In this episode of This Week in AML, Elliot Berman and John Byrne unpack the latest developments in financial crime compliance. They discuss the U.S. Court of Appeals decision upholding the Corporate Transparency Act, new guidance from France’s TracFin on detecting shell companies, and FATF’s mutual evaluation of Belgium under its updated regime. The conversation also covers global civic space concerns, major enforcement actions in the U.S. and UK, IRS-CI’s annual report highlights, and the OCC’s conditional approval of crypto trust charters. Plus, breaking news on sanctions and fentanyl designations.
Corporate Transparency Act Upheld, FATF Updates, and Global AML Insights - Transcript
Elliot Berman: Hi John. How are you today?
John Byrne: I'm good. Good morning. How you doing today?
Elliot Berman: I am good. I know you know what the weather is because you're you're here in Milwaukee, so we're looking out the windows at the same weather. Pretty nice day actually.
John Byrne: Yes. Through the amazement of technology, we can do podcasts in the same city miles away.
Elliot Berman: Right. We don't have to be 1200 miles apart.
John Byrne: That's right. That's right.
Elliot Berman: What would you like to, uh, start with?
John Byrne: The FACT Coalition, who we've, uh, mentioned many, many times issued a press release on a of US Court of Appeals decision upholding, uh, the Corporate Transparency Act. So that happened late yesterday. It's the Court of appeals for the 11th circuit. It reversed a lower court decision finding in favor of the CTA.
And quotes from the FACT Coalition included, Congress already gave our country's law enforcement and national security officials the tools they need to address money laundering through shell and front companies. It's long past time that we empower them to start using these tools to protect our communities. Everybody knows the Treasury earlier this year eliminated the requirement for domestic entities to file. So, this is a victory for the constitutionality of CTA. From a practical standpoint I don't know where this goes next.
Elliot Berman: Yeah, well, there's two choices. Procedurally the government could appeal to the Supreme Court, which would then decide if they want to take the case or not. They could drop it saying, well, it doesn't have a practical effect. They could be influenced by it to actually think about revising the, uh, changes they made. I think right now the likelihood of that is zero. But I think it's interesting because we saw a couple other things where shell companies were a particular key factors. So TracFin, which is the French national FIU, issued guidance on detecting illicit shell companies just in the last couple days.
They highlighted some key traits of shell companies. Continuous renewal of legal entities and bank accounts, a lack of real economic activity, and fast and numerous fund transfers. Known in the payment space as velocity. And they issued what they called warning criteria to identify shell companies. I think in the US we often call those red flags.
Same thing though. Company has recently established and or the manager's profile seems inconsistent with the position. The same manager owns multiple companies. The company's corporate purpose is, vague import, export or something like that, or indicates a sector exposed to fraud or undeclared work.
A significant volume of transactions are there for a recently established company, the speed of credit and debit flows and outbound flows to companies unrelated to the sector of activity or to entities in foreign countries. A reminder from TracFin to companies and others in France, but also important reminder for all of us.
John Byrne: FATF yesterday issued their mutual evaluation of Belgium. According to the description the system is technically largely aligned with FATF recommendations but significant improvements are still needed to improve the effectiveness of the measures in some areas, including relation to rules regarding virtual assets.
But relevant to what you just said about TracFin, the section on beneficial ownership just two quick bullet points. Belgium has a general understanding of the money laundering, terrorist financing risks to which legal persons and legal arrangements are exposed, which, uh, should be further developed. And the creation of Beneficial Owner Register has enabled the country to expand its multi-pronged approach to accessing information on beneficial owners, and it's a useful tool to accessing the necessary data.
Interesting reference because as we know, the US is going to be shortly, I guess it's already started, the throes of their evaluation and what FATF says regarding our lack of strong beneficial ownership requirements given what we just said is gonna be interesting.
Elliot Berman: Yeah. And the Belgium, mutual evaluation was done under the new regime, right? So we're starting to see the first reports come out. Related to that MONEYVAL, which is one of the, uh, nine FATF-style regional bodies announced that its evaluation of Latvia is complete, but that the report issuance has been a little bit delayed because of working through the process between MONEYVAL and FATF. But we're shortly should see another report done under the new regime.
John, I know there was one more thing about FATF. There was a nice piece put out by related to the, mutual evaluation process.
John Byrne: And it was interesting because I was looking at it, I thought not sure that we've mentioned this last week, uh, we had not, 'cause it came out after we we've recorded. So yes, they have on their website, they give you an outline a chart of how country's defenses against illicit finance are assessed. Um. Again, as you just said, it's under a new system and they remind everybody that these are in-depth peer reviews, that look at country's laws and regulations, and that the countries must demonstrate that they have an effective framework, which wasn't the case before. And they defined effectiveness as the core of the onsite visit where experts review evidence that the country's measures work and deliver the right results. And of course there's also technical compliance. They have a chart that walks you through how you set up the peer review process. Uh, they have something called a desk based review and then onsite, and then obviously the response.
So for those of you that are following any of the evaluations, this gives you a good sense and insight into, uh, the comprehensiveness of this process.
Elliot Berman: And it also reflects with this new regime, a change in the timing. Many of the mutual evaluations in the past have been done on a 10 year cycle. They're now moving to a six year cycle. And the evaluations were generally mapped out to take 18 months, and now they've sped up to 16 months. I think there's recognition that a good look more often is probably a good thing.
John Byrne: Absolutely. Our friends at Charity and Security Network in conjunction with Berkeley Law, their Human Rights Clinic, have just issued a report. It's Domestic Oversight of Counter Terrorism Measures. This reports from November, but it was just released. It's a 50 page document. Uh, they walk through, understanding the oversight of the counterterrorism measures. What are the legal basis for those things? Uh, how do they work?
And obviously what's very important from our perspective is their conclusion. And we've heard from the Charity and Security Network folks many times that they are continually concerned about what they see as I, I won't even say overreach, but the unintended impacts. Uh, so part of their conclusion says that it's well documented that the measures counter-terrorism measures impact civil space.
And the interviews that they did, stakeholders described impacts that cut across financial, reputational, operational, and legal domains. They, talked about, some of the things they've seen, existing models that they've referenced, including in Australia, the UK, and Norway do provide what they call helpful starting points, but will need to be remodeled from their perspective. And again, their overall goal here is to safeguard civic space against the overreach of counter-terrorism uh, measures.
Elliot Berman: Right. Charity and Security Network also issued a press release related to a report that was issued by the CIVICUS M onitor, a global watchdog group that monitors civil rights. The hot item for those of us in the US was that the US was downgraded, its civic space rating to obstructed. And the range is from the worst closed, repressed, obstructed, narrowed, and open. And we slid from what would be number two down to number three.
And the issues that were noted was the fact that there's militarized crackdown on protests here in the US, escalating repression against pro-Palestine activists, and media freedom being heavily under attack. And they talked about more broadly that civic freedoms are being curtailed in a record number of countries.
Civil society is under severe attack. This is according to the report, in 122 of 198 countries and territories. This year's report also saw that ratings changes were for 18 countries, 15 of them downgraded while three have been upgraded. And not surprisingly the handful of countries that are in the best zone tend to be the ones that also, for example, do well in the Basel AML index. Kind of a mindset approach to things in terms of the things that have to be done.
John Byrne: Back here in the States, uh, in New York. The New York Attorney General Leticia James has just announced the indictments of five people for dozens of crimes related to what they're calling years long bribery and money laundering schemes to secure favorable contracts from Delta Airlines at JFK Airport. Five people were charged with bribing Delta employees with approximately $250,000 in cash and trips to Vegas and Atlantic City. Quote from the Attorney General, when businesses bribed their way into lucrative contracts, everyday New Yorkers can suffer the consequences of worse service and higher costs.
So again, these are indictments. You can read more about it on their website just ag.ny.gov.
Elliot Berman: John, you had pointed out two reports. One was the IRS-CI Annual Report for 2025, and the other was His Majesty's Treasury, AML and CTF Supervision Report for 24- 25. You wanna start with one of those?
John Byrne: Sure. So on the UK one again it's on their website as all these are. Couple things, they outline the UK system-wide, AML/CTF performance, their supervisory activity. Positions financial crime controls within a broader framework of supervisory intensity.
So a couple of things jumped out. There are sections that describe outcome testing that show that the FCA is shifting toward evidence-based assessments of control effectiveness, moving beyond policy and procedural reviews. In addition, looking at risk profiles across sectors. Crypto asset firms continued supervisory challenges there linked to registration and travel rule compliance. Wholesale banking challenges related to correspondent relationships, what they call complex corporate structures. And the report emphasizes the collaboration, which is always important between FCA, law enforcement, and their intelligence partners.
I have not had the chance to jump through the IRS CI report, but as we as we've said in the past, these reports are not snapshots, they're great entire reviews of the the activity of IRS-CI. We've had the fortune of working with a number of the past CI chiefs. They do list just jumping through the table of contents. Pretty short report actually, but, uh, a lot of links to investigations. The significant cases that they referenced from 2025 include, North Korean Information Technology Scheme. A Bitwise Industries out of the Oakland Field office. Credit Suisse Services. COVID-19 pandemic fraud, which still continues to haunt all of us, and the TD B ank investigations.
And so, um, according to, Guy Ficco, our, our partner who's been active with the AML Partnership Forum and will continue to be, uh, in March. The message from him includes a snapshot of the investigative activities. 11% was done on narcotics. 63% of course on tax and 23.7% investigative time spent on non-tax issues.
And then they'll reference in there the global impact of IRS-CI's work and as we know from talking to Guy and Don and Jim Lee, one of the things that they're most proud of is the work they do with the J5. Uh, and that's the activity with CI chiefs from those various other countries. And that's referenced in here. And I guess one more thing, because our, also another one of our good friends, Lauren Kohr, who has been instrumental in making this successful, the work of IRS's CI-FIRST. Uh, it started in March of this year. And it's, uh, the ability of IRS-CI to work with financial institutions around the country.
And there's been a number of these CI-FIRST events, and they're all been welcomed by the private sector as really an excellent way to continue to share information between, um, between the private or public sector.
Elliot Berman: Glad you mentioned CI-FIRST. I think a, it's a worthy thing. We've talked a lot over the years between industry and government and the need for information sharing. And the CI-FIRST process is doing a great job of providing financial institutions with quantifiable results from IRS-CI and how the agency uses SARs to investigate crimes, which helps, the industry understand, okay, that's what was valuable, let's be sure that we're thinking about, uh, SARs in the right way to support investigations.
FCA in the UK did find Nationwide Building Society 44 million pounds, about 59 million US dollars for any inadequate anti financianal crime controls. They did not get a proper grip on financial crime risks that were in its customer base and took too long to address the flaws in its system.
A building society in the UK is similar to a savings and loan here in the US where they focus on personal bank accounts and residential mortgages. We're seeing more fines in the UK and the EU. And I think, this is just another example that everybody's gotta keep their eye on the ball.
Last thing I wanted to mention was the OCC has conditionally approved two National Bank Trust charters. One for Circle and one for Ripple, and they've conditionally approved the applications from three other, crypto platforms to convert their state trust banks to, uh, national charters. And the reason to do that is that lets you do business nationwide. These have not been finalized, but it would allow the companies to manage and hold assets on behalf of customers and settle payments faster. These charters, and I think we talked about this last week, these types of charters do not allow the companies to accept deposits or make loans. So that's the limited purpose nature of the charter.
John Byrne: Elliot, just, uh, right before we recorded, Trump has just announced a complete blockade of sanctioned oil tankers to Venezuela, and they are naming Maduro and the government of Venezuela, a foreign terrorist organization.
Elliot Berman: And yesterday the administration, I think it was an executive order, but I'm not sure that, designated Fentanyl a uh, weapon of mass destruction.
John Byrne: Yeah, it is an executive order.
Elliot Berman: John I know you and have already recorded two special editions of This Week in AML, one to post the day after Christmas, and one to post on the 2nd of January. So this'll be our last regular one, and then we'll be back on the ninth. Uh, anything else in the hopper that you wanna talk about?
John Byrne: Yes. So there's, uh, you know, this week we have our webinar reviewing global financial crime for the year. And so by the time you hear this, it'll have happened. But recordings will be available after that at some point. So that's one. I interviewed Sarah Beth Felix a week or so ago that's gonna post next week. And that's always an interesting conversation with somebody who's got their finger on the pulse of what's going on in the AML community. We are efforting a couple of other podcasts for early in 2026. And as always, if you're interested in a topic wanna hear from a speaker, whatever it might be, let either of us know. We'd be happy to pursue that.
Elliot Berman: John you have a good rest of the day. I'm actually gonna see you this evening. If you're sitting on the couch and you're tired of football I think our two special editions are worth a listen, and we're excited to be back with you in 2026.
John Byrne: Yes. Happy holidays everybody. Please, please stay safe.
Elliot Berman: Yep, you too, John. Bye-bye.