State of Financial Crime 2023 Report

Delaware Man Faces 45 Years in Prison for $1m+ Drug Trafficking and Money Laundering

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On November 21, 2022, Delaware drug trafficker, Omar Morales Colon, was sentenced to 45 years in prison for conspiracy to commit money laundering, conspiracy to distribute cocaine, and multiple other drug and money laundering offenses. Described by the court as “one of the biggest drug traffickers in the history of the State of Delaware,” Colon and his wife laundered over a million dollars between 2009 and 2017 in drug proceeds through real estate purchases. 

After giving his cocaine supplier $382,045 in cash in a hotel parking lot, Colon was arrested in May 2017. Following this, the Drug Enforcement Administration (DEA) discovered a secret underground bunker beneath Colon’s residence where the defendant concealed his “marijuana grow operation.”

According to evidence given at court, Colon and his wife deposited drug money into several different bank accounts before using the funds to buy cashier’s checks that funded multiple property purchases. At one of Colon’s properties, cocaine suppliers were offered a “safe garage” where they could extract cocaine from oxygen tanks. Colon also rented storage units in the names of various family members, and used them to store cash, marijuana, and a kilogram press used for processing cocaine.

The defendant’s wife, Shakira Martinez, has also been convicted of money laundering offenses. Their sentencing hearing is due to be held in February 2023.

Drug Trafficking as an AML/CFT National Priority

In June 2021, the Financial Crimes Enforcement Network (FinCEN) included drug trafficking as one of its anti-money laundering and combatting the financing of terrorism (AML/CFT) national priorities. Following this, the Biden Administration sent its National Drug Control Strategy to Congress, instructing federal agencies to prioritize actions that will save lives and disrupt drug traffickers’ profits.

FinCEN reminds financial institutions of their reporting obligations under the Bank Secrecy Act (BSA) in its 2019 Advisory on Illicit Financial Schemes and Methods Related to the Trafficking of Fentanyl and Other Synthetic Opioids. Specifically, FinCEN reminds firms that they must conduct risk-based due diligence and, where necessary, implement enhanced policies, procedures, and controls reasonably designed to detect and report known or suspected money laundering activity. 

When filing suspicious activity reports (SARs) to indicate a possible connection between suspicious transactions and drug trafficking, FinCEN instructs firms to provide all pertinent available information. According to the advisory, SAR reporting, in conjunction with effective implementation of due diligence requirements, has been crucial to identifying money laundering and terrorist financing. 

New Real Estate Sector Reporting Requirements

In August 2021, DC-based think tank Global Financial Integrity (GFI) published a study that found more than $2.3 billion was laundered through US real estate between 2015 and 2020. 

In December 2021, FinCEN issued an Advance Notice of Proposed Rulemaking (ANPRM) to help “enhance the transparency of the domestic real estate market nationwide and protect the US real estate market from exploitation by criminals and corrupt officials.” The ANPRM’s comment period closed in February 2022, with FinCEN receiving over 148 comments from stakeholders on its proposal.

While the final rule on real estate sector reporting requirements has yet to be published, compliance staff should ensure they are familiar with the ANPRM and the changes it recommends, including:

  • Extending reporting requirements to all real estate transactions across the US, including all-cash transactions within the commercial real estate sector
  • Instituting a broader regulatory framework to cover “non-financed” real estate transactions, which the ANPRM defines as “any real estate purchase or transaction that is not financed via a loan, mortgage, or other similar instrument”
  • Expanding the list of covered participants to include:
    • Real estate brokers
    • Lawyers representing a buyer or seller
    • Title insurers
    • Closing agents
    • Appraisers
    • Inspectors
    • Settlement agents
    • Escrow companies
    • Real estate investment companies
    • Real estate auction houses
    • Investment advisers
    • Private money lenders 
    • Money services businesses 

To stay up-to-date with global trends and domestic concerns surrounding money laundering in the US real estate sector, compliance staff should familiarize themselves with the Congressional Research Service’s (CRS) January 2022 fact sheet

Originally published December 1, 2022, updated December 2, 2022

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