FinCEN's MX Fuel Smuggling Alert

Took me a minute to digest FinCEN’s Alert-003 concerning fuel smuggling and tax evasion schemes published two weeks ago. I really appreciated Jim Richards humor and insight – if you haven’t read his post, check it out.

I also went back to May 2025 and read my breakdown for the original alert that this 2026-Alert-003 supplements. Some things still hold true, specifically - FinCEN did a great job in explaining a complex situation. But as it stands now, AML Officers are expected to be experts in cannabis production, THC levels, MSB laws, real estate law, etc... we are just going to add oil production and complex international tax evasion schemes to this growing list. Don’t get lost in the weeds though, I think you can safely rely on the industries noted unless presented with other information.

There are 22 red flags noted, in addition to the 14 from the May 2025 alert. This is all to say again, for the umpteenth time – If your AML monitoring system does not give you the ability to run multi-conditional rules to see what parts of these alerts apply to your FI, your AML program is on life-support. Dramatic, a little? YES. But that is because so many FIs are taking the approach of “my examiners haven’t criticized my monitoring or program…” ala no need to change systems. Absolutely incorrect. That means you aren’t focused on providing highly useful, timely information to our law enforcement partners. You are simply trying to stay one micro-step ahead of an examiner’s opinion (which changes quite frequently).

Several key data points should be incorporated into your testing to see if this applicable BEFORE you toss it out as not applicable.

1. Industries such as oil and natural gas, freight, and logistics.

2. Locations most likely to present higher risk in the US – Houston, San Antonio, Lower Rio Grande Valley, with counterparty locations of Mexico, specifically Tamaulipas, Nuevo Leon, and Coahuila.

3. More broadly applicable to ALL FIs is the way the money moves. It is more likely that FIs would be caught up in the money flow by banking the front companies and cartel-controlled MSB-like firms. Look for payments in and out that do not make sense. Often times it will look like – why did they even send that money to us? They could’ve just sent it directly to that other FI? FinCEN does a great job explaining this – “send and receive funds at the direction of the Cartels and their huachicoleros in a manner similar to money services businesses (MSBs) and/or (2) provide invoicing, billing, and other financial services for smaller, unpermitted, and unbanked Mexican fuel distributors seeking to legitimize and commercialize smuggled fuel from the United States.”

4. Payments from companies in item 1 above to luxury good stores, high end vehicles, jewelry, payments for vacations, real estate, payments out to investment accounts. That should be a red flag always, regardless of industry, but especially in this alert.

Hablas español? Un poquito? Es posible que quieras utilizar este recurso to look up the CNE permits that are exploited and mentioned multiple times throughout the alert.

https://www.cne.gob.mx/Permisos/

If a counterparty to a wire or a UBO is noted as having a CNE and there are other odd payment flows, it may be reportable. Yes, even small FIs - banks and credit unions – can play a part in this scheme.

Also, FinCEN clearly states – “FinCEN encourages financial institutions to assess if their customers in the oil and natural gas industry are receiving payments directly from Mexican companies without SENER permits…” But they don’t give the link… so here it is -

https://www.ventanillaunica.gob.mx/vucem/Tramites/SENER.html

Stablecoins. Yes, finally. They are used in illicit ways. The term “stable” is giving a false sense of safe, which gets mass applied across the use of stablecoin. The only stable or safe aspect of this type of digital asset is what it is pegged to. It can and will be used by smart criminals.

A few things noted – comparing the two alerts, this new alert included IRS-CI, CBP, HSTF, and DOC-BIS along with the other agencies noted in the May 2025 alert – FBI, DEA, and HSI. In addition, this alert expanded the National Priorities that they are linking this alert to. May 2025 only listed – DTOs, TCOs, and corruption… this alert added the Priorities of fraud and terrorist financing.

What to do?

Evaluate the flexibility of your AML monitoring program. Waiting for your vendor to do something with this? You’ll be waiting the rest of your career. It is up to you.

Review the 4 points above, their red flags and try and train your mind to read a red flag in terms of data points – NAICS, geo location, transaction type, contextual counterparty info, etc. This is a strength that will never go out of style.

PM me if you want the highlighted version of the Alert-003. If not, lookup FinCEN’s 2026-Alert-003 here.

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