Drug trafficking detection is a greater priority for financial institutions with the current administration’s move to designate international cartels as terrorists. In response, FinCEN has enhanced its National Priorities with new rules that give financial institutions more incentive to identify illicit flows.
Drug trafficking costs the U.S. $225B annually. Criminals conceal these assets through structured money laundering operations, including professional networks, trade-based schemes, shell corporations and money mules.
Financial institutions have the opportunity to leverage AI and consortium data to detect drug trafficking activities, including those originating from transnational cartels.
FinCEN COMMAND: Mobilizing Financial Institutions
FinCEN is empowering community and regional financial institutions to detect drug trafficking through the agency’s public-private information sharing Exchange program. The series, titled COMMAND (Combating and Obstructing Money Movements Associated with Narcotics and Drug Trafficking Organizations), is underpinned by Executive Order EO 14157. The Order addresses organizations trafficking drugs across the U.S. border, including cartels, by labeling them as terrorist organizations.
The COMMAND program provides institutions with more use cases to use BSA data to identify drug trafficking activity. This effort aligns with both FinCEN’s BSA IT Modernization Program, and its AML/CFT National Priorities. Institutions who attend the invitation-only events gain insights on how to better allocate compliance resources. This makes BSA data more actionable for investigations and compliance.
Reinforcing AML/CFT National Priorities
FinCEN’s AML/CFT National Priorities place a regulatory onus on financial institutions to detect drug trafficking-related transactions. In July 2024, FinCEN supported this legislation with the proposed rule Anti-Money Laundering and Countering the Financing of Terrorism Programs.
The rule proposes amendments to the BSA and Anti-Money Laundering Act of 2020 (AML Act). Changes prompt institutions to bolster their AML/CFT programs to be more effective, risk-based and reasonably designed. Moreover, it will require financial institutions to review government-wide AML/CFT priorities and implement them accordingly.
Together with EO 14157 and FinCEN’s COMMAND series, the legislation composes a holistic approach to dismantling the financial infrastructure of transnational drug trafficking. They combine intelligence, law enforcement and financial sector collaboration to build a latticed approach to drug trafficking detection.
A Targeted Approach to Drug Trafficking Detection
Ultimately, drug trafficking is a $287.7B problem in the Americas. The interconnected regulatory environment provides institutions the opportunity to focus on predicate crime detection — empowering investigators to quickly determine financial risk.
Reviewing incoming deposits, outgoing payments and behavioral evidence will help detect potential drug trafficking activity. However, this is a burdensome task to execute efficiently and cost-effectively at institutions with even moderate alert volumes.
Leveraging new AI technology solutions can help you detect more drug trafficking activity, while reducing false positive and alert-to-SAR rates. The efforts can be enhanced by reviewing any adverse media associated with account owners.
Come back to us in the coming weeks for part two of our series on drug trafficking detection, as we talk about insights learned during the first COMMAND series events. For more information, visit Nasdaq Verafin or request a demo.
