Banking and Finance Law Daily Wrap Up, CRIMES AND OFFENSES—FinCEN alert calls for vigilance against cartel-related stolen crude oil smuggling, (May 2, 2025)

By Jeff Williams

The alert explains the stolen crude oil market, spotlights warning signs indicating potential illegal activity, and details BSA reporting obligations.

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN), in coordination with the Treasury’s Office of Foreign Assets Control (OFAC) and the Drug Enforcement Administration, the Federal Bureau of Investigation, and Homeland Security Investigations, has issued an alert (FIN-2025-Alert002, May 1, 2025) urging financial institutions to “be vigilant in detecting, identifying, and reporting suspicious activity” related to Mexico-based cartels and other transnational criminal organizations (TCOs).

“In recent years, fuel theft in Mexico, including crude oil smuggling, has become the most significant non-drug illicit revenue source for the Cartels and enables them to sustain their global criminal enterprises and drug trafficking operations into the United States,” the alert said, pointing specifically to the smuggling of stolen crude oil across the southwest U.S. border by the Jalisco New Generation Cartel (CJNG), Sinaloa Cartel, Gulf Cartel, and other Mexico-based TCOs.

FinCEN noted that the alert provides an “overview of methodologies and financial typologies” associated with cartel oil smuggling operations; highlights “red flag indicators;” and reminds financial institutions of their Bank Secrecy Act (BSA) reporting obligations.

The alert was issued in conjunction with an announcement by OFAC that it has sanctioned three Mexican nationals and two Mexico-based CJNG-linked entities related to fentanyl trafficking, fuel theft, and smuggling of stolen crude oil, FinCEN said.

Citing U.S. law enforcement authorities, the alert detailed that the cartels are using complicit oil and natural gas brokers in Mexico to smuggle and sell crude oil stolen from Mexico’s state-owned energy company, Petróleos Mexicanos (Pemex) to complicit, small U.S.-based oil and natural gas companies near the U.S. southwest border. “Through these schemes, the Cartels are stealing billions of dollars of crude oil from Pemex, fueling rampant violence and corruption across Mexico, and undercutting legitimate oil and natural gas companies in the United States,” FinCEN said.

The activities include the “bribing of corrupt Pemex employees and local government officials,” as well as other tactics to steal crude oil, including illegally drilling taps into oil pipelines, stealing from refineries, and threatening Pemex employees, the alert said. The stolen crude is later smuggled into the U.S. on tanker trucks that are mislabeled as ‘waste oil’ or other hazardous materials related to the oil and gas refining process to “avoid scrutiny and evade taxes and regulations,” it said. The crude oil is then sold by U.S. importers, which then send wire transfers to Mexican brokers who then pay the cartels their share of the illicit profits, FinCEN said.

Some of the numerous red flag indicators the alert advised financial institutions to be aware of include customers that are small, U.S.-based oil and natural gas companies, importing companies, or freight companies “operating in states on the U.S. southwest border with transactional activity and profit margins that exceed the typical business profile of similar companies in their industries,” as well as small U.S.-based oil and natural gas companies that are selling various types of crude oil for “significantly less than the market rate.”

Other red flags include small U.S.-based oil and natural gas companies “suddenly purchasing waste oil or other hazardous materials from a singular or small number of Mexican and U.S. companies” and small U.S.-based oil and natural gas companies that have a “sudden and significant volume of transactional activity with one or a small number of Mexican or U.S. companies that have little to no online presence and displays other indicators of illicit shell company activity,” FinCEN said.

The alert also stressed the importance of financial institutions sharing information regarding cartels smuggling stolen crude oil into the U.S. or money laundering offenses, adding that financial institutions should also continue to use, and potentially expand, their processes to collect and share such information.

FinCEN also underscored that financial institutions are required to file suspicious activity reports if they know, suspect, or have reason to suspect that a transaction conducted or attempted by, at, or through the institution involves funds derived from illegal activities, is designed to evade BSA regulations, “lacks a business or apparent lawful purpose,” or uses the institution to facilitate criminal activity.

RegulatoryActivity: BankingOperations BankSecrecyAct CrimesOffenses