The Fight Against the Opioids Crisis What Can We Do?files.acams.org/pdfs/2019/Opioid_Crisis.pdf · The Fight Against the Opioids Crisis –What Can We Do? Moderator: Nicolas Khouri,

The Fight Against the Opioids Crisis – What Can We Do?

Moderator: Nicolas Khouri, Ally Bank

Joseph Gallion, BB&T

Chris Healy, Department of Homeland Security

David Marwell, US Bank

1ACAMS Carolinas Chapter Annual Symposium July 17th, 2019

Objective

Objective: In this session our speakers will give an overview of the Opioid Epidemic that is currently facing the United States and the region. In addition our speakers will talk about how financial institutions and Law Enforcement can work together to combat this problem.

Agenda

1. History of the opioids crisis

2. Current stats

3. Combatting the Opioids Crisis – A Law Enforcement Perspective

4. Combatting the Opioids Crisis – A Financial Institution Perspective

5. Key Takeaways


History of the Opioids Crisis

• In the late 1990s, pharmaceutical companies reassured the medical community that patients would not become addicted to prescription opioid pain relievers, and healthcare providers began to prescribe them at greater rates

• This subsequently led to widespread diversion and misuse of these medications before it became clear that these medications could indeed be highly addictive

• Opioid overdose rates began to increase. In 2017, more than 47,000 Americans died as a result of an opioid overdose, including prescription opioids, heroin, and illicitly manufactured fentanyl

• That same year, an estimated 1.7 million people in the United States suffered from substance use disorders related to prescription opioid pain relievers, and 652,000 suffered from a heroin use disorder

Source: www.drugabuse.gov


What do we know about the opioid crisis?

• Roughly 21 to 29 percent of patients prescribed opioids for chronic pain misuse them

• Between 8 and 12 percent develop an opioid use disorder

• An estimated 4 to 6 percent who misuse prescription opioids transition to heroin

• About 80 percent of people who use heroin first misused prescription opioids

• Opioid overdoses increased 30 percent from July 2016 through September 2017 in 52 areas in 45 states

• The Midwestern region saw opioid overdoses increase 70 percent from July 2016 through September 2017

• Opioid overdoses in large cities increase by 54 percent in 16 states

Source: www.drugabuse.gov


Opioids by the numbers


Opioids by the numbers


Smuggling of Synthetic Opioids, Fentanyl & Precursors Direct U.S. Supply

• China is the primary source / supply of fentanyl.

• E-Commerce is common, including the silk road / darknet.

• Direct shipments into the U.S. are commonly sent via parcel.

• Traditional smuggling via air, vessel and commercial vehicle is also utilized.

Smuggling via Canada and Mexico

• Canada and Mexico continue to serve as transshipment points for the U.S.

• Mexico is a secondary supplier of synthetic opioids. Cartels purchase fentanyl chemicals / precursors and manufacture sellable fentanyl based products.

Source – Drug Enforcement Administration

The Opioid Smuggling Typology

During the research and information gathering phase, the EFCC approaches the identification of transactional indicators potentially indicative of opioid trafficking from a number of different angles

Opioid TraffickingTypology

Cash + Rental Cars

Western Union

Key Word Scrub

PayPal ?

Consumer accounts conducting >=4 rental car payments in a 3 month time span substantially funded by cash (50%)

Checking and Credit Card accounts conducting payments to an identified descriptor related to a pill press distributor

Population of customers conducting purchases for pill presses and molds via PayPal to Chinese merchants

Population of customers sending WU payments to potential online fentanyl/opioid sellers

Additional approaches based on collaboration and learning sessions with LE

Typology Development: Workstreams

Combatting the Opioids Crisis – A Law Enforcement Perspective


Law Enforcement Role in Combatting the Opioids Crisis• HSI uses post-overdose intelligence, partnerships with State and Locals, Shipping

Information and trends from China and Mexico. Use this information to identify relevant BSA/SAR filings and work with banking industry

• HSI works with financial institutions by identifying typologies in-order to better assist BSA compliance departments to identify potential fentanyl money laundering activity, which could assist HSI in identifying opioids/fentanyl distributors in an effort to minimize fatalities resulting from overdoses. Two way street

• Work closely with US Postal Inspection Service in attempting to ID potential fentanyl distributors who typically utilize the USPS to ship their contraband

• HSI working closer with Money Service Businesses in-order to identify possible transactions indicative of opioids/fentanyl trafficking. Funnel account mentality more for transportation of product


Law Enforcement Role in Combatting the Opioids Crisis• National Drug Threat Assessment found that Mexican Transnational

Criminal Organizations (TCO) produce 70 metric tons of heroin annually, which primarily source the U.S. heroin market

• Fentanyl is a Schedule II synthetic opioid whose chemical analogues and precursors are mass-produced predominantly in China. Fentanyl is at least 100 times more potent than morphine and 40-50 times stronger than heroin. As such, a dose of less than 2mg can be potentially lethal

• In 2018, there were 104,000 drug overdose deaths in the U.S., more than half were attributable to opioids and 30,000 of them were directly attributable to fentanyl. Numbers are currently on pace to top this in calendar year 2019

• Since the opioid explosion HSI has seized in excess of 6,000 lbs. of fentanyl and 25,000 lbs. of heroin


Law Enforcement Role in Combatting the Opioids Crisis• Fentanyl has the US market in a variety of formats using both established smuggling routes and infrastructure as well as

direct marketing to consumers. Mexican TCOs and other criminal groups have identified fentanyl as a mechanism to exploit opioid substance abuse in the U.S. by increasing the potency of their existing products as well as expanding their market to more American addicts

• The per-unit-weight profits TCOs can derive from fentanyl is high: fentanyl purchased at ~$5,000 per kilogram can be cut, packaged, and resold for up to $2 million dollars pill dosage units

• Mexican TCOs mix pure fentanyl with adulterants and other narcotics in clandestine labs in Mexico prior to smuggling it across the Southwest Border (SWB). Seizures of these materials generally contain less pure fentanyl within larger weight shipments (10% purity)

• High levels of purity are seen in current heroin distribution and it is believed the population of heroin users is less than those abusing prescriptions; however, they account for double the overdose deaths. This toxic level of fentanyl provides the end user a much more potential dose leading to devastating results

• Chinese fentanyl entering the U.S. in an unadulterated form is at least 90% pure and is received straight from manufacturers commingled in voluminous e-commerce parcel traffic via International Mail Facilities and Express Consignment Companies, such as UPS, DHL, and FedEx

• 1 kg of Chinese fentanyl sells for approximately $3,500 to $5,000 USD and then creates a street value when turned into tablet form is approximately $30M


Law Enforcement Role in Combatting the Opioids Crisis4 Primary Methods Of Working Cases:

• Overdose death response and working backwards

• Identifying and intercepting shipments of fentanyl and conducting controlled deliveries

• Proactive approach by engaging with vendors and customers on the darknet to get in the financial side of the organizations

• International Coordination. Due to HSI’s global footprint with 67 offices in 50 countries, we are able to work with and coordinate with our international law enforcement partners to work investigations wherever they lead


Law Enforcement Role in Combatting the Opioids Crisis• HSI uses several techniques to infiltrate and exploit peer-to-peer cryptocurrency exchangers who typically launder

proceeds for criminal networks supporting Darknet marketplaces

• HSI is using the latest in blockchain exploitation tools to follow the bitcoin transactions in an effort to deter organizations from laundering proceeds using cryptocurrencies to fund the purchase of fentanyl/opioids

• HSI has created the Money Service Business Initiative (MSBI) to work with several MSBs to further infiltrate these organizations who use MSBs for transportation and currier fees

• Through this strategy HSI continues to effectively identify organizations that operate with little fear of intervention by law enforcement. HSI will work to target and seize these organizations financial assets as well as leverage sanctions against people, institutions and businesses abroad when appropriate

• HSI utilizes traditional financial investigative techniques to target the chokepoints where the cryptocurrency and fiat currency worlds intersect, and it is at these chokepoints where Transnational Criminal Organizations (TCOs) are exposed in their attempt to convert the cryptocurrency into cash

• Silk Road was HSI’s first major case involving darknet market and bitcoin

• Working cryptocurrency as a traditional money case. As great as cryptocurrency is with pseudo-anonymity and ease/speed of movement, criminals still need to convert it to fiat currency to pay living expenses and purchase most goods


Law Enforcement Role in Combatting the Opioids CrisisSHAMO Investigation

• The Aaron SHAMO Et. Al. investigation is a classic example of the extent fentanyl, and other illicit narcotics are trafficked via the Darknet

• SHAMO purchased the Chinese fentanyl directly from the Chinese chemical manufacturer via the Dark web and had the fentanyl imported into the U.S. using false manifests

• SHAMO and multiple co-conspirators purchased binding agents, fillers, and dyes from Canadian suppliers. The co-conspirators were used as straw purchasers for the fentanyl precursors

• HSI investigated and seized $1.2 million in cash and over $2.5 million in virtual currency from SHAMO, who led a Xanax and Fentanyl pill production organization

• SHAMO sold his illicit products via the dark web. An investigation led to the identification of his virtual currency wallet address

• Through the use of Blockchain analysis tools, HSI was able to identify SHAMO’s Bitcoin transactions and seize virtual currency valued at approximately $2.5 million in U.S. dollars


Law Enforcement Role in Combatting the Opioids CrisisSHAMO Investigation

• The investigation revealed that one kilogram of fentanyl produced 1,000,000 pills allowing for the SHAMO organization to gross between $8M-$15M per kilogram of fentanyl

• The preferred method of domestic order delivery was through the U.S. Postal Service due, in large part, to law enforcement requirement to obtain a search warrant to open U.S. first class mail

• Commercial shipments or express consignment shipments sent via FedEx and UPS for example can be opened and inspected without warrant based on the customer contractual agreement for using their services

• Search warrant of SHAMO’s residence, $1.2 M in cash was seized in addition to $6.2 M in Bitcoin, Bitcoin Gold, and Bitcoin Cash


Law Enforcement Role in Combatting the Opioids CrisisOperation Dark Gold

• HSI Agents posed as money launderers on darknet sites exchanging virtual currency for U.S. currency and infiltrated a worldwide opioid/fentanyl trafficking organization

• More than 50 Darknet vendor accounts and 65 targets were identified and attributed to the real individuals selling illicit opioids on Darknet market and operating in more than 50 Federal districts

• HSI seized 333 bottles of liquid synthetic opioids, over 100,000 tramadol pills, 100 grams of fentanyl, more than 24 kilograms of Xanax, and additional seizures of Oxycodone, MDMA, cocaine, LSD, marijuana, and psychedelic mushrooms

• Seizure of more than 100 firearms, including handguns, assault rifles, and a grenade launcher

• Seizure of more than $3.6 million in U.S. currency and gold bars. Seizure of nearly 2,000 Bitcoins and other cryptocurrencies, with an approximate value of more than $20 million

• Seized 15 pill presses, which are used to create illegal synthetic opioids


Combatting the Opioids Crisis – Financial Institutions Perspective


Doctor Charged with Illegally Prescribing Opioids

• Case originated based on negative news

• Doctor charged with the illegal over prescription of opioid pain medications over a three year period

• Owned and operated a family practice / urgent care facility

• Local CVS pharmacy stopped filling the doctors prescriptions

• Five patients of the doctor died due to opioid overdose

• One patient fatally killed a firefighter while driving under the influence

• Investigation identified $116k in unusual activity, including a large quantity of cash / check deposits

Opioid Trafficking Typology DevelopmentResearch and Information Gathering Phase: Literature/Negative Media Reviews

• One of the initial components during the research and information gathering phase is to review public information related to arrests, prosecutions, news items and reports to gain a better understanding and potentially reverse engineer known opioid related cases

• Negative Media Search identified Columbus based individual (identified white male I/W/M) arrested for large quantities of fentanyl

• I/W/M maintained an account with US Bank since 2017. A review of the account identified a number of high risk red flags and potential transactional markers matching details in news article

✓ 1 - $8,880 wire to individual maintaining an account with Bank of China

✓ Substantial cash deposits via ATMs

✓ High volume of hotel purchases in and around Columbus - not indicative of customer type (unemployed)

✓ A number of Paypal transactions to Chinese based entities and/or individuals

✓ One of the Paypal recipients had the description “XITONG4500”

✓ Prior Arrest/Prison Record After the arrest of this I/W/M, 29, police discovered more than 600 grams of fentanyl, 3,000 grams of butyryl fentanyl, 10 grams of heroin, a pistol, an assault rifle an industrial pill press and more than $20,000 in cash

An open source search of “XITONG4500” identified this handle was associated to an online seller on Ebay. A review of the seller’s products included a number pill presses. While the EFCC cannot state definitively the subject purchases from this seller and/or the purchase was related to a pill press. This seller appeared to be an individual based in China, with an apartment listed as the address. The seller had a number of items, including the sale of pill presses

Key Word

Fentanyl Trafficking Typology Development• Fentanyl Trafficking Typology Development: Research and Information Gathering Phase:

PayPal Key Word

• Based on this information, a transactional scrub of “XITONG4500” was conducted to identify additional customers with a PayPalpurchase containing the handle “XITONG4500”

• The following cases were generated as a result of this scrub

ACAMS Carolinas Chapter Annual Symposium July 17th, 2019 23

Appalachian Regional Prescription Opioid (ARPO)• Appalachian Regional Prescription Opioid (ARPO) Strike Force Arrests 60 Individuals, including 53

Medical Professionals

• Involved over 350,000 prescriptions and over 32 million pills

• Involved 11 federal districts in 6 states: Alabama; Kentucky; Ohio; Tennessee; Virginia; and West Virginia

• BB&T identified accounts for 10 of the individuals and 1 business entity (clinic) with unusual activity of over $1.3 million

• What we saw: Suspicious cash transactions; suspicious movements; round dollar amounts; unexplained check deposits; outgoing funding (primarily check, some large) to investment platforms; excessive merchant services credits (over 90%); and, lack of certain expected business credits

• What we did: Coordinated with law enforcement partners and due to the suspicious transactional activities and very high reputational risk, BB&T has closed all identified accounts and dealings

• Lesson learned: With the continued explosion of the Opioid Crisis institutions become increasingly at risk for criminal exposure – continued due diligence is the key


Institutional Challenges and Key Industry Takeaways• In the U.S., we expect medical professionals and their industry to act and be held to a higher standard

• Due to the open market medical industry in the U.S., institutions do not always have the necessary visibility into medical payments, funding and expenses, particularly as related to government funded or regulated programs

• By the nature of the U.S. medical industry which often involves 3rd party vendors / transactions – seeing the full picture of funds and activity can be an obstacle for institutions, especially for reporting purposes

• Institutions can have challenges determining if government interest in a client is traditional health care fraud or related to other criminal activities, unless the law enforcement partners are willing to share some details

• If institutions such as BB&T are not full-scale international banks, it can be difficult to identify suspicious wires and other account activity, especially as it relates to foreign entities and regions

• Like other criminals, especially if organizationally connected, those involved in the explosion of the Opioid Crisis can be hard for institutions to detect as these individuals / entities adapt as to avoid detection by government and industry and they operate under the “guise” of a legitimate medical entity


Key Takeaways

• Information sharing – it goes both ways

• Educating both sides on Banking practices and Law Enforcement practices

• Collaboration not only with law enforcement, but between institutions is critical

• Leverage the value of associations (such as ACAMS, etc.) to learn more about identified or emerging trends


Documents

The Fight Against the Opioids Crisis What Can We Do?files.acams.org/pdfs/2019/Opioid_Crisis.pdf · The Fight Against the Opioids Crisis –What Can We Do? Moderator: Nicolas Khouri,