Last month, FinCEN, OFAC, and the FBI issued a joint notice on timeshare fraud associated with Mexico-based transnational criminal organizations (TCOs). According to the FBI, since at least 2012, Mexico-based TCOs have increasingly targeted U.S. owners of timeshare properties in Mexico, many of whom are older adults, including retirees, and used the illegal proceeds to diversify their revenue streams and finance other criminal activities, including the manufacturing and trafficking of illicit fentanyl and other deadly synthetic drugs into the United States.

After obtaining personally identifiable information (PII), TCOs contact owners claiming to be third parties, brokers, attorneys, or sales representatives in the timeshare, travel, real estate, or financial services industries. TCOs use the PII and timeshare records, such as details about the property name or timeshare location, to foster trust and credibility before beginning their initial timeshare pitch.

There are three primary types of scams:

• Timeshare Exit Scams (also known as Timeshare Resale Scams): Scammers offer to purchase timeshares at or above market rates on behalf of ready buyers.
• Timeshare Re-Rent Scams: Scammers offer to rent out victims’ timeshares to ready renters at or above market rates. In this variation, scammers may highlight an upcoming holiday or tourism event near the victims’ timeshares to convince them that the offers are legitimate.
• Timeshare Investment Scams: Scammers claim that the victims are entitled to supposed shares of stock associated with their timeshares and offer to broker the sale of the equity to ready investors.

TCOs have various methods of making their timeshare schemes appear legitimate. Victims of timeshare fraud schemes in Mexico generally send payments to scammers through wire transfers via U.S. correspondent banks to Mexican shell companies with accounts at Mexican banks or brokerage houses (Casas de Bolsa). The recipient accounts in such transactions are often relatively new and were typically opened in the preceding six months. The shell companies used are directly or indirectly controlled by the TCOs, often recently formed or registered to conduct business in Mexico, and generally appear related to the timeshare, travel, real estate, or financial services industries. However, in some cases, the shell companies may appear to be in business sectors unrelated to timeshares.

Red Flags

While the red flag indicators listed in the joint notice are specific to behavioral and financial red flags of victims, as well as red flags associated with the counterparties, these same red flags are commonly associated with elder financial exploitation and wire fraud, such as:

• A customer appears to be unduly influenced to make transactions by a third party.
• A customer says they have to send large or repetitive sums of money to a third-party, particularly if it involves an urgent or secretive situation.
• A customer requests to send funds to a new or recently formed international company.

This joint notice should serve as a reminder of the importance of training that is specific to the roles and responsibilities of the individuals being trained, as well as transaction monitoring designed to identify potentially suspicious activity. It is also important to ensure your fraud incident response plan includes reporting to the appropriate agencies (e.g., SAR Reporting, FTC reporting, FBI’s IC3, etc.).

Also contributing to this commentary:

Kelly Rozier, Associate, Stout