FinCEN recently released guidance on US currency restrictions in Mexico, specifically tailored to funnel accounts and trade-based money laundering. In 2010, the Mexican Finance Ministry (SHCP) announced new AML regulations that prohibit banks from receiving more than $7,000 USD in cash from a customer during a one month period. The cap also hits its threshold at $300 USD per day and $1500 per month (with no daily threshold) for non-Mexicans citizens. Banks must verify the identity of anyone who is not a customer, but wants to use banking transaction services. These restrictions were later expanded to apply to cases de cambio (“exchange houses”) and brokerages (“cases de bolsa”).

Methods to circumvent this regulation resulted in the proliferation of funnel accounts. In August 2013, a group of California residents were indicted for a drug trafficking conspiracy after trafficking prescription drugs across state lines. Accounts were set up specifically to funnel funds back to California in amounts under $10,000. The group deposited over $3.3 million and withdrew almost $3.1 million from these accounts in a structuring scheme that has emerged in Mexico-related criminal organizations.

Funnel accounts are typically set up in multinational or nationwide banks and utilized because of the ease of access to cash deposits. Not only is a cash deposit typically available on an account immediately after the depository transaction, but also the funds are available anywhere that the account can be accessed: funds deposited in New York City are immediately available in Phoenix, Arizona or Santa Fe, New Mexico. Additionally, these accounts can be viewed and managed online, allowing for simple and quick communication of which accounts to utilize and how much to deposit or withdraw. From there, we see typical trade-based money laundering (TBML).

Source: FinCEN Guidance FIN-2014-A005

The Guidance also describes funnel account and TBML red flags. Find them here.