On April 21, 2015, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) served a Geographic Targeting Order (GTO) on about 700 electronics exporter businesses in the Miami area, in an investigation into cash transactions that may be tied to trade-based money-laundering schemes utilized by drug cartels. The GTO, which goes into effect April 28, 2015, and expires 180 days thereafter (October 25, 2015), was issued in coordination with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations and the Miami Dade State Attorney’s Office South Florida Money Laundering Strike Force. It is similar to a GTO that FinCEN issued to fashion-industry businesses in the Los Angeles area in October 2014.
Under U.S. law, FinCEN is authorized to issue orders imposing additional recordkeeping and reporting requirements on domestic financial institutions or non-financial trades or businesses in a geographic area. Ordinarily, a trade or business does not need to report a cash transaction or multiple related transactions unless more than $10,000 in currency is received. (These transactions include checks, money orders and similar methods, as well as non-U.S. currency.) The GTO temporarily reduces that reporting threshold to $3,000 for “Covered Businesses” that export electronics (including cell phones) and are located in five U.S. zip codes in and around Miami, as well as their agents, subsidiaries, and franchisees.
According to FinCEN, many electronics exporters are exploited by South American drug cartels as part of sophisticated trade-based money laundering schemes. The cartels allegedly convert cash from United States drug sales into electronics goods, which are shipped to South America and sold for local currency. That currency is ultimately transferred to the drug cartels in their home countries.
If the reporting obligation is triggered by a cash transaction greater than $3,000, the electronics exporter must e-file a FinCEN Form 8300 through the Bank Secrecy Act E-filing system. The Form 8300 must describe the goods relating to the transaction and their destination as required by the GTO, and include the unique identifier “DoralGTO1.” (Doral is a city in Miami-Dade County that has a large number of exporting businesses, as a result of its proximity to the Miami International Airport.) The exporter must also obtain from the customer: (i) a telephone number, (ii) a copy of the customer’s valid identification, and (iii) a written certification as to whether the customer is conducting the transaction on behalf of another person, and stating the identity of that third party if applicable. The exporter must also retain and make reasonably accessible to FinCEN all relating records for five years after expiration of the GTO. Violation of the GTO could result in federal civil or criminal liability.
Miami-area electronics exporters have long been in law enforcement’s radar for their potential involvement in trade-based money laundering, including the Black Market Peso Exchange.1 For a number of years, certain law enforcement agencies had invoked civil seizure and forfeiture authority under the structuring statutes, which prohibit structuring cash transactions into amounts less than $10,000 in an attempt to avoid currency reporting requirements, to target these businesses, seize alleged narcotics-related monies, and educate the industry as to its potential role in trade-based money-laundering schemes. Neither the FinCEN nor ICE press releases indicated whether the GTO was issued in response to the Department of Justice’s new policy limiting the use of civil forfeiture in structuring cases.2 Regardless, all financial institutions – and indeed all businesses that have significant export components – should be sensitive to the signs of trade-based money laundering