The Treasury Department’s Office of Foreign Assets Control (OFAC) and Secretary Janet Yellen announced sanctions Thursday against the top leaders of La Nueva Familia Michoacana drug cartel over the illicit trafficking of synthetic opioid fentanyl in the United States.

The sanctions, along with an advisory to financial institutions from the Treasury’s Financial Crimes Enforcement Network (FinCEN), are the opening salvo by the Biden administration in response to the recently enacted FEND Off Fentanyl Act.

The FinCEN advisory provides guidance to nonbank financial institutions like casinos, depository institutions, the insurance industry, money services businesses, mortgage companies/brokers, the precious metals/jewelry industry, and securities and futures, the agency said in a press release.

FinCEN said the cartel procures fentanyl precursor chemicals and manufacturing equipment from suppliers based in China.

Yellen said at a press conference Thursday that she has raised the issue directly with her Chinese counterparts, who have agreed to “deeper cooperation in fighting money laundering,” with the aim to help President Joe Biden’s global coalition crack down on narcotics trafficking.

The supplemental advisory issued Thursday by FinCEN expands on a 2019 advisory, adding new typologies and red flags to identify and report suspicious transactions. Those include:

  • A customer or counterparty that has previous drug-related convictions, or that open-source reporting indicated connections to clandestine lab operations; 
  • A chemical or pharmaceutical company in China, Hong Kong, or located in a jurisdiction that shows indicators of possible illicit shell company activity;
  • A counterparty, with no supposed affiliation with China, using a China-based phone number or IP address affiliated with the website of a Chinese chemical or pharmaceutical company;
  • A customer or counterparty that is a vendor on an e-commerce or darknet marketplace, and advertises the sale of precursor chemicals and manufacturing equipment used to make synthetic opioids;
  • A customer that is a Mexican company importing shipments of fentanyl precursor chemicals and manufacturing equipment without appropriate importing licenses and registrations in Mexico; or, has no online presence but is involved in the import of precursor chemicals and manufacturing equipment;
  • Multiple, seemingly unrelated Mexican importing companies sharing phone numbers, email addresses, or physical addresses, which  transact with the same China-based chemical manufacturing and pharmaceutical companies;
  • A customer that is a Mexican importing company but predominantly transacts only with chemical or pharmaceutical companies in China or Hong Kong for no apparent legitimate reason, compared to similar importers that transact with foreign chemical manufacturing and pharmaceutical suppliers in multiple jurisdictions; and
  • Specific transactional red flags like structuring or transacting in cryptocurrency.

Additionally, OFAC sanctioned eight cartel members for trafficking fentanyl, cocaine, and methamphetamine into the United States. The cartel is also involved in human smuggling, OFAC said, with some victims forced to smuggle drugs into the U.S. The agency added that some workers in the tobacco industry are used to smuggle drugs as well.

Panelists at Compliance Week’s Third-Party Risk Management & Oversight Summit tackled sanctions compliance, touching on these emerging risks involving Mexico and China. 

Jeff Dale is Managing Editor, Editorial Projects and Analytics, at Compliance Week. He previously served as Compliance Week's Digital Editor and has worked as a copy editor at the Boston Herald and city editor at The Hour Publishing Co. in Norwalk, Conn.View full Profile

More from Jeff Dale

Topics