FATF red flags opioids fuelling global black money flows

Organised crime uses digital assets & dark web marketplaces, cautions FATF

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December 2, 2022

FATF red flags opioids fuelling global black money flows

Criminal groups use dark web vendor sites to market their products, says FATF

International financial watchdog FATF warns that organised criminal gangs involved in manufacturing and smuggling to fentanyl and other opioids around the world are using digital assets, dark web marketplaces as well as other forms for money laundering and are rapidly expanding their networks for supplying the drugs around the world.

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In a new report, the Paris-based Financial Action Task Force, an international watchdog mandated to curb money laundering and other international financial crimes has said that organised crime has made fentanyl and other opioids as an easy way to not just expand their illicit businesses of drugs around the world but are also using digital assets, dark web marketplaces as well as other financial tools in order to launder tens of billions of dollars each year.

FATF has issued a series of recommendations for law enforcement agencies around the world to detect and disrupt the criminal networks involved in these activities.

FATF says that in the past 10 years, there is a rise in the illicit trade by criminal groups that have contributed to hundreds of thousands of drug overdose deaths and have increased the cases of money laundering across borders. These criminal groups are fuelling a synthetic opioid crisis.

In the report, FATF looks at the way proceeds are laundered from synthetic opioid trafficking and recommends various approaches for law enforcement bodies to detect and disrupt such criminal activities. FATF report aims to raise awareness about the opioid trade, including the use of precursor chemicals, and the global financial flows.

FATF says that a majority of countries identify drug trafficking as a predicate offence for money laundering, yet the number of investigations and prosecutions concerning the laundering of proceeds from synthetic opioid trafficking has remained low in these years.

“Meanwhile, these organised crime groups use a range of methods that include bulk cash smuggling, cash couriers, trade-based money laundering and virtual assets (crypto), shell companies, the services of professional money launderers, un-authorized money or value transfer services, or the banking system and money brokers,” says FATF, which has been set up under the aegis of the Organisation for Economic Cooperation and Development (OECD).

“Many authorities do not fully understand the global money flows from opioids or do not know how to identify potential procurement of chemicals, or laboratory and other specialised production equipment.

Also, the authorities and reporting entities such as banks and money value transfer services look at opioid trafficking through a domestic lens, whereas the illicit trade involves major transnational organised crime groups and professional money launderers,’’ warns the report.

Practices to stop illicit trade

FATF has issued a set of recommendations to law enforcement agencies to help them detect these activities and take suitable preventive measures. These recommendations include

Ensuring more rigorous risk assessment practices to develop more robust legal and regulatory frameworks to combat illicit opioids.

The authorities should coordinate and share information and intelligence on the methods used to launder illicit proceeds from the emerging drug trade.

Prosecutors and law enforcement authorities with extensive backgrounds in financial investigations (which could include financial intelligence units, customs, and relevant anti-money laundering (AML) and counter-terrorism financing (CFT) authorities), should obtain additional training on investigations into the financial elements of the precursor supply chain.
Countries, on a bilateral, regional, and multilateral basis, should identify and leverage existing mechanisms to expand international cooperation on combating synthetic opioid supply chains.
Countries should ensure that the private sector is aware of the risks of new technologies to launder the proceeds of drug trafficking and take appropriate measures to deny criminals access to their business platforms or products.

The criminal groups are also using dark web vendor sites to market their products and, in some cases, take payment through virtual assets, some of which are anonymity-enhancing. These virtual assets are often converted into flat currency whereas some of the illicit trade is directly procured from chemical producers.

This makes it difficult to detect suspicious financial activity, says FATF, but in the interim the scourge of the opioids continues to spread rapidly across the world.

For the past years, there is an increase in the cases of deaths resulting from overdosing in North America, it is said that the use of fentanyl is the cause behind opioid-related deaths. At the same time, in other parts of the world like Africa, a tramadol has a significant impact on the health of the public while across Asia, many countries are reporting a growing number of cases of deaths resulted from the usage of drugs.

The countries Canada and the United States claim around 80,000 lives a year. In the Middle East and North Africa, sub-Saharan Africa, and South Asia, several drugs are causing regional public health emergencies with growing rates of addiction to illicitly obtained pharmaceutical opioids.