By Sean Parker, Abdelaziz Abouelhoda, May Serageldin, and Sheeraz Ullah, March 4, 2025
The numbers don’t lie.
In 2024, the Canadian border services “reported seizing 10.8lbs of fentanyl entering from the US, while the US border patrol intercepted 32.1lbs of fentanyl coming from Canada.”
According to Christian Leuprecht, Macdonald-Laurier Institute senior fellow and director and editor-in-chief of the Canadian Military Journal, fentanyl flows to the US may be higher because the Canadian border is largely unmonitored and easy to cross. The latest statistics on the amounts of fentanyl seized by both US and Canadian border services, highlight the challenges faced by the Canadian Border Service Agency (“CBSA”), in determining the actual volumes crossing the border, considering that Canada is a country that produces fentanyl. The latest Canadian Border Service Agency 2024 to 2025 Departmental Plan outlined approaches in detecting and intercepting fentanyl including targeted measures such as intelligence development, enhanced postal controls, and advantaged enforcement technology.
The CBSA now aims to use advanced technology and intelligence to detect fentanyl and opioid related movements. In the 2023 to 2024 plan, actions against fentanyl and opioids were not specifically highlighted, failing to reflect the US government’s concern about their movement. But the CBSA is committed to addressing these concerns through a variety of measures, including increased staffing. Proposed full-time staffing levels have increased from 15,937 in the 2023 to 2024 plan to a revised 16,372 full-time equivalents in the 2024-2025 plan. The staffing change includes increases across border management, border enforcement, and internal services and reflect the pressure felt by the US government.
The supply chain and distribution channels for fentanyl, primarily involving freight forward and shipping companies, lacks the robust financial crime risk management protocols that Canadian financial institutions face. The CBSA now faces increased pressure to identify and intercept these illicit flows into the US. With the span of the border, being the width of North America, the geographical size magnifies the challenge CBSA is facing . Canada is a fentanyl producing country and it would be misleading to suggest that the bulk of fentanyl is exported solely outside of Canada and the US. This not only carries significant risks but also highlights the ease with which fentanyl enters the US market, given the porous nature of the border. Arrests related to fentanyl trafficking have occurred not only at the border but also in major Canadian cities, including Toronto and Hamilton, where operations such as Project Dolphin and Project Churchill have resulted in significant busts. This suggests that fentanyl is not just a domestic issue in Canada, but also a serious problem for its southern neighbour.
As the US government intensifies pressure on Canada regarding fentanyl and opioid trafficking, the question arises: are staffing increases and enhanced border technologies the most effective solution, or is there a better approach? This study aims to explore alternative strategies and propose a more effective way to address this critical issue.
FINTRAC and Fentanyl
The financial dimension of this crisis has become increasingly apparent through FINTRAC’s investigations. (The Financial Transactions and Reports Analysis Centre of Canada is Canada’s financial intelligence unit and anti-money laundering and anti-terrorist financing supervisor.) Its 2025 Operational Alert exposed sophisticated money laundering schemes employed by organized crime groups, including “cash smurfing,” trade-based money laundering, and the exploitation of online gambling platforms.
In one striking example, FINTRAC’s analysis of suspicious transaction reports revealed trafficking organizations channeling millions through email money transfers connected to online casinos, effectively circumventing traditional banking controls. The scale of these enforcement efforts is significant: “In 2023–24 alone, FINTRAC provided 93 financial intelligence disclosures that supported more than 50 law enforcement investigations into synthetic opioid trafficking. In 2023, the Alberta Law Enforcement Response Teams (ALERT) credited FINTRAC for its role in Project Carlos, which led to seven arrests and 33 charges in a multi-million-dollar drug trafficking operation. Project Carlos seized over $4.5 million worth of drugs, including fentanyl, and nearly $1 million in cash. … Project Guardian highlights the effectiveness of public-private partnerships in generating actionable intelligence. Since 2018, it has led to nearly 1,000 intelligence disclosures targeting fentanyl-related money laundering. This represents a dual approach to the crisis, with the Canadian Centre on Substance use and Addiction (CCSA) focusing on overdoes prevention, while FINTRAC works to dismantle the economic networks supporting trafficking.”
Strengthening measures to combat fentanyl trafficking
The production and distribution of fentanyl in Canada involves multiple touchpoints across society where detection can occur: at the CBSA, law enforcement, and with Canadian financial institutions and reporting entities. As previously noted, there are challenges in detecting the physical trafficking of fentanyl and opioids. This looks at a more comprehensive way of viewing fentanyl flows, and particular steps financial institutions and reporting entities can take to identify those transactions. While the Canadian Border Services Agency use technology and other tools to identify fentanyl flows at the Canada/US Border, and law enforcement relies on public tips and, occasionally, FINTRAC to investigate opioid-related activity, Canada requires a more comprehensive system to track fentanyl flows. This system could involve collaboration with financial institutions and other reporting entities.
Although financial institutions/reporting entities (e.g. money services businesses (MSBs), virtual currency exchanges) via FINTRAC share information, reporting entities need to have more agile and comprehensive financial crime risk management frameworks in place to identify this specific issue. TD Bank recently pleaded guilty to money laundering failings, including its involvement in fentanyl drug trafficking through their US division. TD Bank is not the only financial institution grappling with these issues; Canadian financial institutions and reporting entities potentially face significant exposure to drug trafficking, and fentanyl in particular.
Financial institutions/reporting entities are driven by profit, which can supersede financial crime indicators and the cost of maintaining a compliance program. It is typically only through investigations that these indicators are revealed, with legal and compliance departments often urging the cessation of business relationships or the rejection of new clients. To address this, financial institutions and reporting entities should assess potential touchpoints for fentanyl flows within their operations, starting with the operational alert issued by FINTRAC. This is an effective starting point. Fentanyl-related indicators for financial institutions and reporting entities may be identified:
- During the onboarding process of a client: Know Your Client/Client Due Diligence (KYC/CDD) phase.
- During the transaction monitoring process of different payment channels.
- Via trade finance flows.
- By leveraging big data from internal and external sources.
By examining these key areas, financial institutions and reporting entities put themselves in a better position to identify potential fentanyl flows. The aforementioned control points do not function in isolation; rather, they often work together to determine whether activity is unusual. It is crucial that each of these control points is thoroughly and robustly developed to ensure effective detection and response.
The KYC/CDD process
During the direct onboarding with a reporting entity, the KYC/CCC procedures are critical control points to not only identify clients but also verify their identities and confirm other key pieces of information, such as the purpose of the accounts. This information is essential for benchmarking a client’s transactional activity, enabling the identification of unusual behaviour. Storing KYC/CDD information in an electronic format enhances the effectiveness of transaction monitoring by providing a more seamless integration into the system. Additionally, it allows for more efficient use of Big Data Analytics, which can help to identify suspicious activity across institutions.
Enhanced measures should be implemented for fentanyl-related entities and their employees. For example, operational indicators call out fentanyl-related shipping corridors involving chemical companies. Canadian financial institutions and reporting entities should consider developing enhanced KYC/CDD questions specific to transportation and shipping companies, such as: 1) expected counterparty types; 2) the flow of funds in and out of the institution; 3) verifying the business purpose for each account; and 4) gaining a detailed understanding of the business, such as shipping routes. Unbeknownst to some companies, employees are at risk of being offered money to facilitate the movement of fentanyl and these accounts should be more closely scrutinized. These key details enable institutions to identify risk elements and, where necessary, escalate concerns to FINTRAC.
Payment channel misuse and transaction monitoring and screening
To combat the flow of fentanyl, reporting entities must identify payment channels vulnerable to exploitation for fentanyl-related activities. Financial intuitions, in particular, are like sieves where transactions can originate and pass through to other institutions. To prevent misuse, payment channels should have appropriate controls in place. For example, cross-border bill payment channels should be restricted from processing person-to-person transactions. These channels often lack complete counterparty information, use different alert systems, and may be exempt from certain FINTRAC reporting requirements, making them less scrutinized compared to other payment channels.
Understanding how each payment channel is processed and monitored by transaction systems is crucial, especially in detecting fentanyl-related activity. Financial institutions should enhance their monitoring processes where possible. If these processes are insufficient, it is recommended to implement account-specific monitoring for new fentanyl adjacent customers to validate responses and flag concerning transactions. Additionally, a thorough review of supporting documentation should be conducted when suspicious activity arises. This action may also involve data analytics to help establish unusual relationships or patterns of activities. Due to limits within the transactional monitoring and screening process, exploring automated solutions that address these gaps, and investing in the technology, is crucial in quickly identifying fentanyl related flows.
Fentanyl and trade finance
Trade finance instruments, such as letters of credit (LCs), documentary collections, and open account transactions, can be exploited to disguise illicit fentanyl transactions within legitimate trade channels. Criminal organizations use trade-based money laundering (TBML) techniques such as misdeclaring shipments, inflating invoices, or using shell companies. For example, a Canadian trafficking group may create a fake exporter selling “nutraceuticals” or “industrial chemicals” to a US front company. The traffickers secure a letter of credit from an American bank to pay for the shipment, which is falsely documented as legitimate goods. Once the goods arrive in the US, they are repackaged and distributed illegally. Meanwhile, the financial transaction – backed by the letter of credit – creates the appearance of a lawful cross-border deal, allowing traffickers to launder drug proceeds while minimizing scrutiny.
Financial institutions can implement several key controls to detect and prevent illicit financial activities related to fentanyl trafficking including:
- Scrutinize companies dealing in chemicals, pharmaceuticals, nutraceuticals, and industrial solvents, which are often used to disguise fentanyl precursor shipments.
- Screen invoices and bills of lading to flag inconsistencies between declared goods and industry norms.
- Scrutinize high-risk trade corridors. Transactions involving regions with known fentanyl distribution hubs, such as Vancouver, Toronto, Chicago, and New York, should undergo additional scrutiny.
- Where possible, conduct independent shipment verification such as working with customs brokers and third-party inspection services to confirm goods match trade documents.
- Enhanced employee training around the indicators of potential fentanyl trafficking.
Big data and the evolution of financial crime detection
The assessment of data from internal and external sources helps to further build out the picture of potential fentanyl/opioid exposure for financial institutions and reporting entities. In a more recent case involving human trafficking, Standard Charter Bank leveraged data from payment flows, payment information, and social media to uncover a potential sex abuse ring. If such activities can be detected through data analytics, it is possible that fentanyl flows can also be identified. As law enforcement, the CBSA, and FINTRAC continue to collaborate, key data points like shipping routes and new counterparty types should be updated in operational alerts and shared broadly.
Most financial institutions and reporting entities in Canada employ relatively antiquated transaction monitoring methods that are inadequate for addressing financial crime in today’s payment landscape. By leveraging data analytics, institutions can process multiple types of datasets, uncover new activity patterns, and make connections more easily, resulting in more comprehensive suspicious transaction filings. To enhance these insights, data should be combined with internal and external sources to identify illicit activity. Soon, artificial intelligence (AI) could modernize financial crime detection, specifically by identifying fentanyl-related touch points. AI offers several benefits, including faster data analysis, detection of unique patterns, and the ability to flag and escalate anomalies.
However, big data analytics has its limitations. Financial institutions and reporting entities must consider the quality and integrity of their data, ensure adequate data privacy and security, address potential ethical concerns, and account for resource constraints related to executing analytics and any subsequent actions required.
Next steps?
A multipronged approach needs to be leveraged.
Physical detection of fentanyl flows should remain a priority for law enforcement and border security on both sides of the border, with timely information sharing between FINTRAC and FINCEN (the US Financial Crimes Enforcement Network). This data could assist financial institutions in detecting drug flows. Locally, FINTRAC should continue sharing information from financial institutions, but suspicious transaction reports should be segregated to prioritize those that may be linked to drugs. Financial Institutions and non-bank financial institutions in Canada and the US should consider a gap analysis and subsequent enhancements to their financial crime risk management framework, including investing in infrastructure and talent.
These overall changes should not only improve the identification of fentanyl flows and establish a more timely, effective information-sharing system. This will empower law enforcement, border services, regulators, and financial institutions to take stronger, more coordinated action in the fight against fentanyl and opioid trafficking.
Strengthening border security and enhancing real-time collaboration will not only address American concerns, but also forge a powerful, united front between Canada and the US, a unity crucial in driving the coordinated efforts needed to effectively combat the escalating fentanyl crisis.
Sean Parker is a compliance leader with well over a decade of experience in financial crime compliance. Parker’s focus has been on practical solutions related to payment channels, transaction monitoring, correspondent banking and high-risk business types. He is a Certified Fraud Examiner (CFE) and a Certified Anti Money Laundering Specialist (CAMS).
Abdelaziz Abouelhoda is an experience financial crime risk advisor with over a decade of experience in correspondent banking and paytechs, focusing on emerging payment methods and technologies, as well as risk management and policy development.
May Serageldin is a trade finance and compliance professional in the Canadian banking sector with almost 20 years of experience in the banking industry. May is the Co-Chair of the BAFT Trade Compliance Committee and holds designations as a Certified Trade Finance Compliance Specialist (CTFC), a Certified Documentary Credit Specialist (CDCS), and in Operational Risk.
Sheeraz Ullah is an experienced data leader with 20-plus years of experience in data governance. Ullah has extensive Canadian banking experience with a focus on artificial intelligence strategy and data management.
