On November 30, 2015, the Financial Action Task Force (FATF) issued its latest report, entitled: Money Laundering Through the Physical Transportation of Cash. For those who may be unfamiliar with the FATF, it is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing, and the financing of proliferation of weapons of mass destruction. The recommendations made by the FATF are recognized as the global standard in anti-money laundering (AML) and counter-terrorist financing (CFT).
The report highlights the prevalent use of cash in the world economy, approximating that 46% to 82% of all transactions in all countries are being conducted in cash. The report also describes the physical transportation of cash across an international border as “widespread” and “one of the oldest and most basic forms of money laundering.” Criminal organizations smuggle cash across borders in order to break the audit trail, further obscuring the source of illegally obtained funds. Cash smuggling is used to launder the proceeds of many types of illicit activities, including tax fraud, arms and drug trafficking, and terrorism finance.
To help combat these problems, the United States requires all persons subject to US jurisdiction transporting cash internationally in excess of $10,000 USD to file FinCEN Form 105. However, the FATF makes recommendations that go beyond basic reporting requirements already implemented in many countries.
The report is also timely. World governments are increasingly focusing their efforts on dismantling money laundering networks. In fact, last month, the Office of Foreign Assets Control (OFAC) designated the Atlaf Khanani Money Laundering Organization pursuant to Executive Order 13581. This is the first time OFAC has designated a professional money laundering network as a transnational criminal organization (TCO) pursuant to the executive order. Furthermore, just two months ago, OFAC designated a bank for the very first time pursuant to the Foreign Narcotics Kingpin Designation Act for its role in laundering drug proceeds.
Although cash smuggling was not explicitly mentioned in these OFAC actions, they reveal the increasing importance of using any and all available tools to combat money laundering and take the profit out of crime. They also demonstrate the willingness of federal agencies to work together and in conjunction with their foreign government counterparts to achieve the goal of securing the global financial system. These trends will likely continue, especially given the FATF’s latest findings in its report.
One such finding is that the standard disclosure or declaration system for cash reporting is insufficient to curb cash smuggling. Cash is being concealed in cargo and adapted freight, which reveals a key vulnerability in FATF Recommendation 32 and its focus on reporting by “natural persons.” Some countries are even legally prohibited from inspecting cargo for smuggled cash because cash is not a required item to be disclosed on customs declaration forms. Moreover, the very nature of cash smuggling requires at least two countries, rendering it an international issue needing inter-governmental cooperation to effectively confront.
Disclaimer: Blog posts should not be relied upon as legal advice and are only provided for informational purposes. Information contained in blog posts may also become outdated with the passage of time as laws change and U.S. foreign policy and national security objectives evolve.