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 Money Service Businesses (MSB) are financial institutions that offer various money-related services, including currency exchange, money transfers, check cashing, and issuing or redeeming money orders. These businesses serve as an important financial link, particularly for individuals who may not have access to traditional banking services.
However, MSBs can be vulnerable to abuse, particularly to money laundering, fraud, and other financial crimes. While the majority of MSBs operate lawfully and take necessary precautions to prevent illegal activity, some may become complicit, either knowingly or unknowingly, in facilitating problematic transactions. The decentralized nature of some MSBs, combined with large cash transactions and international transfers, can make it harder for regulatory bodies to monitor suspicious activity, increasing the risk of their involvement in illicit activity.
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A complicit MSB is an MSB that cooperates with a drug trafficking organization (DTO) to launder narcotics proceeds is complicit in the illegal activity and wrongdoing. The following is an explanation of how complicit MSB’s operate:
Mexican DTO’s use cities in the United States as distribution points for narcotics. Once their products have been sold, narcotics traffickers must find a way to return the proceeds from these sales to Mexico. To accomplish this goal, some Mexican DTO’s partner with complicit MSB’s. Complicit MSB’s will accept narcotics proceeds, in the form of bulk U.S. currency, from couriers that work for Mexican DTO’s. In addition to bulk U.S. currency, the courier, or another member of the DTO, will provide complicit MSB’s with a list of payee names in Mexico. The complicit MSB will structure the bulk U.S. currency into smaller amounts (historically between $500-$999; however, increasingly in excess of $1,000) and then send wire transfers to Mexico using the list of payee names as recipients. The complicit MSB falsifies the information for the sender of the wire transfer, to include name, address, and phone number. Once the wire transfers have been sent, the complicit MSB will text photos of the receipts from the transactions to the DTO. The receipts prove to the DTO that the transfers have been conducted and provide the information necessary for these wire transfers to be redeemed in Mexico. For their participation in the money laundering conspiracy complicit MSB’s collect a fee, often 10%, of the total bulk currency provided to them.
Several factors can increase an MSB’s susceptibility to becoming complicit in financial fraud:
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Insufficient Know Your Customer (KYC) procedures: KYC regulations require financial institutions to verify the identity of their clients to prevent illegal activities. MSBs that neglect these procedures may inadvertently facilitate transactions for individuals involved in fraud, money laundering, or terrorism financing.
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Poor compliance with Anti-Money Laundering (AML) regulations: MSBs are required to report suspicious activity to FinCEN and comply with AML laws. However, some MSBs fail to invest in the necessary resources to ensure compliance, making them easier targets for criminal exploitation.
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High volume of cash transactions: MSBs often deal with large amounts of cash, which is more difficult to trace than electronic transactions. This can create opportunities for criminals to “clean” criminal proceeds by moving it through an MSB, knowing that the cash-based nature of the business makes it harder to detect illicit funds.
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Limited oversight: Some MSBs, especially smaller, independent ones, may not be subject to the same level of scrutiny as larger financial institutions, which can make it easier for criminals to exploit weaknesses in their processes.
Remittances to Mexico, nearly all of which come from the United States, hit a record $58.5 billion last year (2022), according to data from Mexico’s central bank. That’s an increase of $25 billion, or 74%, compared to 2018, when President Andrés Manuel López Obrador came to power. Mexico’s economy has been slow to recover from the coronavirus pandemic, a factor that has boosted migration to the United States in recent years along with the remittances that workers send home.
The cartels are awash in cash from U.S. sales of fentanyl, cocaine, heroin, methamphetamines and marijuana. Presently, up to 10% of all Mexico-bound remittances may be drug money moved by criminal organizations like the Sinaloa Cartel and the Jalisco New Generation Cartel. A March report by the Mexican think tank Signos Vitales, estimated that at least $4.4 billion, or 7.5%, of remittances sent to Mexico last year could come from illegal activity.
reuters.com/investigates/special-report/mexico-drugs-remittances/
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Utilizing the TRAC database is important for investigators who are interested in working money laundering and narcotics investigations. For investigators that are working, or want to work, money laundering cases involving Mexican DTO’s or complicit MSB agents, it is extremely important to utilize the TRAC database. Complicit MSB agents can be identified by other means but the most effective method is using the wire transfer data uploaded to TRAC.
In January 2014, as a result of a Settlement Agreement Amendment between the Arizona Attorney General and Western Union, the Transaction Record Analysis Center (TRAC) was created. The TRAC Data System has evolved into a centralized searchable database containing subpoenaed financial transactions (money transfers) from numerous global money services businesses (MSBs). Subpoenaed transactions consist of only person to person money transfers (no commercial transactions) of at least $500 and greater primarily sent from or paid in U.S. Southwest Border States and Mexico. The Transaction Record Analysis Center is staffed by analysts and current/former law enforcement professionals recognized as experts related to money laundering activity conducted through MSBs. The TRAC Data System is exclusively available to authorized federal, state and local law enforcement while TRAC analysts provide meaningful transaction data analysis, collaboration and anti-money laundering (AML) training to TRAC users and MSB Compliance personnel in their efforts to disrupt criminal organizations and enhance anti-money laundering knowledge and techniques.
As of July 2024, TRAC has 337,158,470 transactions from 28 different MSBs, 22 of which are actively producing records. In order, the top five producers of transactions are as follows:
CES (Ria), Western Union, Intermex, BTS, Moneygram.
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 The following are some of the red flags that are indicative of a Money Service Business (MSB) that is complicit in laundering narcotics proceeds through wire transfers:
1. Heavy concentration of sent transfers paid in one primary drug source state in Mexico.
Mexican drug trafficking organizations (DTO) control narcotics distribution in various cities throughout the United States. When a complicit MSB is utilized to launder narcotics proceeds, through hundreds and thousands of wire transfers, the origin of the DTO becomes apparent through repeated use of a single payee agent state in Mexico. This becomes even more apparent when compared to other nearby MSB agent locations.
2. Complicit MSB agents will often send multiple transfers in a single day to the same drug source state in Mexico or will send several transactions in rapid succession (sometimes only minutes apart), or both (transactions conducted soon after one another and sent to the same drug source state). Law enforcement refer to these groupings as “Clusters” or “Bursts”.
“Clusters” and “Bursts” will appear in the data when a complicit MSB receives bulk currency, structures this amount into numerous smaller amounts, and then sends those amounts via wire transfer, often to the same drug source state.
3. Unique money transfer principal amounts repeated in daily activity and/or are concentrated in a dollar range.
For multiple wire transfers to be sent from the same location, for the exact same principal amount, on the same day, is highly suspicious. The chances of 11 different legitimate customers, utilizing the same MSB location, on the same day, to each send $970, is very low. However, if an MSB is fabricating sender information to launder narcotics proceeds, the chances that they will use the same principal amount numerous times on the same day is high.
4. Lack of commonalities between the surnames of sender and receiver names.
Many individuals utilize wire transfers to send money they have earned legitimately in the United States to their family in Mexico. When this occurs, there will often be a common surname for both the sender and receiver. When a complicit MSB is fabricating the names of senders, or misappropriating the personal information of legitimate customers, common surnames between the sender and receiver will decrease.
5. Payee names receiving payments from several individuals located in several different U.S. states.
Mexican DTO’s will often use a single payee name, numerous times. Since these DTO’s operate cells in various U.S. states, these payees will often receive payments from more than one geographic area. For example, a payee name controlled by a Mexican DTO may receive payments from Georgia, Ohio, Colorado, and California.
6. Lack of transparency in operations/licensing:
If the MSB provides limited information about their procedures, fees, or licenses, this could indicate a lack of proper regulation or a potential for misconduct.
7. Inconsistent compliance with regulations:
An MSB that is not compliant with KYC or AML standards, or is hesitant to provide information regarding these policies, is a major red flag.
8. Unusually high rates for services:
Excessively high or unusually fluctuating rates for basic services like money transfers or currency exchange could indicate that the MSB is engaged in illicit practices, using high rates to mask illegal fees or charges.
9. History of regulatory violations:
Research the MSB’s history with FinCEN or other financial regulatory bodies. A track record of fines, violations, or sanctions is a clear sign that the MSB has had past issues with compliance.
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When selecting a Money Service Business, it’s crucial to screen prospective institutions, and ensure they operate within the bounds of financial laws and have a strong commitment to preventing fraud. Here are some steps you can take:
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Check for registration with FinCEN: All legitimate MSBs are required to register with the Financial Crimes Enforcement Network (FinCEN). You can search the FinCEN database to confirm that the MSB is registered and in good standing.
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Ask about their KYC and AML protocols: Inquire about the measures the MSB takes to verify the identities of its clients and report suspicious activity. A compliant MSB will be transparent about these policies and eager to demonstrate their commitment to preventing fraud.
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Verify state licenses and certifications: In addition to FinCEN registration, MSBs may also be required to obtain state-level licenses. Make sure the MSB you choose is licensed in the state where it operates and adheres to all relevant regulations.
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Read reviews and reputation: Look into the MSB’s reputation by checking reviews and talking to other businesses that have used their services. A company with positive feedback and a clean compliance history is less likely to engage in or be complicit in fraud.
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https://www.justice.gov/usao-ut/pr/24-defendants-including-utah-business-owner-accused-running-drug-and-money-laundering
Georgina Espinoza-Grajeda, 40, of Eagle Mountain, Utah, who is the owner and operator of Multiservicios Lokos LLC, located in South Salt Lake City, Utah, along with her employee Jesid Dadiana De Sutter, 50, of Sandy, Utah, were at the center of a complex conspiracy to secretly and illegally wire millions of dollars in proceeds of narcotics trafficking to suppliers in Mexico and Honduras. Espinoza and De Sutter laundered the money by falsifying wire transfer information to avoid detection. Multiservicios Lokos LLC was allegedly the laundering hub for multiple drug trafficking organizations. Court documents allege that from at least January 2022 to November 2023, Espinoza-Grajeda and De Sutter operated their money remitting business and laundered millions of dollars in drug proceeds deposited by their co-defendants trafficking in fentanyl, heroin, and cocaine throughout the Wasatch Front. Through a collaborative law enforcement effort, agents and officers seized 62,000 fentanyl pills, 24.5 pounds of heroin, 8.5 pounds of cocaine, five firearms, and $237,000 in cash. Agents and officers estimate the criminal organization laundered more than $20 million since January 2022.
Did you know?
Since 2018, IRS Criminal Investigation (Cincinnati Field Office), have maintained a Third Party Money Laundering (3PML) Project. This project focuses on Complicit Money Service Businesses (MSB) working for Mexican Drug Trafficking Organizations. The purpose of this project is to develop high-impact 3PML cases for IRS-CI and other agencies across the United States, by utilizing data analytics. This project is known as the “3PML Fentanyl Initiative” (NOTE: Complicit MSB cases involve poly-substance narcotics trafficking and almost always Fentanyl. Additionally, focusing on Complicit MSB’s is the clearest avenue for financial investigators to combat the Fentanyl crisis – hence the name “3PML Fentanyl Initiative”.)
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HSI encourages the public to report suspected suspicious activity through its toll-free Tip Line at 877-4-HSI-TIP. Callers may remain anonymous. |
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HSI is the principal investigative arm of the Department of Homeland Security (DHS), responsible for investigating transnational crime and threats, specifically those criminal organizations that exploit the global infrastructure through which international trade, travel and finance move. |
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