This Week in AML

A Plenary and a New Report – Much to Discuss

The Financial Action Task Force (FATF) held a plenary last week. FATF also issued a report on Money Laundering and Terrorist Financing in the Art and Antiquities Market. John and Elliot discuss some of the outcomes from the plenary, including the suspension of the Russian Federation’s FATF membership. They also look at key take-aways in the report on arts and antiquities.



A Plenary and a New Report – Much to Discuss - TRANSCRIPT

Elliot Berman: Hi John. How are you today?

John Byrne: Good, Elliot. Things going well. We're both excited that the Marquette Golden Eagles won the Big East outright yesterday when they were picked ninth by the coaches in the beginning of the season. So that's always a great time in college basketball. It's March Madness.

It's gonna be a great few weeks no matter what happens with our teams. It's always exciting.

Elliot Berman: Yes. That's the number six Golden Eagles.

John Byrne: That's right. Yes. First time since I was a senior at Marquette. And you can do the math .

Elliot Berman: Did they have rankings back then, John?

John Byrne: Yes, they did.

Elliot Berman: This week actually late last week FATF, the Financial Action Task Force had one of its three yearly plenaries, and a lot came out and they also published a new report on money laundering, terrorist financing and arts and antiquities. I assume you saw both those notifications.

John Byrne: I did. And I was at the Puerto Rican banker's anti-money laundering symposium last week and next year actually be their 20th. And I've been able to participate in 19 of the 20th if I go next year. We talked a bit about some of the, some of those issues in panel discussions because some of it obviously translates into what our domestic institutions are working on, specifically beneficial ownership and that sort of thing.

But yeah, there's a number of things that came out of that, and I think the biggest highlight, and there's several, is FATF have suspended the membership of the Russian Federation for obvious reasons. Number of strong statements from FATF. From last year when Russia attacked Ukraine and they made a final decision during the plenary last week to suspend the membership of the federation, which obviously was an important not just statement, but an important move by the international organization that deals with, financial crime issues.

Elliot Berman: Yes. As you mentioned a moment ago one of the things that was prominent in the actions at the plenary were things related to transparency and beneficial ownership. You and I have been talking a lot about that. I know during our December webinar you had a extensive conversation about that with our panelists and it seems transparency and beneficial ownership just keep coming up from all different angles. The most interesting one to me is, the whole issue that FATFbrought out about having a registry be effective and accessible. And that's a conversation that we've recently had about the status of the proposed US one.

In fact, during our webinar yesterday, which was compliance for midsize banks, the topic was discussed about whether in its current form would BSA officers use the registry? And obviously it was a focus group of two, but in its current proposed form, people are not really seeing it being valuable. In fact, if anything, there's concerns that it might be a drag on operations.

John Byrne: And I think that's going to be the implementation, whatever it's gonna look like. But also the whole infrastructure that was created under AMLA, they're gonna have to go back to the drawing board. We don't know officially that's what will happen, but I don't think there's any question.

So I think when FATF, spends a lot of time on the issue of transparency and beneficial ownership and talks about the importance of utilization and then our, I say our, but some of our clients and certainly the members of the AML community say, you know what, we're not gonna use this because what's the benefit?

And also there's such a downside to making mistakes. I think that's more than problematic. So that to me was interesting. That was also a theme last week in Puerto Rico from a number of the practitioners there. So that was one thing.

FATF members also approved a report on disrupting financial flows relating to ransomware. There was also issues about looking at cyber enabled fraud and the use of crowdfunding for terrorist financing, which we've talked about before, of course. And then a series of mutual evaluations, which is always part of the plenary. And so there were final reports on Indonesia, Qatar, and several others.

And then some that they're no longer need increased monitoring. So that's some of those jurisdictions like Morocco, Cambodia, a lot of really good information there. Plus, of course, their listing of the timelines for upcoming mutual evaluations, which is always important. The other aspect of the plenary

besides what we've already talked about and something that I'm gonna drill down on in a separate podcast with Liz Vaccaro from the Antiquities Coalition.

We're gonna do the interview this week and post it, hopefully it's sometime next week. And money laundering, terrace financing in the art and antiquities market. So there's a final report that FATF previewed late last week, but they released it earlier this week and there's a lot of information in there, 55, 60 page report. We'll go into detail tomorrow, but that's also important globally, but also domestically because we do anticipate there'll be a regulation, probably not until 2024 now. It's what it looks like, but it's unclear how FinCEN is handling some of the deadlines because AMLA did require that antiquity, sellers, purchasers and advisors be under the BSA in some fashion.

So that's something that we're gonna see. I think what the report will do is give you some additional information on not just indicators, but filling out suspicious activity reports. Now, given some of the things that they highlight there, which I say again, we'll go into greater detail with the interview .

Elliot Berman: Yes. And as we do regularly, both the output of the plenary, the highlights of the outcomes, and a link to the report the Art and Antiquities report will be part of our posting on Friday. And then again we'll do it again when we post your interview with Liz which we'll post next week. When you are running through the countries that are impacted, there are two countries that have been added to the increased monitoring list that is South Africa and Nigeria which is interesting. For similar reasons I guess I would say. And you mentioned Indonesia.

Indonesia's interesting in that it has applied to move from observer status to member status. And having a mutual evaluation is one of the many steps in that process. And they got, FATF doesn't really give grades this way, the old teacher in me is they got a C+. Decent infrastructure, the technical infrastructures there. They've got the laws and all that stuff. In my words, not FATF's, it's not fully filtering through to, be fully functional for law enforcement, for the financial institutions, for the non non-targeted financial institutions. Still work to be done there, but they did indicate that Indonesia was still working toward membership.

John Byrne: Yeah. And the other thing they also highlight jurisdictions that what they say are subject to a FATF of call on its members and other jurisdictions to apply countermeasures. And the three countries are unchanged since a previous call. And that's of course North Korea unchanged since February, 2020. Iran the same. And then they mentioned Myanmar, I think I'm pronouncing it right. They were, they said in February of 2020 that they were gonna address their, what they been outlined, their strategic deficiencies.

But according to FATF, if they said that they need to continue to work on implementing plans to address those deficiencies, and there's a list of what they need to do.

The last part of that statement says that FATF urges Myanmar to fully address the deficiencies, but they will remain on the list of countries subject to a call for action until the full action plan is completed. So they get given some credit for starting that process, but clearly are not there yet.

And so FATF says that the enhanced due diligence measures need to be utilized by countries that are dealing with Myanmar.

Elliot Berman: Yeah. Dealing with any of those three countries is obviously a significant challenge in terms of an organization's risk framework. By the time this posts will have posted your interview with Tom Vartanian about the his new book, the Unhackable Internet, and tell us about the March webinar.

John Byrne: The March webinar is a look in detail into Wolfsberg. Their mission, their issuances of principles, guidance documents, comment letters with the executive secretary Allen Ketley and William Langford, who is I believe William is a co-chair, but he's an active member of of Wolfsberg and William and all of us go way back.

He started off as a treasury lawyer. Was atFinCEN and has been to several institutions and is a, certainly a key AML veteran. But he's been an a strategic director as a member of Wolfsberg. And so what we want to do is go into why an organization that looks at international financial institutions is relevant, not just to those institutions, but as an organization that has a financial footprint in terms of due diligence issues, correspondent banking, payment issues, all sorts of things.

So really looking forward to that because you and I are well aware of Wolfsberg and what they've been able to do in the past couple of decades, but I don't think our community is oftentimes as aware as they should be. So hopefully that'll help them do that. So that's coming up.

I also. An interview that I'm going to do actually today that we'll post in a few weeks on Marquette University's data science area and some of the work that they're doing on data privacy and how that impacts financial crime prevention professionals. We'll be doing that as well.

And always looking for additional topics, interesting people or organizations that you want us to highlight. So always feel free to send us those ideas. We'd be happy. Sit down with folks and have conversations. Yes.

Elliot Berman: The March webinar is March 23rd. It's at 1:00 PM Eastern and 5:00 PM GMT. And registration is open on the AML RightSource website. We'd encourage you to do that. The other thing John, let me give you a chance to give a shameless plug for the AML Partnership Forum.

John Byrne: Yes. So this will be the second year of the AML Partnership Forum. We're going to have it in Washington DC April 26th to the 28th.

A lot of information is available on LinkedIn from us and in other locations. The bottom line is it's not a traditional program. It is without press. There's no exhibit hall. It is private, public case studies. Presenters and an opportunity we feel, which it was last year, to share information, to share strategies on the whole host of financial crime challenges.

We have strong support from our partners in law enforcement, the FBI, Homeland Security and IRS. We're in the process of finalizing the agenda, which will cover a whole host of things. We're going to cap it. Attendance will be capped because we want the ability to have the audience engage directly with all the presenters and each other.

So don't wait on this. Again, in Washington DC three days, not three full days, starts at noon on Wednesday, ends roughly noon on Friday. The support we got last year was phenomenal and we're pushing through.

Elliot Berman: We encourage you to register for that. It's being held at the Mayflower Hotel in the District. And we look forward to seeing many of you there. So John we're gonna root on our golden Eagles for a final regular season game victory. And I will see you next week.

John Byrne: All right. Take care.

Elliot Berman: Bye bye.