FinCEN Employing New Tactics to Combat Money Laundering
Peter M. Skinner and Matthew L. Schwartz write: Although the government has investigated trade-based money laundering in the past, it has historically prioritized the movement of money through financial institutions in allocating its resources. A new FinCEN alert flagging a Geographic Targeting Order indicates that the government is turning its attention to other forms of money laundering.
April 30, 2015 at 09:00 PM
6 minute read
On April 21, 2015, the Financial Crimes Enforcement Network (FinCEN) posted an alert flagging a new Geographic Targeting Order (GTO) that was sent to roughly 700 Miami businesses. According to FinCEN's alert, the GTO was issued “to shed light on cash transactions that may be tied to trade-based money laundering schemes.”
The GTO lowers the monetary threshold for the filing of Form 8300s by Miami-area nonfinancial trades and businesses “that export[] electronics (including cellphones).” The general rule is that a business must file a Form 8300 with the Internal Revenue Service if it receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions.1 There are criminal and civil penalties for failing to file Form 8300s.2 The GTO lowers the reporting threshold to $3,000 for the covered trades and businesses for 120 days—from April 28, 2015, until Oct. 25, 2015.3
The GTO is of obvious import to the businesses covered by the new reporting requirements. And press coverage in the days following the issuance of the GTO focused on the government's “targeting” of those businesses for money laundering. Of note, however, is not the government's enhancement of reporting requirements on a small subset of businesses in one locale, but the government's focus on trade-based money laundering, a complicated but increasingly popular means of laundering criminal proceeds.
Black Market Peso Exchange
Trade-based money laundering involves the transfer of a product (here, an electronic good, but really any product will do) as a substitute for the transfer of money. There are many different trade-based money laundering schemes, including under- and over-invoicing the value of goods, falsifying customs and other reporting documents, and transferring legitimate products through a system known as the Black Market Peso Exchange (BMPE). The BMPE is a particularly effective means of laundering cash and is likely the target of the new GTO.
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