Crime
Mexican cartels are a direct threat to Canada’s public safety, and the future of North American trade

From the Macdonald Laurier Institute
By Gary J. Hale for Inside Policy
RCMP raided a fentanyl ‘superlab’ in Falkland, BC, with ties to a transnational criminal network that spans from Mexico to China.
On October 31, residents of Falkland, BC, were readying their children for a night of Halloween fun. Little did they know that their “quaint, quiet, and low-key little village” was about to make national headlines for all the wrong reasons.
On that day, RCMP announced that it had raided a fentanyl “superlab” of scary proportions near Falkland – one that police called the “largest and most sophisticated” drug operation in Canada. Officers seized nearly half-a-billion-dollars’ worth of illicit materials, including 54 kilograms of finished fentanyl, 390 kilograms of methamphetamine, 35 kilograms of cocaine, 15 kilograms of MDMA, and six kilograms of cannabis” as well as AR-15-style guns, silencers, small explosive devices, body armour, and vast amounts of ammunition.
They also found massive quantities of “precursor chemicals” used to make the drugs. This strongly suggests that the superlab was tied into a transnational criminal network that spans from Mexico to China – one that uses North America’s transportation supply chains to spread its poisonous cargo across Canada and the United States.
The Canada-US-Mexico relationship is comprised of many interests, but the economic benefits of trade between the nations is one of the driving forces that keep these neighbours profitably engaged. The CUSMA trade agreement is the successor to NAFTA and is the strongest example globally of a successful economic co-operation treaty. It benefits all three signatories. This level of interdependence under CUSMA requires all parties to recognize their respective vulnerabilities and attempt to mitigate any threats, risks, or dangers to trade and to the overall relationship. What happens to one affects all the others.
The supply chain, and the transport infrastructure that supports it, affects the balance books of all three. While the supply chain is robust and currently experiences only occasional delays, the different types of transport that make up the supply chain – such as trucks, trains, and sea-going vessels – are extremely vulnerable to disruption or stoppages because of the unchecked violence and crime attributed to the activities of Mexican Transnational Criminal Organizations (TCOs). These cartels operate throughout Mexico, from the Pacific ports to the northern plains at the US-Mexico border.
The sophistication of the Falkland superlab strongly suggests connectivity to multi-national production, transportation, and distribution networks that likely include China (supply of raw products) and Mexico (clandestine laboratory expertise).
For most Canadians, Mexican cartels call to mind the stereotypical villains of TV and movie police dramas. But their power and influence is very real – as is the threat they pose to all three CUSMA nations.
Mexico’s cartels: a deadly and growing threat
Mexican cartels started as drug trafficking organizations (DTOs) in the 1960s. By the late 1990s they had evolved to become transnational enterprises as they expanded their business beyond locally produced drugs (originally marijuana and heroin) to include primarily Colombian cocaine that they transported through Mexico en route to the US and Canada.
Marijuana and the opium poppy are cultivated in Mexico and, in the case of weed, taken to market in raw form. While the cartels required some chemicals sourced from outside Mexico to extract opium from the poppy and convert it into heroin, the large-scale, multi-ton production of synthetic drugs like Methamphetamine and today Fentanyl expanded the demand for sources of precursor chemicals (where the chemical is slightly altered at the molecular level to become the drug) and essential chemicals (chemicals used to extract, process, or clean the drugs.)
The need to acquire cocaine and chemicals internationalized the cartels. Mexican TCO’s now operate on every continent. That presence involves all the critical stages of the criminal business cycle: production, transportation, distribution, and re-capitalization. Some of the money from drug proceeds flow south from Canada and the US back to Mexico to be retained as profits, while other funds are used to keep the enterprise well-funded and operational.
In Mexico, the scope of their activities is economy-wide; they now operate many lines of criminal business. Some directly affect Mexico’s economic security, such as petroleum theft, intellectual property theft (mainly pirated DVDs and CDs), adulterating drinking alcohol, and exploiting public utilities. Others are in “traditional” criminal markets, such as prostitution, extortion, kidnapping, weapons smuggling, migrant smuggling and human trafficking. Organized auto theft has also become another revenue stream.
Criminal Actors
The Cartel de Sinaloa (CDS or Sinaloa Cartel) and the Cartel Jalisco Nueva Generacion (CJNG) are the two principal TCO’s vying for territorial control of Mexico’s air, land, and maritime ports, as well as illegal crossing points. These points on the cartel map are known as “plazas,” and are often between formal ports of entry into the US. By controlling territories crucial for the inbound and outbound movement of drugs, precursors, people, and illegal proceeds, the cartels secretly transport illicit goods and people through commercial supply chains, thus subjecting the transportation segment of legitimate North American trade to the most risk.
That is giving the cartels the power to impair – and even control – the movement of Mexico’s legitimate trade. While largely kept out of the public domain, incidents of forced payment of criminal taxation fees, called “cuotas,” and other similar threats to international business operations are already occurring. For instance, cuotas are being imposed on the transnational business of exporting used cars from the US to Mexico. They’re also being forced on Mexican avocado and lime exporters before the cartels will allow their products to cross the border to the US and international markets. This has crippled that particular trade. Unfortunately, the Mexican government has been slow to react, and the extortion persists throughout Mexico. It is worth repeating – these entirely legitimate goods reach the market only after cartel conditions are met and bribes paid.
The free trade and soft border policies of the US of recent years have allowed cartel operatives to enter that country and work the drug trade with limited consequence. In May, the U.S. Drug Enforcement Administration (DEA) published the National Drug Threat Assessment 2024, where it reported that the Jalisco and Sinaloa cartels operate in all 50 US states and are engaged in armed violence in American cities as they fight for market shares of the sales of Methamphetamine, Fentanyl, and other drugs sourced from Mexico.
The DEA’s findings should sound alarms in Canada. Canada and the US have similar trade and immigration policies, which allow the Mexican cartels to easily enter and control the wholesale component of the drug trade. The long-term effects of the drug trade are the billions of dollars gained that allow for the corruption of government officials. Canada should be on guard: Mexican drug cartels in Canada could begin to not only kill ordinary Canadians by knowingly selling them deadly drugs like Fentanyl – their operatives can also embed themselves in Canadian society, as they have in the US, leading to ordinary citizens on Canadian streets being victimized by the armed violence cartels regularly use to assert their position and power.
Organized crime and Mexican governance
Canada faces these threats directly, but the indirect ones that the cartels present to Mexican governance are no less consequential to Canada in the long term – and likely sooner. Illicit agreements between corrupt Mexican government officials and the cartels assure that the crime organizations retain control of territory and have freedom to operate.
That threat is becoming increasingly existential. Cartel fighters are well disciplined, well equipped and strong enough to challenge Mexico’s military, currently the government’s main tool to fight them. Should the TCOs come to dominate Mexican society or gain decisive influence over government policy, Mexico’s government risks being declared a narco-democracy and the US may come to see the cartels as a threat to national security. That in turn could lead to a US military intervention in Mexico – not an outcome desired by either side.
While that scenario may be considered extreme, it is not as far from reality as many may think. While in many respects the US-Mexico trading relationship remains unchanged, the overall political context has become testy – and could be a real flashpoint for the incoming Trump administration.
Political developments in Mexico have played a role. After his election in 2018, former Mexican President Andrés Manuel López Obrador (commonly referred to his initials, AMLO) demonstrated a disdain for all things North American. This included frequent complaints of US interference or violation of Mexican sovereignty – complaints that were more about keeping Mexican government domestic actions out of the public eye. To retain a shroud of secrecy over government corruption, Mexico under Amlo started in 2022 to limit the activities and numbers of US federal law enforcement agencies operating there, particularly the FBI, DEA, ATF and ICE. These agencies formerly enjoyed a close relationship with the Mexican Federal Police – a force AMLO disbanded and replaced with the National Guard. The AMLO administration reduced the number of US assets and agents in Mexico, particularly singling out the DEA for the most punitive restrictions.
During his administration, AMLO placed the army and navy in charge of all ports of entry and gave them responsibility for all domestic public safety and security by subordinating the Guardia Nacional (GN), or National Guard, to the army. The GN, the only federal law enforcement agency, has been taken over by military officials who are sometimes corrupt and in league with the cartels.
Mexican President Claudia Sheinbaum, who took office in 2024, has continued AMLO’s organizational moves. Sheinbaum comes from the same political party and has so far extended carte blanche to the military, whose administration is opaque and now operates with impunity, under the guise of “national security” and “sovereignty” concerns.
It is expected that Sheinbaum will continue to shield American eyes from Mexico law enforcement and judicial affairs. The fear in the US law enforcement and national security community is that Sheinbaum may even declare DEA non grata, much as then Venezuelan President Hugo Chavez in 2005 and Bolivian President Evo Morales in 2008 did in their countries. Both were anti-American leftists of the same mindset as AMLO and Sheinbaum, who feared detection of their connections to the illegal drug trade.
Sheinbaum has publicly demonstrated disinterest in the consistent application of the rule of law against the TCOs by stating that she will continue the “hugs not bullets” (“abrazos, no balazos”) non-confrontational, non-interventional posture towards organized crime. Agreements with corrupt government officials will allow the cartels to expand their business and to operate with impunity. Through intimidation, bribery, and murder, the cartels affect decision making at the municipal, state, and federal levels of Mexican government. That leverage, while performed outside the public eye, has the potential to negatively affect supply and demand among the three countries at the very least, and at worst, to signal that cartels in Mexico are directly or indirectly involved in the formulation of government security, immigration, drug, and trade policy.
AMLO enacted constitutional changes that will provide Sheinbaum with the powers of a dictator, giving her administration unchecked control of the executive, legislative, and judicial branches of government. As a result, the judiciary in Mexico is in crisis mode with 8 of 11 Supreme Court Justices resigning in October 2024 to protest the unconstitutional disregard for due process that started with AMLO and continues with Sheinbaum thanks to a “voting for judges” law that she and AMLO have rammed into operation without debate. This development portends even more corruption.
Without the existence of an independent judicial system, these institutional changes could give pause to US and Canadian negotiators when it comes time to renew CUSMA in 2026.
Beyond 2025: Mexican organized crime as a threat to the US and Canada, and Greater North American implications
Most worrying, the cartels will be in a yet stronger position to affect and even dictate the pace and volume of legitimate trade between the US and Mexico under Sheinbaum. This makes Mexico the weakest link among the three CUSMA members.
The US and Canada should therefore be concerned about the strength and power of the cartels because the current trajectory could provide them a greater role in Mexico’s performance as a trade partner. Should this trend continue, the US would likely begin to see Mexico through the lens of a threat to critical components of its national security: 1) the public safety of US citizens being killed in epidemic proportions by the drugs produced by citizens of Mexico; 2) the negative impact or increased cost of commerce that supplies goods to the American market; and 3) the CUSMA relationship that sustains the economic strength of all three participating countries.
This worrisome evolution requires proactivity by Canada and the US to insist that Sheinbaum reverse the gains that the cartels have made to influence policy and erode the government’s monopoly on territorial control and the use of violence, and reverse Mexico’s limits on drug enforcement co-operation with what should be its partners to the north. Pressure should also be applied to demand a return to a drug policy model that includes international law enforcement co-operation and a continuation towards the transformation of the Mexican judicial system from a mixed inquisitorial or accusatorial system to an adversarial system that employs the use of juries, witness testimony, oral hearings and trials, and cross-examination of witnesses, as opposed to a system where cartel-influenced elections could dictate judicial outcomes.
The implications of the further development of a Mexico narco-democracy for US-Mexico-Canada relations would be devastating. Co-operation on public safety and security would cease completely, allowing the cartels to take full control of commercial supply lines, significantly reducing trade between the three nations – likely causing the CUSMA trade deal to fracture until governance returned to duly elected civilian officials.
Continental security and Canada’s contribution
The continued success of CUSMA lies with Mexico more than any other country. Should Mexico continue on its path to autocracy, it could upset the trade deal, crucial to the prosperity of all three countries. Canada is not immune from what on the surface may appear to be mostly bilateral, US-Mexico issues, because, regardless of the commodity – whether it’s consumables or manufactured items – the cartels are positioned and empowered to affect imports, exports, trade, and migration throughout North America.
For the foreseeable future, Mexico is not going to voluntarily change its security posture. This enables the cartels to remain persistent threats, especially to trade. Canada and the US need to continue to jointly insist that Mexico take a stronger stance against organized crime and that it take steps to strengthen the judiciary and the rule of law in that country.
Gary J. Hale served 31 years in the Drug Enforcement Administration (DEA), retiring as an executive-level intelligence analyst. In 2010, he was appointed as Drug Policy fellow and Mexico Studies Scholar at the James A. Baker III Institute for Public Policy at Rice University in Houston, Texas.
Business
China, Mexico, Canada Flagged in $1.4 Billion Fentanyl Trade by U.S. Financial Watchdog

Sam Cooper
The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has identified $1.4 billion in fentanyl-linked suspicious transactions, naming China, Mexico, Canada, and India as key foreign touchpoints in the global production and laundering network. The analysis, based on 1,246 Bank Secrecy Act filings submitted in 2024, tracks financial activity spanning chemical purchases, trafficking logistics, and international money laundering operations.
The data reveals that Mexico and the People’s Republic of China were the two most frequently named foreign jurisdictions in financial intelligence gathered by FinCEN. Most of the flagged transactions originated in U.S. cities, the report notes, due to the “domestic nature” of Bank Secrecy Act data collection. Among foreign jurisdictions, Mexico, China, Hong Kong, and Canada were cited most often in fentanyl-related financial activity.
The FinCEN report points to Mexico as the epicenter of illicit fentanyl production, with Mexican cartels importing precursor chemicals from China and laundering proceeds through complex financial routes involving U.S., Canadian, and Hong Kong-based actors.
The findings also align with testimony from U.S. and Canadian law enforcement veterans who have told The Bureau that Chinese state-linked actors sit atop a decentralized but industrialized global fentanyl economy—supplying precursors, pill presses, and financing tools that rely on trade-based money laundering and professional money brokers operating across North America.
“Filers also identified PRC-based subjects in reported money laundering activity, including suspected trade-based money laundering schemes that leveraged the Chinese export sector,” the report says.
A point emphasized by Canadian and U.S. experts—including former U.S. State Department investigator Dr. David Asher—that professional Chinese money laundering networks operating in North America are significantly commanded by Chinese Communist Party–linked Triad bosses based in Ontario and British Columbia—is not explored in detail in this particular FinCEN report.¹
Chinese chemical manufacturers—primarily based in Guangdong, Zhejiang, and Hebei provinces—were repeatedly cited for selling fentanyl precursors via wire transfers and money service businesses. These sales were often facilitated through e-commerce platforms, suggesting that China’s global retail footprint conceals a lethal underground market—one that ultimately fuels a North American public health crisis. In many cases, the logistics were sophisticated: some Chinese companies even offered delivery guarantees and customs clearance for precursor shipments, raising red flags for enforcement officials.
While China’s industrial base dominates the global fentanyl supply chain, Mexican cartels are the next most prominent state-like actors in the ecosystem—but the report emphasizes that Canada and India are rising contributors.
“Subjects in other foreign countries—including Canada, the Dominican Republic, and India—highlight the presence of alternative suppliers of precursor chemicals and fentanyl,” the report says.
“Canada-based subjects were primarily identified by Bank Secrecy Act filers due to their suspected involvement in drug trafficking organizations allegedly sourcing fentanyl and other drugs from traditional drug source countries, such as Mexico,” it explains, adding that banking intelligence “identified activity indicative of Canada-based individuals and companies purchasing precursor chemicals and laboratory equipment that may be related to the synthesis of fentanyl in Canada. Canada-based subjects were primarily reported with addresses in the provinces of British Columbia and Ontario.”
FinCEN also flagged activity from Hong Kong-based shell companies—often subsidiaries or intermediaries for Chinese chemical exporters. These entities were used to obscure the PRC’s role in transactions and to move funds through U.S.-linked bank corridors.
Breaking down the fascinating and deadly world of Chinese underground banking used to move fentanyl profits from American cities back to producers, the report explains how Chinese nationals in North America are quietly enlisted to move large volumes of cash across borders—without ever triggering traditional wire transfers.
These networks, formally known as Chinese Money Laundering Organizations (CMLOs), operate within a global underground banking system that uses “mirror transfers.” In this system, a Chinese citizen with renminbi in China pays a local broker, while the U.S. dollar equivalent is handed over—often in cash—to a recipient in cities like Los Angeles or New York who may have no connection to the original Chinese depositor aside from their role in the laundering network. The renminbi, meanwhile, is used inside China to purchase goods such as electronics, which are then exported to Mexico and delivered to cartel-linked recipients.
FinCEN reports that US-based money couriers—often Chinese visa holders—were observed depositing large amounts of cash into bank accounts linked to everyday storefront businesses, including nail salons and restaurants. Some of the cash was then used to purchase cashier’s checks, a common method used to obscure the origin and destination of the funds. To banks, the activity might initially appear consistent with a legitimate business. However, modern AI-powered transaction monitoring systems are increasingly capable of flagging unusual patterns—such as small businesses conducting large or repetitive transfers that appear disproportionate to their stated operations.
On the Mexican side, nearly one-third of reports named subjects located in Sinaloa and Jalisco, regions long controlled by the Sinaloa Cartel and Cartel Jalisco Nueva Generación. Individuals in these states were often cited as recipients of wire transfers from U.S.-based senders suspected of repatriating drug proceeds. Others were flagged as originators of payments to Chinese chemical suppliers, raising alarms about front companies and brokers operating under false pretenses.
The report outlines multiple cases where Mexican chemical brokers used generic payment descriptions such as “goods” or “services” to mask wire transfers to China. Some of these transactions passed through U.S.-based intermediaries, including firms owned by Chinese nationals. These shell companies were often registered in unrelated sectors—like marketing, construction, or hardware—and exhibited red flags such as long dormancy followed by sudden spikes in large transactions.
Within the United States, California, Florida, and New York were most commonly identified in fentanyl-related financial filings. These locations serve as key hubs for distribution and as collection points for laundering proceeds. Cash deposits and peer-to-peer payment platforms were the most cited methods for fentanyl-linked transactions, appearing in 54 percent and 51 percent of filings, respectively.
A significant number of flagged transactions included slang terms and emojis—such as “blues,” “ills,” or blue dots—in memo fields. Structured cash deposits were commonly made across multiple branches or ATMs, often linked to otherwise legitimate businesses such as restaurants, salons, and trucking firms.
FinCEN also tracked a growing number of trade-based laundering schemes, in which proceeds from fentanyl sales were used to buy electronics and vaping devices. In one case, U.S.-based companies owned by Chinese nationals made outbound payments to Chinese manufacturers, using funds pooled from retail accounts and shell companies. These goods were then shipped to Mexico, closing the laundering loop.
Another key laundering method involved cryptocurrency. Nearly 10 percent of all fentanyl-related reports involved virtual currency, with Bitcoin the most commonly cited, followed by Ethereum and Litecoin. FinCEN flagged twenty darknet marketplaces as suspected hubs for fentanyl distribution and cited failures by some digital asset platforms to catch red-flag activity.
Overall, FinCEN warns that fentanyl-linked funds continue to enter the U.S. financial system through loosely regulated or poorly monitored channels, even as law enforcement ramps up enforcement. The Drug Enforcement Administration reported seizures of over 55 million counterfeit fentanyl pills in 2024 alone.
The broader pattern is unmistakable: precursor chemicals flow from China, manufacturing occurs in Mexico, Canada plays an increasing role in chemical acquisition and potential synthesis, and drugs and proceeds flood into the United States, supported by global financial tools and trade structures. The same infrastructure that enables lawful commerce is being manipulated to sustain the deadliest synthetic drug crisis in modern history.
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Business
Closing information gaps to strengthen Canada’s border security and track fentanyl

By Sean Parker, Dawn Jutla, and Peter Copeland for Inside Policy
To promote better results, we lay out a collaborative approach
Despite exaggerated claims about how much fentanyl is trafficked across the border from Canada to the United States, the reality is that our detection, search, and seizure capacity is extremely limited.
We’re dealing with a “known unknown”: a risk we’re aware of, but don’t yet have the capacity to understand its extent.
What’s more, it may be that the flow of precursor chemicals—ingredients used in the production of fentanyl—is where much of the concern lies. Until we enhance our tracking, search, and seizure capacity, much will remain speculative.
As border security is further scrutinized, and the extent of fentanyl production and trafficking gets brought into sharper focus, the role of the federal government’s Precursor Chemical Risk Management Unit (PCRMU)—announced recently by Health Canada—will become apparent.
Ottawa recently took action to enhance the capabilities of the PCRMU. It says the new unit will “provide better insights into precursor chemicals, distribution channels, and enhanced monitoring and surveillance to enable timely law enforcement action.” The big question is, how will the PCRMU track the precursor drugs entering into Canada that are used to produce fentanyl?
Key players in the import-export ecosystem do not have the right regulatory framework and responsibilities to track and share information, detect suspect activities, and be incentivized to act on it. That’s one of the reasons why we know so little about how much fentanyl is produced and trafficked.
Without proper collaboration with industry, law enforcement, and financial institutions, these tracking efforts are doomed to fail. To promote better results, we lay out a collaborative approach that distributes responsibilities and retools incentives. These measures would enhance information collection capabilities, incentivize system actors to compliance, and better equip law enforcement and border security services for the safety of Canadians.
Trade-off bottleneck: addressing the costs of enhanced screening
To date, it’s been challenging to increase our ability to detect, search, and seize illegal goods trafficked through ports and border crossings. This is due to trade-offs between heightened manual search and seizure efforts at ports of entry, and the economic impacts of these efforts.
In 2024, the Canada Border Services Agency (CBSA) admitted over 93 million travelers. Meanwhile, 5.3 million trucks transported commercial goods into Canada, around 3.6 million shipments arrived via air cargo, nearly 2 million containers were processed at Canadian ports, roughly 1.9 million rail cars carried goods into the country, and about 145.7 million courier shipments crossed the border. The CBSA employs a risk-based approach to border security, utilizing intelligence, behavioral analysis, and random selection to identify individuals or shipments that may warrant additional scrutiny. This triaging process aims to balance effective enforcement with the facilitation of legitimate travel and trade.
Exact percentages of travelers subjected to secondary inspections are not publicly disclosed, but it’s understood that only a small fraction undergo such scrutiny. We don’t learn about the prevalence of these issues through our border screening measures, but in crime reporting data—after it’s too late to avert.
It’s key to have an approach that minimizes time and personnel resources deployed at points of entry. To be effective without being economically disruptive, policymakers, law enforcement, and border security need to strengthen requirements for information gathering, live tracking, and sharing. Legislative and regulatory change to require additional information of buyers and sellers—along with stringent penalties to enforce non-compliance—is a low-cost, logistically efficient way of distributing responsibility for this complex and multifaceted issue. A key concept explored in this paper is strengthening governance controls (“controls”) over fentanyl supply chains through new processes and data digitization, which could aid the PCRMU in their strategic objectives.
Enhanced supply chain controls are needed
When it comes to detailed supply chain knowledge of fentanyl precursor chemicals moving in and out of Canada, regulator knowledge is limited.
That’s why regulatory reform is the backbone of change. It’s necessary to ensure that strategic objectives are met by all accountable stakeholders to protect the supply chain and identify issues. To rectify the issues, solutions can be taken by the PCRMU to obtain and govern a modern fentanyl traceability system/platform (“platform”) that would provide live transparency to regulators.
A fresh set of supply chain controls, integrated into a platform as shown in Fig. 1, could significantly aid the PCRMU in identifying suspicious activities and prioritizing investigations.

Our described system has two distinctive streams: one which leverages a combination of physical controls such as package tampering and altered documentation against a second stream that looks at payment counterparties. Customs agencies, transporters, receivers, and financial institutions would have a hand in ensuring that controls in the platform are working. The platform includes several embedded controls to enhance supply chain oversight. It uses commercially available Vision AI to assess packaging and blockchain cryptography to verify shipment documentation integrity. Shipment weight and quantity are tracked from source to destination to detect diversion, while a four-eyes verification process ensures independent reconciliation by the seller, customs, and receiver. Additionally, payment details are linked to shipments to uncover suspicious financial activity and support investigations by financial institutions and regulators like FINTRAC and FINCEN.
A modern platform securely distributes responsibility in a way that’s cost effective and efficient so as not to overburden any one actor. It also ensures that companies of all sizes can participate, and protects them from exploitation by criminals and reputational damage.
In addition to these technological enhancements and more robust system controls, better collaboration between the key players in the fentanyl supply chain is needed, along with policy changes to incentivize each key fentanyl supply chain stakeholder to adopt the new controls.
Canadian financial institutions: a chance for further scrutiny
Financial institutions (FIs) are usually the first point of contact when a payment is being made by a purchaser to a supplier for precursor chemicals that could be used in the production of fentanyl. It is crucial that they enhance their screening and security processes.
Chemicals may be purchased by wires or via import letters of credit. The latter is the more likely of the two instruments to be used because this ensures that the terms and conditions in the letter of credit are met with proof of shipment prior to payment being released. Payments via wire require less transparency.
Where a buyer pays for precursor chemicals with a wire, it should result in further scrutiny by the financial institution. Requests for supporting documentation including terms and conditions, along with proof of shipment and receipt, should be provided. Under new regulatory policy, buyers would be required to place such supporting documentation on the shared platform.
The less transparent a payment channel is in relation to the supply chain, the more concerning it should be from a risk point of view. Certain payment channels may be leveraged to further mask illicit activity throughout the supply chain. At the onset of the relationship the seller and buyers would link payment information on the platform (payment channel, recipient name, recipient’s bank, date, and payment amount) to each precursor or fentanyl shipment. The supplier, in turn, should record match payment information (payment channel, supplier name, supplier’s bank, date, and payment amount).
Linking payment to physical shipment would enable data analytics to detect irregularities. An irregularity is flagged when the amounts and/or volume of payments far exceed the value of the received goods or vice versa. The system would be able to understand which fentanyl supply chains tend to use a particular set of FIs. This makes it possible to conduct real-time mapping of companies, their fentanyl and precursor shipments and receipts, and the payment institutions they use. With this bigger picture, FIs and law enforcement could connect the dots faster.
Live traceability reporting
Today, suppliers of fentanyl precursors are subject to the Pre-Export Notification Online (PEN Online) database. This database enables governments to monitor international trade in precursor chemicals by sending and receiving pre-export notifications. The system helps prevent the diversion of chemicals used in the illicit manufacture of drugs by allowing authorities to verify the legitimacy of shipments before they occur.
To further strengthen oversight, the platform utilizes immutability technologies—such as blockchain or secure immutable databases—which can be employed to encrypt all shipping documents and securely share them. This presents an auditable form of chain-of-custody and makes any alterations apparent. Customs and buyers would have the capability to verify the authenticity of the originating documents in a way that doesn’t compromise business confidentiality. With the use of these technologies, law enforcement can narrow down their investigations.
An information gap currently exists as the receivers of the shipments don’t share their receipts information with PEN. To strengthen governance on fentanyl supply chains, regulatory policy and legislative changes are needed. The private sector should be mandated to report received quantities of fentanyl or its precursors, as well as suspicious receiving destinations. This could be accomplished on the platform which would embed the receiving process, a reconciliation process of the transaction, the secure upload and sharing of documents, and would be minimally disruptive to business processes.
Additionally, geo-location technology embedded in mobile devices and/or shipments would provide real-time location-based tracking of custody transactions. These geo-controls would ensure accountability across the fentanyl supply chain, in particular where shipments veer off or stop too long on regular shipping routes. Canadian transporters of fentanyl and its precursor chemicals should play an important role in detecting illicit diversion/activities.
Digital labelling
Licensed fentanyl manufacturers could add new unique digital labels to their shipments to get expedited clearance. For example, immutable digital labelling platforms enable tamper-proof digital labels for legitimate fentanyl shipments. This would give pharmacies, doctors, and regulators transparency into the fentanyl’s:
- Chemical composition and concentrations (determining legitimate vs. adulterated versions of the drug)
- Manufacturing facility ID, batch ID, and regulatory compliance status
- Intended buyer authentication (such as licensed pharmaceutical firms or distributors)
Immutable digital labelling platforms offer secure role-based access control. They can display customized data views according to time of day, language, and location. Digital labels could enable international border agencies and law enforcement to receive usable data, allowing legal shipments through faster while triggering closer shipment examinations for those without of a digital label.
International and domestic transporter controls
Transporters act as intermediaries in the supply chain. Their operations could be monitored through a regulatory policy that mandates their participation in the platform for fentanyl and precursor shipments. The platform would support a mobile app interface for participants on-the-move, as well as a web portal and application programming interfaces (APIs) for large-size supply chain participants. Secure scanning of packaging at multiple checkpoints, combined with real-time tracking, would provide an additional layer of protection against fraud, truckers taking bribes, and unauthorized alterations to shipments and documents.
Regulators and law enforcement participation
Technology-based fentanyl controls for suppliers, buyers, and transporters may be reinforced by international customs and law enforcement collaboration on the platform. Both CBSA and law enforcement could log in and view alerts about suspicious activities issued from the FIs, transporters, or receivers. The reporting would allow government personnel to view a breakdown of fentanyl importers, the number of import permit applications, and the amount of fentanyl and its precursors flowing into the country. Responsible regulatory agencies—such as the CBSA and PCRMU—could leverage the reporting to identify hot spots.
The platform would use machine learning to support CBSA personnel in processing an incoming fentanyl or precursor shipment. Machine learning refers to AI algorithms and systems that improve their knowledge with experience. For example, an AI assistant on the traceability system could use machine learning to predict and communicate which import shipments arriving at the border should be passed. It can base these suggestions on criteria like volume, price, origin of raw materials, and origin of material at import point. It can also leverage data from other sources such as buyers, sellers, and banks to make predictions. As an outcome, the shipment may be recommended to pass, flagged as suspicious, or deemed to require an investigation by CBSA.
It’s necessary to keep up to date on new precursor chemicals as the drug is reformulated. Here, Health Canada can play a role, using its new labs and tests—expected as part of the recently announced Canadian Drug Analysis Centre—to provide chemical analysis of seized fentanyl. This would inform which additional chemical supply chains should be tracked in the PCRMU’s collaborative platform, and all stakeholders would widen their scope of review.
These new tools would complement existing cross-border initiatives, including joint U.S.-Canada and U.S.-Mexico crackdowns on illicit drug labs, as well as sovereign efforts. They have the potential to play a vital role in addressing fentanyl trafficking.
A robust, multi-pronged strategy—integrating existing safeguards with a new PCRMU traceability platform—could significantly disrupt the illegal production and distribution of fentanyl. By tracking critical supply chain events and authenticating shipment data, the platform would equip law enforcement and border agencies in Canada, the U.S., and Mexico with timely, actionable intelligence. The human toll demands urgency: from 2017 to 2022, the U.S. averaged 80,000 opioid-related deaths annually, while Canada saw roughly 5,500 per year from 2016 to 2024. In just the first nine months of 2024, Canadian emergency services responded to 28,813 opioid-related overdoses.
Combating this crisis requires more than enforcement. It demands enforceable transparency. Strengthened governance—powered by advanced traceability technology and coordinated public-private collaboration—is essential. This paper outlines key digital controls that can be implemented by global suppliers, Canadian buyers, transporters, customs, and financial institutions. With federal leadership, Canada can spearhead the adoption of proven, homegrown technologies to secure fentanyl supply chains and save lives.
Sean Parker is a compliance leader with well over a decade of experience in financial crime compliance, and a contributor to the Macdonald-Laurier Institute.
Dawn Jutla is the CEO of Peer Ledger, the maker of a traceability platform that embeds new control processes on supply chains, and a professor at the Sobey School of Business.
Peter Copeland is deputy director of domestic policy at the Macdonald-Laurier Institute.
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2025 Federal Election1 day ago
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