2022), https://www.
justice.gov/usao-mn/pr/thai-woman-pleads-guilty-her-role-international-sex-traicking-conspiracy.
191 Id.
192 FinCEN, “Supplemental Advisory on Identifying and Reporting Human Traicking and Related Activity”, FIN2020-A008, (October
15, 2020).
193 DOJ, “Former San Diego Police Oicer and Three Others Plead Sentenced from Years-long Operation of Illicit Massage
Businesses, (Oct. 13, 2023), https://www.justice.gov/usao-sdca/pr/former-san-diego-police-oicer-and-three-others-sentenced-
crimes-stemming-years-long.
39
2024 ◆ National Money Laundering Risk Assessment
2. Human Smuggling
Human smugglers engage in bringing people, who have consented to their travel, across international
borders through deliberate evasion of immigration laws, oen for financial benefit. Human smuggling
is an inherently transnational crime, with smuggling routes across the southwest border remaining the
most popular for entry into the United States. In recent years, law enforcement has witnessed an increase
in the number of women, children, and families seeking transportation by human smugglers.
194
Human
smuggling networks are lucrative, and Illicit financial networks of criminals who profit o vulnerable
migrants can command smuggling fees ranging from $5,000 up to tens of thousands of dollars per
migrant.
195
Moving human beings as cargo pays billions of dollars for transnational criminal smuggling
organizations and involves significant risk to the people involved.
196
TCOs that control drug smuggling
territory also profit from this illegal activity by charging smuggling organizations a fee or tax to pass
through their territories. According to HSI, Human smuggling also represents a national security concern,
as identified instances of known or suspected terrorists attempting to infiltrate the United States through
illegal migration have occurred.
In one recent criminal indictment, the DOJ alleged that a human smuggling organization had generated
millions of dollars in proceeds.
197
The defendant and co-conspirators allegedly employed various
methods to conceal the nature, location, source, ownership, and control of the proceeds of the
organization, including the use of funnel accounts; investing in property and luxury goods; amassing
large amounts of cash to avoid bank reporting requirements; and moving illicit proceeds between
accounts, among other methods.
In another case, Homeland Security Investigations (HSI) announced the arrest of six alleged human
smugglers in a coordinated, multistate enforcement operation.
198
In this case, the DOJ is prosecuting
members of a TCO that allegedly used funnel accounts and directed electronic money transfers to avoid
detection, including by making payments for funds derived from the TCO’s alien smuggling activity
through peer-to-peer money transfer applications to coconspirators. Other members of the TCO are
alleged to have been involved in moving money through funnel accounts and electronic money transfers
on behalf of the organization.
194 ICE, Features, “Human Smuggling equals grave danger, big money”, (Jan. 26, 2022), https://www.ice.gov/features/human-
smuggling-danger.
195 ICE, “HSI San Diego, BP case results in migrant smuggler admitting to sexually assaulting a juvenile while being smuggled into
the US,” (Nov. 6, 2023) https://www.ice.gov/news/releases/hsi-san-diego-bp-case-results-migrant-smuggler-admitting-sexually-
assaulting-juvenile; DOJ, “Four Defendants Extradited from Guatemala Sentenced for Roles in Deadly International Human
Smuggling Conspiracy,” (Nov. 1, 2023) Oice of Public Aairs | Four Defendants Extradited from Guatemala Sentenced for Roles
in Deadly International Human Smuggling Conspiracy | United States Department of Justice.
196 ICE, Features, “Human Smuggling equals grave danger, big money”, (Jan. 26, 2022), https://www.ice.gov/features/human-
smuggling-danger.
197 DOJ, “Four Indicted for Money Laundering in Prolific Human Smuggling Network Takedown”, (July 28, 2023), https://www.
justice.gov/opa/pr/four-indicted-money-laundering-prolific-human-smuggling-network-takedown.
198 DOJ, “Ten Indicted and Six Arrested in Joint Task Force Alpha Investigation of the Lopez Crime Family Human Smuggling
Organization Operating in Guatemala, Mexico, and the United States,” (June 15, 2023), https://www.justice.gov/usao-nm/pr/ten-
indicted-and-six-arrested-joint-task-force-alpha-investigation-lopez-crime-family.
2024 ◆ National Money Laundering Risk Assessment
40
Special Focus: Tax Crime
This section was included primarily due to the increase in State and federal payroll tax evasion and
workers’ compensation insurance fraud in the U.S. residential and commercial real estate construction
industries. Tax crime refers to any illicit activity related to Internal Revenue Code violations.
199
The IRS
projected the gross tax gap at $688 billion for tax year 2021 alone, which could result in approximately
$7 trillion in lost tax revenue over the next decade. The IRS Criminal Investigation (IRS-CI) is the main
LEA that focuses on tax crime. In FY22 the IRS-CI identified over $31 billion from tax and financial crimes,
and the agency seized assets valued at approximately $7 billion in FY22.
200
The IRS prevented the loss of
an additional $4.6 billion by stopping the issuance of fraudulent refunds during the 2022 tax season.
201
The direct loss of tax revenue resulting from tax crime deprives the U.S. government of proper funding
for essential services and programs. For example, in January of 2022, an American chief executive oicer
(CEO) was sentenced to 60 months in prison for using a foreign trust and real estate transactions to evade
over $20 million in income tax.
202
Tax schemes have evolved into opaque arrangements, oen giving the appearance that the perpetrator
is not associated with earnings. Abusive tax schemes originally took the structure of fraudulent domestic
and foreign trust arrangements. However, the taxpayers receive their funds through debit/credit cards
or fictitious loans. These schemes oen involve oshore banking and sometimes establish scam
corporations or entities.
203
There has been a concerning increase in state and federal payroll tax evasion and workers’ compensation
insurance fraud in the U.S. residential and commercial real estate construction industries. Illicit actors
perpetrate these schemes through banks and check cashing businesses by exploiting shell construction
companies and fraudulent documents to commit insurance fraud and pay their workers “o the books,”
State and federal tax authorities lose hundreds of millions of dollars to these schemes and legitimate
construction companies and their workers are put at a competitive disadvantage.
204
Criminals launder illicit tax proceeds, using the same money laundering methods applicable to other
proceeds-generating crimes, including the misuse of legal entities, trusts, and real estate to conceal the use
of illicit tax funds. For example, a Florida developer defrauded investors out of more than $30 million while
evading $2.5 million in U.S. income taxes and penalties in July 2023. To launder the proceeds of his scheme,
the developer misused legal entities and purchased several real estate properties using discrete LLCs.
205
199 U.S. Code: Title 26.
200 IRS, “2023 Annual Report”, (November 3, 2022), https://www.irs.gov/pub/irs-pdf/p3583.pdf.
201 TIGTA, “Results of the 2022 Filling Season”, (Mar. 30, 2023), https://www.tigta.gov/sites/default/files/reports/2023-
04/202340021fr.pdf.
202 DOJ, “CoFounder and Former CEO of Foreign Oil Company Sentenced to 60 Months in Prison for Failure to File Taxes Causing
over $20 Million in Losses to U.S. Treasury”, (January 26 2022), https://www.justice.gov/usao-sdny/pr/co-founder-and-former-
ceo-foreign-oil-company-sentenced-60-months-prison-failure-file.
203 IRS, “Tax Fraud Alerts”, (August 2023), https://www.irs.gov/compliance/criminal-investigation/tax-fraud-alerts.
204 FinCEN, “FinCEN Notice Highlights Concerning Increase in Payroll Tax Evasion, Workers’ Compensation Fraud in the
Construction Sector,” (August 2023), https://www.fincen.gov/news/news-releases/fincen-notice-highlights-concerning-
increase-payroll-tax-evasion-workers.
205 DOJ, “Real Estate Developer Sentenced for Investment Fraud, Bank Fraud, Money Laundering, and Tax,” (July 31. 2023), https://
www.justice.gov/usao-ct/pr/real-estate-developer-sentenced-investment-fraud-bank-fraud-money-laundering-and-tax.
41
2024 ◆ National Money Laundering Risk Assessment
Tax refund fraud typologies have become more prevalent. In one case, King Isaac Umoren, a tax preparer,
was sentenced for filing false tax returns, aggravated identity the, wire fraud, money laundering, and
impersonating an FBI agent. Umoren required clients to use a refund anticipation check program, which
Umoren then used to take fees from clients’ tax refunds without their knowledge.
206
In a dierent scheme,
in March 2023, a federal grand jury unsealed an indictment charging seven individuals in a conspiracy to
claim fraudulent tax refunds using the stolen identities of accountants and taxpayers by filing at least 371
false tax returns claiming over $111 million in refunds. The conspirators posed as authorized agents of
multiple taxpayers and allegedly used prepaid debit cards to receive the fraudulent refunds. They used
the cards to launder the funds by purchasing money orders from local stores in amounts low enough
to avoid reporting thresholds. The conspirators purchased designer clothing and used cars with the
proceeds from the illicit activity.
207
Update on Wildlife Trafcking and other Nature Crimes
As an update to the 2022 NMLRA’s special focus section on wildlife traicking, the Treasury is calling
attention to the broader category of nature crime. Given its strong association with corruption and
transnational organized crime (AML/CFT National Priorities), FinCEN indicates that wildlife traicking
aects the U.S. financial sector.
208
The illicit proceeds generated in the U.S. or that pass through the U.S.
financial system related to nature crimes are not as significant compared to the top threats described
above. Still, the importance of the U.S. dollar and financial system to international trade and finance,
these types of crimes pose a unique money laundering threat to the United States.
A recent example of a money laundering scheme involving nature and other crimes involves Bhagavan
“Doc” Antle, who pleaded guilty to money laundering and conspiracy to commit oenses against the
United States. Antle owned and operated a South Carolina-based safari park and conducted financial
transactions with cash he believed was obtained from transporting and harboring illegal aliens. Antle
violated the Lacey Act by directing the sale or purchase of numerous animals that are protected under
the Endangered Species Act.
209
He used bulk cash payments to hide the transactions and falsified
paperwork to show non-commercial transfers entirely within one state. In addition, Antle requested that
payments for endangered species be made to his nonprofit so they could appear as “donations”.
210
1. The Intersection of Nature Crimes with Other Threats
Foreign corruption: According to law enforcement sources, foreign corruption consistently plays
a critical role for wildlife traicking networks in facilitating poaching, smuggling, transportation,
206 IRS, “Las Vegas tax preparer sentenced to prison for multiple fraud schemes,” (December 1, 2022), https://www.irs.gov/
compliance/criminal-investigation/las-vegas-tax-preparer-sentenced-to-prison-for-multiple-fraud-schemes.
207 DOJ, “Seven Charged in Sophisticated Stolen Identity Tax Refund Fraud Scheme that Sought Over $100 Million from the IRS”,
(March 13, 2023), https://www.justice.gov/opa/pr/seven-charged-sophisticated-stolen-identity-tax-refund-fraud-scheme-
sought-over-100-million.
208 FinCEN, Financial Threat Analysis, “Illicit Finance Threat Involving Wildlife Traicking and Related Trends in Bank Secrecy Act Data,”
(December 22, 2021), https://fincen.gov/sites/default/files/2021-12/Financial_Threat_Analysis_IWT_FINAL%20508_122021.pdf.
209 The Lacey Act prohibits traicking of illegally taken wildlife, fish or plants, including animals protected under the Endangered
Species Act.
210 DOJ, November 6, 2023, “Doc Antle, Owner of Myrtle Beach Safari, Pleads Guilty to Federal Wildlife Traicking and Money
Laundering Charges”, https://www.justice.gov/opa/pr/doc-antle-owner-myrtle-beach-safari-pleads-guilty-federal-wildlife-
traicking-and-money.
2024 ◆ National Money Laundering Risk Assessment
42
distribution, trade, and money laundering. In November 2022, the DOJ indicted a senior Cambodian
Forestry oicial who allegedly conspired with other oicials to smuggle wild-caught primates into the
United States for biomedical research. This le U.S. pharmaceutical companies exposed to transacting
with corrupt oicials and their intermediaries. This case, which involved financial flows of nearly $20
million, was a major initiative involving coordination among U.S. law enforcement agencies and U.S.
financial institutions registered under section 314(b) of the USA PATRIOT Act.
211
Drug traicking: According to law enforcement sources, there are instances of Mexican DTOs trading
wildlife and wildlife parts to Chinese drug traickers in exchange for precursor chemicals for fentanyl
and methamphetamine that may be destined for the United States. In May 2023, Abdi Hussein Ahmed, a
member of a wildlife traicking ring, was sentenced to 48 months in prison for conspiring to traic large
quantities of rhinoceros horns (rhino horn) and elephant ivory and conspiring to distribute and possess
with intent to distribute heroin. The value of the wildlife products involved in the case exceeded $7
million. Ahmed and his co-conspirators received payments from foreign customers by international wire
transfers, some of which were sent through U.S. financial institutions.
212
Transnational Criminal Organizations: On October 7, 2022, OFAC designated the Teo Boon Ching TCO,
213
which has been involved in wildlife traicking for two decades. The TCO focused its business model on
exploiting high-value assets, such as ivory, rhino horn, and pangolins, and coordinating transport from
Africa to customers in Asia, especially in China and Vietnam. Malaysian national Teo Boon Ching was
arrested in Thailand and extradited to the United States. Ching pleaded guilty to conspiracy to commit
wildlife traicking, and was sentenced to 18 months in prison. Ching served as a specialized smuggler,
transporting rhino horns from rhinoceros poaching operations located predominantly in Africa to the
eventual customers who were primarily in Asia. Ching also claimed to be able to ship rhino horns to the
United States.
214
As outlined in the plea agreement, Ching charged a fee in RMB (rather than USD) for
his traicking services and operated through an “underground bank” to get around AML/CFT controls
at certain banks. Ching also accepted USD in cash because he could convert it to RMB. Ching instructed
rhino horn customers to structure payments into multiple Chinese bank accounts before he would
release the rhino horn. Upon confirming the deposit of funds, Ching directed the delivery of the rhino
horn to undercover law enforcement in Bangkok.
211 DOJ, Environmental Crimes Bulletin November 2022 , “United States v. Omaliss Keo, et al., No. 1:22-CR-20340 (S. D. Fla.),” https://
www.justice.gov/enrd/blog/ecs-bulletin-december-2022#Keo.
212 DOJ, “Fih Defendant Sentenced To 48 Months In Prison For Large-Scale Traicking Of Rhinoceros Horns And Elephant
Ivory And Heroin Conspiracy,” (May 11, 2023), https://www.justice.gov/usao-sdny/pr/fih-defendant-sentenced-48-months-
prison-large-scale-traicking-rhinoceros-horns#:~:text=Damian percent20Williams percent2C percent20the percent20United
percent20States,species percent20 percentE2 percent80 percent94 percent20worth percent20millions percent20of
percent20dollars.
213 Treasury, October 7, 2022, “Treasury Sanctions Wildlife Traicking Organized Crime Group”, https://home.treasury.gov/news/
press-releases/jy1001.
214 DOJ, “U.S. Attorney Announces Extradition of Malaysian National For Large-Scale Traicking Of Rhinoceros Horns,” (October 7,
2022), https://www.justice.gov/usao-sdny/pr/us-attorney-announces-extradition-malaysian-national-large-scale-traicking-
rhinoceros.
43
2024 ◆ National Money Laundering Risk Assessment
SECTION II. VULNERABILITIES AND RISKS
In the context of the 2024 NMLRA, a money laundering vulnerability is something that facilitates or
creates the opportunity to launder money. Vulnerabilities may relate to a specific financial sector
or product or a weakness in regulation, supervision, or enforcement. They may also reflect unique
circumstances in which it may be diicult to distinguish legal and illegal activity. The methods that allow
for the largest amount of money to be laundered quickly or with little risk of being caught present the
greatest potential vulnerabilities. This section represents the residual risk of a particular sector or service.
It takes into consideration any remaining risk aer the eect of mitigating measures including regulation,
supervision, and enforcement, among other things.
Money launderers attempt to identify and exploit money laundering vulnerabilities, given the nature,
location, and form of their illicit proceeds. Money laundering methods shi and evolve in response to
opportunities and changes in financial services, regulation, and enforcement.
Cash
Criminals use cash-based money laundering strategies in significant part because cash oers anonymity.
The commonly use U.S. currency due to its wide acceptance and stability. To combat this, the United
States requires that large cash transactions be reported to the Treasury.
215
However, according to federal
agency reports, TCOs and other criminals take steps to avoid this reporting through the following
strategies.
1. Bulk Cash Smuggling
The use of U.S. dollar banknotes (cash) remains a popular method to transport and launder illicit
proceeds both within and outside of the United States. BCS involves moving physical currency across an
international border, oen to be deposited in another country’s financial institution.
216
Unreported bulk
currency may sometimes be the proceeds of illegal activity, such as financial fraud and money scams.
BCS remains a favored means for TCOs to repatriate their illicit funds from or move funds into the United
States to support their criminal operations. TCO networks on the Southwest border smuggle narcotics
into the United States while illegally exporting currency from drug proceeds and firearms into Mexico.
TCO networks also use the northern border to smuggle high-potency drugs and currency both into and
out of the United States.
At the nation’s more than 300 ports of entry, U.S. Customs and Border Protection’s (CBP) Oice of Field
Operations (OFO) has a complex mission with broad law enforcement authorities tied to screening all
foreign visitors, returning American citizens, and imported cargo that enters the United States. Along the
215 For example, federal law requires a person to file IRS Form 8300 for cash transactions of $10,000 or more received in a trade or
business, and financial institutions generally must report currency transactions of $10,000 or more made by, through, or to the
institution. See 31 C.F.R. part 1010, subpart C.
216 The United States prohibits knowingly concealing more than $10,000 in currency or other monetary instruments and
transporting or transferring or attempting to transport or transfer such currency or monetary instruments across a U.S.
border with the intent to evade currency reporting requirements. 31 U.S.C. § 5332. In addition, 18 U.S.C. § 1956 prohibits the
international transportation, transmission or transfer of funds (or attempted transportation, transmission or transfer of funds)
that the person knows represent the proceeds of an unlawful activity and conducts the transportation, transmission or transfer
to disguise circumstances of the unlawful activity or avoid state or federal transaction reporting requirements.
2024 ◆ National Money Laundering Risk Assessment
44
nation’s borders. From an inbound perspective, for calendar year (CY) 2023, there were a total of 1,480
seizures of currency and monetary instruments totaling $18 million.
217
Law enforcement has indicated that although there had been a decline in outbound BCS activity (and
stockpiling) due to a decline in travel and trade related to the COVID pandemic, the activity has again
reached pre-pandemic levels.
218
For CY 2023, there were 1,010 outbound currency and monetary seizures
totaling approximately $53 million.
219
The top sites for outbound bulk cash seizure sites were Detroit
International Airport, Chicago O’Hare International Airport, and the Port of Fort Lauderdale. The top
three recorded intended destination countries for bulk cash seized during 2023 were Mexico, Vietnam,
and Haiti.
220
Historically, there has not been a specific budget allocation for outbound inspection.
Although OFO policies do not require outbound inspections, oicers at some land border crossings
conduct inspections of personal vehicles and pedestrians departing the United States to prevent the
illegal exportation of currency and other contraband, and there have been some significant currency
seizures.
221
Previous NMLRAs have focused mainly on cash couriers, those individuals directly responsible for moving
the cash across international borders. Recent insights by law enforcement have shed further light on the
role of “currency handlers,” who are thought to occupy positions with higher levels of responsibility and
trust within criminal organizations than couriers and are more likely to be involved in the coordination
and scheduling of BCS activities. Law enforcement sources have indicated that they suspect financial
supply chain specialists employed by some TCOs send their trusted agents to the currency points of
origin to coordinate shipments of bulk cash across the country and then return to the destination to
oversee onward movement of those proceeds.
Identifying a currency handler can provide a window to the inner workings of the criminal networks they
serve. According to discussions with U.S. law enforcement, over half of the identified currency handlers
were U.S. citizens. Mexican citizens represented the largest block (approximately one third) of foreign
currency handlers, followed by citizens from the Dominican Republic and Jamaica.
2. Cash Consolidation Cities
Every year, illicit cash proceeds from all crimes including illegal opioid sales travel on the U.S. highway
system. In FY 2022, most cash seized from domestic cash couriers on U.S. highways originated in
California, Colorado, Georgia, Florida, Ohio, Oklahoma, Texas, and Virginia.
According to U.S. law enforcement personnel, there has been a shi in location where conversions in
bill denominations (e.g., converting smaller denominations into $100 bills) take place. This conversion
traditionally took place within the interior United States, but can now be found in border states such as
California, Florida, and Texas.
217 CBP, Currency & Other Monetary Instrument Seizures, (Data current as of November 6, 2023), https://www.cbp.gov/newsroom/
stats/currency-other-monetary-instrument-seizures.
218 See 2022 NMLRA, PP.31-32.
219 CBP, Currency & Other Monetary Instrument Seizures, (Data current as of November 6, 2023), https://www.cbp.gov/newsroom/
stats/currency-other-monetary-instrument-seizures.
220 HSI, BSCS statistics as of 9/8/2023.
221 DHS, Oice of the Inspector General, “CBP Outbound Inspections Disrupt Transnational Criminal Organization Illicit Operations
(REDACTED),” August 3, 2023, https://www.oig.dhs.gov/sites/default/files/assets/2023-08/OIG-23-39-Aug23-Redacted.pdf.
45
2024 ◆ National Money Laundering Risk Assessment
While most domestic bulk cash is destined for California, lesser (though still significant) amounts are
destined for Arizona and Texas. Ohio, Virginia, Georgia, North Carolina, Florida, Missouri, and New York
(from lowest to highest) were the nation’s top seven states of origin for cross-country bulk cash destined
for the Southwest Border region. Once these proceeds reach their border destinations, criminals may
smuggle them across the border or enter one of several money laundering schemes intended to unite
illicit proceeds with the drug cartels that raised them.
222
Case examples
• In May 2022, a California woman residing in Atlanta, Georgia, was charged with smuggling over $114,000
of cash into Mexico from the United States. According to court documents, the defendant attempted
to pass through a Border Patrol checkpoint as a taxi passenger. The vehicle was referred to secondary
inspection, when the defendant denied the relevant custom form (i.e., made a negative declaration) for
having more than $10,000. However, according to the charges, $114,294 was discovered in her purse.
223
• In February 2022, a Mexican man was charged with smuggling $195,731 in cash into Mexico. The cash
was hidden in the bed and center console of a pickup truck. According to the charges, the defendant
attempted to exit the United States through the Juarez-Lincoln Port of Entry in Laredo as a solo driver in a
pickup truck. There, he allegedly gave a negative declaration for possessing currency over $10,000.
224
SNAPSHOT: Use of Private Aircraft
Law enforcement sources have noted an increased use of private aircra to smuggle bulk cash. The
use of aircra is a more expeditious method to move currency into, through, and out of the United
States over longer distances than by loading money into a vehicle or strapping it to a pedestrian.
U.S.-registered aircra are less likely to be inspected by state, local or federal agencies and can be
identified by the “N” designated tail number on the tail of the aircra. In many small airports along
the Mexico-U.S. border, CBP does not maintain a 24-hour presence. This security gap allows TCOs
and criminal elements to move currency derived from criminal endeavors into and out of the United
States with greater ease than by cars or pedestrians.
Law enforcement sources note TCOs manipulate Federal Aviation Administration (FAA) reporting
requirements to purchase, register, and export U.S. aircra. TCO members will establish shell
companies and then use LLCs to purchase and register aircra, which allows the aircra to be
registered through a trust pursuant to FAA regulations.
225
This enables TCO members to circumvent
the regulatory requirement that a foreign company must be organized and doing business under
the laws of the United States to register an aircra and that the aircra must be based and primarily
used in the United States.
226
222 Information provided by HSI, BCSC.
223 ICE, “California woman charged with smuggling over $114k inside taxi, following HSI, federal partner, probe,” (May 18,
2022) https://www.ice.gov/news/releases/california-woman-charged-smuggling-over-114k-inside-taxi-following-hsi-
federal#:~:text=However percent2C percent20A percent20search percent20of percent20Zuniga percent27s,a percent20possible
percent20 percent24250 percent2C000 percent20maximum percent20fine.
224 DOJ, “Visa holder caught smuggling nearly $200,000 to Mexico”, (February 23, 2022), https://www.justice.gov/usao-sdtx/pr/visa-
holder-caught-smuggling-nearly-200000-mexico.
225 See 14 CFR 47.7(c).
226 See 14 CFR 47.3(a)(3).
2024 ◆ National Money Laundering Risk Assessment
46
3. Cash-Intensive Businesses and Front Companies
Criminal actors continue to use cash intensive businesses (CIBs) as a laundering vehicle. Criminal
organizations and individuals oen attempt to set up a front company associated with a CIB to launder
criminally derived proceeds. Criminal actors have long relied on these “fronts” which otherwise conduct
legitimate business and have a physical location and natural cash flows to launder large volumes of
cash. To introduce illicit funds, individuals mix legitimate business revenue with illicit proceeds using
cash deposits and other conventional placement techniques. Furthermore, criminal actors can exploit
seemingly reasonable business operations to facilitate bulk cash movements.
LEAs see a wide array of CIBs utilized as front companies such as convenience stores, restaurants, and
liquor stores.
227
In recent years, laundering operations have continued to exploit automotive shops
including dealers and repair shops as front companies for money laundering.
228
An IRS/FinCEN Report of
Cash Payments Over $10,000 in a Trade or Business (referred to as the “Form 8300”) is required to be filed
if a person in a trade or business receives more than $10,000 in cash in a single transaction or in related
transactions.
229
Case examples
• A March 2022 indictment charged multiple codefendants with allegedly using an Oregon beauty
salon as a front to launder proceeds for a DTO that dealt fentanyl, heroin, and counterfeit oxycodone
pills throughout the Pacific Northwest.
230
Agents seized 115,000 counterfeit Oxycodone pills that
contained fentanyl and 57 pounds of heroin as part of their investigation. The salon owner allegedly
opened several accounts at dierent banks for her salon entity. She then made numerous large cash
deposits and purchases of cashier’s checks under the guise of “business transactions”. The defendant
allegedly used her salon to avoid scrutiny regarding the size of cash-based transactions. Aer the
owner made the deposits and purchased the cashier checks, they used the funds to buy several real
estate properties. The salon owner tried to further disguise the source of these funds by claiming the
real estate transactions were purchases of “rental properties.”
231
• A March 2022 indictment charged the owners of a Sacramento area grocery store with operating
a front business for a CJNG-supplied cocaine operation.
232
Law enforcement was able to observe
laundering by infiltrating the operation. Most laundering activity took place via money remittances
and bulk cash smuggling. The laundering activity allegedly involved transporting $230,000 of bulk
cash and exchanging it with a DTO associate. Court documents indicate this was one week of cocaine
sales. Evidence within the criminal complaint notes the grocery store was allegedly used to store
cash, disguise the source of illicit deposits, and support individual remittances to Mexico.
233
227 FFIEC, Risks Associated with Money Laundering and Terrorist Financing, Cash-Intensive Business – Overview, https://bsaaml.
iec.gov/manual/RisksAssociatedWithMoneyLaunderingAndTerroristFinancing/26.
228 DOJ, “Milton Man Sentenced for Money Laundering: Owner of used car dealership laundered fraud proceeds through his
business”, (August 5, 2022) https://www.justice.gov/usao-ma/pr/milton-man-sentenced-money-laundering#:~:text=BOSTON
percent20 percentE2 percent80 percent93 percent20The percent20owner percent20of percent20a,two percent20years
percent20of percent20supervised percent20release.
229 31 C.F.R. § 1010.330.
230 United States District Court District of Oregon, See case 3:22-cr-00045 (Feb. 09, 2022).
231 DOJ, “12 Members of Drug Traicking Organization Indicted for Distributing Counterfeit Oxycodone Pills Containing Fentanyl,
Laundering Proceeds”, Mar. 18, 2022, https://www.justice.gov/usao-or/pr/12-members-drug-traicking-organization-indicted-
distributing-counterfeit-oxycodone.
232 DOJ, “Two Sacramento Area Men Indicted for Cocaine Traicking”, (Mar. 31, 2022), https://www.justice.gov/usao-edca/pr/two-
sacramento-area-men-indicted-cocaine-traicking.
233 United States District Court Eastern District of California, see case 2:22-cr-00064, (Mar. 14, 2022).
47
2024 ◆ National Money Laundering Risk Assessment
4. Funnel Accounts
Funnel accounts are bank accounts used to collect deposits from various locations. Multiple individuals
deposit cash in a bank account available to other members of the criminal network in another part of the
country. Criminal actors continue to use funnel accounts to circumvent Currency Transaction Report (CTR)
thresholds and other BSA obligations to facilitate money laundering. Funnel accounts allow individuals
to make multiple deposits utilizing separate accounts at numerous financial institutions to stay below
regulatory threshold amounts. Criminal and money laundering organizations use geographic structures
where money mules deposit cash across several accounts in one area while another member of the
organization withdraws the funds in a consolidation region. Accounts being used to transfer or “funnel”
cash are oen used to make rapid transactions and withdrawals aer depositing criminal proceeds.
Funnel accounts remain a key component of DTOs moving funds across the Mexican border.
Organizations funnel cash through accounts in U.S. regional hubs and consolidate the funds by
withdrawing them at branches closer to the border, commonly in California, Texas, and Arizona. They
then employ BCS techniques to transport the cash over the border into Mexico. Recent and historical
examples demonstrate that criminal actors oen utilize funnel accounts in tandem with a front company
to achieve widescale placement of illicit funds.
Case examples
• Pharmacy owners Arkadiy Khaimov and Peter Khaim, who made millions by submitting fraudulent claims for
expensive medications during the pandemic, pleaded guilty to conspiracy to commit money laundering in
November 2022. The owners used 16 dierent registered corporate entities to funnel $47 million of illicit funds
through their associated bank accounts. The codefendants conspired with an unregistered MSB to trade cash
in return for their fraudulent Medicare funds. The scheme then utilized nominee account signatories to act as
mules, purchasing cashier checks with the illicit money as a form of deposit. These cashier’s checks and other
cash deposits were then aggregated within accounts that the codefendants ultimately owned. This allowed
the codefendants to purchase legitimate assets with the proceeds of their fraud scheme.
234
• An Oklahoma City restaurant owner was charged with conspiracy to commit money laundering in a May
2023 indictment for using funnel accounts as a vehicle to launder $25 million. A branch manager reported
the defendant’s suspicious behavior aer they allegedly attempted to open 14 separate accounts for their
singular restaurant entity. The defendant moved to another bank aer being denied the accounts, where
they successfully open 14 accounts that resembled cash deposit funnel accounts. Court documents also
detailed a separate financial institution closing the defendant’s accounts due to large deposits and rapid
withdrawals.
235
• A June 2023 indictment charged a Honduran national with money laundering in connection to their role
as a high-level human smuggling coordinator. Court documents outlined the defendant allegedly showing
associates how to open additional bank accounts to facilitate funneling activity. Investigators were also
able to present a financial accounting ledger that explicitly showed smuggling fees and cash flows. Court
documents also claim that the defendant’s organization had money mules deposit cash at several dierent
banks in dierent regions within the United States. Following these geographically diverse deposits, the
criminal actors allegedly withdrew millions of dollars in smuggling proceeds in the Phoenix, Arizona area.
236
234 DOJ, “Two Pharmacy Owners Plead Guilty in COVID-19 Money Laundering and Health Care Fraud Case”, (November 16, 2022),
https://www.justice.gov/opa/pr/two-pharmacy-owners-plead-guilty-covid-19-money-laundering-and-health-care-fraud-case.
235 Western District of Oklahoma, USA vs Lin et al, case 5:24-mj-276-STE (May 2, 2023), See https://www.pacermonitor.com/public/
case/49505889/USA_v_Lin_et_al.
236 DOJ, “Prolific Human Smuggler Extradited to the United States from Honduras”, (Jun. 23, 2023), https://www.justice.gov/usao-
az/pr/prolific-human-smuggler-extradited-united-states-honduras.
2024 ◆ National Money Laundering Risk Assessment
48
Financial Products and Services
1. Money Orders
Criminal actors continue to attempt to evade the controls in place on money orders to launder proceeds
from narcotic and fraud schemes. A money order is a financial instrument that acts as a secure form of
cash replacement. Because a money order is paid for in advance, unlike a personal check, a money order
cannot be rejected for insuicient funds. Issuers or sellers of money orders are a type of MSB and thus
subject to certain registration, recordkeeping, program, and reporting obligations under the BSA and
its implementing regulations applicable to MSBs.
237
Specifically, issuers or sellers of money orders are
required to develop, implement, and maintain an AML program to obtain, verify and record customer
identification for currency purchases of money orders totaling $3,000 or more,
238
and file CTRs and
SARs.
239
Money orders are oered for a fee by MSBs such as Western Union and MoneyGram as well as the
United States Postal Service (USPS).
240
In 2023, FinCEN received 396,763 SARs related to transactions that utilized money orders.
241
According to
law enforcement sources, money order investigations can be challenging based on the minimal amount
of information recorded during transactions.
Laundering facilitated through the misuse of money orders oen follows a similar typology. In many
cases, criminals use prepaid debit cards or illicit cash to purchase bulk money orders. They then use
these money orders to purchase material assets, such as cars, and export the vehicles or assets to a
foreign country.
242
Criminals may also deposit money orders into bank accounts where the funds can be
further wire transferred to other bank accounts to further layer the illicit proceeds. Businesses that accept
bulk money orders from customers as payment for goods or services are also vulnerable to abuse by
criminals laundering illicit proceeds.
In contrast to recordkeeping requirements involving funds transfer services provided by banks, there
is no explicit requirement for sellers of money orders to collect payee information. The issuer does not
know the payee’s name until that payee negotiates the money order and the instrument subsequently
clears the banking system. This situation means money order sellers may be unable to screen the name
of the payee and, depending on the amount, the sellers may not be able to verify the payer’s name. The
BSA recordkeeping obligation applicable to money orders only requires issuers and sellers of money
orders to obtain, verify and record customer identification with the purchase of money orders for $3,000,
or more in currency. However, sellers of money orders may request payee information to satisfy other
BSA requirements, such as AML program and SAR filing obligations. Nonetheless, criminals circumvent
237 31 C.F.R. Part 1022.
238 31 C.F.R. § 1022.210
239 31 CFR § 1010.310-1010.314 and 31 CFR § 1010.320.
240 DOJ, “Drug Conspiracy Leader Gets 262-Months Imprisonment for Distributing Methamphetamine in Southern Illinois,”
(September 7, 2023), https://www.justice.gov/usao-sdil/pr/drug-conspiracy-leader-gets-262-months-imprisonment-
distributing-methamphetamine.
241 FinCEN, “Suspicious Activity Report Statistics (SAR Stats),” https://www.fincen.gov/reports/sar-stats.
242 DOJ, “Four Men Charged in a Superseding Indictment with Conspiring to Launder Funds from Various Fraud Schemes,” (Jul. 3,
2023), https://www.justice.gov/opa/pr/four-men-charged-superseding-indictment-conspiring-launder-funds-various-fraud-
schemes.
49
2024 ◆ National Money Laundering Risk Assessment
this record keeping requirement by structuring their money order transactions below this requirement,
as demonstrated in the following case examples:
Case examples
• In February 2022, the U.S. Court of Appeals for the Eleventh Circuit airmed a defendant’s conviction
in a marijuana distribution and money laundering conspiracy. Aer receiving drugs from California,
the defendant helped distribute and launder money for more than 900 kilograms of marijuana by
processing drug money through casinos and nail salons before converting the cash into money orders
under the $3,000 record keeping threshold.
243
• In January 2023, 24 defendants were charged with marijuana distribution, money laundering,
firearms, and related oenses. They allegedly laundered proceeds from the sale of marijuana and
edibles through a variety of means, including money transfers; the transportation and delivery of
cash, including $179,710 in cash that authorities seized at the Albany International Airport; the
purchase of cashier’s checks; real estate transactions; and cash and money order deposits into
various bank accounts.
244
2. Prepaid Cards
Prepaid cards (also referred to as prepaid debit cards, stored value cards, or prepaid access devices) are
a type of prepaid access that enables pre-loading and in some cases, reloading of funds onto physical or
digital cards.
The use of prepaid cards is growing rapidly. The most recent Federal Reserve Payments Study found that,
on average, the number of prepaid card transactions increased by 9.6 percent per year from 2018 to 2021,
and the value of prepaid card transactions grew by 20.6 percent per year, compared with 12.7 percent for
debit cards and 7.0 percent for credit cards.
245
The total value of prepaid card payments was $610 billion
in 2021, accounting for 6.5 percent of the value of all card payments. Globally, the prepaid card market
was valued at $1.73 trillion in 2019 and is projected to reach $6.87 trillion by 2030.
246
There are two systems under which prepaid cards operate: an “open” or “closed” loop system. Open loop
(also called general purpose) prepaid cards are branded by a payment network (e.g., Visa, Mastercard,
American Express, Discover) and can be used for purchases at any merchant that accepts cards on that
network, as well as to access cash at ATMs that connect to the ailiated ATM network. Some open-loop
prepaid cards may be reloaded with additional funds, allowing the cardholder or other person (such as an
employer) to add value. Closed-loop prepaid cards generally can only be used at a specific merchant or a
select group of merchants and cannot be used for cash access or transfer of funds. Examples of closed-loop
cards include retail gi cards and mass transit cards.
247
Providers and sellers of prepaid access are types of
MSBs under FinCEN’s regulations unless they qualify for an applicable exemption.
248
243 United States v. Bui, No. 21-10356, 2022 WL 475002 (11th Cir. Feb. 16, 2022).
244 DOJ, “24 People Indicted for Cross-Country Marijuana Distribution and Money Laundering Conspiracies, Firearms Oenses,
and Other Crimes,” (January 31, 2023), https://www.justice.gov/usao-ndny/pr/24-people-indicted-cross-country-marijuana-
distribution-and-money-laundering.
245 Federal Reserve, The Federal Reserve Payments Study: 2022 Triennial Initial Data Release, Table 1, https://www.federalreserve.
gov/paymentsystems/fr-payments-study.htm.
246 Allied research, Prepaid Card Market Research 2023, https://www.alliedmarketresearch.com/prepaid-card-market.
247 FFIEC, BSA/AML Manual, https://bsaaml.iec.gov/manual/RisksAssociatedWithMoneyLaunderingAndTerroristFinancing/09.
248 31 C.F.R. 1010.100()(4) and (7).
2024 ◆ National Money Laundering Risk Assessment
50
Prepaid cards can also be used in some cases as a method of cross-border funds transfer, in which two or
more prepaid cards are linked to the same account: funds loaded to a prepaid card in the United States,
for instance, could be withdrawn from a second, linked card in another country.
249
Several features of prepaid cards make them popular for use by criminals as a tool for fraud and money
laundering: they are easy to purchase and use; people can fund them, through a variety of methods; they
typically do not require the cardholder to have an account and can oen be used anonymously; and they
are highly portable, providing an attractive alternative to bulk cash smuggling. In addition, individuals
can use many open-loop prepaid cards globally, enabling money to move easily across borders. In some
cases, criminals use false identification and fund initial loads onto prepaid cards with stolen credit
or debit card credentials or may purchase multiple prepaid cards under aliases.
250
Another common
fraud scheme involves criminals calling victims and impersonating the government or a company.
Through false and fraudulent claims, they will convince victims that they owe money and must pay it by
purchasing gi cards or prepaid cards and providing the criminals with the card information. Both open
and closed- loop prepaid cards have been used as an alternative to bulk cash smuggling.
Prepaid cards are used in all stages of money laundering. In the placement stage, criminals purchase
prepaid cards in bulk using illegal funds, or they hire or convince others to purchase or transport the
cards for them. In the layering stage, criminals can use prepaid cards to purchase merchandise or other
prepaid cards, which they can sell for cash. According to law enforcement sources, a common money
laundering scheme involves criminals using prepaid cards to purchase money orders. These, in turn, are
used to purchase material goods, which can then be re-sold. In the integration stage, criminals may use
prepaid cards to fund illicit and legitimate activities and transactions.
Case examples
• In March 2023, Chaohui Chen and Wenyi Zheng were sentenced to 21 months and 36 months
imprisonment, respectively, aer pleading guilty to wire fraud. Under their wire fraud scheme and
gi card conspiracy they deceived victims into purchasing prepaid Walmart gi cards and providing
that information to the defendants for their personal gain. According to the plea agreement,
a typical execution of the scheme involved unnamed third parties who would make false and
fraudulent telephone calls, sometimes claiming to the victims they were part of the Social Security
Administration. Using false pretenses, the callers would convince victims to purchase prepaid gi
cards and provide to them with the 16-digit gi card numbers and unique pins for the gi cards, in
return for a cashier’s check in the amount of the gi card purchased. Once in control of the gi cards,
the defendants would redeem the gi cards at various stores by purchasing household items and
additional prepaid gi cards, which they would convert and use for their personal gain, and neglect to
return any of the money to the victims.
251
• In June 2022, Yanio Montes De Oca and Atnetys Ferreira Milian were sentenced to 27 months and one
year of probation for their respective roles in a conspiracy to commit money laundering. Between
December 2015 and July 2019, De Oca laundered thousands of gi cards that were obtained using
fraudulent debit and credit cards encoded with information stolen using gas station skimming
devices. Aer obtaining the gi cards from co-conspirators, De Oca sold them and transferred the
249 FFIEC, BSA/AML Manual, https://bsaaml.iec.gov/manual/RisksAssociatedWithMoneyLaunderingAndTerroristFinancing/09.
250 FFIEC BSA Manual, https://bsaaml.iec.gov/manual/RisksAssociatedWithMoneyLaunderingAndTerroristFinancing/09.
251 DOJ, “Defendants Sentenced in a $217,200 Gi Card Conspiracy and Wire Fraud Scheme that Cheated Victims, Including the
Elderly, Out of Thousands of Dollars,” (March 20, 2023) https://www.justice.gov/usao-ut/pr/defendants-sentenced-217200-gi-
card-conspiracy-and-wire-fraud-scheme-cheated-victims.
51
2024 ◆ National Money Laundering Risk Assessment
resulting amounts to bank accounts he controlled. De Oca would distribute some of the money to
the other conspirators and retain the rest of the funds for himself. Ferreira Milian used multiple bank
accounts that she controlled to launder money orders that had been purchased with fraudulent debit
cards. The debit cards used stolen account numbers that had been skimmed at gas station pumps
across the country. During the period of the conspiracy, Ferreira Milian deposited over 1,100 money
orders, totaling over $691,000, into her accounts, and then withdrew most of the laundered funds in
cash.
252
• In February 2022, Malan Doumbia and Souleymane Diarra were convicted of nine counts including
conspiracy to commit wire fraud, access device fraud, aggravated identity the, and conspiracy to
commit money laundering. This criminal activity was in connection with a scheme to purchase stolen
credit card numbers from the dark web, using the accounts to purchase consumer products, and then
re-selling the products for cash. The defendants worked with several associates to purchase stolen
credit card numbers from black market websites located in Russia, Ukraine, and elsewhere overseas.
Aer encoding these card numbers onto blank cards, they employed a network of runners to use
the cards to purchase large quantities of gi cards and other items that could be quickly resold for
cash. When the United States Secret Service searched the defendants’ homes, they found more than
200,000 stolen credit card numbers.
253
3. Peer-to-Peer Payments
Over the last decade, peer-to-peer (P2P) payments have grown in popularity and become ubiquitous
throughout the United States. P2P services – such as mobile applications Venmo, PayPal, Cash App, and
Zelle – allow individuals to send and receive instant digital payments directly with another person, either
in fiat currency or virtual currency.
The P2P market has grown dramatically in recent years, helped along by a spike in adoption during
the COVID-19 pandemic. P2P users are forecast to reach 168 million in 2024, with a total transaction
value projected to exceed $1.2 trillion.
254
According to a survey conducted by Fiserv in 2020, 79 percent
of consumers say they have used a P2P service.
255
However, the convenience and speed that make P2P
platforms popular for legitimate purposes also make them attractive to scammers. In 2021, the Federal
Trade Commission received nearly 70,000 complaints from consumers who sent money to fraudsters via
payment apps or similar services, totaling $130 million in losses.
256
Depending on the platform and form of currency, a consumer can initiate a P2P payment from their
online bank account, prepaid card account, virtual asset wallet or through a mobile application. With
respect to mobile applications, P2P apps are free to download, and payments are typically free when
made using a linked checking account, debit card, or stored balance; some platforms also allow funding
via credit card for a fee. P2P services operate as relatively closed environments where users can only
252 DOJ, “Miami Residents Sentenced for Their Roles in a Money Laundering Conspiracy Connected to a Nationwide Gas Station
Skimming Scheme”, (June 30, 2022) https://www.justice.gov/usao-ndny/pr/miami-residents-sentenced-their-roles-money-
laundering-conspiracy-connected-nationwide.
253 DOJ, “Two Philadelphia Men Convicted of Running Credit Card Fraud Ring Using 200,000+ Stolen Accounts,” (February 28, 2022),
https://www.justice.gov/usao-edpa/pr/two-philadelphia-men-convicted-running-credit-card-fraud-ring-using-200000-stolen.
254 CFPB, Person-to-Person (P2P) Payment Fraud Conversation, (November 2022), https://files.consumerfinance.gov/f/documents/
cfpb_person-to-person-p2p-payment-fraud-conversation_presentation_2022-11.pdf.
255 Fiserv, “Consumer Payments Executive Summary,” (February 2021), file:///C:/Users/SandersA/Downloads/EE_Consumer_
Payments_Executive_Summary_0221.pdf.
256 Federal Trade Commission, “Consumer Sentinel Network Data Book 2021,” (February 2022), https://www.c.gov/system/files/
c_gov/pdf/CSN percent20Annual percent20Data percent20Book percent202021 percent20Final percent20PDF.pdf#page=12.
2024 ◆ National Money Laundering Risk Assessment
52
send funds to another individual on the same platform. Because of this feature, bank account details can
be kept private from individual users: all that is typically required from a user to send a payment is the
recipient’s email address or phone number. When users receive a payment, they usually can maintain
a balance in the app or transfer the funds to their bank accounts. While most P2P services in the United
States only operate domestically, some, such as PayPal, oer cross-border payment options. P2P
payment services are considered either banks or MSBs (depending on the platform) and thus subject to
the reporting, recordkeeping, and AML program requirements under the BSA, and, if it classifies as an
MSB, must register with FinCEN.
257
P2P services have come to play a sizable role in various types of fraud and scams. These include
unauthorized electronic fund transfers, seller scams, buyer scams, and money mule scams, among
others.
258
In unauthorized electronic fund transfers, scammers oen impersonate a bank, fraud
department, or merchant and ask the victim to confirm information such as account name and
password. Unauthorized electronic fund transfers can also result from a hacked account, stolen phone,
or phishing scheme. In a seller scam, scammers impersonate legitimate sellers or businesses and request
a P2P payment for a good or service from the victim. Once the victims sends the payment, the scammer
disappears and the victim never receives what they paid for.
259
In money mule scams, scammers send
money to a victim, sometimes by check, and ask the victim to send some of it to someone else. Oen,
these victims are instructed to make these payments via P2P services. Typically, the check is fake, and the
victims are on the hook for the funds they sent out (and potentially legally liable for helping a scammer
move stolen money).
260
In another version of money mule scams, a scammer will “accidentally” send a
person funds on a P2P platform and request that they send the money back. The original funds are stolen
funds that the P2P service will eventually flag as fraud, and the victim is held responsible for the funds
they sent back to the scammer.
261
Case examples
In June 2021, an indictment was unsealed charging 60 members of a San Diego-based methamphetamine
traicking organization with ties to the Sinaloa Cartel with money laundering, drug traicking, and firearm
oenses. The network obtained thousands of kilograms of methamphetamine from the Sinaloa Cartel in
Mexico to smuggle across the international border concealed in hidden compartments in passenger cars
and motorcycles. The network then, at the order of the Sinaloa Cartel, distributed the methamphetamine
to dozens of sub-distributors located across 12 states and at least two other countries.
The members of the
DTO returned tens of thousands of dollars in narcotics proceeds to the network’s leaders via shipments of
bulk cash, structured cash deposits into bank accounts, and money transfers through MoneyGram, Western
257 31 C.F.R. Part 1022.
258 Capital One, “Peer-to-peer payment scams & fraud: How to protect yourself,” (November 2, 2022), https://www.capitalone.com/
bank/money-management/financial-tips/what-is-p2p-fraud/.
259 American Bankers Association, “Peer to Peer Payment Scams,” https://www.aba.com/advocacy/community-programs/
consumer-resources/protect-your-money/peer-to-peer-payment-scams#:~:text=Scammers percent20posing percent20as
percent20a percent20legitimate,paid percent20for percent20and percent20they percent20disappear.
260 FTC, “What’s a money mule scam?” (March 4, 2020), https://consumer.c.gov/consumer-alerts/2020/03/whats-money-mule-scam.
261 American Bankers Association, “Peer to Peer Payment Scams,” https://www.aba.com/advocacy/community-programs/
consumer-resources/protect-your-money/peer-to-peer-payment-scams#:~:text=Scammers percent20posing percent20as
percent20a percent20legitimate,paid percent20for percent20and percent20they percent20disappear.
53
2024 ◆ National Money Laundering Risk Assessment
Union, PayPal, Zelle, Venmo, and Cash App.
262
In July 2022, Linda Ann Been pleaded guilty to conspiracy, wire fraud, conspiracy to commit wire fraud,
and conspiracy to commit money laundering for her role in heading a retail the organization that
caused more than $10 million in losses to retailers. Fieen others involved in the organization also
pleaded guilty. According to state and federal court documents, Been led a ring of “boosters” that netted
$4.5 million from selling stolen merchandise to “fencing organizations,” which then sold the stolen
products through e-commerce sites. Been provided her boosters with a detailed list of items to steal and
the pricing she would pay for each. Been further instructed her ring on boosting techniques. Been and
her team of boosters stole products from retailers in Oklahoma, Kansas, Texas, Missouri, Arkansas, and
Colorado. Been would pay boosters’ expenses when they traveled outside the state. Been would further
pay boosters’ bond when arrested so they could continue boosting. Been and her team normally made
financial payments for stolen products through PayPal, Venmo, and Cash App.
263
Legal Entities and Arrangements
As reported in previous risk assessments, illicit actors deliberately misuse legal entities to facilitate
money laundering schemes, fraud, sanctions evasion, tax evasion, and drug traicking, among other
types of oenses. These actors rely on the anonymity and perceived legitimacy aorded to legal entities,
including limited liability companies and other corporate structures, to disguise illicit financial activity
and criminal beneficial owners. Recent cases highlight the misuse of legal entities as a significant,
ongoing vulnerability in the U.S. financial system; for example, illicit actors have used complex schemes
involving shell companies to commit COVID-19 relief fraud and to procure dual-use U.S. technology to
advance Russian aggression in Ukraine. These schemes oen feature layers of corporate entities, trusts,
and nominee arrangements, and can involve both domestic and foreign natural or legal persons.
1. Legal Entities
In addition to the use of shell companies, criminals also rely on shelf and front companies to obfuscate
illicit financial activity. Shelf companies are ready-to-use legal entities that were incorporated in the past
and put on the ‘shelf’ to age, which may give them the appearance of being ‘established.’ Unlike shell
and shelf companies that typically have no employees, operations, or even a physical location other than
a registered agent, front companies generate real economic activity and are used to commingle illicit
proceeds with earnings from legitimate business operations. In a recent case, front companies were used
as part of a scheme to raise capital and acquire goods for North Korea in violation of U.S. sanctions.
Case examples
• In September 2023, a Russian citizen and Hong Kong resident, was charged with participating in
an illicit procurement scheme that provided military grade microelectronics to end users in Russia.
According to the complaint, the defendant and two co-conspirators used shell companies based in
Hong Kong and other deceptive means to conceal from U.S. Government agencies and U.S.
262 DEA, “Sixty Defendants Charged in Nationwide Takedown of Sinaloa Cartel Methamphetamine Network”, (June 29, 2021) https://
www.dea.gov/press-releases/2021/06/29/takedown-sinaloa-cartel.
263 FBI, “Woman Pleads Guilty for Leading a Retail The Organization that Netted $4.5 Million”, (July 14, 2022), https://www.justice.
gov/usao-ndok/pr/woman-pleads-guilty-leading-retail-the-organization-netted-45-million.
2024 ◆ National Money Laundering Risk Assessment
54
distributors that the OLED micro-displays that they purchased were destined for Russia. In total,
between about May 2022 and August 2023, the defendant’s shell companies allegedly funneled a
total of more than $1.6 million to the United States in support of the procurement network’s eorts to
smuggle the OLED microdisplays to Russia.
264
• In September 2022, the DOJ announced federal criminal charges against 47 defendants for their
alleged roles in a $250 million fraud scheme that exploited a federally funded child nutrition program
in Minnesota during the COVID-19 pandemic. The defendants are alleged to have defrauded the
Federal Child Nutrition Program, exploiting changes in the program intended to ensure underserved
children received adequate nutrition during the COVID-19 pandemic. The defendants are alleged
to have created dozens of shell companies to receive and launder the proceeds of their fraudulent
scheme.
265
• In May 2022, brothers Luis Enrique Martinelli Linares and Ricardo Enrique Martinelli Linares, both
dual citizens of Panama and Italy, pleaded guilty to conspiracy to commit money laundering and
admitted to agreeing with others to establish oshore bank accounts in the names of shell companies
to receive and disguise over $28 million in bribe proceeds from Odebrecht S.A., a Brazil-based
global construction conglomerate, for the benefit of a close relative, a high-ranking public oicial in
Panama. Both were sentenced to 36 months in prison and ordered to forfeit more than $18.8 million,
pay a $250,000 fine, and serve two years’ supervised release.
266
2. Beneficial Ownership Information
Lack of transparency in legal entity ownership structures has continued to be a challenge for U.S. law
enforcement agencies, requiring time and resource-intensive processes to obtain beneficial ownership
information (BOI). This issue also remains a key vulnerability globally. A 2022 FATF study on the state
of global eectiveness and compliance with the FATF standards revealed that only half of jurisdictions,
on average, have the necessary laws and regulations to understand, assess the risks of, and verify
the beneficial owners or controllers of legal persons and arrangements. Furthermore, only 9 percent
of countries are meeting the overall eectiveness requirements concerning beneficial ownership
transparency.
267
To strengthen the standard on beneficial ownership transparency for legal persons, in
March 2022, FATF adopted significant amendments to Recommendation 24.
268
These amendments seek
to enhance the quality of BOI collected by governments, facilitate eicient access to BOI by competent
authorities (including through registries or an alternative mechanism), and improve international
264 DOJ, “Russian International Money Launderer Arrested for Illicitly Procuring Large Quantities of U.S.-Manufactured Dual-Use
Military Grade Microelectronics for Russian Elites”, (September 18, 2023), https://www.justice.gov/opa/pr/russian-international-
money-launderer-arrested-illicitly-procuring-large-quantities-us.
265 DOJ, “U.S. Attorney Announces Federal Charges Against 47 Defendants in $250 Million Feeding Our Future Fraud Scheme”,
(September 20, 2022), https://www.justice.gov/opa/pr/us-attorney-announces-federal-charges-against-47-defendants-250-
million-feeding-our-future.
266 DOJ, May 20, 2022, Panama Intermediaries Each Sentenced to 36 Months in Prison for International Bribery and Money
Laundering Scheme, https://www.justice.gov/opa/pr/panama-intermediaries-each-sentenced-36-months-prison-international-
bribery-and-money.
267 FATF “Report on the State of Eectiveness and Compliance with the FATF Standards”, (April 2022), https://www.fatf-gafi.org/en/
publications/Fatfgeneral/Eectiveness-compliance-standards.html.
268 FATF “Public Statement on Revisions to R.24”, (March 4, 2022), https://www.fatf-gafi.org/en/publications/
Fatfrecommendations/R24-statement-march-2022.html.
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cooperation. The amendments also include a new requirement for national authorities to collect BOI in
the course of public procurement as a means to combat corruption.
269
In the United States, criminals have historically been able to take advantage of the lack of uniform laws
and regulations pertaining to the disclosure of BOI to law enforcement. FinCEN’s 2016 CDD Rule, which
became applicable in May 2018 and requires certain financial institutions, such as banks and broker-
dealers, to identify and verify the identities of the beneficial owners of most legal entity customers at
account opening, has helped mitigate this vulnerability to an extent. However, the lack of timely access
to high-quality BOI and BOI disclosure requirements at the time of a legal entity’s creation or registration
has continued to hamper law enforcement investigations, which is why the Treasury continues to
prioritize the implementation of the Corporate Transparency Act (CTA).
Enacted as part of the Anti-Money Laundering Act of 2020 (AML Act),
270
the CTA requires certain U.S.
and foreign companies to disclose BOI to FinCEN. It also requires FinCEN to build a secure, non-
public database of this information and disclose to authorized government authorities and financial
institutions, subject to safeguards and controls. In September 2022, FinCEN issued a final BOI Reporting
Rule to implement the reporting requirements of the CTA.
271
The rule describes who must file a
BOI report, what information must be reported, and when a report is due. This rule represents the
culmination of years of bipartisan eorts by Congress, the Treasury, national security agencies, law
enforcement, and other stakeholders to bolster the United States’ corporate transparency framework
and address the most significant gap in the U.S. AML/CFT regime that the FATF identified in the 2016 U.S.
Mutual Evaluation.
FinCEN began accepting BOI on January 1, 2024, the eective date of the final BOI Reporting Rule. In
parallel, in December 2023, FinCEN issued a final BOI Access Rule to establish who may request and
receive BOI, how recipients may use it, and how they must secure it.
272
This rule becomes eective on
February 20, 2024. As required by the CTA, FinCEN will also revise the CDD Rule to conform with the CTA.
However, until these revisions are finalized, existing requirements for covered financial institutions to
collect BOI under the CDD Rule remain unchanged presenting a lingering information gap.
Looking ahead, while the full implementation of the CTA will help facilitate law enforcement
investigations and make it more diicult for illicit actors to hide behind anonymous shell companies
created in the United States or foreign entities registered to do business in the United States, there is a
risk that illicit actors will seek to exploit certain types of entities that are exempt under the CTA or shi
their activities to corporate structures that are not covered by the CTA (e.g., trusts that do not qualify as
reporting companies under the final BOI Reporting Rule).
269 In March 2023, FATF also adopted revisions to Recommendation 25 on beneficial ownership transparency of legal
arrangements, including trusts. Also in March, FATF adopted revised guidance to assist countries in implementing the changes
to Recommendation 24; work on developing guidance associated with revised Recommendation 25 is ongoing and is expected
to be finalized in 2024.
270 Public Law No. 116-283 (Jan. 1, 2021).
271 FinCEN, Beneficial Ownership Information Reporting Requirements, 87 FR 59498, (Sept. 30, 2022), https://www.federalregister.
gov/documents/2022/09/30/2022-21020/beneficial-ownership-information-reporting-requirements.
272 FinCEN, Beneficial Ownership Information Access and Safeguards, 88 FR 88732, (Dec. 21, 2022), https://www.federalregister.gov/
documents/2023/12/22/2023-27973/beneficial-ownership-information-access-and-safeguards.
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56
3. Trusts
In the United States, as in many countries, trusts are private legal arrangements commonly used by
individuals and legal entities (known as grantors/settlors) to place assets in custody and to provide the
benefit of those assets
273
or to disburse assets on behalf of designated individuals or entities (known as
beneficiaries), such as upon the death of the individual conveying assets to the trust (also known as the
grantor/settlor). Trusts have long been a cornerstone of estate and tax planning, and many individuals
choose to use trusts for legitimate reasons, including protecting the privacy of estate management
decisions; safeguarding the interests of beneficiaries who are not of age or otherwise not capable of
making sound financial decisions; and, in the case of inheritance, avoiding the requirements of probate
and, under some circumstances, enjoying certain tax benefits.
The FATF has previously identified trusts and other similar legal arrangements as vulnerable to money
laundering and has worked to strengthen its Recommendation 25 to impose requirements to obtain
information on the beneficial ownership of trusts.
274
Trusts, in the aggregate, are susceptible to misuse
primarily for fraud and tax evasion. This illicit activity may occur through the unethical and illegal
conduct of the trustee themselves, for instance, engaging in fraud or embezzlement against the wishes
and interests of the settlor and beneficiaries. Additionally, trusts may be utilized by the grantor/settlor
to hide and move illicit proceeds of crime, in which case the trustee may be fulfilling their fiduciary
obligations without knowledge that the assets were illegally obtained. The IRS has also cited a number of
tax-related abuses of trusts, including false claims related to instruments that are advertised as trusts but
do not meet the legal definition of trust.
In reviewing the risks associated with trusts used to launder funds in the United States, it is important to
distinguish between the risks of U.S. trusts and foreign trusts with a U.S. nexus. While law enforcement
does see criminal actor abuse of trusts, particularly for those trusts settled in what LEAs call “notorious
privacy states” like South Dakota, Wyoming, Delaware, Alaska, and Nevada, the risk is higher for those
trusts settled outside of the United States (or settled overseas and then converted into U.S. trusts).
275
At present, based on available information and consultations with subject matter experts, the Treasury
continues to assess that while they pose risk and there have been instances of abuse, U.S. trusts may
not be systemically used for money laundering. Certain factors contribute to the apparent current lack
of systematic misuse of trusts for money laundering or sanctions evasion. For illicit finance purposes,
creating a trust is complex and time consuming and involves too many co-conspirators or knowledgeable
parties as compared to creating a shell company, which any individual (non-professional) can do for
a nominal fee. Additionally, U.S. law enforcement has judicial and administrative recourse to find
information for U.S. trusts created by a U.S. settlor or for a U.S. beneficiary. Based on discussion with law
enforcement and case review, these factors may make trusts less attractive than, or not as easy to use as,
other methods to launder funds or obfuscate the ownership or control of assets (such as the misuse of
shell companies). However, this is a preliminary baseline assessment, and we acknowledge some current
data limitations.
273 For example, the interest on principal invested, or rental income from property held in trust.
274 See FATF Recommendation 25 and its interpretative note, available at https://www.fatf-gafi.org/en/publications/
Fatfrecommendations/Fatf-recommendations.html, that was amended at the February 2023 Plenary (described further in this
document), see https://www.fatf-gafi.org/en/publications/Fatfgeneral/outcomes-fatf-plenary-february-2023.html.
275 ICE, Cornerstone September 2023 Issue #44, “Money Laundering via Trusts,” https://content.govdelivery.com/bulletins/gd/
USDHSICE-36cc596?wgt_ref=USDHSICE_WIDGET_217.
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2024 ◆ National Money Laundering Risk Assessment
In contrast to U.S. trusts, trusts settled in foreign jurisdictions that establish suicient links
276
to the U.S.
financial system present a higher risk for money laundering and sanctions evasion because the non-
U.S. status of grantors, settlors, trustees, or beneficiaries may limit law enforcement access to beneficial
ownership and other information about those arrangements.
277
A review of cases indicates a higher
degree of risk arising from trusts being used to custody assets derived from foreign corruption, especially
to obtain U.S. real estate or investments.
Except for certain trusts that are taxed as business entities, the federal government does not require
trusts formed in the United States to register or otherwise disclose their creation. However, trusts
must disclose themselves when applying for a tax identification number or filing annual income tax
or information returns. Law enforcement access to this type of information is limited without a court
order. The federal government also does not any comprehensive AML/CFT obligations or regulations on
trustees except for financial institutions that oer trust services (including commercial banks and trust
companies).
Case examples
• On June 30, 2022, OFAC issued a Notification of Blocked Property to Heritage Trust, a Delaware-
based trust in which OFAC-designated Russian oligarch Suleiman Abusaidovich Kerimov holds a
property interest. Heritage Trust was formed in July 2017 for the purpose of holding and managing
Kerimov’s U.S.-based assets. Kerimov used a complex series of legal structures and front persons
to obscure his interest in Heritage Trust, the funds of which first entered the U.S. financial system
through two foreign Kerimov-controlled entities prior to imposing sanctions against him. The funds
were subsequently invested in large public and private U.S. companies and managed by a series of
U.S. investment firms and facilitators. Kerimov and his proxies used various layers of U.S. and non-
U.S. shell companies to hold formal titles to assets and to conduct transactions in a manner that
concealed his interest.
278
• On August 31, 2022, the DOJ announced the return of approximately $686,000 in forfeited criminal
proceeds to the Republic of Peru linked to the corruption and bribery of former Peruvian President
Alejandro Celestino Toledo Manrique (Toledo) by Odebrecht S.A. (Odebrecht), a Brazil-based
construction conglomerate. In the civil forfeiture matter and a related case, the United States alleged
that Toledo, while holding public oice as President of Peru, solicited millions in bribe payments
from Odebrecht in connection with government contracts awarded for construction of the Peru-
Brazil Southern Interoceanic Highway, a Peruvian government infrastructure project. Odebrecht
276 In February 2023, the FATF amended Recommendation 25 to require jurisdictions to conduct risk assessments for, inter
alia, “3.(c) types of foreign legal arrangements that have suicient links with their country.” The FATF leaves it to countries
to determine what is considered a “suicient link.” The Interpretative Note provides examples of what a suiciency test may
include, including when a trustee has “significant and ongoing business relations with financial institutions or DNFBPs, has
significant real estate/other local investment, or is a tax resident, in the country.” (see https://www.fatf-gafi.org/content/dam/
fatf-gafi/recommendations/FATF percent20Recommendations percent202012.pdf.coredownload.inline.pdf.)
277 Non-U.S. settlors who settle trusts in the United States raise particular issues in collecting data about them. One of the issues
is that such settlors create a mismatch between U.S. trust residence rules which treat the trust as foreign and the rules of their
home jurisdiction/another jurisdiction where the same trust may be viewed as a foreign trust as well (because it is established
under U.S. law). By virtue of the trust being non-resident in both jurisdictions, the overall tax and information reporting stance
is diminished.
278 Treasury, “Treasury Sanctions Global Russian Military Supply Chain, Kremlin-linked Networks, and Elites with Western Fortunes,”
(November 14, 2022), https://home.treasury.gov/news/press-releases/jy1102#:~:text=In percent20June percent202022
percent2C percent20OFAC percent20issued,valued percent20at percent20over percent20 percent241 percent20billion.
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58
subsequently made bribery payments to Toledo through accounts maintained by Toledo’s co-
conspirators. Ultimately, Toledo and his family used approximately $1.2 million of the bribery
payments to purchase real estate in Maryland in 2007 through a scheme designed to hide Toledo’s
ownership of the funds and their connection to Odebrecht. The forfeited assets represent the
proceeds from the sale of the Maryland real estate, which were further laundered through a trust and
bank account controlled by Toledo. Aer acquiring a Maryland residential property, obtained through
legal entities, Toledo had the title transferred to the Havenell Trust, an irrevocable trust with the trust
documents prepared by a law firm. Toledo and a relative were initially listed as the trustees and the
beneficiaries before amending the trust to successively make a real estate agent and then an attorney
as the trustees. The trust later sold the property in question and placed the sale proceeds into a
bank account. Toledo later used the Havenell Trust as the final destination for additional proceeds of
corruption transferred through oshore shell companies. Toledo also used the Havenell Trust account
to transfer money to an attorney escrow account belonging to a cooperating witness, which was then
transferred to dierent accounts controlled by Toledo or his associates.
279
Virtual Assets
280
Since the publication of the 2022 NMLRA, the virtual asset ecosystem has been in flux. The market
value of virtual assets have fallen considerably since their height in the fall of 2021, with many virtual
assets losing value through early 2023 but rebounding in the fall of 2023. Despite several large virtual
asset-related firms declaring bankruptcy, hundreds of virtual asset service providers (VASPs) continue
to operate in the United States. Traditional financial institutions continue to consider virtual asset-
related products and services, including oering to custody virtual assets, banking VASPs, and using the
technology underpinning virtual assets to experiment with tokenizing existing traditional financial assets.
In the United States, VASPs have AML/CFT obligations if they fall under the BSA definition of a financial
institution, which covers banks, broker-dealers, mutual funds, MSBs, futures commission merchants
(FCMs), introducing brokers, and other forms of financial institutions.
281
Many VASPs in the United States
are considered MSBs, but depending on the activities in which the VASP engages, they may be considered
FCMs or securities intermediaries such as broker-dealers.
282
Foreign-located VASPs that operate wholly or
in substantial part in the United States are considered MSBs, unless an applicable exemption applies, and
must comply with applicable BSA requirements. Each of these types of financial institutions has AML/CFT
obligations, including requirements to establish and implement an eective AML Program
283
and
279 DOJ, “Justice Department Will Return Approximately $686,000 in Forfeited Corruption Proceeds to the Republic of Peru,” (August 31,
2022), https://www.justice.gov/opa/pr/justice-department-will-return-approximately-686000-forfeited-corruption-proceeds-republic.
280 This report uses the terms “virtual asset” and “VASP (virtual asset service provider),” terms not contained explicitly in U.S. law
or regulation, to align with the terminology defined by the FATF. Virtual assets, as used in this report, include non-sovereign-
administered digital assets such as convertible virtual currencies [CVCs], like bitcoin and stablecoins. For consistency, this
terminology is also used in case examples, but this is intended only to facilitate an understanding of illicit finance risk and does
not alter any existing legal obligations. This, however, does not cover central bank digital currencies, which are representations
of fiat currency.
281 31 U.S.C. § 5312(a)(2); 31 C.F.R. § 1010.100(t).
282 FinCEN, “Leaders of CFTC, FinCEN, and SEC Issue Joint Statement on Activities Involving Digital Assets,” (Oct. 11, 2019), https://
www.fincen.gov/sites/default/files/2019-10/CVC percent20Joint percent20Policy percent20Statement_508 percent20FINAL_0.pdf.
283 See31 C.F.R. § 1020.210 (banks); 31 C.F.R. § 1021.210 (casinos and card clubs); 31 C.F.R. § 1022.210 (MSBs); 31 C.F.R. § 1023.210
(brokers or dealers in securities); 31 C.F.R. § 1024.210 (mutual funds); 31 C.F.R. § 1026.210 (futures commission merchants and
introducing brokers in commodities).
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2024 ◆ National Money Laundering Risk Assessment
recordkeeping and reporting requirements, including SAR filing obligations.
284
FinCEN, OFAC, SEC,
and the Commodities Futures Trading Commission (CFTC) have issued statements and guidance on
regulatory requirements for VASPs.
285
Further, VASPs that are U.S. persons, like all other U.S. persons, wherever located, are required to
comply with economic sanctions programs administered and enforced by OFAC. At the same time, non-
U.S. persons may also have OFAC sanctions compliance obligations in some circumstances. Sanctions
compliance obligations are the same regardless of whether a transaction is denominated in virtual assets
or traditional fiat currency.
286
While the use of virtual assets for money laundering continues to remain far below that of fiat currency
and more conventional methods that do not involve virtual assets, U.S. law enforcement agencies have
observed virtual assets being misused for ransomware, scams, drug traicking, human traicking, and
other illicit activities.
1. Inconsistent Compliance with Domestic Obligations
In the United States, there are cases in which VASPs fail to comply with their AML/CFT and sanctions
obligations. When covered VASPs fail to register with the appropriate regulator, fail to establish and
maintain suicient AML/CFT controls, or do not comply with sanctions obligations, criminals may more
easily exploit their services for nefarious purposes, including circumventing United States and United
Nations sanctions. For example, some VASPs currently do not implement adequate AML/CFT controls or
other processes to identify customers, allowing placement, layering, and integration of illicit proceeds to
occur instantaneously and pseudonymously without collecting appropriate identifying information.
In some cases, such VASPs may claim not to be subject to U.S. jurisdiction despite doing business wholly
or in substantial part in the United States. In some instances, VASPs have directed U.S.-based users to use
virtual private networks or other methods such as the creation of shell companies to obscure that they
are based in the United States.
287
VASPs have also marketed themselves as requiring little to no customer
284 See31 C.F.R. § 1020.320 (banks); 31 C.F.R. § 1021.320 (casinos and card clubs); 31 C.F.R. § 1022.320 (MSBs), 31 C.F.R. § 1023.320
(brokers or dealers in securities), 31 C.F.R. § 1024.320 (mutual funds), and 31 C.F.R. § 1026.320 (futures commission merchants
and introducing brokers in commodities).A suspicious transaction must be reported if it is conducted or attempted by, at, or
through the financial institution and the amount involved exceeds a certain threshold.
285 See, e.g., SEC, “Strategic Hub for Innovation and Financial Technology,” https://www.sec.gov/finhub; SEC, Crypto Assets, https://
www.investor.gov/additional-resources/spotlight/crypto-assets; FinCEN, “FinCEN Guidance,” (May 9, 2019), https://www.fincen.
gov/sites/default/files/2019-05/FinCEN percent20Guidance percent20CVC percent20FINAL percent20508.pdf; SEC, “Leaders
of CFTC, FinCEN, and SEC Issue Joint Statement on Activities Involving Digital Assets,” (October 11, 2019), https://www.sec.
gov/news/public-statement/cc-fincen-secjointstatementdigitalassets; Treasury, “Sanctions Compliance Guidance for the
Virtual Currency Industry,” (October 2021), https://ofac.treasury.gov/media/913571/download?inline; OFAC, “Frequently Asked
Questions: Questions on Virtual Currency,” (May 9, 2019), https://home.treasury.gov/policy-issues/financialsanctions/faqs/,
FinCEN, “FinCEN Guidance”, https://www.fincen.gov/sites/default/files/2019-05/FinCEN percent20Guidance percent20CVC
percent20FINAL percent20508.pdf; FinCEN, “Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using
Virtual Currencies,” (March 18, 2013), https://www.fincen.gov/sites/default/files/administrative_ruling/FIN-2014-R002.pdf.
286 Treasury, “Sanctions Compliance Guidance for the Virtual Currency Industry,” (October 2021), https://ofac.treasury.gov/media/913571/
download?inline; See e.g., OFAC, “Frequently Asked Questions,” (March 19, 2018), https://ofac.treasury.gov/faqs/topic/1626; OFAC,
“Frequently Asked Questions: 646,” (October 15, 2021), https://ofac.treasury.gov/faqs/646; OFAC, “Frequently Asked Questions: 1021,”
(March 11, 2022), https://ofac.treasury.gov/faqs/1021.
287 FinCEN, “In the Matter of: Binance Holdings Limited, Binance (Services) Holdings Limited, Binance Holdings (IE) Limited, d/b/a
Binance and Binance.com, Number 2023-04, Consent Order Imposing Civil Money Penalty,” (November 21, 2023),
https://fincen.gov/sites/default/files/enforcement_action/2023-11-21/FinCEN_Consent_Order_2023_04_Final508.pdf.
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information from users prior to transactions, in violation of U.S. AML/CFT requirements.
288
However,
even among VASPs that do take steps to register or obtain a license with U.S. regulators, some VASPs
may be licensed or registered incorrectly and, therefore, not meeting the full AML/CFT obligations for
the services that they are providing. For example, a VASP registered as an MSB may also be operating as
an unlicensed FCM or broker dealer, in which case they would be required to implement measures as an
FCM, like a customer identification program, that do not apply to MSBs. More recently, many purportedly
DeFi services (see Special Focus Section on DeFi) and some virtual asset peer-to-peer platforms claim
that they are not subject to BSA requirements, purporting to enable automated transactions without
the need for an account or custodial relationship. These entities may, however, be regulated financial
institutions depending on specific facts and circumstances surrounding their financial activities.
289
There have also been instances in which VASPs subject to BSA obligations based on their financial activities
have failed to meet AML program requirements under the BSA and its implementing regulations. For
example, based on services the VASP provides, the VASP may be required to implement an AML program,
with internal controls that are commensurate with the risks posed by their customers, the nature and
volume of the financial services they provide, and the jurisdictions in which they provide services.
Some VASPs have scaled quickly without adequately assessing and mitigating potential regulatory
risks associated with providing new or additional services, including oering anonymity-enhancing
cryptocurrencies (AECs) and expanding into new geographic markets.
290
Law enforcement and regulators
have observed VASPs oering services to so-called nested VASPs, (i.e., smaller VASPs that oer services to
their customers through accounts and sub-accounts held at larger VASPs to benefit from the liquidity and
convenience the larger market players provide). In such instances, VASPs are expected to ensure that their
AML Program has appropriate policies, procedures, and internal controls to identify “nested” activity and
comply with applicable BSA requirements which will vary based on the services the VASP oers.
291
Law enforcement has also observed the misuse of virtual asset kiosks, which are oen considered MSBs
for BSA purposes, to launder illicit proceeds. Some perpetrators of scams or fraud may direct victims
to use virtual asset kiosks to purchase virtual assets with fiat currency and send virtual assets to the
perpetrator, sometimes by sharing Quick Response codes that auto-populate the perpetrator’s virtual
asset wallet address.
292
Some kiosk owners have failed to comply with AML/CFT obligations or disabled
features designed to support compliance, enabling misuse by illicit actors.
293
288 DOJ, “Justice Department Seizes and Forfeits Approximately $500,000 from North Korean Ransomware Actors and their
Conspirators”, (July 19, 2022), https://www.justice.gov/opa/pr/justice-department-seizes-and-forfeits-approximately-500000-
north-korean-ransomware-actors.
289 CFTC, “Statement of CFTC Division of Enforcement Director Ian McGinley on the Ooki DAO Litigation Victory” (June 9, 2023), https://
www.cc.gov/PressRoom/PressReleases/8715-23#:~:text=June percent2009 percent2C percent202023&text=Critically percent2C
percent20in percent20a percent20precedent percent2Dsetting,violate percent20the percent20law percent20as percent20charged;
CFTC, CFTC Orders Event-Based Binary Options Markets Operator to Pay $1.4 Million Penalty, (January 3, 2022), https:// www.cc.
gov/PressRoom/PressReleases/8478-22; SEC, SEC Charges Decentralized Finance Lender and Top Executives for Raising $30 Million
Through Fraudulent Oerings, (August 6, 2021), https://www.sec.gov/news/press-release/2021-145.
290 FinCEN, “Consent Order Imposing Civil Money Penalty, In the Matter of Bittrex, Inc.,” (Number 2022-03), https://www.fincen.gov/
sites/default/files/enforcement_action/2023-04-04/Bittrex_Consent_Order_10.11.2022.pdf.
291 See Footnotes 338 and 339.
292 IC3, “The FBI Warns of Fraudulent Schemes Leveraging Cryptocurrency ATMs and QR Codes to Facilitate Payment” (November
04, 2021), https://www.ic3.gov/Media/Y2021/PSA211104.
293 DOJ, “Ian Freeman Sentenced to 8 Years in Prison for Operating a Bitcoin Money Laundering Scheme” (October 2, 2023), https://
www.justice.gov/usao-nh/pr/ian-freeman-sentenced-8-years-prison-operating-bitcoin-money-laundering-scheme.
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2024 ◆ National Money Laundering Risk Assessment
Case examples:
• Binance: In November 2023, Binance Holdings Limited and its ailiates, which operate the world’s
largest VASP, Binance.com, entered into the largest resolutions in the Treasury’s history with FinCEN
(including a penalty of $3.4 billion) and OFAC (including a penalty of nearly $1 billion), as well as
resolutions of parallel investigations by the DOJ and the CFTC. As part of these resolutions, Binance
pleaded guilty and paid penalties totaling over $4.3 billion, to resolve the Justice Department’s
investigation into violations related the BSA, failure to register as a money transmitting business, and
the International Emergency Economic Powers Act.
294
• Binance’s founder and CEO also pleaded guilty to BSA violations and resigned from Binance.
295
Aer
launching in 2017, Binance quickly became the largest VASP in the world, with the greatest share
of its customers coming from the United States. As a result of serving U.S. customers, Binance was
required to register with FinCEN as an MSB and to establish, implement and maintain an eective
AML program. Due in part to Binance’s failure to implement an eective AML program, including
(among other things) failing to perform KYC on a large number of its users, illicit actors used Binance’s
exchange in various ways. Furthermore, Binance failed to file SARs on their suspicious transactions,
including those related to terrorist financing, ransomware, child sexual abuse materials, as well as
darknet markets, scams, and other illicit activity. As part of the resolution with FinCEN, Binance has
also agreed to retain an independent compliance monitor for three years and remediate and enhance
its AML and sanctions compliance programs. Binance separately has also reached agreements with
the CFTC, FinCEN, and OFAC, and the Justice Department will credit approximately $1.8 billion toward
those resolutions. Under its settlement with FinCEN, Binance also agreed to significant compliance
undertakings, including a groundbreaking five-year monitorship, an independent review of its AML
program, and a SAR lookback review.
• Bittrex: In October 2022, OFAC and FinCEN announced that Bittrex, a VASP, had entered into separate
settlements of over $24 million and $29 million, respectively.
296
Bittrex failed to prevent persons
located in sanctioned jurisdictions, namely the Crimea region of Ukraine, Cuba, Iran, Sudan, and
Syria, from using its platform to transact approximately $263 million in virtual assets between
March 2014 and December 2017. Additionally, from February 2014 to December 2018, Bittrex failed
to maintain an eective AML program as required under the BSA by maintaining an inadequate
transaction monitoring system on its platform, to address the risks associated with its products
appropriately, and failing to file any SARs over a three-year period, including on transactions
involving sanctioned jurisdictions. Bittrex’s inadequate AML compliance program and transaction
monitoring le its platform open to abuse by bad actors, including money launderers, terrorist
financiers, ransomware attackers, and sanctions evaders.
294 Treasury, “U.S. Treasury Announces Largest Settlements in History with World’s Largest Virtual Currency Exchange Binance for
Violations of U.S. Anti-Money Laundering and Sanctions Laws,” (November 21, 2023), https://home.treasury.gov/news/press-
releases/jy1925; DOJ, “Binance and CEO Plead Guilty to Federal Charges in $4B Resolution” (November 21, 2023), https://www.
justice.gov/opa/pr/binance-and-ceo-plead-guilty-federal-charges-4b-resolution.
295 DOJ, “Binance and CEO Plead Guilty to Federal Charges in $4B Resolution,” (November 21, 2023), https://www.justice.gov/opa/
pr/binance-and-ceo-plead-guilty-federal-charges-4b-resolution.
296 Treasury, “Treasury Announces Two Enforcement Actions for Over $24M and $29M Against Virtual Currency Exchange Bittrex,
Inc.,” (October 11, 2022), https://home.treasury.gov/news/press-releases/jy1006.
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62
2. Inconsistent Implementation of International AML/CFT Obligations
As highlighted in previous NMLRAs, uneven and oen inadequate regulation and international
supervision allows VASPs and illicit actors to engage in regulatory arbitrage. This risk can expose the
U.S. financial system to VASPs with deficient or nonexistent AML/CFT controls operating abroad. VASPs
operating in the U.S. that constitute financial institutions under the BSA are generally subject to the BSA
and its implementing regulations, including foreign-located VASPs obligations that operate wholly or in
substantial part in the United States. This issue is of particular concern with VASPs given the ability to
transfer virtual assets across borders nearly instantaneously compared to other financial transfers, the
fact that many VASPs operate or have architecture in several jurisdictions, and the breadth of gaps in
implementing international AML/CFT standards set forth by the FATF. Four years ago, the FATF clarified
how its global standards on AML/CFT apply to virtual assets and VASPs. However, a recent FATF report
based on a voluntary survey of jurisdictions found that jurisdictions continue to struggle with fundamental
elements of the FATF standards. It also found that one-third of countries have not yet completed an
illicit finance risk assessment for virtual assets and over 40 jurisdictions had not decided if and how
to regulate the virtual asset sector for AML/CFT purposes. Even jurisdictions that have decided on and
begun implementing an approach oen lack suicient supervision and monitoring systems to eectively
conduct supervision and sanction non-compliant VASPs, when applicable.
297
The uneven implementation
of eective AML/CFT requirements can allow VASPs to concentrate their operations in jurisdictions with
minimal or nonexistent AML/CFT requirements, weak supervision of VASPs, or both.
298
Other VASPs
have adopted a distributed architecture where they register in one country, have personnel in a second
country, maintain data on servers located in a third country, and oer services in several countries with
dierent legal and regulatory approaches to virtual assets. This approach can complicate supervision and
enforcement, which oen require considerable cooperation amongst competent authorities.
3. Obfuscation Tools and Methods
Criminals commonly use obfuscation tools and methods to introduce challenges for investigators
attempting to trace illicit funds. These tools include mixers (see snapshot) and mixing-enabled wallets, as
well as AECs, which reduce the transparency of virtual financial flows through anonymizing features. For
example, the virtual asset Monero obfuscates transaction information using cryptographic technologies,
such as (1) ring signatures, which are used to hide the identity of the transaction originator; (2) ring
confidential transactions, which obfuscate the amount of the transaction; and (3) stealth addresses,
which hide the identity of the beneficiary.
299
Other methods may include laundering as a service, which is
available in some darknet markets.
Additional methods, such as chain hopping, may frustrate the ability to trace financial transactions
quickly or for service providers to detect if incoming funds are tied to illicit activity. Actors can chain-hop
by exchanging virtual assets on one blockchain for virtual assets on another. Chain hopping can pose
challenges to tracing if actors use specific assets or blockchains that are more diicult to trace given
297 FATF, “Virtual Assets: Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service
Providers,” (June 27, 2023), https://www.fatf-gafi.org/en/publications/Fatfrecommendations/targeted-update-virtual-assets-
vasps-2023.html.
298 Treasury, “Action Plan to Address Illicit Financing Risks of Digital Assets,” September 22, 2022, https://home.treasury.gov/
system/files/136/Digital-Asset-Action-Plan.pdf.
299 See Treasury, National Money Laundering Risk Assessment, February 2022.
63
2024 ◆ National Money Laundering Risk Assessment
current limits on blockchain analysis or if the transactions are done quickly. Criminals are constantly
evolving techniques to obfuscate illicit proceeds and are learning how to use these techniques eectively.
The pace of change can present challenges for competent authorities.
Virtual asset transactions oen occur on public blockchains, which means that anyone with internet
access can view the pseudonymous transaction data in a public ledger for the blockchain. Public ledgers
can support investigations in tracing the movement of illicit proceeds and, paired with other pieces of
information, law enforcement can sometimes identify transaction participants. However, the ability to
use public blockchain data can be limited by the eective execution or use of the techniques and services
described above.
Case examples
• In February 2022, two individuals were arrested for an alleged conspiracy to launder virtual assets
stolen during a 2016 hack, presently valued at approximately $4.5 billion.
300
Over the last five years,
approximately 25,000 of those stolen bitcoin were allegedly transferred out of the defendant’s
wallet via a complicated money laundering process that ended with some of the stolen funds being
deposited into financial accounts controlled by both defendants.
• A criminal complaint filed by DOJ alleges that the defendants employed numerous sophisticated
laundering techniques, including converting bitcoin to other forms of virtual assets, including
anonymity-enhanced cryptocurrencies, via chain hopping and depositing the stolen funds into
accounts at a variety of VASPs and darknet markets and then withdrawing the funds. In August 2023,
one defendant, Ilya Lichtenstein, pleaded guilty to money laundering conspiracy, which carries a
maximum penalty of 20 years in prison, and the other defendant, Heather Morgan, pleaded guilty to
one count of money laundering conspiracy and one count of conspiracy to defraud the United States,
each of which carries a maximum penalty of five years.
301
4. Mixing
Criminals can use virtual asset mixing to functionally obfuscate the source, destination, or amount
involved in a transaction.
302
Mixing can accomplish this through various mechanisms, including pooling
or aggregating virtual assets from multiple individuals, wallets, or accounts into a single transaction or
transactions. Mixing is frequently used by cybercriminals connected to the DPRK, money launderers,
ransomware actors, participants in illicit darknet markets, among others. Mixing services may be
advertised as a way to evade AML/CFT requirements and rarely, if ever, include the willingness to provide
upon request to regulators or law enforcement the resulting transactional chain or information collected
as part of the transaction.
303
300 DOJ, “Two Arrested for Alleged Conspiracy to Launder $4.5 Billion in Stolen Cryptocurrency,” (February 8, 2022), https://www.
justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency.
301 DOJ, “Bitfinex Hacker and Wife Plead Guilty to Money Laundering Conspiracy Involving Billions in Cryptocurrency,” (August 3,
2023), https://www.justice.gov/opa/pr/bitfinex-hacker-and-wife-plead-guilty-money-laundering-conspiracy-involving-billions.
302 Treasury, “Illicit Finance Risk Assessment of Decentralized Finance” (April 2023), https://home.treasury.gov/system/files/136/
DeFi-Risk-Full-Review.pdf.
303 Treasury, “U.S. Treasury Issues First-Ever Sanctions on a Virtual Currency Mixer, Targets DPRK Cyber Threats,” (May 6, 2022),
https://home.treasury.gov/news/press-releases/jy0768; FinCEN, “First Bitcoin “Mixer” Penalized by FinCEN for Violating Anti-
Money Laundering Laws,” (October 19, 2020), https://www.fincen.gov/news/news-releases/first-bitcoinmixer-penalized-fincen-
violating-anti-money-laundering-laws.
2024 ◆ National Money Laundering Risk Assessment
64
Because mixing provides foreign illicit actors with enhanced anonymity that allows them to launder
their illicit proceeds, in October 2023 FinCEN announced a notice of proposed rule making (NPRM) that
identifies international CVC mixing as a class of transactions of primary money laundering concern
pursuant to section 311 of the USA PATRIOT Act. FinCEN’s proposal would require covered financial
institutions to implement certain recordkeeping and reporting requirements on transactions that the
covered financial institutions know, suspect, or have reason to suspect it involves CVC mixing within or
involving jurisdictions outside the United States.
304
Case examples
• In March 2023, the DOJ announced a coordinated action against ChipMixer, a virtual asset “mixing”
service responsible for laundering more than $3 billion worth of virtual assets.
305
The operation
involved U.S. federal law enforcement’s court-authorized seizure of two domains that directed users
to the ChipMixer service and one Github account, as well as the German Federal Criminal Police’s
seizure of the ChipMixer back-end servers and more than $46 million in cryptocurrency. As alleged
in the complaint, ChipMixer processed hundreds of millions of dollars’ worth of bitcoin connected
to or associated with ransomware strains, stolen funds, customers of Hydra Market, and Russian
intelligence services. ChipMixer also served U.S. customers but failed to register with FinCEN
and employed technology to conceal the operating location of servers to avoid law enforcement
detection. In addition to the coordinated action, an individual was charged with money laundering,
operating an unlicensed money transmitting business, and identity the, connected to the operation
of ChipMixer.
• In August 2023, the DOJ unsealed an indictment charging a Russian and U.S. national of creating,
operating, and promoting Tornado Cash, a virtual asset mixer that facilitated more than $1 billion in
money laundering transactions, and laundered hundreds of millions of dollars for the Lazarus Group,
the sanctioned DPRK cybercrime organization.
306
According to the indictment, Tornado Cash service
advertised to customers that it provided untraceable and anonymous financial transactions. Storm
and Semenov allegedly chose not to implement know-your customer or anti-money laundering
programs as required by law. Even aer the Treasury designated Tornado Cash in August 2022, the
operators allegedly helped the Lazarus Group to transfer criminal proceeds from a virtual asset wallet
that OFAC had designated as blocked property. The operators are each charged with one count of
conspiracy to commit money laundering, one count of conspiracy to operate an unlicensed money
transmitting business, and one count of conspiracy to violate the International Economic Emergency
Powers Act. OFAC also sanctioned Semenov for his role in providing material support to Tornado Cash
and to the Lazarus Group.
307
304 FinCEN, “FinCEN Proposes New Regulation to Enhance Transparency in Convertible Virtual Currency Mixing and Combat
Terrorist Financing”, (October 19, 2023), https://www.fincen.gov/news/news-releases/fincen-proposes-new-regulation-
enhance-transparency-convertible-virtual-currency.
305 DOJ, “Justice Department Investigation Leads to Takedown of Darknet Cryptocurrency Mixer that Processed Over $3 Billion of
Unlawful Transactions” (March 15, 2023), https://www.justice.gov/opa/pr/justice-department-investigation-leads-takedown-
darknet-cryptocurrency-mixer-processed-over-3.
306 DOJ, “Tornado Cash Founders Charged with Money Laundering and Sanctions Violations”, (August 23, 2023), https://
www.justice.gov/opa/pr/tornado-cash-founders-charged-money-laundering-and-sanctions-violations#:~:text=According
percent20to percent20the percent20indictment percent2C percent20unsealed,laundering percent20transactions percent2C
percent20and percent20laundered percent20hundreds.
307 Treasury, “Treasury Designates Roman Semenov, Co-Founder of Sanctioned Virtual Currency Mixer Tornado Cash”, (August 23,
2023), https://home.treasury.gov/news/press-releases/jy1702.
65
2024 ◆ National Money Laundering Risk Assessment
5. Disintermediation
Many virtual assets can be self-custodied and transferred without the involvement of an intermediary
financial institution, which can be referred to as disintermediation. For example, funds transfers
between two users of unhosted wallets may not involve a regulated financial institution. The absence
of a regulated financial institution, subject to AML/CFT obligations can limit authorities’ collection of
and access to information. It can also reduce the eectiveness of preventive measures by other financial
institutions with exposure to disintermediated transactions or users involved in such transactions. Such
instances present a vulnerability, although these transactions may occur on public blockchains providing
some transparency.
6. Special Focus: Decentralized Finance (DeFi)
In April 2022, the Treasury published an illicit finance risk assessment on DeFi.
308
The DeFi risk
assessment identified that illicit actors, including ransomware cybercriminals, thieves, scammers,
and DPRK cyber actors, are using DeFi services transferring and laundering their illicit proceeds. To
accomplish this, illicit actors are exploiting vulnerabilities in the U.S. and foreign AML/CFT regulatory,
supervisory, and enforcement regimes as well as the technology underpinning DeFi services. As
explained in the risk assessment, a DeFi service that constitutes a financial institution as defined by the
BSA, regardless of whether the service is centralized or decentralized, is required to comply with BSA
requirements, including AML/CFT obligations. Despite this, many existing DeFi services covered by the
BSA fail to comply with AML/CFT obligations, a vulnerability that illicit actors exploit.
For example, in June 2023, a federal judge ruled in favor of the CFTC, entering a default judgment
order that requires Ooki DAO, a DAO, to pay a civil monetary penalty of over $643,000.
309
The CFTC
had charged Ooki DAO in an administrative order against Ooki DAO’s predecessor LLC (bZeroX), which
had transferred control of the soware to a DAO, and its founders. The bZx Protocol purported to
oer users the ability to engage in transactions in a decentralized environment supported by smart
contracts - i.e., without third-party intermediaries taking custody of user assets.
310
However, the court
held that the Ooki DAO is a “person” under the Commodity Exchange Act and thus can be held liable
for violating the law. The administrative order and this enforcement action charged that bZeroX
(and then the Ooki DAO) unlawfully oered leveraged and margined retail commodity transactions
outside of a registered exchange, unlawfully acted as an FCM, and unlawfully failed to comply with BSA
obligations applicable to FCMs.
308 Treasury, “Illicit Finance Risk Assessment of Decentralized Finance” (April 2023), https://home.treasury.gov/system/files/136/
DeFi-Risk-Full-Review.pdf. See also IOSCO, “Final Report with Policy Recommendations for Decentralized Finance (DeFi),”
(December 2023), https://www.iosco.org/library/pubdocs/pdf/IOSCOPD754.pdf.
309 CFTC, “Statement of CFTC Division of Enforcement Director Ian McGinley on the Ooki DAO Litigation Victory” (June 9, 2023),
https://www.cc.gov/PressRoom/PressReleases/8715-23#:~:text=June percent2009 percent2C percent202023&text=Critically
percent2C percent20in percent20a percent20precedent percent2Dsetting,violate percent20the percent20law percent20as
percent20charged.
310 CFTC, “CFTC Imposes $250,000 Penalty Against bZeroX, LLC and Its Founders and Charges Successor Ooki DAO for Oering
Illegal, O-Exchange Digital-Asset Trading, Registration Violations, and Failing to Comply with Bank Secrecy Act,” (September 22,
2022), https://www.cc.gov/PressRoom/PressReleases/8590-22.
2024 ◆ National Money Laundering Risk Assessment
66
AML/CFT Compliance Deciencies
Financial institutions and entities in the United States are subject to the provisions of the BSA and play an
important role in preventing and detecting illicit activity that threatens the integrity of the U.S. financial
system. Many of these financial institutions and entities implement eective AML/CFT programs and
controls to guard against their misuse. However, some have demonstrated significant AML/CFT failings.
1. Banks
Over the past 10 years there has been a decline in the number of banks operating in the United States.
Recent data indicates that there were approximately 4,672
311
Federal Deposit Insurance Corporation
(FDIC)-insured commercial banks and savings institutions in existence as of the first quarter of 2023,
compared to 7,019 from the first quarter of 2013.
312
This decline appears to be primarily driven by the
consolidation and merger of existing financial institutions. A shi in traditional banking activities, and an
increase in financial technology (i.e., “FinTech”) companies partnering with banks, a trend referred to as
“banking-as-a-service” has also impacted the financial services landscape.
313
Recent actions taken by the FinCEN and Federal Financial Institutions Regulatory Agencies (FFIRAs),
314
indicate that some banks still struggle to implement corrective actions for issues identified in examinations
within the necessary time frames including implementing an adequate system of AML/CFT internal controls
or filing SARs in a timely manner. This struggle is especially true for banks lacking a federal functional
regulator, which only became subject to comprehensive federal BSA requirements in 2021.
New technologies employed by financial institutions have advanced financial crimes compliance but also
exposed banks to risks. In 2022, the Oice of the Comptroller of the Currency (OCC) cautioned that use of
new technologies or entry into new markets may cause familiar risks to manifest in dierent ways or may
necessitate new techniques to identify, measure, monitor, and control them appropriately.
315
Recent activity shows that the emergence of virtual asset-focused firms may pose unique vulnerabilities
as these entities evolve into financial institutions (e.g., banks) as defined under the BSA and seek to
resource themselves suiciently to deal with their risk exposure and regulatory requirements. Other
enforcement actions indicate that some banks have failed to follow the procedures to identify their
customers in a timely manner and are not properly utilizing technological solutions to mitigate customer
risk. More recently, in 2023, the OCC noted an increase in financial crime and AML/CFT risks in traditional
banking products and services that align with this assessment.
316
311 FDIC, “QUARTERLY BANKING PROFILE: FIRST QUARTER 2023, (2023, Vol.17, #2) (https://www.fdic.gov/analysis/quarterly-banking-
profile/fdic-quarterly/2023-vol17-2/fdic-v17n2-1q2023.pdf.
312 FDIC, QUARTERLY BANKING PROFILE: THIRD QUARTER 2022, (2022, Vol.16, #2) https://www.fdic.gov/analysis/quarterly-banking-
profile/fdic-quarterly/2022-vol16-2/fdic-v16n2-1q2022.pdf.
313 FRB, Governor Michelle W. Bowman, “The Consequences of Fewer Banks in the U.S. Banking System”, (April 14, 2023) https://
www.federalreserve.gov/newsevents/speech/bowman20230414a.htm.
314 As defined in 12 U.S.C. 3302(1).
315 OCC, “Semiannual Risk Perspective”, (Fall 2022), https://www.occ.treas.gov/publications-and-resources/publications/
semiannual-risk-perspective/files/pub-semiannual-risk-perspective-fall-2022.pdf.
316 OCC, “OCC Report Identifies Key Risks Facing Federal Banking System”, (Spring 2023), https://www.occ.treas.gov/publications-
and-resources/publications/semiannual-risk-perspective/files/semiannual-risk-perspective-spring-2023.html.
67
2024 ◆ National Money Laundering Risk Assessment
Further, OFAC’s sanctions in response to Russia’s invasion of the Ukraine in February 2022 are complex
and evolving, requiring financial institution management to assess the applicability and impact of
sanctions on their institutions and customers, including the impact of sanctions imposed by both the
United States and other countries on foreign branches, overseas oices, and subsidiaries.
317
Case examples
• In October 2023, the Federal Reserve Board (FRB) fined Metropolitan Commercial Bank (MCB), of
New York, New York, approximately $14.5 million for violations of customer identification rules
and deficient third-party risk management practices relating to the bank’s issuance of reloadable
prepaid card accounts.
318
In 2020, MCB opened prepaid card accounts for illicit actors using stolen
identities who subsequently used the accounts to collect more than $300 million in illegally obtained
state unemployment insurance benefits. By opening prepaid card accounts through a third-party
program manager without having adequate procedures for verifying each applicant’s true identity,
MCB violated customer identification rules set forth in the BSA and its implementing regulations. The
Board required MCB to improve its customer identification, customer due diligence, and third-party
risk management programs.
• In September 2023, FinCEN issued a consent order imposing a civil money penalty of $15,000,000
on Bancrédito International Bank and Trust Corporation, an International Banking Entity operating
in Puerto Rico for willfully violating the BSA between October 2015 and May 2022, by failing to
timely report suspicious transactions to FinCEN; failing to establish a due diligence program for
correspondent accounts established, maintained, administered, or managed in the United States for
foreign financial institutions; and failing to implement and maintain an AML program.
319
Bancrédito
did not comply with SAR reporting obligations, failing to file SARs for years and ignoring violations
cited by its primary regulator, the Puerto Rico Oice of the Commissioner of Financial Institutions.
These transactions included suspicious activity by a Bancrédito executive and suspicious activity
involving customers in the high-risk jurisdiction of Venezuela, including customers linked to foreign
bribery and money laundering.
• In September 2023, FinCEN assessed a concurrent civil money penalty of $15 million against Shinhan
Bank America (SHBA)for willfully violating the BSA from April 2016 through March 2021, including
failure to implement and maintain an eective AML program that was reasonably designed to guard
against money laundering and failing to timely report several hundred transactions to FinCEN
involving suspicious financial activity by its customers processed by, at, or through the bank.
320
As a
result, tens of millions of dollars in suspicious transactions were not reported to FinCEN in a timely
manner, including transactions connected to tax evasion, money laundering, and other financial
crimes. The FDIC issued a concurrent civil money penalty of $5 million against SHBA for violations of
the BSA and its implementing AML regulations and for failure to comply with the requirements of an
FDIC-issued consent order dated June 12, 2017.
321
The New York Department of Financial Services
also assessed a civil penalty of $10 million for AML-related violations.
317 OCC, “SEMIANNUAL RISK PERSPECTIVE”, (Spring 2022), https://www.occ.treas.gov/publications-and-resources/publications/
semiannual-risk-perspective/files/pub-semiannual-risk-perspective-spring-2022.pdf.
318 The New York Department of Financial Services also took a joint action against Metropolitan. See FRB, “In the Matter of METROPOLITAN
COMMERCIAL BANK New York, New York”, https://www.federalreserve.gov/newsevents/pressreleases/files/enf20231019a1.pdf.
319 FinCEN, “FinCEN Announces $15 Million Civil Money Penalty against Bancrédito International Bank and Trust Corporation for
Violations of the Bank Secrecy Act”, (September 15, 2023), https://www.fincen.gov/news/news-releases/fincen-announces-15-
million-civil-money-penalty-against-bancredito-international.
320 FinCEN, CONSENT ORDER IMPOSING CIVIL MONEY PENALTY, “IN THE MATTER OF Shinhan Bank America New York, NY: Number
2023-03”, https://www.fincen.gov/sites/default/files/enforcement_action/2023-09-29/SHBA_9-28_FINAL_508.pdf.
321
FDIC, “In the Matter of SHINHAN BANK AMERICA NEW YORK, NEW YORK”, https://www.fdic.gov/news/press-releases/2023/pr23080a.pdf.
2024 ◆ National Money Laundering Risk Assessment
68
• In April 2023, FinCEN assessed a $1.5 million civil money penalty on South Dakota-chartered The
Kingdom Trust Company (Kingdom Trust) for violations of the BSA and its implementing regulations.
As part of the consent order, Kingdom Trust admitted that it willfully failed to accurately and timely
report hundreds of transactions to FinCEN involving suspicious activity by its customers, including
transactions with connections to a trade-based money laundering scheme and multiple securities
fraud schemes that were the subject of both criminal and civil actions. These failures stemmed
from Kingdom Trust’s severely underdeveloped and ad-hoc process for identifying and reporting
suspicious activity.
322
• In January 2023, the FRB issued a civil money penalty on Popular Bank $2.3 million for processing
six Paycheck Protection Program (PPP) loans despite “having detected that the loan applications
contained significant indications of potential fraud.”
323
Specifically, in addition to the processing
and funding of the loans, the Bank failed to timely report the potential fraud which demonstrated
“ineective controls and procedures that resulted in violations of the Bank’s internal BSA protocols”.
324
• In December 2022, Danske Bank pleaded guilty and agreed to forfeit $2 billion to resolve the United
States’ investigation into Danske Bank’s fraud on U.S. banks related to the Bank’s concealment
of the state of its AML/CFT controls. According to court documents, Danske Bank defrauded U.S.
banks regarding subsidiary Danske Bank Estonia’s customers and anti-money laundering controls
to facilitate access to the U.S. financial system for Danske Bank Estonia’s high-risk customers, who
resided outside of Estonia – including in Russia.
325
Specifically, between 2008 and 2016, Danske
Bank Estonia – which Danske Bank acquired through an acquisition of Finland-based Sampo Bank
in 2007
326
-- processed $160 billion through U.S. banks on behalf of its high-risk customer base that
resided outside of Estonia. By at least February 2014, as a result of internal audits, information from
regulators, and an internal whistleblower, Danske Bank knew that some high-risk customers were
engaged in highly suspicious and potentially criminal transactions, including transactions through
U.S. banks. Danske Bank also knew that Danske Bank Estonia’s anti-money laundering program
and procedures did not meet Danske Bank’s standards and were not appropriate to meet the risks
associated with the high-risk customers. Instead of providing the U.S. banks that processed Danske
Bank’s transactions with truthful information, Danske Bank lied about the state of Danske Bank
Estonia’s AML compliance program, their transaction monitoring capabilities, and information
regarding Danske Bank Estonia’s customers and their risk profiles. Danske Bank did this allegedly to
continue to gain access to the U.S. financial system.
327
• In October 2022, OFAC issued a Finding of Violation to Nodus International Bank, an international
financial entity in Puerto Rico, for violations of the Venezuelan Sanctions Regulations and the
Reporting, Penalties, and Procedures Regulations. According to OFAC documentation, upon
322 FinCEN, “FinCEN Assesses $1.5 Million Civil Money Penalty against Kingdom Trust Company for Violations of the Bank Secrecy
Act”, (April 26, 2023), https://www.fincen.gov/news/news-releases/fincen-assesses-15-million-civil-money-penalty-against-
kingdom-trust-company.
323 FRB, “Federal Reserve Board announces it has fined Popular Bank $2.3 million for processing six PPP loans despite having
detected that the loan applications contained significant indications of potential fraud,” (January 24, 2023), https://www.
federalreserve.gov/newsevents/pressreleases/enforcement20230124a.htm.
324 FRB, Order of Assessment of Civil Money Penalty, “In the Matter of Popular Bank, New York, New York”, (January 20, 2023),
https://www.federalreserve.gov/newsevents/pressreleases/files/enf20230124a1.pdf.
325 DOJ, “Danske Bank Pleads Guilty to Fraud on U.S. Banks in Multi-Billion Dollar Scheme to Access the U.S. Financial System”, (December
13, 2022) https://www.justice.gov/opa/pr/danske-bank-pleads-guilty-fraud-us-banks-multi-billion-dollar-scheme-access-us-financial.
326 DOJ, SDNY, USA v. Danske Bank, https://www.justice.gov/d9/press-releases/attachments/2022/12/13/danske_
information_508_compliant_0.pdf.
327 DOJ, “Danske Bank Pleads Guilty to Fraud on U.S. Banks in Multi-Billion Dollar Scheme to Access the U.S. Financial System”, (December
13, 2022), https://www.justice.gov/opa/pr/danske-bank-pleads-guilty-fraud-us-banks-multi-billion-dollar-scheme-access-us-financial.
69
2024 ◆ National Money Laundering Risk Assessment
determining that a designated individual held an interest in certain securities, Nodus sought to
redeem the designated person’s securities and place the proceeds into a blocked account, a process
that would require a license from OFAC. Nodus compliance personnel relayed this to senior Nodus
bank oicials, but Nodus processed the securities redemption without a license. Separately,
the designated individual also held other accounts and financial products at Nodus, which were
blocked upon learning of the individual’s designation. However, due to human error Nodus allowed
an automatic debit from one of the blocked accounts to credit the designated person’s blocked
credit card account – the balance of which was written o by Nodus. Additionally, during the OFAC
investigation, Nodus informed OFAC that the Bank lacked access to all records or communications
related to the handling of the designated person’s blocked property. The Bank also submitted several
inconsistent Annual Reports of Blocked Property to OFAC.
328
• In September 2022, the OCC assessed a $6 million civil money penalty against Sterling Bank
and Trust, FSB, Southfield, Michigan. According to the consent order, in addition to prudential
deficiencies, the Bank failed to implement an adequate system of AML/CFT internal controls and
failed to file SARs in a timely manner.
329
• In July 2022, OFAC announced that it reached an agreement with American Express National Bank
(Amex), a subsidiary of the American Express Company that provides charge and credit card products
and travel-related services to consumers and businesses, to settle the potential civil liability for 214
apparent violations of OFAC’s Kingpin sanctions. According to OFAC documentation, Amex processed
transactions for an account whose supplemental card holder was designated. A combination of
human error and sanctions compliance program deficiencies enabled the account to process
$155,189.42 worth of transactions.
330
• In July 2022, OFAC issued a Finding of Violation to MidFirst Bank (MidFirst) for violations of the
Destruction Proliferators Sanctions Regulations (WMDPSR). According to OFAC documentation,
MidFirst maintained accounts for and processed 34 payments on behalf of two individuals
added to OFAC’s SDN List for 14 days post-designation. The violations stemmed from the Bank’s
misunderstanding of the frequency of its vendor’s screening of new names added to the SDN List
against its existing customer base; the vendor only engaged in screening of MidFirst’s entire existing
customer base once a month instead of daily.
331
• In June 2022, the FDIC issued a consent order regarding Oxford University Bank of Oxford,
Mississippi.
332
The order required the bank, among other things, to: (1) assess AML/CFT department
staing; (2) appoint a BSA oicer; (3) develop, adopt, and implement appropriate CDD procedures;
(4) develop and establish a system of internal controls; (5) establish and maintain an independent
testing program for compliance with the BSA and its implementing rules and regulations; (6) develop
an eective training program and revise the Bank’s AML/CFT Risk Assessment; and (7) develop, adopt,
and implement revised procedures and processes for monitoring and reporting suspicious activity.
328 OFAC, “OFAC Issues a Finding of Violation to Nodus International Bank, Inc. for Violations of the Venezuelan Sanctions Regulations
and the Reporting, Penalties and Procedures Regulations” (October 18, 2022),
https://ofac.treasury.gov/media/928941/
download?inline#:~:text=The%20RPPR%20violations%20reflected%20Nodus’s,of%20a%20civil%20monetary%20penalty
.
329 OCC, Consent Order, “In the Matter of: Sterling Bank and Trust, FSB Southfield, Michigan”, https://www.occ.gov/static/
enforcement-actions/ea2022-039.pdf.
330 OFAC, “OFAC Settles with American Express National Bank for $430,500 Related to Apparent Violations of Foreign Narcotics
Kingpin Sanctions Regulations” (July 15, 2022), https://ofac.treasury.gov/media/924406/download?inline.
331 OFAC, “OFAC Issues Finding of Violation to MidFirst Bank”, (July 21, 2022) https://ofac.treasury.gov/media/924506/
download?inline.
332 FDIC, Consent Order, “In the Matter of OXFORD UNIVERSITY BANK, OXFORD, MISSISSIPPI.”
2024 ◆ National Money Laundering Risk Assessment
70
In April 2022, the OCC issued a consent order to Anchorage Digital Bank of Sioux Falls, South Dakota.
The order found that Anchorage Digital Bank – a bank specializing in virtual assets – “failed to adopt and
implement a compliance program that adequately covers the required AML/CFT program elements.” The
specific deficiencies that the Bank did not adopt and implement included: internal controls for customer
due diligence and procedures for monitoring suspicious activity; appointment of BSA oicer and sta;
and training.”
333
2. Money Services Businesses
The term “money services business” is defined by regulation
334
as any of the following categories of
business: (1) dealers in foreign exchange; (2) check cashers; (3) issuers or sellers of traveler’s checks or
money orders; (4) providers of prepaid access; (5) money transmitters; (6) U.S. Postal Service; or (7) sellers
of prepaid access.
335
MSBs are non-bank financial institutions oen used by customers who may have
diiculty obtaining financial services at banks as well as those that send remittance payments abroad
to family members in a cost-eective manner. Notably, the United States is the world’s largest source of
remittances, having sent approximately $72.1 billion abroad in 2021.
336
There are approximately 26,472 registered MSBs in the United States,
337
as of December 15, 2023. MSBs,
which are commonly used in the U.S. are continuously innovating, leveraging mobile and internet-based
options to ensure convenient payment of funds across the world. Hundreds of MSBs oer services in
virtual assets, and many VASPs in the United States are registered as MSBs.
IRS Small Business/Self Employed (SB/SE) is the entity delegated by FinCEN to examine MSBs compliance
with obligations under the BSA. There has been no change to the previously reported decrease in principal
exams by IRS SB/SE and the current examiner force is still half of what it was in 2010. In investigations in
which IRS-CI is involved, 18 USC 1960 is oen cited regarding unlicensed MSBs, specifically as a predicate
oense in virtual currency cases involving money laundering charges. (see Virtual Asset Vulnerabilities for
cases involving MSBs and other financial institutions oering virtual asset services).
In 2022, depository institutions submitted almost 3,580 SARs, citing potential unlicensed MSB activity.
338
Almost half of the SARs (49 percent) were filed in California, New York, Ohio, Texas, North Carolina, and
Virginia collectively.
339
Many institutions identified grocery or convenience stores, gas stations, or liquor
stores as potentially operating illegally as money transmitters, check cashers, or dealers in foreign
exchange.
340
Additionally, individuals may misuse their personal or business bank accounts to transmit
funds for customers on a commercial scale, thus operating as unregistered MSBs.
333 OCC, Consent Order, “In the Matter of: Anchorage Digital Bank, National Association Sioux Falls, South Dakota”, https://www.
occ.gov/static/enforcement-actions/ea2022-010.pdf.
334 31 C.F.R. § 1010.100(). See also https://www.fincen.gov/am-i-msb.
335 See previous sections for vulnerabilities unique to check, money orders, and providers and sellers of prepaid access.
336 CRS, Remittances: Background and Issues for the 118th Congress, (May 10, 2023), https://sgp.fas.org/crs/misc/R43217.
pdf; https://www.worldbank.org/en/news/press-release/2023/12/18/remittance-flows-grow-2023-slower-pace-migration-
development-brief.
337 FinCEN, MSB Registrant Search, https://www.fincen.gov/msb-state-selector.
338 FinCEN, Depository Institution, Exhibit 5, Line 102, https://www.fincen.gov/reports/sar-stats/sar-filings-industry.
339 FinCEN, Depository Institution, Exhibit 3, Lines 15-20, https://www.fincen.gov/reports/sar-stats/sar-filings-industry.
340 GAO, “VIRTUAL CURRENCIES: Additional Information Could Improve Federal Agency Eorts to Counter Human and Drug
Traicking” (December 2021), https://www.gao.gov/assets/gao-22-105462.pdf.
71
2024 ◆ National Money Laundering Risk Assessment
Unregistered and unlicensed MSBs can include hawalas and other forms of IVTS. There is no practical
or functional distinction between a hawala and any other money transmitter. While it is theoretically
possible for IVTS to operate wholly outside the banking system, it is not oen the case. Instead, law
enforcement investigations indicate IVTS oen use an account at a bank to clear and settle transactions
internationally. The following are case examples of AML/CFT compliance failures and unregistered or
unlicensed MSBs.
Case Examples
• In September 2023, Ryan Salame, the co-CEO of FTX’s Bahamian ailiate (FTX Digital Markets Ltd.),
pleaded guilty to a conspiracy to make unlawful political contributions and defraud the Federal
Election Commission and a conspiracy to operate an unlicensed money transmitting business.
341
Between 2019 and 2021, Salame along with other co-conspirators, owned and operated an
unlicensed money-transmitting business to transmit customer deposits of virtual assets and
traditional currencies on and o the FTX exchange. Salame opened a fraudulent bank account by
using false and misleading statements on the bank’s due diligence questionnaire. Ultimately, Salame
agreed to forfeit more than $1.5 billion to authorities.
342
• In June 2023, a Paraguayan man admitted his role in facilitating an international money laundering
conspiracy; he pled guilty to one count of operating an unlicensed money-transmitting business.
According to court documentation, the individual was the owner and operator of a money exchange
business in the Republic of Paraguay, which was not licensed or registered to operate as a money-
transmitting business under the laws of the United States or the state of New Jersey. The individual’s
associates traveled to New Jersey and Florida and accepted approximately $800,000 in U.S. currency
from purported drug traickers and caused those funds to be transmitted through the individual’s
money exchange business. Using the unlicensed business, the individual caused those funds to be
transmitted through accounts located in multiple countries and ultimately caused the funds to be
transferred back to an account maintained by the purported drug traickers. To disguise the illicit
source of funds, the individual and his associates coordinated to generate fraudulent invoices that
stated legitimate business reasons for the transfers of the laundered funds. Unbeknownst to the
individual and one of his associates, the currency they accepted was actually from two undercover
FBI agents as part of an undercover investigation of the money laundering network.
343
• In June 2023, in Massachusetts, a man was charged with money laundering in connection with
an alleged unlicensed money transmitting business. The business was allegedly responsible for
converting more than $1 million in cash to bitcoin - largely on behalf of scammers and drug dealers.
The defendant used his vending machine business and encrypted messaging apps to secretly
communicate with customers.
344
• In May 2023, in Florida, the president, chief executive oicer, and founder of Aurae Lifestyle and
Club Swann was charged with illegally operating an unlicensed money-transmitting business. The
defendant provided fiat and virtual asset financial services to customers through his dierent lines of
341 DOJ, “Statement Of U.S. Attorney Damian Williams On The Guilty Plea Of Ryan Salame, Former CEO Of FTX”, (September 7,
2023), https://www.justice.gov/usao-sdny/pr/statement-us-attorney-damian-williams-guilty-plea-ryan-salame-former-ceo-x.
342 Reuters, “Former Bankman-Fried lieutenant Salame pleads guilty to illegal campaign contributions,” ( September 8, 2023),
https://www.reuters.com/legal/ex-x-executive-salame-due-us-court-expected-guilty-plea-2023-09-07/.
343 DOJ, “Paraguayan National Admits Unlicensed Money Transmitting in Connection with International Money Laundering
Investigation”, (June 23, 2022), https://www.justice.gov/usao-nj/pr/paraguayan-national-admits-unlicensed-money-
transmitting-connection-international-money.
344 DOJ, “Danvers Man Arrested for Money Laundering and Operating Unlicensed Money Transmitting Business”, (June 12, 2023),
https://www.justice.gov/usao-ma/pr/danvers-man-arrested-money-laundering-and-operating-unlicensed-money-transmitting.
2024 ◆ National Money Laundering Risk Assessment
72
business. The conspiracy charge carries a fine up to $250,000.
345
In May 2023, an individual was indicted in the Northern District of Georgia on one count of operating
an unlicensed money transmitting business and 39 accounts of money laundering. According to the
indictment and other information presented in court, the individual allegedly registered eight companies
in Georgia, that were used to transmit over $150 million in a series of 1,300 transactions. The companies
were purportedly headquartered in Buford, Georgia, and Dacula, Georgia but the companies did not
generate typical business expenses or maintain employees. The money was used, in part, to purchase
more than $65 million in overseas gold bullion. The individual, a Russian citizen who resides in North
Georgia, allegedly transferred millions overseas from multiple bank accounts in Georgia.
346
In April 2023, four defendants were indicted for wire fraud, mail fraud, money laundering, transacting
in criminal proceeds, tax evasion, and conducting an unlawful money transmitting business. The
defendants used online romance scams and apartment rental scams to collect money from over 100
victims, which totaled about $4.5 million in illicit funds. Aerward, one of the defendants used an
international hawala system to transfer the illicit funds from his U.S. bank accounts to overseas accounts
in Nigeria and Turkey.
347
In July 2022, Ping Express U.S. LLC (Ping) – a money transfer company – pleaded guilty to failure to
maintain an eective anti-money laundering program. According to court documents, Ping failed to
file a single report over a three-year period, despite its requirement to report suspicious transactions to
regulators. Ping also admitted that it conducted money transmission business in states in which it was
not licensed to do so; the company claimed to have soware that could detect and deter transmissions
initiated in “unlicensed” states, but the soware did not function. Additionally, the company transmitted
more than $167 million overseas, including $160 million to Nigeria, of which it admitted it failed to seek
suicient details about the sources or purposes of the funds involved in the transactions or the customers
initiating the transmissions. According to the HSI investigation, some of the funds Ping transmitted were
illegally derived.
348
3. Securities Broker-Dealers and Mutual Funds
Broker-dealers and mutual funds have AML/CFT obligations under the BSA and their implementing
regulations. In its 2024 Examination Priorities, the SEC reiterated that it will continue to focus on AML/
CFT programs to review whether broker-dealers and certain registered investment companies are: (1)
appropriately tailoring their AML program to their business model and associated AML risks; (2) conducting
independent testing; (3) establishing an adequate customer identification program, including for beneficial
owners of legal entity customers; and (4) meeting their SAR filing obligations.
349
The SEC also noted that
it will review policies and procedures to oversee applicable financial intermediaries during examinations
345 IRS, “Businessman charged with conspiring to own unlicensed money transmitting business”, (May 25, 2023), https://www.irs.gov/
compliance/criminal-investigation/businessman-charged-with-conspiring-to-own-unlicensed-money-transmitting-business.
346 DOJ, “Russian charged with money laundering and illegally transmitting more than $150 million”, (May 1, 2023), https://www.
justice.gov/usao-ndga/pr/russian-charged-money-laundering-and-illegally-transmitting-more-150-million.
347 IRS, “Four people indicted for roles in romance and internet frauds, illegal money transmitting” (April 13, 2023), https://www.irs.
gov/compliance/criminal-investigation/four-people-indicted-for-roles-in-romance-and-internet-frauds-illegal-money-transmitting.
348 DOJ, “Money Transfer Company Ping Pleads Guilty to Failure to Combat Money Laundering”, (July 7, 2022), https://www.justice.
gov/usao-ndtx/pr/money-transfer-company-ping-pleads-guilty-failure-combat-money-laundering.
349 SEC, “FISCAL YEAR 2024 EXAMINATION PRIORITIES”, https://www.sec.gov/files/2024-exam-priorities.pdf.
73
2024 ◆ National Money Laundering Risk Assessment
of certain registered investment companies. Additionally, the 2023 Examination Priorities highlighted the
elevated risk for broker-dealers and certain registered investment companies due to the current geopolitical
environment and the increased imposition of OFAC and international sanctions.
350
The Financial Industry Regulatory Authority (FINRA), a self-regulatory organization responsible for
examining broker-dealers in the United States, notes a variety of emerging money laundering risk areas:
manipulative trading in small cap initial public oerings (IPOs); sanctions evasion; and automated
customer account transfer service (ACATS Fraud).
351
Overall, recent enforcement actions by regulatory
authorities indicate that broker-dealers and certain registered investment companies demonstrated
failures linked to a lack of SAR filings, independent testing, or establishment and implementation of an
AML program, among other issues.
Case examples
• In September 2023, the SEC announced charges against registered investment adviser DWS
Investment Management Americas Inc. (DIMA or DWS), a subsidiary of Deutsche Bank AG, for its
failure to develop a mutual fund AML/CFT program. The SEC’s order found that DIMA caused mutual
funds it advised to fail to develop and implement a reasonably designed AML program to comply
with the BSA and applicable FinCEN regulations. The order also found that DIMA caused such mutual
funds’ failure to adopt and implement policies and procedures reasonably designed to detect
activities indicative of money laundering and to conduct AML/CFT training specific to the mutual
funds’ business.
352
• In July 2023, the SEC announced charges against Merrill Lynch, Pierce, Fenner & Smith (Merrill Lynch),
and its parent company BAC North America Holding Co. (BACNAH) for failing to file hundreds of SARs
from 2009 to late 2019. According to the SEC’s order, BACNAH assumed responsibility for Merrill Lynch’s
SAR policies and procedures and for filing their SARs. Over the course of a decade, BACNAH improperly
used a $25,000 threshold instead of the required $5,000 threshold for reporting suspicious transactions
or attempted transactions where a suspect may have been seeking to use Merrill Lynch to facilitate
criminal activity. As a result, BACNAH caused Merrill Lynch to fail to file hundreds of required SARs.
353
• In March 2023, the SEC announced settled charges against Utah-based brokerage firm Cambria
Capital, LLC, for failing to file SARs on numerous transactions. The SEC’s order finds that from March
2017 through May 2019, Cambria failed to file SARs on suspicious activity that raised red flags
identified in the firm’s anti-money laundering policies and procedures. According to the SEC’s order,
most of the suspicious activity was associated with the liquidation of microcap securities, including
the deposit of physical certificates; the liquidation of large quantities of microcap securities; and
the immediate wire out of liquidation proceeds from customer accounts. In addition, the order also
finds that in many of these transactions, the pattern of liquidations oen occurred in combination
with other red flags noted in Cambria’s policies and procedures, such as unusually large deposits;
suspicious wire activity; or multiple accounts simultaneously trading in the same microcap security.
354
350 SEC, “FISCAL YEAR 2023 EXAMINATION PRIORITIES”, https://www.sec.gov/files/2023-exam-priorities.pdf.
351 FINRA, “Regulatory Obligations and Related Considerations”, https://www.finra.org/rules-guidance/guidance/reports/2023-
finras-examination-and-risk-monitoring-program/aml.
352 See SEC, “Deutsche Bank Subsidiary DWS to Pay $25 Million for Anti-Money Laundering Violations and Misstatements Regarding
ESG Investments” (Sept. 25, 2023), https://www.sec.gov/news/press-release/2023-194.
353 SEC, “SEC Charges Merrill Lynch and Parent Company for Failing to File Suspicious Activity Reports”, (July 11, 2023), https://
www.sec.gov/news/press-release/2023-128.
354
SEC, “SEC Charges Broker-Dealer with Failing to Report Suspicious Transactions”, (March 2, 2023), https://www.sec.gov/enforce/34-97020-s.
2024 ◆ National Money Laundering Risk Assessment
74
• In May 2022, the SEC announced charges against Wells Fargo Advisors for failing to file at least 34
SARs in a timely manner between 2017 and October 2021. According to the SEC’s order, due to
Wells Fargo Advisors’ deficient implementation and failure to test a new version of its internal AML
transaction monitoring and alert system adopted in January 2019, the system failed to reconcile the
dierent country codes used to monitor foreign wire transfers. As a result, Wells Fargo Advisors did
not timely file at least 25 SARs related to suspicious transactions in its customers’ brokerage accounts
involving wire transfers to or from foreign countries that it determined to be at high or moderate risk
for money laundering, terrorist financing, or other illegal money movements. The order also found
that beginning in April 2017, Wells Fargo Advisors failed to timely file at least nine additional SARs due
to a failure to appropriately process wire transfer data into its AML transaction monitoring system in
certain other situations.
355
4. Complicit Professionals
As indicated in other sections of this report and previous NMLRAs, money laundering can be perpetrated
by complicit insiders who abuse their positions of trust and access across professions and corporate
structures to engage or facilitate illicit financial activity. Criminals continue to seek out complicit
professionals, including those in the financial services sector. This is an acute problem because such
complicit financial services professionals may undermine an institution’s AML/CFT compliance program.
Case examples
• In January 2024, Peter McVey, who served as vice president and director of treasury services for a
Missouri bank, pleaded guilty to failing to maintain an appropriate anti-money laundering program
under the BSA. According to court documents, between April 2014 and July 2022, McVey assisted
high-risk bank customers engaged in deceptive sweepstakes and short-term online loan activities
in evading the bank’s AML/CFT controls. Specifically, McVey worked with other bank oicials and
customers to submit fraudulent CTR exemption forms to FinCEN and knowingly accepted forged bank
forms from customers that permitted them to exceed applicable limits on daily transaction values.
McVey also admitted that he did not follow KYC or SAR requirements.
356
• In October 2023, a New Jersey-based employee of an international financial institution was arrested
for accepting bribes to facilitate millions of dollars of money laundering.
357
According to documents
filed in this case and statements made in court, in early 2022, the employee exploited his position as
a bank employee to facilitate money laundering activities in exchange for bribes. The employee used
his position and inside access to open bank accounts in the names of shell companies with nominee
owners. Those accounts were then used to launder narcotics proceeds, including to Colombia. The
employee allegedly assisted the money laundering eorts by giving those who bribed him online
access to the accounts, along with dozens of debit cards for the accounts that were later used to
withdraw cash from ATMs in Colombia. The employee allegedly received thousands of dollars in
bribes for each account he opened. The investigation has revealed that millions of dollars were
laundered to Colombia through accounts opened by the employee since early 2022.
355 SEC, “SEC Charges Wells Fargo Advisors with Anti-Money Laundering Related Violations”, (May 20, 2022), https://www.sec.gov/
news/press-release/2022-85.
356 DOJ, “Former Banking Executive Pleads Guilty to Evading Anti-Money Laundering Regulations,” (January 17, 2024), https://www.
justice.gov/opa/pr/former-banking-executive-pleads-guilty-evading-anti-money-laundering-regulations.
357 DOJ, “Bank Insider Charged with Accepting Bribes to Facilitate Millions of Dollars of Money Laundering” (October 30, 2023),
https://www.justice.gov/usao-nj/pr/bank-insider-charged-accepting-bribes-facilitate-millions-dollars-money-laundering.
75
2024 ◆ National Money Laundering Risk Assessment
• In March 2023, Stephen Roland Reyna, a former bank branch manager, was ordered to federal prison
for helping a drug traicking ring launder money through his bank. Reyna was the manager of a bank
branch in Harlingen, Texas. While serving in that position and utilizing his position and knowledge
of the banking industry, he assisted a drug traicking organization in laundering $410,000 in drug
sale proceeds. The organization would transport multi-kilogram cocaine loads from the Rio Grande
Valley to northern states. Upon successful delivery, thousands of dollars in drug proceeds would
then be dispersed through multiple bank accounts in the northern states. Reyna would coordinate
with multiple co-conspirators in the Rio Grande Valley to launder the funds through their bank
accounts. Reyna ensured the proceeds were successfully withdrawn from his branch in Harlingen. Co-
conspirators would frequently pay Reyna in cash right aer he helped them get their drug proceeds
out of the bank.
358
Luxury and High-Value Goods
Purchases of high-value assets, such as real estate, precious metals, stones, jewels, art, automobiles and
other types of vehicles are another strategy that criminals and TCOs use. By holding the value of their
proceeds in a moveable commodity that later can be sold elsewhere, traickers can convert the proceeds
to currency in a dierent country. As noted above, CMLOs and other criminal organizations are known to
export high-value goods purchased with criminal proceeds from the United States where they resell the
goods for a profit. Sales documentation can provide a veil of legitimacy should a financial institution seek
to understand the source of a client’s funds.
1. Real Estate
The U.S. real estate market is one of the largest and most valuable real estate markets in the world and
is attractive to both domestic and international buyers. In 2023, the U.S. residential market is estimated
to be valued at $47 trillion,
359
and numerous U.S. cities including New York, Los Angeles, San Francisco,
Dallas, Washington D.C., and Boston are amongst the top ten leading commercial real estate market hubs
in the world.
360
The relative stability of the U.S. real estate market and its historic reputation as a reliable
store of long-term value has traditionally attracted both legitimate interest and those looking to find a
reliable mechanism to launder money. Money laundering through real estate can negatively aect home
prices, particularly since illicit actors seeking to integrate illicit funds may be willing to over or under
pay for a property. According to a Commission in British Columbia, Canada, this activity can distort the
market and disadvantage legitimate buyers and sellers.
361
The financed portion of the U.S. real estate market is well-regulated and banks and non-bank lenders
that issue residential and commercial mortgages and housing-related government-sponsored
358 DOJ, “Local banker sent to prison for money laundering conspiracy”, (March 8, 2023), https://www.justice.gov/usao-sdtx/pr/
local-banker-sent-prison-money-laundering-conspiracy.
359 RedFin, “U.S. Housing Market Recovers the Nearly $3 Trillion It Lost, Hitting Record $47 Trillion in Total Value,” (Updated on
August 31st, 2023), https://www.redfin.com/news/housing-market-value-hits-record-high-2023/.
360 Mordor Intelligence, U.S. Residential Real Estate Market Size & Share Analysis - Growth Trends & Forecasts (2023 - 2028),
https://www.mordorintelligence.com/industry-reports/residential-real-estate-market-in-usa., 16 U.S. Metros Are in Top 30
Largest Commercial Markets Globally in 2020; NYC is the Number One CRE Market, April 2021, https://www.nar.realtor/blogs/
economists-outlook/16-u-s-metros-are-in-top-30-largest-commercial-markets-globally-in-2020-nyc-is-the-number-one-cre.
361 See The Honourable Austin F. Cullen, Commission of Inquiry into Money Laundering in British Columbia, (June 3, 2022), https://
cullencommission.ca/files/reports/CullenCommission-FinalReport-Full.pdf.
2024 ◆ National Money Laundering Risk Assessment
76
enterprises, must establish AML/CFT programs and file SARs.
362
However, an estimated 20 to 30 percent
of residential real estate purchases in the United States are non-financed and not fully subject to
comprehensive AML/CFT requirements.
363
Since 2002, “persons involved in real estate closings and
settlements” have received a temporary exemption from compliance as a financial institution from
FinCEN and are exempt from instituting and maintaining comprehensive AML/CFT programs.
364
Because
of the key role real estate professionals play in closings and settlements, this is a critical vulnerability,
and real estate professionals have been found to act as both witting and unwitting participants in
money laundering schemes. Currently, under FinCEN’s Real Estate Geographic Targeting Order (GTO),
365
in eect since 2016, title insurance companies involved in the non-financed purchase of residential real
estate by a legal entity in select jurisdictions are required to report the legal entity’s beneficial ownership
information. FinCEN has utilized this tool to gather information about vulnerabilities in the non-financed
market, and the Real Estate GTOs currently cover 69 counties.
366
However, GTOs are time-limited and
location-specific and remain a temporary solution to information gaps. In December 2021, the Treasury
issued an advance notice of proposed rulemaking (ANPRM) to solicit public feedback on how to address
the risks associated with this sector. Building on this information and public feedback, FinCEN has an
NPRM in OMB review that will continue the process of addressing money laundering vulnerabilities in the
residential real estate sector.
Predicate oenses for money laundering through real estate continue to involve domestic and
transnational activity, including narcotics traicking, corruption, human traicking, fraud, and sanctions
evasion.
367
Illicit actors oen make non-financed purchases using legal vehicles or arrangements
designed to obfuscate the purchaser’s identity and source of funds to integrate ill-gotten proceeds into
the formal economy.
Additional factors that make the U.S. real estate market vulnerable to money laundering include the
ease through which illicit actors can anonymize their identity or the source of their funds through legal
entities, legal arrangements, and pooled accounts like IOLTAs. Money laundering typologies include the
use of nominees and gatekeepers
368
to facilitate transfers without revealing the identity of the true owner
362 31 USC § 5318 (g),(h).
363 “Anti-Money Laundering Regulations for Real Estate Transactions,” Federal Register (December 8, 2021), https://www.
federalregister.gov/documents/2021/12/08/2021-26549/anti-money-laundering-regulations-for-real-estate-transactions. See also
FinCEN, “Statement of FinCEN Acting Director Himamauli Das before the House Committee on Financial Services,” (April 7, 2023).
364 67 FR 21110: FinCEN Interim final rule ‘Anti-Money Laundering Programs for Financial Institutions’; 31 CFR §1010.205(b)(v)
365 FinCEN, “FAQ: Geographic Targeting Orders Involving Certain Real Estate Transactions”, (April 21, 2023), https://www.fincen.gov/
sites/default/files/shared/508_FAQ_April2023REGTO.pdf.
366 FinCEN, “FinCEN Renews and Expands Real Estate Geographic Targeting Orders”, (October 20, 2023), https://www.fincen.gov/
news/news-releases/fincen-renews-and-expands-real-estate-geographic-targeting-orders-2.
367 CRS, Money Laundering in the real estate sector, (January 4, 2022), https://sgp.fas.org/crs/misc/IF11967.pdf.
368 The term “gatekeepers” refers to financial facilitators that have the “ability to furnish access (knowingly or unwittingly) to the
various functions that might help the criminal with funds to move or conceal”. See FATF Report on Money Laundering Typologies
2000-2001, February 1, 2001, available at http://www.fatf-gafi.org/dataoecd/29/36/34038090.pdf. The Treasury Department has
used the term gatekeeper in prior risk assessments and public remarks. See, e.g., Remarks by Assistant Secretary for Terrorist
Financing and Financial Crimes Elizabeth Rosenberg at The Brookings Institution, September 7, 2022, available at https://home.
treasury.gov/news/press-releases/jy0938 (observing that the 2022 National Money Laundering Risk Assessment examined
concerns around “financial facilitators – sometimes known as gatekeepers – that move…dirty money along”). The term’s
application to illicit finance was coined at the 1999 meeting of the G-8 Finance Ministers. See Ministerial Conference of the G-8
Countries on Combating Transnational Organized Crime (October 19-20, 1999), Communique, available at http://www.justice.
gov/criminal/cybercrime/g82004/99MoscowCommunique.pdf.
77
2024 ◆ National Money Laundering Risk Assessment
or source of funds for the property, the use of all-cash payments to avoid the AML/CFT scrutiny that
comes with financing, the use of loan-back mortgage schemes to reintegrate illicit proceeds into the licit
economy, over or under paying for real estate, and the successive transfer of real estate at a higher value
or between legal entities and arrangements or natural persons, sometimes for no consideration.
369
As highlighted in FinCEN’s January 2023 alert on “Potential U.S. Commercial Real Estate Investments by
Sanctioned Russian Elites, Oligarchs and their Proxies,” the commercial real estate sector is also exposed
to risk, as it is common to use purpose-built legal entities, indirect ownership chains, multiple types of
ownership and financing options, and the presence of multiple parties to each commercial real estate
transfer, each of which can obscure an owner’s identity and source of funds.
370
Further, the anonymity of ownership in the residential and commercial real estate markets presents
both a money laundering and a national security risk because it can help facilitate sanctions evasion,
corruption, and even espionage. A 2016 GAO report found that ownership information for 1406, or
one-third of high-security General Services Administration (GSA)-leased commercial real estate spaces
was unavailable. The report found that some of these spaces were rented by foreign companies based
in Canada, China, Israel, Japan, and South Korea, all countries that may have an interest in obtaining
information about U.S. government-owned facilities. Beginning in 2018, a series of actions culminating
with the passage of the Secure Federal Leases from Espionage and Suspicious Entanglements Act of 2020
requires collecting foreign ownership information, including beneficial ownership information of foreign-
owned high-security commercial real estate leased by the GSA.
371
Case examples
• In April 2023, Robert Wise, a New York-based attorney, pleaded guilty to paying on behalf of
sanctioned Russian oligarch, Viktor Vekselberg, nearly four million dollars to help him maintain his
ownership of six properties in the United States. The properties in question were (i)two apartments
on Park Avenue in New York, New York, (ii)an estate in Southampton, New York, (iii) two apartments
on Fisher Island, Florida, and (iv) a penthouse apartment also on Fisher Island, Florida. The properties
were all acquired using a series of shell companies prior to Vekselberg’s OFAC designation. Before
his designation, accounts associated with Vekselberg sent 90 wire payments totaling $18.5 million
to Wise’s IOLTA. Aer Vekselberg’s designation as an SDN, Wise’s IOLTA started to receive payments
from an account in the Bahamas held in the name of a shell company, Smile Holding Ltd., that was
controlled by Vekselberg’s longtime associate, Vladimir Voronchenko and from another Russian bank
account held by a Russian national related to Voronchenko. Between approximately June 2018 and
March 2022, Wise’s IOLTA received around 25 wire transfers totaling $3.8 million. Wise used these
funds to maintain and service Vekselberg’s properties knowing that he was violating ongoing U.S.
sanctions.
372
369 Lakshmi Kumar, Kaisa de Bel, Global Financial Integrity, August 2021, Acres of Money Laundering, https://34n8bd.p3cdn1.
secureserver.net/wp-content/uploads/2021/08/Acres-of-Money-Laundering-Final-Version-2021.pdf?time=1698916839.
370 FinCEN, “Potential U.S. Commercial Real Estate Investments by Sanctioned Russian Elites, Oligarchs and their Proxies”, (January
25, 2023), https://www.fincen.gov/sites/default/files/shared/FinCEN%20Alert%20Real%20Estate%20FINAL%20508_1-25-23%20
FINAL%20FINAL.pdf.
371 Secure Federal Leases from Espionage and Suspicious Entanglements Act, Public Law 116–276, 134 Stat. 3362 (2020) (the
“Secure Federal LEASEs Act”).
372 DOJ, “New York Attorney Pleads Guilty to Conspiring to Commit Money Laundering to Promote Sanctions Violations by
Associate of Sanctioned Russian Oligarch,” (April 25, 2023), https://www.justice.gov/opa/pr/new-york-attorney-pleads-guilty-
conspiring-commit-money-laundering-promote-sanctions.
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78
• In January 2023, a Miami federal grand jury indicted a Venezuelan Supreme Court justice for
conspiring to launder bribes he received in exchange for using his position to resolve civil and
criminal cases in Venezuela to favor bribe payers. It is alleged that the justice received more than $10
million in bribes, typically from Venezuelan contractors who had received contracts from Venezuelan
government-owned entities. The individual allegedly used the bribe proceeds to purchase or
renovate real estate around the world, including a villa in Tuscany, Italy, for 2.4 million euros, a luxury
villa in La Romana, Dominican Republic, for $1.5 million; a building in Las Mercedes in Caracas,
Venezuela, for $1.3 million, and an apartment in Miami for $1.3 million. He also used the bribe
proceeds for cars, luxury goods, expensive travel, and musical entertainment.
373
• In December 2022, a Russian intelligence agent designated by OFAC was charged with conspiracy to
violate the International Emergency Economic Powers Act, bank fraud conspiracy, money laundering
conspiracy, and four counts of money laundering in connection with the purchase and maintenance
of two condominiums in Beverly Hills, California. As alleged in the indictment, beginning in 2013,
the individual and a co-conspirator devised a scheme to purchase and maintain two luxury
condominiums in Beverly Hills while concealing his interest in the transactions from U.S. financial
institutions. Specifically, the individual used the services of a corporate nominee, a multi-tiered
structure of California-based shell companies, and numerous U.S. bank and brokerage accounts.
Using this framework, the individual wired approximately $3.92 million to the nominee from overseas
accounts in Latvia and Switzerland belonging to companies registered in the British Virgin Islands.
The suspect then used the money to pay $3.2 million in cash for real estate in the name of a corporate
entity set up by the nominee, with the individual having no visible ailiation with the purchase. The
remaining $800,000 was invested in a brokerage account maintained by the nominee and used to pay
expenses for the condominiums.
374
• In November 2022, an individual in Delaware was sentenced to 45 years in prison for conspiracy to
commit money laundering, conspiracy to distribute cocaine, and various other drug and money
laundering oenses. According to court records and evidence presented at trial, between 2009
and 2017, the individual and his wife laundered over a million dollars in drug proceeds through
the purchase of real estate in Delaware and Pennsylvania using their company, Zemi Property
Management. They deposited drug money into several dierent bank accounts – and asked their
friends and family members to do the same – and then used those funds to buy cashier’s checks that
funded the property purchases.
375
2. Precious Metals, Stones, and Jewels
The precious metals, stones, and jewels (PMSJs) industry in the United States presents varying money
laundering risks.
376
Persons involved include large-scale mining interests, artisanal and small-scale
mining, traders, refiners, manufacturers, designers, retailers, and secondary markets such as auction
373 DOJ, “Former President of Venezuelan Supreme Court Indicted on Charges of Accepting Bribes to Resolve Court Cases,”
(January 26, 2023), https://www.justice.gov/usao-sdfl/pr/former-president-venezuelan-supreme-court-indicted-charges-
accepting-bribes-resolve.
374 DOJ, “Russian Intelligence Agent Charged with Fraud and Money Laundering in Connection with Purchase and Use of Luxury
Beverly Hills Real Estate,” https://www.justice.gov/usao-edny/pr/russian-intelligence-agent-charged-fraud-and-money-
laundering-connection-purchase-and.
375 DOJ, Delaware Man Sentenced to 45 years in Federal Prison for Traicking over 150 Kilograms of Cocaine and Laundering
the Proceeds, (November 23, 2022), https://www.justice.gov/usao-de/pr/delaware-man-sentenced-45-years-federal-prison-
traicking-over-150-kilograms-cocaine-and.
376 U.S. Bureau of Statistics, Occupational Employment and Wage Statistics, (May 2022), https://www.bls.gov/oes/current/
oes519071.htm.
79
2024 ◆ National Money Laundering Risk Assessment
houses and pawnshops.
377
“Dealers” of PMSJs - or a person who both buys and sells covered goods - are
required to develop and implement AML/CFT programs reasonably designed to prevent the dealer from
being leveraged to facilitate money laundering and terrorist financing if they meet a $50,000 annual
threshold for both the purchase and sale of PMSJs in the preceding calendar or tax years, with some
exceptions for those who sell primarily to the U.S. public.
378
While PMSJ dealers are subject to some BSA
reporting requirements, vulnerabilities for bad actors seeking to launder their illicit proceeds remain.
379
PMSJs are an attractive money laundering vehicle due to their high value, high value to low mass ratio,
stable pricing, anonymity, and exchangeability for other commodities. Moreover, the PMSJ industry is
a cash-intensive trade, allowing bad actors to disguise their involvement.
380
PMSJ pipelines, such as the
cutting and polishing of diamonds or the refinement of gold, are extensive, increasing opportunities for
money laundering at dierent stages. Criminals may view PMSJs as a useful laundering tool allowing them
to conceal illicit wealth without increased scrutiny, because the underlying commodity is legal. From a
smuggling perspective, PMSJs can be transported across borders by couriers on their person, hidden in
other items, or melted down into ordinary objects, making it diicult for law enforcement and customs
personnel to detect the criminal activity.
381
Once the PMSJs enter the United States, criminals sell the items
to refineries or trade the items through illicit shell or front companies using falsified documents.
Case Examples
• In June 2023, Eduard Ghiocel and Floarea Ghiocel pleaded guilty to laundering $1.4 million in
proceeds from robberies, scams, and fraudulent employment claims.
382
Among other actions, the pair
stole jewelry from elderly communities in San Diego and pawned the items in jewelry stores in San
Francisco. The Ghiocels wired the cash via an MSB to Romania in addition to shipping gold bars, gold
coins, and luxury vehicles bought with the stolen proceeds to Romania. These eorts were in support
of an international crime ring that targeted elderly victims.
• In April 2023, nine individuals were federally charged with conspiring to defraud the United States,
evade U.S. sanctions laws, and money laundering. The conspirators used a web of business entities
to obtain valuable artwork from U.S. artists and to secure U.S.-based diamond grading services for
the benefit of Nazem Ahmad, who the U.S. sanctioned for being a financier for Hizballah. Ahmad was
involved in the international trade of diamonds, real estate development, and the global art market.
The defendants used U.S.-based Diamond Grading Company-1 to aect the sale prices of diamonds,
377 FinCEN, FAQs: Interim Final Rule - Anti-Money Laundering Programs for Dealers in Precious Metals, Stones, or Jewels, (May 3,
2005), https://www.fincen.gov/resources/statutes-regulations/guidance/frequently-asked-questions-0.
378 Federal Register, Financial Crimes Enforcement Network; Anti-Money Laundering Programs for Dealers in Precious Metals,
Stones, or Jewels, (June 9, 2005), https://www.federalregister.gov/documents/2005/06/09/05-11431/financial-crimes-
enforcement-network-anti-money-laundering-programs-for-dealers-in-precious-metals.
379 FATF, Money laundering and terrorist financing through trade in diamonds, (October 2013), https://www.fatf-gafi.org/content/
dam/fatf-gafi/reports/ML-TF-through-trade-in-diamonds.pdf.coredownload.pdf.https://www.fatf-gafi.org/en/publications/
Methodsandtrends/Ml-tf-through-trade-in-diamonds.html.
380 UN CTED, “Concerns over the Use of Proceeds from the Exploitation, Trade, and Traicking of Natural Resources for the
Purposes of Terrorism Financing”, (June 2022), https://www.un.org/securitycouncil/ctc/sites/www.un.org.securitycouncil.ctc/
files/files/documents/2022/Jun/cted_c_trends_alert_june_2022.pdf.
381 CBP, Black Gold Seized by CBP Oicers in Florida,” (October 8, 2021), https://www.cbp.gov/newsroom/local-media-release/
black-gold-seized-cbp-oicers-florida.
382 DOJ, Romanian Citizens Plead Guilty to Laundering $1.4 Million in Proceeds from Jewelry Thes and Covid Fraud, (June 20, 2023),
https://www.justice.gov/usao-sdca/pr/romanian-citizens-plead-guilty-laundering-14-million-proceeds-jewelry-thes-and-covid.
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80
increasing the profit made from the diamonds. By using a network of corporate entities and
individuals to hide Ahmad’s involvement, the group attempted to evade U.S. sanctions.
383
• In May 2022, a Russian national was indicted for operating an unlicensed money transmitting
business and money laundering.
384
The individual used the U.S. banking system to transmit more
than $150 million. This money was used, in part, to purchase more than $65 million in overseas
gold bullion. The individual purchased the gold bullion in two ways. First, he transferred money
from his business bank accounts to the Singapore Precious Metals Exchange. Second, money was
transferred to the Scottsdale Mint in Arizona then to the Singapore Precious Metals Exchange.
385
These transactions are linked to the assets of “Russian oligarchs with potential ties to the Russian
government,” indicating the accused individual acted as a potential facilitator for sanctions evasion
related to the Russian invasion of Ukraine.
3. Update on Art
As demonstrated in the Treasury’s detailed study conducted in 2022,
386
the art market is susceptible
to abuse. During the reporting period there was little change in its risk profile. The high-dollar values
of single transactions, the ease of transportability of works of art (including across borders), the long-
standing culture of privacy in the market, and the increasing use of art as an investment or financial asset
all contribute to making high-value art vulnerable to money laundering. Further, LEAs can face challenges
investigating money laundering through art due to the subjectivity of the pricing of artworks, the cross-
border nature of the market, and having less art market expertise across competent authorities.
Case Examples
• In April 2023, nine individuals were indicted for conspiring to defraud the United States and foreign
governments, evade U.S. sanctions and customs laws, and launder money by securing goods
and services for the benefit of one of the defendants, a sanctioned individual. According to court
documents, the co-conspirators relied on a complex web of entities and individuals to obtain
valuable artwork from U.S. artists and art galleries while hiding the involvement of the sanctioned
individual. The network’s acquisition and sale of high-value artwork served as tools for sanctions
evasion and “layering,” or disconnecting proceeds from the activities that generated them.
387
383 DOJ, OFAC-Designated Hizballah Financier and Eight Associates Charged with Multiple Crimes Arising Out of Scheme to Evade
Terrorism-Related Sanctions,” (April 18, 2023), https://www.justice.gov/usao-edny/pr/ofac-designated-hizballah-financier-and-
eight-associates-charged-multiple-crimes.
384 DOJ, Russian Charged with Money Laundering and Illegally Transmitting More than $150 Million,” (May 1, 2023), https://www.
justice.gov/usao-ndga/pr/russian-charged-money-laundering-and-illegally-transmitting-more-150-million.
385 U.S. District Court for the Northern District of Georgia, United States v. Feliks Medvedev, Criminal Indictment," Case
1:22-cr-00184-TWT-CMS, (May 17, 2022), https://storage.courtlistener.com/recap/gov.uscourts.gand.303502/gov.uscourts.
gand.303502.1.0.pdf.
386 Treasury, Study of the Facilitation of Money Laundering and Terror Finance Through the Trade in Works of Art, (February 2022), https://
home.treasury.gov/system/files/136/Treasury_Study_WoA.pdf.
387 Treasury, Treasury Disrupts International Money Laundering and Sanctions Evasion Network Supporting Hizballah Financier, (April 18,
2023), https://home.treasury.gov/news/press-releases/jy1422.
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4. Automobiles
The purchase of high-end vehicles with proceeds of crime, particularly drug proceeds, has been a long-
standing money laundering typology. The use of car dealerships, vehicle auctions and international
car shipping companies has also been used to launder and transmit the proceeds of romance scams,
pandemic unemployment fraud, and other fraudulent schemes.
388
Case examples
• In November 2022, Daniel Fruits was sentenced to six years in federal prison aer pleading guilty to
wire fraud and money laundering. According to court documents, Fruits, who was hired to manage
and run a Greenwood, Indiana-based trucking company, defrauded his employer out of more than
$14 million over a 4.5-year period. From January 2015 through June 2019, a Kentucky-based legal
entity invested over $14 million into the trucking company. Fruits used those embezzled funds
to purchase real estate; several vehicles, including two Ferraris and a Corvette; farm equipment
including a horse trailer; a show horse; expensive jewelry, including multiple Rolex watches; firearms;
private jet flights; and high-end escort services.
389
• In May 2022, Stephen Mudd, Jr. was convicted and sentenced for conspiring to commit money
laundering by assisting in the unlawful purchase of automobiles with criminal proceeds and was
sentenced for a financial crime involving the use of a nominee to purchase automobiles to conceal
the source of the funds used. While working as a car salesman, Mudd helped falsify employment
and bank account information to facilitate the purchase of automobiles with criminal proceeds—
with either the proceeds providing a cash down payment or the means of monthly payments on an
automobile loan from a financial institution. Mudd knew that lenders would not extend financing
without proof of a legitimate source of income.
390
• In March 2022, James Pinson, the owner of a used car dealership, was convicted of three counts
of wire fraud, six counts of mail fraud, one count of aggravated identity the, and two counts of
conspiring to commit money laundering. Evidence at trial revealed that to carry out his scheme,
Pinson bought pick-up trucks at wholesale prices at auction, obtained hundreds of copies of
Kentucky and West Virginia residents’ driver’s licenses, fraudulently titled the trucks in the name of
those residents, and fraudulently induced the auto manufacturer to repurchase the trucks at 150
percent of their retail value. The auto manufacturer issued 350 checks in the names of individual false
owners between 2013 and 2015. Pinson forged signatures on all 350 checks and deposited them into
his bank account.
391
388 Any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must
file a Form 8300. By law, in this context, a "person" is an individual, company, corporation, partnership, association, trust or
estate. See IRS Form 8300 and Reporting Cash Payments of Over $10,000, https://www.irs.gov/businesses/small-businesses-
self-employed/form-8300-and-reporting-cash-payments-of-over-10000.
389 IRS, Greenwood man sentenced to six years in federal prison for embezzling $14 million from his former employer to fund his
lavish lifestyle available at IRS-CI, (November 29, 2022), https://www.irs.gov/compliance/criminal-investigation/greenwood-
man-sentenced-to-six-years-in-federal-prison-for-embezzling-14-million-from-his-former-employer-to-fund-his-lavish-lifestyle.
390 IRS, Four men convicted of federal financial crimes involving money laundering, structuring, wire fraud, and bank fraud,
(June21, 2022), https://www.justice.gov/usao-wdky/pr/four-men-convicted-federal-financial-crimes-involving-money-
laundering-structuring-wire.
391 DOJ. Two Men Sentenced to Prison for Roles in $4.3 Million Fraud and Money Laundering Scheme, (March 3, 2022), https://www.
justice.gov/usao-sdwv/pr/two-men-sentenced-prison-roles-43-million-fraud-and-money-laundering-scheme#:~:text=Money
percent20Laundering percent20Scheme-,Two percent20Men percent20Sentenced percent20to percent20Prison percent20for
percent20Roles percent20in,Fraud percent20and percent20Money percent20Laundering percent20Scheme&text=CHARLESTON
percent2C percent20W.Va.,a percent20Toyota percent20Customer percent20Support percent20Program.
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82
Casinos and Gaming
The recent growth of gaming activity at brick-and-mortar casinos and online gaming platforms has
raised the risk profile for U.S. casinos and gaming activity in the United States. Casinos and card clubs
are considered financial institutions subject to BSA requirements if they are licensed to do business as a
casino or card club (by the relevant state, tribal, or territorial authority) and have gross annual gaming
revenues in excess of $1,000,000.
392
The gaming industry has expanded considerably in recent years
with increases in commercial revenue and an influx of new market participants, such as online gaming
platforms (see Special Focus Section on Online Gaming below).
The sophistication and resourcing of regulatory and supervisory regimes for casinos and card clubs vary
considerably across federal, state, tribal, and territorial levels. This variation may create opportunities
for jurisdictional arbitrage in the casino sector. The risk profiles of casinos and card clubs also vary
considerably, owing to their dierences in size, volume of cash flow, location, customers and clientele,
and range of games and services oered, among other factors. There are also continuing challenges
with AML/CFT supervision of some gaming operators - including online platforms, firms oering “games
of skill” (as opposed to “games of chance”), and third-party operators that may engage in casino-like
activities but that are not necessarily subject to BSA obligations because they are not licensed as casinos.
The casino and gaming industry has expanded considerably in recent years with increases in commercial
revenue and an influx of new market participants, such as online gaming platforms. There are roughly
1,500 casinos and card clubs in the United States and commercial revenue from casino gaming and
sports betting reached a record $60 billion in 2022.
393
Casino and gaming activity is increasingly dispersed
across the United States as a growing number of state, tribal, and territorial jurisdictions legalize and
operationalize gaming activity, including online and sports betting. The jurisdictions with the largest
commercial casino markets by revenue are Las Vegas (Nevada) and Atlantic City (New Jersey).
394
Casinos
and card clubs in these regions are also among the most highly regulated and file among the most SARs
in the country.
395
Those BSA requirements include AML program obligations, including written procedures, internal
controls, training of personnel, a designated compliance oicer, and independent testing, among other
requirements.
396
Both casinos and card clubs are also subject to obligations relating to general and
gaming-specific SAR and CTR filing as well as recordkeeping, and, other requirements.
397
In addition to
federal AML/CFT reporting obligations under the BSA, some states, such as Nevada, require additional
state-level reporting by casinos and gaming operators. FinCEN supervises casinos and card clubs and
delegated examination authority belongs to the IRS SB/SE.
392 IRS-CI, ITG FAQ #1 Answer-When are casinos considered to be financial institutions subject to requirements of the Bank Secrecy
Act (Title 31)?, https://www.irs.gov/government-entities/indian-tribal-governments/itg-faq-1-answer-when-are-casinos-
considered-to-be-financial-institutions-subject-to-requirements-of-the-bank-secrecy-act-title-31.
393 American Gaming Association, “State of The States 2023”, (May 2023), https://www.americangaming.org/wp-content/
uploads/2023/05/AGA-State-of-the-States-2023.pdf.
394 American Gaming Association, “State of The States 2023”, (May 2023), https://www.americangaming.org/wp-content/
uploads/2023/05/AGA-State-of-the-States-2023.pdf.
395 FinCEN, SAR Filings by Industry, (July 2023), https://www.fincen.gov/sites/default/files/shared/Section percent201 percent20-
percent20Casino percent20and percent20Card percent20Club percent20SARs.xlsx
396 See 31 CFR Part 1021, Subpart B, https://www.ecfr.gov/current/title-31/subtitle-B/chapter-X/part-1021.
397 See 31 CFR Part 1021, Subparts C and D, https://www.ecfr.gov/current/title-31/subtitle-B/chapter-X/part-1021.
83
2024 ◆ National Money Laundering Risk Assessment
The risks in this sector involve not only compliance issues by casinos and card clubs regarding their
respective AML/CFT obligations under the BSA, but also the misuse of casinos by foreign illicit actors
(especially CMLOs and Junket Operators) and uneven supervision. CMLO threat actors have used “mirror
trades” (See CMLO section) as a feature of casino junkets.
398
Casino junkets attract high-net-worth
individuals, such as those who want to move money out of mainland China and enable large transfers of
funds between dierent jurisdictions. We discuss the risks associated with online gaming activities, including
sports betting and oshore gaming platforms in the subsequent special focus section on those issues.
Law enforcement reporting and criminal prosecutions suggest continuing money laundering risks
associated with placing illicit proceeds in casinos. These are oen earned from illegal gambling, fraud,
CMLO-related activity, and the proceeds of drug, arms, and human traicking. Recent SAR filing data
suggests this activity may involve chip walking, structuring, and the large deposit or withdrawal of funds
with minimal gaming activity. For example, in 2022 casinos and card clubs filed a record number of SARs
relating to chip walking and a six-year record of SARs relating to structuring and minimal gaming with
large transactions.
399
Other methodologies may include the use of money-mule networks, the misuse
of line-of-credit services to avoid CTR filings, the misuse of private gaming salons, and chip-walking in
dominations lower than what casinos generally track (i.e., using chips valued at less than $5,000).
According to federal and state law enforcement sources, some foreign illicit actors engage in intra-
property transfers, wherein they deposit funds at a foreign branch of a U.S.-based casino property and
then access an equivalent amount of funds at a U.S. branch of that same casino property - either in cash,
chips, or through a line-of-credit vehicle. Using this arrangement, actors may ultimately withdraw the
funds (plus any additional gambling winnings) at either the United States or the foreign branch of the
casino, potentially bypassing both foreign currency controls and BSA reporting obligations.
There are continuing concerns regarding covered casinos’ and card clubs’ compliance with relevant AML/
CFT obligations. Federal and state law enforcement underscored the extent to which covered casinos
and card clubs may be fulfilling their required obligations, including SAR and CTR filing, but not taking
other forms of proactive risk-based action against suspected money laundering. This approach may be
indicative of casinos and card clubs seeking to attract, retain, and accommodate wealthy patrons, which
may include illicit actors, despite money laundering concerns or their inability to determine sources of
funds. Nonetheless, such practices can facilitate money laundering and other illicit activities occurring
through licensed U.S. casinos. The sophistication and resourcing of regulatory and supervisory regimes
for casinos varies considerably across federal, state, tribal, and territorial levels. This variation may create
opportunities for jurisdictional arbitrage in the casino sector.
Case Examples
• In October 2022, six individuals were indicted for drug, gun, and money laundering crimes by a
federal grand jury. According to the indictment, the drug conspiracy occurred between August 2020
and June 2022 and involved more than 400 grams of fentanyl and 500 grams of methamphetamine.
The charged money laundering oenses included the transportation of large amounts of cash, the
purchase of casino chips and placement of sportsbook bets, buying expensive jewelry, and leasing
398 See FinCEN, Frequently Asked Questions on Casino Recordkeeping, Reporting, and Compliance Program Requirements, https://
www.fincen.gov/resources/statutes-regulations/guidance/frequently-asked-questions-casino-recordkeeping-reporting.
399 FinCEN, SAR Filings by Industry, (July 2023), https://www.fincen.gov/sites/default/files/shared/Section percent201 percent20-
percent20Casino percent20and percent20Card percent20Club percent20SARs.xlsx.
2024 ◆ National Money Laundering Risk Assessment
84
a luxury apartment and vehicle, all using the proceeds of drug traicking. The indictment alleges,
among other transactions, that $51,000 in cash was seized from a checked bag belonging to one
individual; that two other individuals purchased casino chips and placed sportsbook bets totaling
over $540,000 and later cashed out more than $445,000; and that members of the group spent tens of
thousands of dollars on Rolex and Audemars Piguet watches and a diamond and gold chain.
400
• In July 2022, Demetrius Burt Catching was sentenced to 93 months in federal prison aer pleading
guilty to the distribution of marijuana and money laundering. According to the plea agreement,
Catching admitted to distributing marijuana in the Lexington area and then taking the proceeds from
the marijuana sales and placing large sports bets and wagers at various Indiana casinos. According
to the plea, aer Catching was banned from one of the casinos, he recruited others to go in his place
to make his wagers and bets. Cash from the wagers was deposited in bank accounts in his name.
Catching was also ordered to forfeit approximately $215,000 in proceeds from his drug traicking and
money laundering oenses, and ordered to serve an additional, consecutive term of 55 months for
supervised release violations on previous convictions.
401
• In May 2022, the California Gambling Control Commission issued a stipulated settlement decision
and order for Lucky Chances Casino, located in Colma, California. As part of the settlement
decision, the commission required the Casino to perform the following actions, among others: (1)
fully comply with the BSA and its implementing regulations, (2) report to the Bureau of Gambling
Control any examination by FinCEN and IRS any examination regarding the Casino’s compliance
with the implementation of the BSA (3) implement and maintain an eective AML program; (4)
employ a compliance oicer to ensure compliance with the BSA; (5) and hire a qualified independent
consultant to review the eectiveness of the Casino’s AML program.
402
1. Special Focus: Online Gaming
In recent years, legal and technological developments have led to substantial growth in online gaming
activity in the United States. While online gaming can take a number of forms, of particular illicit finance
concern are the emergent money laundering risks associated with sports betting, oshore sports betting,
and virtual asset gambling. These activities bear many of the same risks associated with traditional
gaming at brick-and-mortar casinos. However, there are unique risks stemming from the size and rapid
growth of these sectors, uneven or inadequate regulation, and anonymity aorded by online gaming.
a) Sports Betting
Since the U.S. Supreme Court overturned a broad prohibition on regulated sports betting in 2018, U.S.-
based persons have collectively wagered more than $220 billion in legal sports bets as of 2023, nearly
half of which occurred between 2022 and 2023.
403
Legal sports betting in the United States occurs across
numerous settings, including at in-person sportsbooks (which can be co-located on casino premises)
400 IRS-CI, October 27, 2022, Six Detroiters charged with drug, gun, and money laundering crimes, https://www.irs.gov/compliance/
criminal-investigation/six-detroiters-charged-with-drug-gun-and-money-laundering-crimes.
401 IRS-CI, July 25, 2022, Jessamine County man sentenced to 93 months for distribution of marijuana and money laundering,
https://www.irs.gov/compliance/criminal-investigation/jessamine-county-man-sentenced-to-93-months-for-distribution-of-
marijuana-and-money-laundering.
402 CGCB, “Stipulated Settlement, Decision and Order in the Matter of Lucky Chances Inc.,” Case No.: CGCC 2022-0210-14, (May 31,
2022), http://www.cgcc.ca.gov/documents/adminactions/decision/Lucky_Chances_Stipulated_Settlement_App-32323.pdf.
403 American Gaming Association, Assessing Shis in the Sports Betting Market 5 Years Post-PASPA, (May 9, 2023), https://www.
americangaming.org/wp-content/uploads/2023/05/AGA_PASPA_LSBResearch.pdf.
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2024 ◆ National Money Laundering Risk Assessment
and at sporting events, such as stadiums and racetracks. However, most sports betting activity in the
United States occurs via online or mobile gaming platforms. These platforms generally operate either (1)
as third-party operators through licensing arrangements with BSA-covered casinos that are licensed at
the state, tribal, or territorial level; or (2) by acquiring online gaming operator licenses or permits directly
from relevant authorities without an ailiation with a brick-and-mortar, BSA-covered casino.
Both models create AML/CFT compliance challenges and opportunities to launder illicit proceeds. For
example, online gaming platforms may not have robust AML/CFT controls; they may not be ailiated
with a BSA-covered casino or entity; they may be unaware of any BSA obligations to which they may
be subject as an extension of any licensing arrangement with a casino; and a BSA-covered casino could
have limited visibility into potential criminal activity occurring on its third-party operator’s services. In
some instances, casinos and gaming operators that do not meet the BSA’s definition of a casino (oen
due to a licensing requirement) may be operating as money transmitters.
404
These factors, in addition to
the volume of the betting activity, the rapid growth of the sector, and the lack of uniform requirements
or regulations of these services across state, territorial, and tribal jurisdictions, present significant and
increasing money laundering risks.
There are numerous types of money laundering methodologies and schemes associated with sports
betting, many of which resemble traditional casino-based criminal schemes. For example, users may
deposit the proceeds of crime into betting accounts and subsequently withdraw funds aer minimal
betting activity, disguising the illicit funds as betting earnings. These schemes also demonstrate how
criminal actors abuse U.S. financial institutions. Confederates can also collude on one or a series of bets,
working together to hide the illicit origin of the source of funds.
In August 2023, a Georgia man was charged with money laundering and other crimes for a scheme to
misdirect more than $30 million from faith-based charities and individual donors, originally intended
for religious causes, for personal gain.
405
In his misuse of the funds, the man deposited approximately
$1 million of the misdirected funds into an online sports gambling website. In 2021, New Jersey state
authorities arrested a man for a fraudulent scheme involving his alleged use of stolen identities to create
and fund more than 1,800 online gambling accounts through Atlantic City’s online gaming providers.
406
As part of the scheme, he also allegedly created fraudulent bank accounts using the victims’ stolen
identities. He transferred funds from fraudulent unemployment benefits claims to those accounts, later
making cash withdrawals.
407
404 See 31 CFR 1010.100(t)(5)(i) and 31 CFR 1010.100()(5)(i)(A).
405 DOJ, Fugitive charged in scheme that misdirected millions in charitable donations intended for Christian outreach in China,
(August 1, 2023), https://www.justice.gov/usao-sdga/pr/fugitive-charged-scheme-misdirected-millions-charitable-donations-
intended-christian.
406 State of New Jersey, State Police Arrest Man Who Stole Identities to Fund Online Gambling Accounts, (June 8, 2021), https://
www.nj.gov/njsp/news/2021/20210608.shtml.
407 State of New Jersey, State Police Arrest Man Who Stole Identities to Fund Online Gambling Accounts, (June 8, 2021), https://
www.nj.gov/njsp/news/2021/20210608.shtml.
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86
b) Oshore Online Gaming
There is also a significant amount of online gaming activity occurring through oshore operators.
Industry reporting suggests that Americans wager an estimated $64 billion annually on illegal or oshore
gaming platforms, accounting for roughly 40 percent of the U.S. sports betting market.
408
Many illegal
sports betting platforms are based in foreign jurisdictions with deficient regulatory frameworks yet
actively advertise to U.S. consumers and markets.
There is evidence that U.S. persons have used oshore gaming platforms to engage in illicit activity. For
example, in January 2023, eleven defendants were charged in a multi-million-dollar scheme relating
to the operation of an illegal sports betting organization.
409
The scheme, which included the evasion of
excise tax totaling nearly $20 million between 2019 and 2021, involved betting activities occurring online
via an oshore server located in Costa Rica.
Some oshore gaming platforms use virtual assets as forms of payment, presenting additional risk
factors. Large, transnational virtual asset gambling firms have grown rapidly since 2020, driven by
increases in the adoption of virtual assets as well as the anonymity provided by the technology.
410
In
2019 guidance, FinCEN clarified that gaming operators and internet casinos that are not covered by the
regulatory definition of casino, gambling casino, or card club but that accept and transmit virtual assets
may still be regulated under the BSA as a money transmitter.
411
Many large virtual asset gambling services screen for users’ locations and deny access to users located
in the United States in accordance with U.S. law. However, virtual private networks can allow U.S.-based
users to, with relative ease, fraudulently circumvent these location-screening protocols by obfuscating or
misreporting their locations. This obfuscation may also inhibit the ability of virtual asset gambling firms
to conduct due diligence into U.S.-based users and understand sources of funds.
Entities Not Fully Covered by AML/CFT Requirements
1. Investment Advisers
The investment adviser (IA) industry in the United States consists of a wide range of business models that
provide a variety of financial services to retail investors, high-net-worth individuals, private institutions,
and governmental entities (including but not limited to local, state, and foreign government funds). The
assets managed by dierent types of IAs—including IAs registered with the SEC (referred to as Registered
Investment Advisers, or “RIAs”), IAs exempt from SEC registration (also known as Exempt Reporting
408 American Gaming Association, Sizing the Illegal and Unregulated Gaming Markets in the U.S., (November 30, 2022), https://
www.americangaming.org/resources/sizing-the-illegal-and-unregulated-gaming-markets-in-the-u-s/#:~:text=AGA percent27s
percent20report percent2C percent20Sizing percent20the percent20Illegal,billion percent20in percent20lost percent20tax
percent20revenue.
409 DOJ, Eleven Indicted in Multi-Million Dollar Excise Tax Evasion and Money Laundering Scheme Involving Illegal Sports-Betting
Organization, (January 6, 2023), https://www.justice.gov/usao-ndal/pr/eleven-indicted-multi-million-dollar-excise-tax-evasion-
and-money-laundering-scheme.
410 DOJ, Report of the Attorney General’s Cyber Digital Task Force: Cryptocurrency Enforcement Framework, see p. 39,. (October
2020), https://www.justice.gov/archives/ag/page/file/1326061/download.
411 See FinCEN, “Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies,” (May
9, 2019), https://www.fincen.gov/sites/default/files/2019-05/FinCEN percent20Guidance percent20CVC percent20FINAL
percent20508.pdf.
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2024 ◆ National Money Laundering Risk Assessment
Advisers, or “ERAs”), and state-registered IAs (who are prohibited from registering with the SEC)—vastly
exceed the holdings of U.S. banks.
As of July 31, 2023, there were approximately 15,000 RIAs reporting approximately $125 trillion in assets
under management (AUM) for their clients.
412
There are also approximately 5,800 ERAs that report certain
information to the SEC but are not required to register. According to the SEC, ERAs manage approximately
$5 trillion in assets.
413
Finally, there are approximately 17,000 investment advisers who are required to
register with state securities regulators. As of December 31, 2022, these state-registered investment
advisers managed approximately $420 billion in assets.
414
Oversight of the investment adviser industry by federal and state securities regulators is generally
focused on protecting investors and the overall securities market from fraud and manipulation. However,
the IA sector is not uniformly subject to comprehensive AML/CFT regulations and is not typically
examined for AML/CFT compliance. Some RIAs may implement an AML/CFT program as the entity may
also be a registered broker-dealer (i.e., a dual registrant) or bank; other RIAs that are subsidiaries of a
financial holding company may implement an enterprise-wide AML/CFT program. Additionally, some
IAs may perform certain AML/CFT measures through contractual obligations for a joint customer of a
regulated financial institution or as a voluntary best practice.
415
But these arrangements are not uniform
across the IA industry, and the IAs’ implementation of these measures is not subject to comprehensive
enforcement and examination.
A review of law enforcement cases and BSA reporting identified several illicit finance threats involving
IAs. First, IAs have served as an entry point into the U.S. market for illicit proceeds associated with foreign
corruption, fraud, and tax evasion. Second, certain investment advisers (or entities required to register
as investment advisers) have managed billions of dollars ultimately controlled by designated Russian
oligarchs and their associates. Separately, numerous fraud cases involving smaller IAs (both SEC and
state-registered) where they defrauded their clients and stole their funds.
416
IAs may be vulnerable to these threats, at least in part, for several reasons. First, the lack of
comprehensive AML/CFT regulation for the IA sector may create arbitrage opportunities for illicit actors
by allowing them to more easily find IAs with weaker or non-existent client due diligence practices as
they seek to access the U.S. financial system. Second, IAs’ business activities may be segmented across
intermediaries (and potentially national borders), possibly creating information asymmetries. Obligated
entities (such as custodian banks or broker-dealers) working with an IA may not necessarily have a direct
412 The number of RIAs and AUM, and the number of ERAs are based on a Treasury review of Form ADV information filed as
of July 31, 2023. This Form ADV data is available at Frequently Requested FOIA Document: Information About Registered
Investment Advisers and Exempt Reporting Advisers, http://www.sec.gov/foia/docs/invafoia.htm. The $125 trillion in AUM
includes approximately $22 trillion in assets managed by mutual funds, which are advised by RIAs and are subject to AML/CFT
obligations under the BSA and its implementing regulations.
413 88 Fed. Reg. 63206, 63304 (Sept. 14, 2023).
414 North American Security Administrators Association, NASAA Investment Adviser Section 2023 Annual Report, p.3, https://www.
nasaa.org/wp-content/uploads/2023/09/2023-IA-Section-Report-FINAL.pdf.
415 See, for example, SEC, Letter to Mr. Bernard V. Canepa, Associate General Counsel, Securities Industry and Financial Markets
Association, Request for No-Action Relief Under Broker-Dealer Customer Identification Program Rule (31 CFR 1023.220) and
Beneficial Ownership Requirements for Legal Entity Customers (31 CFR 1010.230) (Dec. 9, 2022), https://www.sec.gov/divisions/
marketreg/mr-noaction/2020/sifma-120920-17a8.pdf.
416 In most of the identified cases, authorities pursued civil or criminal enforcement for violations of the federal securities laws
against the investment adviser or other associated individuals.
2024 ◆ National Money Laundering Risk Assessment
88
relationship with the client (or, in the case of private funds, the ultimate investor). They may be unable
to require an IA to disclose relevant information. At the same time, entities that can obtain information
about ultimate clients and investors (typically the IA and certain service providers for the advised fund)
are not required to do so, nor are they required to report potentially suspicious activity. Third, certain
business practices oen promote the secrecy of client/ or investor identity and information and the
outsourcing of key compliance responsibilities.
The entities in the investment adviser sector that pose the highest risks are ERAs, RIAs who are not dually
registered as, or ailiated with, a bank or broker dealer, and IAs who manage private funds.
Private funds advised by investment advisers, such as hedge and private equity funds and, venture
capital funds, hold over $20 trillion in assets, and have limited reporting obligations. Advisers managing
these funds may also routinely invest assets from foreign legal entities that are generally not required
to disclose their ultimate beneficial owners. As of Q4 2022, private funds managed by RIAs represented
$284 billion in equity beneficially owned by non-U.S. investors where the RIA did not know, and could not
reasonably obtain information about, the non-U.S. beneficial ownership because the beneficial interest
was held through a chain involving one or more third-party intermediaries.
417
Case examples
• In December 2021, a founder of a New York financial advisory and investment company was charged
with wire fraud, IA fraud, and money laundering in connection with a scheme to misappropriate
more than $1 million from current and prospective clients. As alleged in the indictment, the former
investment adviser executed a calculated scheme in which he repeatedly lied to his current and
prospective clients about putting their money into legitimate investments, when, in reality, he stole
their money to fund his lavish lifestyle. As noted in the indictment, the victims sent multiple wire
transfers to the private bank account of the IA’s investment firm. The IA then misappropriated the
funds into his personal banking account, among other things.
418
• In November 2019, Mark Scott, a former equity partner at the law firm Locke Lord LLP, was convicted
of one count of conspiracy to commit money laundering and one count of conspiracy to commit bank
fraud. Beginning in 2016, Scott established fake private equity investment funds in the British Virgin
Islands, known as the “Fenero Funds” to launder approximately $400 million in proceeds from a large
international pyramid fraud scheme called OneCoin. Scott claimed that the investments were from
“wealthy European families,” when in fact the money represented proceeds of the OneCoin fraud
scheme. Scott layered the money through Fenero Fund bank accounts in the Cayman Islands and
the Republic of Ireland. As part of the scheme, Scott and his co-conspirators lied to banks, including
U.S. banks and other financial institutions, to cause those institutions to make transfers of OneCoin
proceeds and evade AML procedures.
419
417 SEC, “Private Fund Statistics, Fourth Calendar Quarter 2022”, (July 18, 2023), https://www.sec.gov/files/investment/private-
funds-statistics-2022-q4.pdf.
418 DOJ, “Founder of Investment Advisory Firm Charged with Wire Fraud, Investment Adviser Fraud and Money Laundering”,
(December 6, 2021), https://www.justice.gov/usao-edny/pr/founder-investment-advisory-firm-charged-wire-fraud-investment-
adviser-fraud-and-money; United States v. Slothower (Indictment) Case 2:21-cr-00602 (E.D.N.Y), December 1, 2021.
419 DOJ, “Former Partner Of Locke Lord LLP Convicted In Manhattan Federal Court Of Conspiracy To Commit Money Laundering
And Bank Fraud In Connection With Scheme To Launder $400 Million Of OneCoin Fraud Proceeds,” (Nov. 21, 2019), https://www.
justice.gov/usao-sdny/pr/former-partner-locke-lord-llp-convicted-manhattan-federal-court-conspiracy-commit-money.
89
2024 ◆ National Money Laundering Risk Assessment
2. Third-Party Payment Processors
Third-party payment processors (TPPPs or payment processors) are services that enable merchants and
other business entities to accept card and other non-cash payments from consumers without having to
maintain their own merchant account with a financial institution. TPPPs simplify payment processing
for merchants by using their own commercial bank accounts to process merchants’ payments, oen
aggregating all of their clients’ transactions into a single merchant account or, in some cases, opening an
account at a financial institution in the merchant’s name. Merchant transactions primarily include credit
card payments but can also include Automated Clearing House (ACH) transactions, remotely created
checks (RCC), digital wallet payments, and debit and prepaid card transactions. Payment processors
traditionally contracted primarily with retailers with physical locations; however, retail borders have been
eliminated with the expansion of the Internet and e-commerce.
420
As described in the 2022 NMLRA, TPPPs generally are not subject to AML/CFT regulatory requirements,
and the scope of BSA coverage depends on the company’s unique circumstances. However, only those
payment processors that meet very specific conditions outlined in FinCEN guidance are exempt from BSA
obligations.
421
These conditions are as follows: (1) the company must facilitate the purchase of goods or
services, or the payment of bills for goods or services (other than money transmission itself); (2) it must
operate through clearance and settlement systems that admit only BSA-regulated financial institutions
(e.g., the Automated Clearing House); (3) it must provide the service pursuant to a formal agreement; and
(4) the entity’s agreement must be at a minimum with the seller or creditor that provided the goods or
services and receives the funds from the entity.
The FDIC, OCC, and FinCEN each issued guidance in the early 2010s regarding the risks, including the
AML/CFT risks, associated with banking third-party processors. In 2023, the FDIC, OCC, and the FRB
issued joint guidance for banking organizations regarding managing third-party relationships, as
such relationships can reduce a bank’s direct control over activities and may introduce new risks.
422
Banks may face heightened ML/TF risks when dealing with a processor account, similar to risks from
other activities in which the bank’s customer conducts transactions through the bank on behalf of the
customer’s clients. Some higher-risk merchants routinely use payment processors to process their
transactions because they do not have a direct bank relationship. Criminals can use payment processors
to mask illegal or suspicious transactions and launder proceeds of crime, especially if the processor does
not have an eective means of verifying their merchant clients’ identities and business practices. In
addition, payment processors have been used to place illegal funds directly into a financial institution
using ACH credit transactions originating from foreign sources.
423
420 Federal Financial Institutions Examination Council (FFIEC) Manual, “Risks Associated with Money Laundering
and Terrorist Financing, Third-Party Payment Processors—Overview,” https://bsaaml.iec.gov/manual/
RisksAssociatedWithMoneyLaunderingAndTerroristFinancing/10.
421 FinCEN, “Application of Money Services Business Regulations to a Company Acting as an Independent Sales Organization and
Payment Processor,” (FIN-2014-R009), (August 24, 2014), https://www.fincen.gov/sites/default/files/administrative_ruling/FIN-
2014-R009.pdf.
422 Interagency Guidance on Third-Party Relationships: Risk Management, 88 Fed. Reg. 37920 (June 9, 2023), https://www.occ.gov/
news-issuances/federal-register/2023/88fr37920.pdf.
423 FinCEN Advisory, “Risk Associated with Third-Party Payment Processors,” FIN-2012-A010, (October 22, 2012), https://www.fincen.
gov/sites/default/files/advisory/FIN-2012-A010.pdf.
2024 ◆ National Money Laundering Risk Assessment
90
A review of cases, including criminal cases and civil enforcement actions, over the last three years
involving TPPPs revealed several patterns of fraudulent behavior. The most common typology, present
in eight of the cases, involved complicit TPPPs. As a primary gateway to the legitimate financial system,
payment processors are in a unique position to facilitate high volumes of fraud by working together
with fraudulent merchants or failing to address suspicious activity. In some cases, payment processors
ignored red flags indicating fraudulent activity by merchants, such as a high rate of chargebacks, which
can indicate unlawful debiting; in other cases, payment processors actively worked to disguise merchant
activity, misrepresenting the types of transactions merchants were processing to banks or even creating
shell companies or designing fake websites.
In six of the cases, the payment processors were taken advantage of by merchants and used to process
transactions. These cases oen involve merchants misrepresenting the nature of their transactions to
payment processors. In other instances, the defendant made micro-debits from victims’ accounts, which
oen went unnoticed and lowered the merchant’s chargeback rate. Finally, four cases involved TPPPs
that were themselves defrauding either merchants or consumers.
These and other recent cases indicate that the use of TPPPs for money laundering and fraud is on the
rise. This vulnerability seems to be largely driven by TPPPs themselves, which can take advantage of the
exemption from BSA requirements and the access they have to the financial system to facilitate money
laundering.
Case Examples
• In May 2023, Stephen Short was sentenced in federal court to 78 months in prison for conspiracy to
commit wire and bank fraud in connection to a scheme to obtain credit card processing services for
his telemarketing operation through a third-party credit card processing network. Between 2012 and
2015, Short targeted customers with outstanding credit card debt to oer services, including debt
consolidation and interest-rate reduction, to generate over $19 million in fraud proceeds. The scheme
involved collaboration between Short’s company and CardReady, with the latter keeping one-third
of credit card sale transactions in exchange for access to the credit card processing network and
concealment of the underlying merchant.
424
• In July 2022, the executives of Electronic Transactions Systems Corporation were indicted for
defrauding approximately 7,000 merchant clients out of millions of dollars. Between 2012 and 2019,
the defendants intentionally disguised a portion of processing fees for clients, embedding hidden
markups and failing to disclose the true fee structure in billing and account statements. Specifically,
the company altered the Interchange fees to include hidden markups by accessing soware on
computer systems belonging to a third-party company.
425
This action facilitated the over-valuing of
the company during its acquisition in 2018.
426
424 DOJ, “Head Of Telemarketing Operation Sentenced To 78 Months In Prison For $19 Million Credit Card Laundering Scheme,”
(May 2, 2023), https://www.justice.gov/usao-sdny/pr/head-telemarketing-operation-sentenced-78-months-prison-19-
million-credit-card#:~:text=U.S.%20Attorney%20Damian%20Williams%20said,more%20than%2019%2C000%20victims%20
nationwide.
425 DOJ, “Executives of Card Payment Processing Company Indicted in East Texas for Nationwide Multimillion Dollar Fraud
Scheme,” (July 27, 2022), https://www.justice.gov/usao-edtx/pr/executives-card-payment-processing-company-indicted-east-
texas-nationwide-multimillion.
426 Id.
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2024 ◆ National Money Laundering Risk Assessment
3. Attorneys
There are over 1.3 million attorneys in the United States whose practices encompass a broad range of
client services.
427
Certain legal practice areas or services such as representing clients in disputes and
mediations, providing advice concerning childhood custody proceedings, and providing regulatory
advisory services, may pose lower inherent money laundering or illicit finance risk than others.
On the other hand, where attorneys advise on real estate transactions, assist in the formation and
administration of legal entities and trusts, and transfer and manage client assets, they may be more
vulnerable because these attorneys may act as intermediaries between a client and the U.S. financial
system (i.e., a gatekeeper).
428
These practice areas are at higher risk because the associated services are
typically essential to the specific transactions undertaken, and, because of the involvement of attorneys,
the underlying transactions may acquire a veneer of respectability and integrity.
Similarly, the involvement of attorneys may eectively shield the illicit actors’ identities from financial
institutions processing transactions involving those clients. This issue may occur due to misapplication
of attorney-client privilege, the duty of confidentiality, and the lack of AML/CFT obligations covering the
legal profession. As a result, attorneys may be attractive to illicit actors intending to launder the proceeds
of crime.
Common threads running through these vulnerable or high-risk practice areas include the movement of
funds and the level of beneficial ownership information available to financial institutions. Two possible
examples might be escrow accounts and the IOLTAs required to be maintained by lawyers and their firms,
primarily for the collection and disbursement of settlement and other funds payable to their clients.
These are pooled bank accounts in which attorneys deposit client funds to keep them separate from the
attorneys’ funds, as legal ethics require.
429
An IOLTA functions as a standard bank account, except that the
bank has no direct relationship with or knowledge of the beneficial owners of the client funds in these
accounts. The bank transfers the interest earned by these accounts to a state IOLTA program, which uses
this money to fund charitable causes, including the delivery of legal services to indigent clients.
430
These IOLTA and other attorney-client trust accounts, including escrow accounts, are not titled in the
name of any underlying client, causing banks to find it diicult to identify suspicious transactions
eectively. Without comprehensive AML/CFT regulations covering attorneys, the obligation to report
suspicious transactions involving IOLTAs falls on the financial institution that serves them. Even where
neither privilege nor legal ethics prohibit reporting client identities or facts of a transaction, financial
427 2022 ABA National Lawyer Population Survey, available at https://www.americanbar.org/content/dam/aba/administrative/market_
research/2022-national-lawyer-population-survey.pdf; see also The American Bar Association’s 2022 Profile of the Legal Profession
Report, which contains state-by-state demographic details of the legal profession. Given that one quarter of all attorneys are subject to
ethics rules and disciplinary procedures in two jurisdictions (New York and/or California), reform eorts focused on these states may
have a disproportionate aect in bringing the U.S. legal profession in line with international standards.
428 See supra note [375] (Section II, covering BSA/AML compliance deficiencies and complicit professionals, explaining the
definition and origin of the term “gatekeeper”).
429 According to the American Bar Association (ABA), before state and Supreme Court rules created the IOLTA framework, attorneys
typically placed client deposits into combined, or pooled, trust accounts that contained other nominal or short-term client
funds. Trust funds pooled in this manner earned no interest because trust accounts typically are checking accounts (to allow
easy access to the funds) and, until the early 1980s when the IOLTA framework was craed, checking accounts did not earn
interest. In addition, these trust funds earned no interest because it is unethical for attorneys to derive any financial benefit
from funds that belong to their clients.
430 FFIEC, “Bank Secrecy Act/Anti-Money Laundering InfoBase, Professional Service Providers – Overview,” https://bsaaml.iec.gov/
manual/RisksAssociatedWithMoneyLaunderingAndTerroristFinancing/26.
2024 ◆ National Money Laundering Risk Assessment
92
institutions are not well placed to detect such transactions. They do not have a relationship with the
attorney’s client or eective means to dispute a lawyer’s claim of privilege, which results in vulnerabilities
in the U.S. financial system. The Treasury assesses complicit attorneys may misuse IOLTA and other
lawyer trust accounts to launder criminal proceeds into and out of the United States, as reflected in its
review of case examples.
The vulnerability stems from the ability of the attorney to direct transfers into and out of the account
without necessarily raising red flags at the bank where the account is held. Banks may not be able to
successfully identify the transaction pattern for the account since they do not have insight into the
ultimate source of funds or beneficial ownership information. This can be challenge exacerbated when
attorneys use one account to facilitate transactions on behalf of multiple clients, as the commingled
funds make the expected activity murkier. For example, two Beverly Hills attorneys assisted the son of
the President of Equatorial Guinea to circumvent AML and PEP controls at U.S. financial institutions by
allowing him to use IOLTAs as conduits for over $100 million and without alerting the bank to his use of
those accounts. When a bank uncovered the illicit actor’s use of an account and closed it, the attorneys
helped him open another account, thus allowing the IOLTAs to accept millions of dollars in wire transfers
from Equatorial Guinea, moving those funds into other related accounts, and using them to pay bills and
expenses. Both attorneys declined to testify before the U.S. Senate Select Committee on Intelligence
hearing, citing the Fih Amendment, and the California Bar disciplined neither of them.
431
A resonant example that reflects the complexity of attorneys’ involvement in money laundering and
other illicit activity was detailed in the 2022 NMLRA. The DOJ identified a prominent global law firm in a
series of civil forfeiture actions as having provided a trust account through which they illicitly siphoned
hundreds of millions of dollars belonging to Malaysia’s 1MDB fund.
432
Despite these well-understood risks the United States has no uniform national regulation of attorneys.
Instead, attorneys are self-regulated by state bar associations, although not for AML/CFT. Across the
country, attorneys are not subject to comprehensive AML/CFT measures. Like any person in any trade or
business, they are obligated to file Form 8300 for cash transactions exceeding $10,000 and may choose
to use Form 8300 under certain circumstances for cash transactions of $10,000 or less. Attorneys, like any
other person, may be subject to penalties for failures to file a correct and complete Form 8300, including
a minimum penalty of $31,520 that may be imposed if the failure is due to an intentional or willful
disregard of the cash reporting requirements.
433
The Treasury assesses IOLTA accounts and other lawyer
431 United State Senate Permanent Subcommittee on Investigation, “Keeping Foreign Corruption out of the United
States: Four Case Histories,” (February 04, 2010), https://www.hsgac.senate.gov/wp-content/uploads/imo/media/doc/
FOREIGNCORRUPTIONREPORTFINAL710.pdf. See also DOJ, “Second Vice President of Equatorial Guinea Agrees to Relinquish
More Than $30 Million of Assets Purchased with Corruption Proceeds,” (October 10, 2014), https://www.justice.gov/opa/pr/
second-vice-president-equatorial-guinea-agrees-relinquish-more-30-million-assets-purchased.
432 See Treasury, National Money Laundering Risk Assessment, February 2022. See also Complaint at 42, U.S. v. One Drawing Entitled
“Self-Portrait” by Jean-Michel Basquiat, (C.D. Cal. 2020) (No. e 2:20-cv-05910) (“Between approximately October 21, 2009, and
October 13, 2010, eleven wires totaling approximately $368 million were sent …to an Interest on Lawyer Account held by the
law firm Shearman & Sterling LLP in the United States.”) See also Press Release, U.S. Repatriates $300 Million to Malaysia in
Proceeds of Funds Misappropriated from 1Malaysia Development Berhad (Apr. 14, 2020), available at https://www.justice.gov/
opa/pr/us-repatriates-300-million-malaysia-proceeds-funds-misappropriated-1malaysia-development. One notable example
is the 1MDB case where hundreds of millions of dollars were siphoned out of Malaysia’s sovereign wealth fund. These funds
passed through pooled accounts held at law firms in the U.S. Law firms authorized transfers that were used to pay for luxury
U.S. real estate, jewelry, and yacht and jet rentals.
433 IRS Form 8300 Reference Guide, https://www.irs.gov/businesses/small-businesses-self-employed/irs-form-8300-reference-
guide#penalties.
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trust accounts that complicit attorneys are using to launder criminal proceeds into and out of the United
States.
The American Bar Association (ABA), a voluntary, member-led organization, publishes Model Rules of
Professional Conduct (“Model Rules”) that have substantially influenced nearly every state jurisdiction’s
standards of conduct, ethics, and discipline for attorneys. Accordingly, in most states, the professional
discipline of attorneys is conducted pursuant to regulations contained in codes that have been approved
by the highest court in the jurisdiction in which the attorney is admitted. The ABA revised its Model Rules
of Professional Conduct on August 8, 2023, in an eort to better protect the legal profession and U.S.
financial system from money laundering and terrorist financing risks.
434
To date, no state bar association
has adopted these amendments.
The revision to these codes by states leaves attorneys substantial discretion to determine whether
to accept or continue representation under the facts and circumstances of a particular case. These
state codes are permissive rather than mandatory because they generally leave final decision-making
and authority over the conduct of attorneys to a state court or a specially designated grievance or
discipline committee within the state. These entities generally lack the resources or authority to conduct
systematic audits, examinations, or other regulatory measures for AML/CFT purposes. At the same time,
unscrupulous attorneys continue to be involved in complex money laundering, sanctions evasion, and
other illicit finance schemes.
Case Examples
• In March 2023, Jack Stephen Pursley, a Texas attorney pleaded guilty to conspiring with a former
client to repatriate more than $18 million in untaxed income from oshore accounts held in the Isle
of Man that the client had earned through his company. Pursley was aware that his client had never
paid taxes on these funds. He designed and implemented a scheme whereby fund transfers from an
Isle of Man bank account to the United States were disguised as stock purchases in U.S. corporations
Pursley and his client owned and controlled. The attorney received more than $4.8 million and a 25
percent ownership interest in his client’s business for his role in the fraudulent scheme.
435
• In 2022, an Illinois attorney named Hassan Abbas was sentenced for his role in a scheme to defraud
victims in multiple states, many of whom thought they were closing real estate transactions or
sending money to romantic partners. Once the attorney received the funds, he sent large sums
to fellow fraudsters overseas and took a cut, which he used to spend on luxury items and an
international lifestyle. When approached by financial institutions about his account activity, the
attorney disguised the purposes of wire transfers to bank investigators, claiming that certain transfers
were for non-existent “clients” and, in one instance, insisting that information about the wires was
protected by the attorney-client privilege.
436
434 The changes create a duty to “inquire into and assess the facts and circumstances of each representation to determine whether
the lawyer may accept or continue each representation,” and to decline to represent or withdraw from representing a client
who “seeks to use or persists in using the lawyer’s services to commit or further a crime or fraud.” See ABA Model Rules of
Professional Conduct 1.16 (a)(4).
435 DOJ, “Houston Attorney Pleads Guilty to Oshore Tax Evasion Scheme,” (March 28, 2023), https://www.justice.gov/opa/pr/
houston-attorney-pleads-guilty-oshore-tax-evasion-scheme.
436 DOJ, “Illinois Lawyer Sentenced to Nine Years in Prison for Sophisticated Wire Fraud and Money Laundering Scheme,” (October
28, 2022), https://www.justice.gov/usao-ma/pr/illinois-lawyer-sentenced-nine-years-prison-sophisticated-wire-fraud-and-
money-laundering.
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4. Accountants
The U.S. accounting sector includes approximately three million individuals who provide a wide range of
services. These include (but are not limited to) Certified Public Accountants (CPAs); non-licensed public
and private accountants; internal and external auditors; and bookkeeping, accounting and auditing
clerks (who do not require professional licenses or four-year college degrees). Accountants in the United
States are regulated through a complex framework at the federal, state, and local levels, including several
private sector bodies that promulgate professional and ethical standards. State accountancy boards
also supervise CPAs. The U.S. accounting sector is generally not subject to comprehensive requirements
under the BSA for the purposes of AML/CFT, and oversight of the accounting industry is largely aimed
at protecting the market and the public from fraud and manipulation.
437
Additionally, as U.S. persons,
accountants are subject to sanctions regulations issued by OFAC concerning prohibitions on providing
financial services to sanctioned persons or entities.
A review of this sector for ML/TF risks finds that licensed and unlicensed accountants face a lower to
medium-low level of ML/TF risk largely because U.S. accountants generally provide financial record
keeping or advice services rather than managing or holding client funds, purchasing real estate, or
establishing companies. For example, even a CPA certification does not grant an accountant special
access to form accounts or manage financial transactions.
While accountants are not financial service providers in the United States, there is some concern about
an accountant’s ability to act as financial facilitators for criminal or terrorist organizations due to their
knowledge of the legal and financial system. For example, an accountant’s knowledge on creating
and structuring shell companies, bank accounts, wire transfers, and financial statements could be
attractive to those looking to conceal financial transactions or launder money. However, an accounting
background does not aord an individual any ability to register companies, open bank accounts, or
authorize financial transactions beyond what an ordinary citizen can do. When accountants do commit
ML oenses, their status as accountants does not allow them special access or privileges to mechanisms
for hiding or transferring money. While a complicit accountant could perform these services for a criminal
or terrorist organization, professional accountants or CPAs are not routinely involved in organized
crime or major narcotics investigations. A criminal organization may have a “money person” that they
call a “bookkeeper” or “accountant” but this may be a person with no professional training but who is
entrusted by the criminal organization to coordinate payments throughout the criminal enterprise.
In the limited cases since 2016 where accountants were charged with money laundering oenses, only
a few cases involved accountants using their professional capacity to launder money. Accountants have
not frequently come up in large-scale money laundering or illicit finance schemes.
437 AML/CFT requirements under the BSA do not apply to the accounting sector as accountants, or accounting firms, are not
defined as one of the enumerated financial institution categories; however, as with any U.S. person, they are subject to
BSA requirements for filing reports when receiving $10,000 or more in currency. See https://www.irs.gov/businesses/small-
businesses-self-employed/form-8300-and-reporting-cash-payments-of-over-10000. Further, participants in the U.S. accounting
sector may be subject to certain cash-based reporting requirements under the BSA applicable to non-financial businesses and
trades. They may also be subject to other requirements under the BSA depending on whether sector participants meet other
conditions, such as whether they meet the definition of a financial institution, such as a broker-dealer, already subject to BSA
requirements.
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Case examples
• In August 2023, Craig Clayton, the owner of a “virtual CFO” business, agreed to plead guilty
to laundering tens of millions of dollars in proceeds from internet fraud schemes by creating
shell companies and opening fraudulent business bank accounts.
438
According to the charging
documents, from 2019 to 2021, Clayton and others used his accounting and “virtual CFO” business,
Rochart Consulting, as a front to launder the proceeds of internet fraud schemes. As part of the
conspiracy, Clayton founded shell companies to open business bank accounts in Rhode Island and
Massachusetts, through which he laundered the proceeds of internet fraud schemes on behalf of his
clients. In total, Clayton laundered more than $35 million.
• In October 2018, San Diego-based CPA Luke Fairfield, was sentenced to 21 months in prison for his
role in the criminal enterprise led by former USC football player Owen Hanson – an international drug
traicking, gambling, and MLO known as “ODOG.”
439
Hanson operated ODOG in the United States,
Central and South America, and Australia from 2012 to 2016, traicking in thousands of kilograms
of cocaine, heroin, methamphetamine, MDMA (also known as “ecstasy”), and other illegal drugs in
wholesale and retail quantities. The ODOG enterprise also operated a vast illegal gambling network
focused on high-stakes wagers placed on sporting events. To carry out its gambling operation, the
ODOG enterprise employed numerous bookies and money runners, and in the event a customer did
not pay his gambling debt, the ODOG enterprise employed enforcers to threaten, intimidate, and
injure its customers to force compliance. As Fairfield admitted when pleading guilty in March of 2017,
his role in the ODOG enterprise included laundering money, aiding in the creation of shell companies
to hide ODOG’s criminal proceeds, and training ODOG money runners on methods and tactics to hide
the enterprise’s activities from law enforcement and banks. Because of this conviction, Fairfield is no
longer licensed as a CPA.
Although accountants pose a lower ML/TF risk, a review of law enforcement cases and information
available to the U.S. government finds that other illicit finance risks are present, especially regarding
tax oenses, embezzlement, fraud, and crimes of professional misconduct. Additionally, accountants
working as auditors warrant continued regulatory attention as they are guarantors of financial data
prepared by businesses, companies, trusts, and other legal entities. However, these additional risks
are outside the scope of this risk assessment. The U.S. government will continue to monitor the money
laundering risks posed by accountants.
438 DOJ, “Rhode Island Business Owner to Plead Guilty to Money Laundering Conspiracy and Obstruction of Justice” (August 17,
2023), https://www.justice.gov/usao-ma/pr/rhode-island-business-owner-plead-guilty-money-laundering-conspiracy-and-
obstruction.
439 DOJ, “CPA Sentenced for Role in Racketeering Enterprise”, ( October 2, 2018), https://www.justice.gov/usao-sdca/pr/cpa-
sentenced-role-racketeering-enterprise.
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CONCLUSION
While many of the U.S.’ most significant money laundering risks have remained consistent in recent years,
a range of new factors have emerged that are reshaping the risk landscape in the United States. As this
National Money Laundering Risk Assessment identifies, crimes like fraud, drug and human traicking,
cybercrime, corruption, and human smuggling remain the most significant proceeds-generating
activities associated with money laundering. However, in the aermath of the COVID-19 pandemic,
and, other recent geopolitical, technological, and financial developments, the broader illicit finance
ecosystem in which these crimes occur has substantially evolved. The result, therefore, is an evolved
‘landscape’ for money laundering risk.
A number of recent money laundering threats and vulnerabilities have become more significant and
pernicious over the past two years. For example, criminals, scammers, and illicit actors are increasingly
using virtual assets and digital peer-to-peer payment systems to engage in fraud and other crimes.
CMLOs are no longer just emerging threats but are now dominant across the professional money
laundering market. The wide availability of illicit fentanyl throughout the United States is indicative of
the reach and scale of the transnational illicit supply chains supporting the production of these deadly
substance.
This 2024 NMLRA aims to highlight to the public and private sectors these and other high-level threats
to the U.S. financial system, both the continuing challenges as well as emerging vulnerabilities and
risks that the United States faces. Only by enumerating these challenges can the United States work to
prioritize and address them eectively.
As the case examples within this report demonstrate, there is robust coordination between financial
oversight entities and law enforcement agencies to identify, prosecute, and ultimately dismantle money
laundering activity within the United States. Indeed, it is due to the integrity, reliability, and security
of the U.S. financial system that individuals and businesses both within the United States and across
the world continue to use and invest their funds in the U.S. financial system—it is the most secure and
trusted in the world.
The findings of the 2024 NMLRA, taken in tandem with the findings of the proliferation finance risk
assessment and the terrorist financing risk assessment, will inform the forthcoming 2024 National Illicit
Finance Strategy, which will lay out the roadmap to address the threats and vulnerabilities to the U.S.
financial system, and ultimately strengthen the integrity of the U.S. financial system.
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PARTICIPANTS
In draing this assessment, the Department of the Treasury’s Oice of Terrorist Financing and Financial
Crimes consulted with sta from the following U.S. government agencies, who also reviewed this report:
• Department of the Treasury
Internal Revenue Service - Criminal Investigation (IRS-CI)
Internal Revenue Service - Passthroughs & Special Industries
Terrorism and Financial Intelligence (TFI)
Financial Crimes Enforcement Network (FinCEN)
Oice of Foreign Assets Control (OFAC)
Oice of Intelligence and Analysis (OIA)
Oice of Terrorist Financing and Financial Crimes (TFFC)
• Department of Justice
Criminal Division
Computer Crime and Intellectual Property Section
Fraud Section
Money Laundering and Asset Recovery Section
Narcotic and Dangerous Drugs Section
Organized Crime and Gang Section
Environment and Natural Resources Division
Executive Oice for U.S. Attorneys
Drug Enforcement Administration (DEA)
Federal Bureau of Investigation (FBI)
Organized Crime Drug Enforcement Task Forces (OCDETF)
• Department of Homeland Security
Customs and Border Protection (CBP)
Homeland Security Investigations (HSI)
United States Secret Service (USSS)
• Department of the Interior
U.S. Fish and Wildlife Service
• U.S. Postal Inspection Service (Inspection Service)
• Sta of the Federal functional regulators440
• Nevada Gaming Control Board
440 This includes sta of the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation (FDIC),
the Board of Governors of the Federal Reserve System (FRB), the National Credit Union Administration (NCUA), the Oice of
the Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC). The SEC sta also sought input
from the sta of the Financial Industry Regulatory Authority (FINRA), which is the largest self-regulatory organization for broker-
dealers doing business with the public in the United States.
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METHODOLOGY
Treasury’s Oice of Terrorist Financing and Financial Crimes by statute is the AML/CFT policy
coordination for Treasury and routinely interacts with our domestic partners. This report is based on
a review of federal and state public sector analysis, enforcement actions, guidance, and interviews
with U.S. Treasury sta, intelligence analysts, law enforcement agents, and prosecutors. During the
research and analysis phase we shared working dras of dierent sections with relevant stakeholders for
comment and coordinated input and feedback on three separate dras of this document.
The NMLRA uses all available information to identify the current money laundering environment within
the United States. This initiative includes feedback and input from various private sector participants
through formal and informal mechanisms and targeted meetings on illicit finance trends. This action is
generally done though outreach following the publication of the previously released NMLRA. Relevant
components of agencies, bureaus, and oices of the Treasury, the U.S. Department of Justice (DOJ), the
U.S. Department of Homeland Security (DHS), and others s listed above, participated in the development
of the risk assessment. This year, we engaged with several State agencies, particularly with respect to the
Casino and Gaming Section (See list of Participants). Data collected is current as of January 31, 2024.
Section I on Threats is based on discussions with law enforcement and cites specific public charges that
are intended to provide an example of the wider trends identified by investigators. The discussion of
each threat category highlights their consequences, including the harm inflicted upon U.S. citizens and
the eects on the U.S. economy. Understanding the threat environment is essential to understanding the
vulnerabilities that create opportunities for laundering illicit proceeds.
Numerous federal agencies collect data on the outcomes of their illicit finance investigations at
the agency, interagency, and government-wide levels. However, a single source of comprehensive,
government-wide data on the full range of such outcomes does not exist. Therefore, identifying cases
based solely on charges filed is challenging. For instance, although there are specific money laundering
statutes, additional statutes might include relevant cases - such as tax evasion - but be overly broad
for the purpose of conducting such searches. Furthermore, agencies may charge defendants under the
predicate crime instead of under a money laundering-related statute or a prosecutor may drop a money
laundering charge as part of a plea bargain. We have identified those cases (mainly citing DOJ or LEA
Press Releases) that demonstrate some type of ML activity or how criminal actors used the U.S. financial
system to move, disguise, or hide proceeds of crime. Case examples may involve criminal charges in an
indictment, which are merely allegations. All defendants are presumed innocent unless, and until, proven
guilty beyond a reasonable doubt in a court of law. The case examples only cite the names of those
found guilty. We have also utilized qualitative data, oen provided by LEAs, when no public sources are
available (e.g., press releases or court documentation). When citing qualitative data, the NMLRA makes
clear that certain information is “according to law enforcement sources.”
We have incorporated advisories, alerts and bulletins published by our LEAs, FinCEN, and consumer
protection agencies (e.g., the Consumer Trade Commission). Examples include public service
announcements on various types of frauds/scams. From a drug perspective, we relied on national drug
threat assessments and data provided by our health protection agencies (e.g., Centers for Disease Control
and Prevention). We also rely on top-down assessments or strategies produced at the national level,
which the President of the United States issues. These have included national eorts to combat human
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traicking, ransomware, and corruption among other criminal threats with a financial nexus. We also use
open-source documents from our Intelligence Community such as the “Annual Threat Assessment of the
U.S. Intelligence Community.”
From a vulnerability perspective, we rely on regulatory agencies who issue public advisories, such as on
the role of the U.S. Dollar, data on financial products or services, or various types of frauds and scams.
U.S. federal functional regulators (banks, securities, commodities) also issue annual supervisory insights
and examination priorities which provides insight into areas of focus for compliance based on current or
emerging shortcomings in AML/CFT compliance. We also utilize information from our FFIRAs, including
the BSA/AML Manual issued by the Federal Financial Institutions Examination Council (FFIEC). Within the
Treasury, we oen conduct public (e.g., Art, DeFi) and non-public sectoral (e.g., DNFBPs) risk assessments
which assist us in developing our understanding of ML risk and that we have incorporated into the NMLRA.
The Department of the Treasury will conduct extensive outreach to our public and private sectors to
deliver the results of this report. In doing so, we hope to receive valuable feedback on the usefulness of
this assessment and how we can continue to improve this process.
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TERMINOLOGY
The terminology and methodology of the NMLRA are based in part on the guidance of the FATF, the
international standard-setting body for AML/CFT safeguards. The following concepts are used in this risk
assessment:
Threats: For purposes of the NMLRA, threats are the predicate crimes that are associated with money
laundering. The environment in which predicate oenses are committed and the proceeds of crime are
generated is relevant to understanding why, in some cases, specific crimes are associated with particular
money laundering methods.
Vulnerabilities: Vulnerabilities are what facilitate or create the opportunity for money laundering. They
may relate to a specific financial sector or product or a weakness in law, regulation, supervision, or
enforcement.
Consequences: Consequences include harms or costs inflicted upon U.S. citizens and the eect on the
U.S. economy, which provide further context on the nature of the threats.
Risk: Risk is a function of threat, vulnerability, and consequence. It represents an overall assessment,
considering the eect of mitigating measures, including regulation, supervision, and enforcement.
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LIST OF ACRONYMS
ACH Automated Clearinghouse
ABA American Bar Association
AEC Anonymity-Enhanced Cryptocurrencies
AML/CFT Anti-Money Laundering / Countering the Financing of Terrorism
ANPRM Advance Notice of Proposed Rulemaking
ATM Automated Teller Machine
AUM Assets Under Management
BCS Bulk Cash Smuggling
BEC Business Email Compromise
BOI Beneficial Ownership Information
BSA Bank Secrecy Act
CBP U.S. Customs and Border Protection (Department of Homeland Security)
CDD Customer Due Diligence
CDG Clan del Golfo
CEO Chief Executive Oicer
CFTC Commodity Futures Trading Commission
CIB Cash-Intensive Business
CIP Customer Identification Program
CJNG Cártel Jalisco Nueva Generación
CMLO Chinese Money Laundering Organization
CTA Corporate Transparency Act
CTR Currency Transaction Report
CVC Convertible Virtual Currency
DEA Drug Enforcement Administration (U.S. Department of Justice)
DeFi Decentralized Finance
DHS Department of Homeland Security
DOJ Department of Justice
DPRK Democratic Republic of North Korea
DTO Drug Traicking Organization
EDD Enhanced Due Diligence
EFE Elder Financial Exploitation
EIDL Economic Injury Disaster Loan
ERC Employee Retention Credit
FAA Federal Aviation Administration
FATF Financial Action Task Force
FBI Federal Bureau of Investigation
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FCM Futures Commission Merchant
FCPA Foreign Corrupt Practices Act
FDIC Federal Deposit Insurance Corporation
FFIEC Federal Financial Institutions Examination Council
FFIRAs Federal Financial Institution Regulatory Agencies
FinCEN Financial Crimes Enforcement Network (U.S. Department of the Treasury)
FINRA Financial Industry Regulatory Authority
FRB Board of Governors of the Federal Reserve System (or “Federal Reserve Board”)
FTC Federal Trade Commission
FY Fiscal Year
GTO Geographic Targeting Order
ICE HSI U.S. Immigration and Customs Enforcement Homeland Security Investigations
(U.S. Department of Homeland Security)
IC3 Internet Crime Complaint Center (Federal Bureau of Investigation)
IOLTA Interest on Lawyers’ Trust Accounts
IPO Initial Public Oering
IRS-CI Internal Revenue Service-Criminal Investigation
IVTS Informal Value Transfer Service
ML/TF Money Laundering/Terrorist Financing
MLO Money Laundering Organization
MSB Money Services Business
NCUA National Credit Union Administration
NDAA National Defense Authorization Act
NDTA National Drug Threat Assessment
NPRM Notice of Proposed Rulemaking
OCC Oice of the Comptroller of the Currency
OCDETF Organized Crime Drug Enforcement Task Forces (U.S. Department of Justice)
OFAC Oice of Foreign Assets Control (U.S. Department of the Treasury)
PII Personally Identifiable Information
PML Professional Money Laundering
PMSJs Precious Metals, Stones, And Jewels
PEP Politically Exposed Person
PMO Postal Money Order
PPP Paycheck Protection Program
PRC People’s Republic of China
P2P Peer-To-Peer
RIA Registered Investment Adviser
RMB Chinese Renminbi
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SAR Suspicious Activity Report
SBA Small Business Administration
SB/SE Small Business/Self-Employed
SEC Securities and Exchange Commission
SDN Special Designated National
TBML Trade-Based Money Laundering
TCO Transnational Criminal Organization
TCSP Trust and Company Service Provided
TPPP Third-Party Payment Processor
USD U.S. Dollar
USPIS U.S. Postal Inspection Service
VAIS Virtual Asset Investment Scheme
VASP Virtual Asset Service Provider
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