This Week in AML
This week, George Mason University published a report about Anti-Muslim Discrimination and Information Manipulation, the Basel Institute on Governance reported on successful efforts to improve public integrity in Peru, and the GAO issued a report on the need for more accurate collection of data on foreign investment in US farmland. John and Elliot discuss these items and others and their meaning for the financial crime compliance community.
Disinformation, Public Integrity, Foreign Investment, and More - TRANSCRIPT
Elliot Berman: Hi John, how are you today?
John Byrne: Hi Elliot, good. Warming up out here in the northeast and just in general. We faced more snow than we've had in a few years, but it's almost all gone. So that's all good. I know you guys, it's been a little chillier there, but my guess is you're probably in decent Milwaukee weather for January now, right?
Elliot Berman: Yes, we're in the mid 30s, and I think tomorrow, Friday, and Saturday, we're supposed to be right around 40. So the inch thick plate of ice on my driveway is receding.
John Byrne: Yeah, in the 40s, that's short sleeved weather in Milwaukee.
Elliot Berman: I know, you'll be able to run outside if you feel like it.
John Byrne: There you go. One of the benefits of doing this every week is as we challenge ourselves to make sure we're finding relevant information to pass on to everybody is all the various organizations and companies and colleges that produce reports that are definitely adjacent to our space. So I think that's been the one major benefit of doing this. You and I have been doing this for decades already, but from the international and academic perspective, so there's a couple, there's a couple of things we want to mention this week.
And the first one, I'll just jump in we interviewed folks from the Basel Institute of Governance for a podcast a few weeks ago, and they just produced a report that is very interesting but telling from an anti corruption standpoint. They looked at the country of Peru, and they looked at an example, and they called the report, Improving Public Integrity in Peru, and how regional governments can take the lead.
So their point is, corruption almost always gets talked about at the national level of any jurisdiction, which makes sense. But they looked at what Peru did regionally, the regional government of San Martin, of an example of what can be done, which they're calling at sub national levels, and in this particular case, to deal with public integrity and transparency.
Peru had its own National Integrity Index, and at the end of last year, San Martin came in first. That index is published by what they call their Council of Ministers, and similar to what the Basel Institute and what Transparency International do, they have these scales and they look at these various components.
And so they had scored a 1. 6 on a scale of 0 to 2, but to them, meaning the analyst, it's a significant progress in implementation there. And so they felt the Basel Institute that this warranted to be highlighted. And so what they focused on was targeted assistance on public finance management, which is an area where obviously there can be a lot of corruption, and environmental corruption.
So in those two areas they gave San Martin authorities a lot of credit for improvement. And just one quick quote here. The British ambassador to Peru, according to the report, congratulated the country in this focus, this way. It said that it's brilliant to see that UK support through, there's a fund called the Conflict, Stability, and Security Fund, to the work of the Basel Institute of Governance that tackle green corruption in the San Martin region of Peru is producing real results. And they're both giving themselves credit a bit for the dollar amount, but they're also saying that's a good highlight of what Peru's National Integrity Program is. Take a look at this. This is on the Basel Institute on Government Report page and their news and blog page, and was published on January 23rd.
Elliot Berman: Yes, and if you access This Week in AML from the AML RightSource website we'll link to it in the description of this week's episode. I did see that item, and what caught my eye beyond what you talked about is the fact that at the national level, Peru actually maintains a public integrity index. I'm not aware, and correct me if I'm wrong, John, but I'm not aware in the United States that the federal government monitors or manages such an index for the 50 states.
John Byrne: I think you're right. I don't think that does happen. I think any sort of analysis of corruption in the states would be from global groups like Transparency International or Global Financial Integrity. So I think that's right. If any of our listeners know that if we're incorrect, pop us a note. We'd be happy to correct that if that's not true, but I think that's right.
Elliot Berman: And if we don't, which we're pretty sure we don't might be something for us to think about.
Another thing we saw this week, an online pastor in Colorado, and this was reported in the Washington Post, was charged with civil fraud for selling a cryptocurrency that regulators described as practically worthless. His explanation, and I'm quoting here from the article, God told him to do it, although it's possible he, meaning the pastor, misheard.
But the Colorado Securities Commissioner filed a legal complaint against the pastor and his wife. The couple raised nearly $3.2 million by targeting Denver's Christian community with the cryptocurrency marketed as INDXcoin.
Why are we talking about this? First it did make us smile. But on the other hand, I think it's really important we've talked a lot over the years about fraud scams and things like that, and whether this was an intentional fraud or he really did mishear God, the point is that the buyers or the investors of this crypto asset really need to be, doing some due diligence as opposed to just saying yes because of who the seller is.
And I guess that's the cautionary tale from there, but wanted to share that one with you this week.
John Byrne: Hey, something we didn't talk about before we jumped on, but just came across my desk here is that the Treasury Department's OFAC announced today that, together with Australia and the UK, they designated an individual as a cyber actor who played a part in what they call the Medibank hack. That is an Australian health care insurer a ransomware attack, and this is an announcement of the many, obviously, but this is a basically a trilateral effort by UK and Australia. So just want to mention that very quickly.
Elliot Berman: And that ties into something you and I talked about in our separate podcast about trends for 2024. And that is more cooperative activity by the U S and other governments this year in terms of sanctions and and seeking out bad actors.
John Byrne: And as we mentioned in terms of reports I'm fortunate to be an adjunct professor at George Mason University's Scarr School of Policy and Government. And one of our colleagues with help from several researchers has just issued a report. And this report focuses on misinformation or the increase in the frequency of manipulation of information that attack Muslim led humanitarian and developmental aid international NGOs.
Obviously, with what's going on in terms of derisking and fear the financial institutions have regarding banking entities that are considered high risk either by the institution itself or by the government. If there is, in fact, manipulation of information to accuse without evidence, if that's the case certain groups of being connected with terrorist organizations, then obviously that's harmful for humanitarian groups.
So this is a 70 plus page think piece that I would urge folks to take a look at that was just released by George Mason. As I said they do have some references in there to potential solutions, but they do look at funding, how the tools are used to manipulate information, what are the various political networks. And then they certainly give you a review of the methodology used to arrive at their conclusions and their concerns.
So definitely an interesting take on an issue we've covered for quite a long period of time, that of derisking, but this looks at what they call over regulation and how that could be, Impacted if that's a result of reaction to misinformation. And some of the misinformation has to do with saying some organizations are tied to illegal organizations when that's not the case.
Others what they call legitimators that legitimize statements that are in fact false. It can be proven to be false. So it's a very interesting view of this and I want to give a shout out to Andrea Hall from InterAction. She let us know that this was going to be released and she's also gonna be part of our forum discussion in March on deisking.
But it's an interesting view of the tools used to confuse either financial institutions, government folks, or just potential customers about the use of charities or the misuse of charities. Which is unfortunate for obvious reasons, but also because there are cases in which organizations are tied to illicit activity or terrorist organizations, and that sort of negates the ability to determine that when you can't figure out what's accurate and what's not.
Elliot Berman: Yes. It's very interesting. And again it's a big report. So going too deep is going to be difficult, but they break the process into of three tiers. There are generators and they actually identify five organizations that they view as the principal generators of this manipulated information. Then the legitimators, as you mentioned, people who amplify it. And then the disseminators. News outlets or other organizations that then put this material out either through their website or other e-newsletters or other things like that.
If you go to our website to access this episode, we'll link to the report in the description of the episode.
John Byrne: Yeah, and part of the report has specific examples where there's been congressional response that the report authors would argue is based on false information. Whether they be letters to Attorney General Garland, or to the President, or the Speaker. Again to Elliot's point, it's worth your time to read this. This is an angle that, frankly, has not been discussed very much.
Elliot Berman: Last thing we want to touch on, and again, just quickly, the GAO published a report this week about foreign investments in U. S. agricultural land, enhancing efforts to collect, track, and share key information could better identify national security risks.
And there's been a lot in the popular press over the last several years about foreign investment, buying up land in the US. But this analysis coming out of GAO talks about who meaning which of the various government agencies would be aware of who's buying land and, whether or not adequate information is being collected and equally importantly shared so that to the extent that there are national security risk assessments that this information would be fully available in a real time format.
So again, a bit arcane admittedly, but a reminder to all of us that there are many different facets to risk assessments and at the federal level for national security purposes which, money laundering and fraud and things like that do factor into it. This regular commercial activity also makes the list.
John Byrne: That sounds good. Elliot, when this gets posted we will have finished our January webinar, but obviously we will be sending out portions of it in the future on human trafficking. Just a reminder again, this is Human Trafficking Awareness Month. And then I have a podcast scheduled for next week that will run sometime after that, with the Human Security Collective which we mentioned earlier, because they also have released a report that discusses derisking from various aspects. So that's coming up, and we are efforting some other interviews in the next couple of weeks.
Elliot Berman: Yes, and our February webinar will be the 22nd of February, 1 p m ET. By the time you hear this, you'll be able to register for it on our website, and it's about the challenges for both banks and financial technology companies of banking as a service. A very high profile issue these days with the regulatory agencies and with others, both the value of it and how to manage the risks on both sides of that commercial transaction. I think everybody will find it very interesting.
John Byrne: Sounds good, Elliot. You have a safe rest of your week, and we'll talk again soon.
Elliot Berman: You too and be safe in your travels.
John Byrne: Thanks.
Elliot Berman: All right. Bye bye.