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Cornerstone is U.S. Immigration

and Customs Enforcement’s

(ICE’s) comprehensive

investigative initiative for

fighting financial crime.

The Cornerstone Report is a 

quarterly bulletin highlighting

key issues related to ICE Homeland Security Investigations

(HSI) financial, narcotics and

special operations investigations.

Vol XI: No. 1 • Winter 2014

Interstate Funnel Accounts — 

Raising The Money 

Off The Streets . . . . . . . . . 1

Waine Vassel Drug 

Trafficking Organization . . . 3

Shawn Falando Smith Drug 

Trafficking Organization . . . 4

INTERSTATE FUNNEL ACCOUNTS – 

Raising The Money 

Off The Streets

While interstate funnel accounts important benefits are the rapid 

have not replaced other tradi- movement of money across great 

tional means of moving cash, like distances with minimal fees and 

transportation of bulk currency the anonymity of the depositors 

in vehicles, they are an evolution since the cash deposits are usually 

under the reporting thresholds. of money laundering practices. 

To criminal organizations, in- Additional benefits of funnel 

terstate funnel accounts offer accounts are the consolidation of 

several benefits. The two most the physical volume of the cash. 

Over the past few years, the money laundering trend 

known as “interstate funnel accounts” has grown in 

popularity particularly among drug and alien smuggling 

organizations. Interstate funnel accounts, or interstate cash accounts, are currently one of the most efficient means for drug 

and human smuggling organizations to rapidly move illicit proceeds within the interior of the U.S. (destination states) to those 

states bordering the Republic of Mexico (source states).1

1

 The border states are known as “source states” as they are the initial source or transit point for 

the majority of the drug and human smuggling activity in the U.S. Eventually, the illegal drugs or 

aliens will transit to the interior of the U.S. to “destination states.”
For example, 

cash deposits 

can consist of a 

mixture of low 

and high bill denominations while 

the subsequent withdrawals can 

be made into high-denomination bills. The decrease in volume 

makes it easier for organizations 

to subsequently move and conceal 

cash loads. Another benefit is the 

literal cleaning of the bills, as cash 

deposited by a drug trafficking organization (DTO) may hold strong 

narcotic residue and odor while 

the cash withdrawn from the bank 

in a different state is clean and 

free from concentrated residue. 

Furthermore, the use of interstate 

funnel accounts allows criminal 

organizations to avoid highway, 

airport and parcel interdiction 

efforts by law enforcement. 

Interstate Funnel 

Account Attributes

The banking customer who 

opens the interstate funnel account is usually a nominee (front 

or straw person) for the criminal 

organization and typically does 

not engage in the crime of drug 

trafficking or human smuggling. 

In most cases, the account holders are paid a fee by the criminal 

organizations to utilize existing 

accounts or open new accounts. 

This fee may range from $200 

to $500 per transaction. Account 

holders are paid to accept deposits, make withdraws, and deliver 

the illicit proceeds withdrawn 

from the account to the criminal 

organization representative.

Once the account is opened, the 

criminal organization representative communicates the account 

number(s) to their co-conspiring 

customers around the U.S. Shortly 

thereafter, the conspiring customer 

deposits cash into the organization’s account, which in turn, 

is instantly available for withdrawal 

in the source state. This method of 

paying for alien smuggling fees, 

or any other illicitly gained proceed, 

Red-Flag Indicators

• Account(s) with multiple deposits which are shortly transferred to other accounts;

• Accounts with high aggregate dollar deposit activity but with low account balances;

• Accounts with deposits from multiple, different individuals or companies;

• Accounts with multiple deposits from multiple locations outside the banking area; 

(e.g., a California domiciled bank with deposits from Illinois and Georgia);

• Accounts with multiple deposits from multiple sources (e.g., cash, ATM deposits, checks, 

wire transfers, etc.);

• Accounts opened in the U.S., by individuals temporarily within the U.S. who are bearing 

immigration identity documents (such as border crossing cards), then used to wire transfer 

funds back to Mexico;

• Deposits are immediately (or within 1 to 2 days) withdrawn or wired from the account;

• Accounts with an unusually high number of charge-backs;

• Financial activity not commensurate with stated business or occupation of the depositing 

individual;

• Anonymous cash deposits made in destination states followed by rapid cash withdrawals 

made in source states;

• Abrupt change in account activity; and

•	Branch-shopping	at	various	financial	institutions	to	disguise	nexus	of	the	deposited	funds	

with movements across the U.S.’ international borders. 

INTERSTATE FUNNEL ACCOUNTS – 

Raising The Money Off The Streets Continued

— 2 —

Volume XI: No. 1

Winter 2014
is as convenient

as making trips 

to local bank 

branches. 

Analysis of Bank Secrecy Act 

(BSA) reporting has identified 

that the following account activity is often associated with funnel 

accounts: out-of-state, anonymous cash deposits in multiple 

states; rapid cash withdrawals for 

amounts similar to cash deposits; 

use of counter deposit slips; individual deposits and withdrawals intentionally under $10,000 

(structuring); limited account 

credits besides cash deposits (i.e., 

no payroll, wire transfers); no 

legitimate business purpose evident; and deposit activity greater 

than expected income.

Currency transaction reports 

(CTRs) may be filed on interstate 

funnel account activity if multiple 

deposits aggregate greater than 

$10,000. CTRs filed on funnel 

accounts often indicate that multiple transactions occurred in geographically distant bank branches. 

Case Examples

Waine Vassel Drug 

Trafficking Organization

In June 2008, HSI Phoenix 

initiated an investigation regarding a bank employee that 

was facilitating “interstate funnel account” activity for a fee. 

The investigation revealed that 

an account opened by the bank 

employee in his name was being 

utilized by a DTO as a primary 

method to move their illicit funds 

in furtherance of their criminal Waine Vassel and Anton Holt, 

enterprise. Initial findings of the were instrumental in smuggling 

bank employee’s account showed thousands of pounds of marijuaa pattern of suspicious financial na through the U.S. mail system 

transactions involving anony- from Arizona to East Coast states. 

mous cash deposits at financial Vassel and Holt found willing ininstitutions located on the east dividuals to open bank accounts 

coast of the U.S. Subsequent cash and receive and deposit the illicit 

withdrawals were made by the funds derived from the conemployee in Phoenix, Arizona. traband sold in the destination 

The DTO utilized numerous bank states. Each of the bank account 

accounts to move over $700,000 holders would then withdraw 

in illicit proceeds from elsewhere cash in Phoenix and hand deliver 

in the U.S. to Arizona. the money to Vassel, minus a 

$300 transaction fee. The conspiracy widened when 

the investigation identified mem- In April 2010, Vassel and Holt were 

bers of the DTO that operated sentenced to 70 and 36 months ima narcotics mailing and money prisonment, respectively, for their 

laundering operation from Phoe- role in the drug smuggling and 

nix, Arizona. Two of the targets money laundering operation. Four 

of HSI Phoenix’s investigation, other co-conspirators pled guilty 

INTERSTATE FUNNEL ACCOUNTS – 

Raising The Money Off The Streets Continued

— 3 —

Volume XI: No. 1

Winter 2014
to violations of 

18 U.S.C. § 1960, 

for engaging 

in unlicensed 

money transmitting businesses. 

Shawn Falando Smith Drug 

Trafficking Organization 

In September 2009, HSI Phoenix 

received information regarding 

bank accounts that involved numerous out-of-state cash deposits 

and subsequent cash withdraws 

within the state of Arizona. 

The deposits and withdrawals 

from the bank accounts were 

structured to avoid BSA reporting requirements. In addition, 

most of the deposits were made 

using counter deposit slips to 

implement an additional level of 

anonymity. Further analysis of 

the bank accounts revealed that a 

number of individuals funneled 

over $2.5 million in illicit funds 

through the financial system. 

HSI Phoenix noted a discrepancy 

because the bank accounts were 

opened at branches in Phoenix, 

while the nominee information 

showed the account holders resided outside the state of Arizona. 

HSI Phoenix confirmed that the 

personal information utilized 

to open the bank accounts in 

Phoenix was derived from the 

victims of personal identity theft. 

The identity theft was traced to 

Shawn Falando Smith, who 

obtained copies of birth certificates of males in the same age 

range as those opening the bank 

accounts in Phoenix from a 

compromised county employee 

in Pennsylvania. Smith and his 

co-conspirators used the birth 

certificates to obtain Arizona 

driver licenses and subsequently 

open bank accounts. Investigators 

identified the five conspirators as 

members of a DTO involved in a 

large narcotics trafficking operation who used bank accounts to 

move their proceeds across the 

U.S. In June 2010, all of the suspects with the exception of one 

defendant pled guilty and received 

sentences up to five years in prison 

for marijuana distribution, money 

laundering, and identity theft. 

The Way Forward

HSI has developed a comprehensive national strategy to address 

the susceptibility of interstate 

funnel accounts. A holistic approach encompassing collaboration with the U.S. Department of 

the Treasury’s Financial Crimes 

Enforcement Network (FinCEN), 

the financial industry and the 

Department of Justice (DOJ) 

will ensure this vulnerability is 

addressed. The national strategy 

includes, but is not limited to, 

the following:

• Sharing typologies and lessons 

learned with the financial 

institutions;

• Encouraging financial institutions to require identification 

for cash deposits to third party 

accounts; and

• Identification/tracking of interstate funnel accounts based 

on existing BSA and investigative data. 

The combination of successful 

criminal enforcement actions, 

report fillings under the BSA, and 

anti-money laundering (AML) 

compliance efforts by financial 

institutions strengthen banking 

systems and force criminal organizations to seek other means 

to move illicit funds. HSI will 

continue to work with private 

and public sector stakeholders to 

identify new trends and money 

laundering schemes and share 

information by providing redflag indicators, tips and insight 

to more effectively investigate 

these complex and sophisticated 

criminal schemes. 

Mark A. Witzal, Deputy Assistant 

Director, U.S. Immigration and Customs 

Enforcement (ICE’s), Homeland Security Investigations (HSI), Washington, 

D.C., USA, mark.a.witzal@ice.dhs.gov

Originally published in the June-August Vol. 13 No. 3 edition of ACAMS Today, 

a publication of the Association of Certified Anti-Money Laundering Specialists (ACAMS) 

© 2014 | www.acams.org |www.acamstoday.org. | This article is hereby reproduced with full consent and express authorization of ACAMS®

Volume XI: No. 1

Winter 2014

INTERSTATE FUNNEL ACCOUNTS – 

Raising The Money Off The Streets Continued

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