700 Miami Businesses Under Dragnet for Money Laundering

Federal regulators issued an order Tuesday to monitor about 700 Miami businesses, with the intention of rooting out cash transactions related to money laundering schemes.

Washington, D.C.-based Financial Crimes Enforcement Network (FinCEN) issued a Geographic Targeting Order (GTO) to electronic exporters located near Miami. The schemes the GTO is intended to shine a light on are a primary method of money laundering used by drug cartels, according to FinCEN.

“This is going to have an impact on both local businesses and banks,” said Ivan Garces, a risk advisory services principal with Miami-based accounting and advisory firm Kaufman Rossin. “Every bank in the area that services these businesses is now on alert that FinCEN is looking at them.”

Local banks have begun looking through their databases to identify customers that may be impacted by the GTO.

The order will last 180 days beginning on April 28 and requires the business to file a form with the regulator for all related currency transactions over $3,000. Typically, FinCEN requires a filing for transactions over $10,000.

The form requires that the businesses know their customers, and can produce the customer’s telephone number and a copy of their identification like a driver’s license or passport. For third-party transactions, the order requires that the third party be identified as well.

The affected businesses must also retain all the records relating to the GTO for five years.

Electronic exporters are primarily located in the Doral, Medley, Miami Springs and Virginia Gardens area, Garces said. A lot of banks are looking to reduce and manage their risk, and some of these customers could end up raising red flags if they are under scrutiny.

“I’m concerned with where this could end up for banks and businesses, because they go up on FinCEN’s radar screen and the risk has now been elevated,” Garces said. Noncompliance with this order is incredibly risky, and could subject a business to civil and criminal penalties.

Garces had anticipated a GTO in Miami ever since the Los Angeles GTO, because of the risk associated with export-import activity.

“Because of that international component and that international flavor, there is a that exposure to international trade, trade financing, corruption and trade-based money laundering,” he said.

If the problem is related to a region, it’s possible that businesses may simply move, Garces said. “If they’re targeted in [some] zip codes, why not just move zip codes?”

The GTO does not assume that a business has knowledge of or lack thereof of money laundering schemes, according to FinCEN.

A similar order was issued in the Los Angeles area last year related to the city’s garment district.