14 Red flag indicators of oil smuggling

Red Flag Indicators of Cartel Oil Smuggling Schemes.

As no single red flag is determinative of illicit or suspicious activity, financial institutions should conduct an comprehensive review of the relevant activity, to see if the customer exhibits multiple red flag indicators.

A customer is a small company that:

1. has transactional activity and profit margins that exceed the typical profile of similar companies in their industries.
2. is selling crude oil for significantly less than the market rate.
3. is selling millions of dollars of crude oil per month but has no online presence or is using a generic website to appear legitimate.
4. it is sending wire transfers to Mexican companies for purchases of purported waste oil or other hazardous materials.
5. is suddenly purchasing waste oil or other hazardous materials from a singular or small number of Mexican and U.S. companies.
6. is sending wire transfers for waste oil or other hazardous materials without possessing the appropriate registrations with the U.S. Environmental Protection Agency (EPA).
7. is sending wire transfers for waste oil or other hazardous materials to companies that do not appear to be related to the oil and natural gas industry.
8. has a sudden and significant volume of transactional activity with companies that have little to no online presence and displays other indicators of illicit shell company activity.
9. is receiving wire transfers for invoices related to the sale of crude oil and sending wire transfers for the purchase of waste oil or other hazardous materials.
10. is receiving wire transfers and lacks the U.S. importing appropriate registrations.
11. is receiving wire transfers for the sale of waste oil or other hazardous materials and rewiring those funds to a singular or small number of companies in Mexico.
12. appears to be a shell company of a Mexican company.
13. is registered to a residential address.
14. is transacting with Mexican and U.S. companies and their beneficial owners are associated with Cartel-related activities.

Source:

• FIN-2025-Alert 002. May 1, 2025.

Oil smuggling Texas-Mexico

Process:

1. Steal crude oil from Pemex.
2. Storage in distribution hubs.
3. Transported on tanker trucks across the U.S. border.
4. Delivered to vacant lots.
5. Delivered to complicit U.S. importers.
6. Sold on the U.S. and global energy markets.
7. Money flows back from final buyers to mexican cartels.

Key points:

• Corrupt or coped Pemex employees and local government officials.
• Labeled as “waste oil” to evade taxes and regulations.
• U.S. companies under the control of the Mexican brokers or complicit U.S. importers.
• Wire transfers through multiple accounts and jurisdictions.

Source:

FIN-2025-Alert 002. May 1, 2025.

FinCEN Alert

Alerta. La Financial Crimes Enforcement Network (FinCEN) del Departamento del Tesoro, en coordinación con la Drug Enforcement Administration (DEA), el Federal Bureau of Investigation (FBI), la Office of Foreign Assets Control (OFAC) y la Homeland Security Investigations (HSI) emitió una alerta para instar a las autoridades financieras a estar atentas al contrabando de petróleo y sus derivados a través de la frontera con México por parte de diversas organizaciones criminales transnacionales (TCO) generalmente asociadas con cárteles mexicanos, las cuales fueron declaradas Specially Designated Global Terrorists (SDGTs).

Suspicious Activity Report (FinCEN Report 111) is a brief filed by financial institutions to FinCEN in the U.S. to flag potential illegal financial activities, such as money laundering, terrorist financing (AML/CFT), or fraud. To reference to this alert the key term FIN-2025-OILSMUGGLING must be included.

Oil Smuggling is a growing evolution of pervasive and broader fuel theft (huachicol) schemes in Mexico. Mexico export primarily unrefined and partially refined sour and heavy crude oil to higher-capacity refineries in the United States and other countries and imports the refined gasoline, diesel, and other fuel back into Mexico. Cartels smuggle crude oil across the border, labeling it as waste oil, selling it at a steep discount and repatriate the illicit profits back to Mexico.