A United States (U.S.) bank was recently alerted by law enforcement of an increase in sale of large denomination U.S. bank notes to casas de cambio. They suspect that a Mexican syndicate is operating a money laundering scheme in the bank’s jurisdiction. Which two steps should be taken to trace funds through the bank to assist law enforcement in their investigation? (Choose two.)

The scenario describes indicators of a potential Black Market Peso Exchange (BMPE) scheme, a complex money laundering method. Law enforcement has alerted the bank, which now must assist by tracing the flow of funds. The most effective tracing steps involve following the money through the subsequent stages of the laundering cycle.
1. Placement/Layering: After the casas de cambio acquire bulk US dollars, the illicit funds must be placed back into the financial system. A common method is through structured deposits, often using third-party items or sequentially numbered monetary instruments to avoid currency transaction reporting thresholds (Option C).
2. Layering: To obscure the audit trail, the funds are then moved. A key step is wiring the money from the casa de cambio's account to other jurisdictions, particularly those that have no logical business connection to the exchange house's operations (Option D). These two steps represent direct, actionable investigative procedures to trace the suspected illicit funds.

A. Identify the money laundering scheme and submit a suspicious transaction report This describes the overall objective and the final reporting obligation, not the specific investigative steps taken to trace the funds that lead to that conclusion.
B. Identify if there is a decrease in the sale of large denomination U.S. bank notes to casas de cambio by the bank The alert from law enforcement was based on an increase in this activity. Investigating a decrease would be illogical and counterproductive to tracing the suspicious trend.

1. Financial Crimes Enforcement Network (FinCEN). (2010, September 1). Advisory to Financial Institutions on the Black Market Peso Exchange. FIN-2010-A011.

This official advisory lists red flags associated with BMPE. It specifically mentions: "Third-party deposits into a U.S. account of a casa de cambio, particularly when the deposits are structured in amounts under the cash reporting threshold" (supports Option C) and "Wire transfers from a casa de cambio's U.S. account to third parties in jurisdictions other than the casa de cambio's home country" (supports Option D).

2. Financial Action Task Force (FATF). (2010, March). Money Laundering Vulnerabilities of Free Trade Zones. FATF, Paris, France.

Section 3.2, "The Black Market Peso Exchange (BMPE)," describes the mechanics of this scheme. It notes that once illicit US dollars are exchanged, the funds are often moved via "wire transfers and monetary instruments" to integrate them, highlighting the relevance of investigating both deposits of monetary instruments and subsequent wire transfers. (See pages 17-18).

3. Zdanowicz, J. S. (2009). Trade-Based Money Laundering. Florida International University College of Business Administration.

This academic paper discusses methods related to trade-based money laundering, which often intersects with BMPE. It explains how abnormal financial transactions, such as payments to or from unrelated third parties in foreign jurisdictions, are key indicators for investigators tracing illicit funds. This principle underpins the logic in both options C and D.