In May, FinCEN issued a joint alert, alongside OFAC, DOJ, FBI, DEA, and HSI, that exposed cartel-led schemes smuggling stolen crude oil across the U.S.–Mexico border.
FinCEN identified the Jalisco New Generation Cartel (CJNG), Sinaloa Cartel, Gulf Cartel, and other transnational criminal organizations (TCOs) as major players in these schemes. The cartels have been diverting billions of dollars of oil from Mexico’s state-owned energy company, Pemex, via small U.S. based oil and natural gas companies operating near the U.S.-Mexico border.
Fuel theft has become cartels’ top non-drug revenue stream, thereby fueling violence, corruption, and undercutting lawful oil businesses on both sides of the border. FinCEN’s alert aims to strengthen institutional detection, reporting, and collaboration to disrupt this critical financial lifeline for cartels.
>> Stay ahead of risk with Sayari’s Cartel Affiliates Module <<
Reviewing FinCEN Guidance
Cartels source stolen crude through corruption, pipeline taps, refinery theft, and hijacked tanker trucks. They conceal shipments of that stolen crude by mislabeling tanker contents as “waste oil” or various hazardous materials, selling to U.S. importers at steep discounts, who then resell it domestically and globally. Proceeds are laundered through wired invoices falsely labeled for waste-oil purchases.
The U.S. Treasury has designated cartel-affiliated individuals and shell entities under terrorism-financing sanctions. This alert outlines key typologies and red flags to look out for, such as low-profile importers, ERP mislabeling, suspicious wire-transfer patterns, and unregistered hazardous-material filings.
Financial institutions are required to file a suspicious activity report (SAR) if it knows or suspects a transaction involves funds derived from illegal activity; is intended to disguise funds derived from illegal activity; is designed to evade regulations; lacks an apparent lawful purpose; or involves the use of the financial institution to facilitate criminal activity. In this case, FinCEN additionally encourages financial institutions to participate in information sharing with each other for the purposes of identifying, and, where appropriate, reporting activities that may involve possible terrorist activity or money laundering.
Watching Out for Red Flags
In the alert, FinCEN outlines 14 red flag indicators to help detect, prevent, and report potentially suspicious activity related to cartel oil smuggling. Here are a few ways that Sayari’s public data can complement internal data to effectively adjudicate potential risk. Here are a few of those red flags and how you can use public data to uncover these potential risks when conducting AML/CFT and KYC operations:
- Red Flag:A customer is a small U.S.-based oil and natural gas company that is suddenly purchasing waste oil or other hazardous materials from a singular or small number of Mexican and U.S. companies.
- Sayari Data Support: Trade data, complemented with transaction data, can help uncover if this customer is purchasing waste oil from risky Mexican suppliers, and compare recent shipments against a historical baseline.
- Red Flag:A customer is a small U.S.-based oil and natural gas company that is sending wire transfers for waste oil or other hazardous materials to Mexican or U.S. companies that do not appear to be related to the oil and natural gas industry.
- Sayari Data Support: Reviewing an entity’s registered business purpose in corporate records can help verify whether it is actually related to the oil and gas industry to identify any potential discrepancies
- Red Flag: A customer is a small U.S.-based oil and natural gas company that has a sudden and significant volume of transactional activity with one or a small number of Mexican or U.S. companies that have little to no online presence and displays other indicators of illicit shell company activity
- Sayari Data Support: Corporate records can be used to check legitimacy of these counterparties by verifying the company’s date of registration and ownership structures
- Red Flag: A customer is a U.S. company that is the ultimate consignee of purchases of waste oil or other hazardous materials but is registered to a residential address.
- Sayari Data Support: Comparing a company’s registration address with import/export data could validate whether or not the waste oil is coming from a residential address
- Red Flag: A customer is a small U.S.-based oil and natural gas company, importing company, or freight company operating on the U.S. southwest border that is transacting with Mexican and U.S. companies and their beneficial owners associated with cartel-related activity based on open source reporting in Mexico, indictments, and OFAC designations and/or press releases.
- Sayari Data Support: Corporate and trade records pulled during customer screening or due diligence activities can demonstrate whether or not beneficial owners of the company are involved in cartel-related activities
With access to Sayari’s solutions, financial institutions can stay ahead of the potential risks outlined in this latest FinCEN alert. Sayari Graph leverages global public records enriched with trade data and graph technology to pre-compute complex, cross-border corporate networks, thus providing a clearer picture of illicit financial actors potentially involved in oil smuggling.
Sayari’s first-to-market cartel screening data can instantly identify individuals and companies connected to Mexican cartels and other OFAC Sanctioned entities linked to transnational organized crime in Mexico, helping organizations meet heightened due diligence requirements. This data module uncovers disguised connections by automatically and continuously updating corporate registry information to track changes in names, addresses, and corporate statuses, which are key tactics used by cartel networks to obscure their connections.
Schedule a personalized demo of Sayari’s Cartel Affiliates Module to uncover any hidden connections to potential oil smuggling schemes your business may have.
