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This Week in AML

A Busy Week in Financial Crime Compliance

John and Elliot discuss several items this week, including a posting by the International Consortium of Investigative Journalists (ICIJ), a comment letter by a group of bank trade associations on the FinCEN Beneficial Ownership Registry proposal, and the announcement that the Organized Crime and Corruption Reporting Project (OCCRP) has been nominated for the Nobel Peace Prize.



A Busy Week in Financial Crime Compliance - TRANSCRIPT

Elliot Berman: Hi John, how are you this week?

John Byrne: Hi, Elliot. This week at home, my wife's brother passed. Dynamite guy. Way too young. So it's a sad thing, but we're going have a celebration of his life on Saturday. So I would be remiss if I didn't mention it. Mike Chapman, just a great brother-in-law and a good family man, hardworking guy.

And so I know we all go through things like that, but again, I'd be remiss if I didn't mention it. That sort of put a pale over the week. But, as I know, a lot of people have things they need to get by. So we will, but we'll remember the good, all the good stuff .

Elliot Berman: Our sympathies are with you and Sue and the rest of the family.

I know you will get through it. Losses are challenging.

John Byrne: A very active week in the financial crime field, a whole series of things which we could spend, 20 minutes on each, which obviously we won't do. But I thought a couple things I wanted to highlight and then get your take on some of the things that we talked about before we jumped on here. One is my former organization, one of my former organizations, American Bankers Association, filed a comment letter with all of the state banking associations signed on, which is fairly rare. It's happened before, but it's fairly rare.

And this is on the beneficial ownership access proposal that we're obviously all well aware of. It's the second prong of three prongs under the Corporate Transparency Act of dealing with a really challenging issue, which we'll talk about a little bit later, about the need for beneficial ownership information.

But the comment letter is very detailed, but dramatic in its conclusion. They restate that the industry has long supported the establishment of the beneficial ownership registry. And that is true. Everybody wanted to see that being implemented and up and running, but it was also important that it reduces regulatory burden on regulated entities and small business.

But the strong statement here is they believe the proposal will not accomplish those objectives. So they want FinCEN, urge FinCEN to withdraw the current proposal and to reengage with the financial services industry and small businesses to develop a new proposal.

I say reengage, their letter says engage. I don't think that's completely fair. It was an open comment process. So small business was able to file comments as was the financial services industry. So re-engagement is a more accurate description of what the industry believes should happen. So I think that's important as we know.

The key here is Congress directed some of this, so to some degree FinCEN's outlining of access, restrictions were directed by Congress. So it wasn't necessarily coming out of FinCEN's own outline of the proposal. They were following congressional mandates and congressional directions.

I'm not sure how you fixed those issues, but it's clear if you're going to have a registry and you want the financial sector to be able to access that registry, it has to be logical. So you should be able to do things like use the information for a variety of purposes.

And it seems that's fairly limiting under the proposal. Folks who take a look at it, it's obviously on a various number of websites. People have reposted it on LinkedIn, but I think it was pretty important to reference that comment letter and the dramatic call to withdraw the proposal.

Elliot Berman: Yes, and I'm not saying that's never happened before.

Nothing jumps to mind in terms of major anti-money laundering regulations or proposals over the years where significant industry groups or others call for basically a do-over. We've certainly seen agencies withdraw proposed rules over the years where the comments, caused them to reconsider and decide that, different mechanisms other than what was proposed would happen. But I, again, off the top of my head, I don't recall a call for withdrawal as this one, this comment letter has in it. So it'll be interesting to see. What happens when the comment period closes and what FinCEN decides to do?

John Byrne: Yeah, no, I should say that even though it's rare, the one major one that sticks in my mind is the call to withdraw the know your customer proposal back in 1999 that our good friend Rick Small knows all too well. And that was also a very dramatic call. There was a lot of political pressure on that one.

This is more operational concerns by the industry. But that was one that those of us that were around then certainly remember that. But it's very it's fairly rare.

Elliot Berman: Yes. So another thing that we both saw the I CIJ, an organization we've talked about a number of times the International Consortium of Investigative Journalists issued a report. It's entitled How US Lawyers and Bankers Aided Powerful Haitian Tycoons Now Sanctioned Over Corruption by Canada. And we'll talk about the details in a little bit. That came out about a week ago. Some of the information goes back to the Pandora Papers.

It was prompted by sanctions issued against two Haitian financial elites, Gilbert Bigio and Sherif Abdallah. They were sanctioned by Canada at the beginning of December. There's a lot of twists and turns like there in are, and so many of these. One is that each of those people were also honorary consuls for different countries.

This sort of volunteer diplomat status that you and I have talked about before, one for Israel and one for Italy, which was kind of interesting.

John Byrne: Yeah. And the other part of this that the story goes into that both of them had links to almost 20 companies and trusts created in tax havens. That was obviously discovered in the Pandora Papers, but also, this is no surprise, lawyers and bankers in Miami provided the men with tax advice, letters of reference, and other services.

And the quote from the government in announcing the sanctions is as you alluded, Canada has reason to believe these individuals use their status as high profile members of the economic elite in Haiti to protect and enable illegal activity of armed criminal gangs through money laundering and other acts of corruption.

So this is a perfect example of the issues of offshore banking, tax havens, corruption, and enabling by professional service providers.

Elliot Berman: Yes. And Haiti is a country that suffered financial instability and certainly enforcement instability as well as significant political challenges over the last, I don't know, several decades at least.

John Byrne: Yeah. This, these are just awful people. It's awful people taking advantage of the Haitian population. It's just it's, you just can't even describe it. One of the most active helpers, according to the story is the

Miami based firm, Packman, Neuwahl & Rosenberg. And of course they do a great job, ICIJ.

And one of the things they discovered was a letter where the founder, co-founder, Rosenberg, and the 2010 letter of reference to help Bigio said, my firm has been doing business with Gilbert for 10 years, and we found him to be of utmost integrity, to be extremely moral and professional. And then lightning struck him.

Elliot Berman: That's right. Something happened. It is interesting the whole process that various professional firms, professional service firms, whether they be lawyers or accountants or others, what vetting do they actually do before they issue these letters.

And I think that varies from firm to firm. Some firms I think, are very public minded, but they're also very risk averse. And so as a result, they want to know who they're doing business with. Doesn't mean they won't do business with them, but it might limit the kind of business they do based on the vetting they do.

There's a spectrum there. There are those firms that are less concerned about who they're doing business with, as long as there's business. I don't know this firm. This is the only exposure I've had is, what's in this article. So I'm not saying where they fall on the spectrum, but it doesn't surprise me that someone who would need such a letter and might have things in their background that were discoverable that might keep them from getting the services they want from a bank in Switzerland, could in fact find a firm that could help them this way.

John Byrne: I would just say ICIJ does great work. But we also saw something announced recently and I know you flagged it for us with another organization in terms of them being n minated for the Nobel Peace Prize. Talk a bit about that.

Elliot Berman: The Organized Crime and Corruption Reporting Project, two members of whom joined you for our December webinar, has been nominated for the Nobel Peace Prize. A professor at a university in Amsterdam who's eligible to make nominations, said in his letter that OOCRP contributes to peace by unmasking political corruption and organized crime.

You and I have had a number of conversations about the connection between political instability and corruption and organized crime. That was a part of the conversation that you had during the webinar. And I thought it was

interesting that someone focused on it to the extent that they actually put them in nomination for the peace prize.

I know nothing about the Peace prize decisioning process. How many nominations they get and all of that. I'm totally ignorant about that. But it was interesting for me to see the connection that you and I talk about regularly, and that others in the financial crime compliance community talk about regularly, governmental officials and others, that someone took it to the next level and said, yeah that, that's important in these, this particular group along with many others do really important work to try to stop that from happening and therefore, among other things help build a lasting peace.

John Byrne: Yeah. In the Organized Crime Corruption Reporting Project, our good friend and colleague, Kevin Hall was on our webinar and he's been great. Oh. I've known Kevin for many years. The other part of this, like ICIJ in terms of having investigative journalists, they created something a bit ago called the Global Anti-Corruption Consortium that they do in conjunction with Transparency International.

It's about the seventh year of their formulation. And they look at things like how money laundering operates along various international financial systems and then exposing the corrupt exploitation of things like natural resources. They do a lot of interesting things and we need investigative journalists and these two organizations, among others, do a great job.

Elliot Berman: Yes. So we'll watch and see if they're the winner. John, what else do you have that you're working on?

John Byrne: I interviewed a banking law expert that I've been able to talk to before. Tom Vartanian. Tom has just recently published book, actually today it came out. It was released today. Dealing with internet related issues.

It's called Unhacking the Internet. Tom and I talked late last week. So that'll get posted fairly soon. Just a super super great banking expert. He's done so many things. He has his own cybersecurity center. A lot of that'll be in that interview. So that's coming up and I know we have in the pipeline some interviews that we've been able to do with Homeland Security.

That's coming up. And then, we're just planning some add additional programs and maybe you can tell them about what's happening in February.

Elliot Berman: Yes, , our February webinar, which is Tuesday the 28th, you can still register at our website, is about compliance at mid-size banks. Talking about the challenges and how midsize banks try to overcome those challenges based on the expectations that are put upon them, as well as the resources that they have to allocate. So I think that'll be really good. And that's being moderated by our colleague Chuck Taylor.

And then I also want to give a shout out to one of our other colleagues, Rachel Detmer. The first of a five part series of blogs that she wrote taking a look at 2023 market outlook b was published today. It was the one focusing on the UK and the EU. And Rachel looks at five global regions and the outlook in the financial crime space in each of those regions for this year. You can find that on our website.

John Byrne: That sounds great. Elliot, have yourself a good rest of the week and we'll talk again soon.

Elliot Berman: Yes. I hope you and the family have an easy time this weekend.

John Byrne: Thanks so much. Take care.

Elliot Berman: Bye-bye.