EU Blacklists Russia, Crypto Crackdowns, and U.S. Regulatory Shifts

In this episode of This Week in AML, Elliot Berman and John Byrne unpack a pile of developments across the globe. From the EU’s decision to add Russia to its AML blacklist and phase out Russian gas imports, to major enforcement action against a crypto mixer, the conversation dives deep into the evolving financial crime landscape. They also cover Canada’s updated guidance on politically exposed persons, U.S. alerts on cross-border transfers, OCC’s changes for community banks, and a surprising OFAC penalty tied to real estate sanctions. Plus, insights on humanitarian access challenges and upcoming year-in-review discussions. Stay informed on what’s shaping compliance and risk management today.

EU Blacklists Russia, Crypto Crackdowns, and U.S. Regulatory Shifts - Transcript

Elliot Berman: Hi John. How are you today?

John Byrne: Good, Elliot. Hope you had a great Thanksgiving week last week and, uh, I know you guys got some snow. Are you still dealing with that?

Elliot Berman: You know, Milwaukee's good at moving snow 'cause we get it. Mm-hmm. So, uh. Things are okay. It's certainly below average in terms of temperatures. Today's supposed to be 30, but I think tomorrow the high is supposed to be 17, so it'd be nice to still be in the thirties, or even low forties. But otherwise, we're okay. And, uh, we had a great Thanksgiving. You too.

John Byrne: Yep, we did. We had all three of our grandkids. So was that was great. Um, there's so much going on there's no way we can cover all of it this week. So we're gonna do our best. In part, 'cause some of this occurred during Thanksgiving week, but obviously a lot also occurs every day, as we've talked about many, many times. But I wanna start off with a head scratcher here among many head scratchers throughout 2025.

The Trump administration or the President specifically has pardoned the former Honduran president, Juan Orlando Hernandez, who you may remember, was convicted by a US Court last year on charges that he ran a narco state that helped send South American cocaine to the United States. This was a jury trial.

The investigations happened during multiple administrations. He was released earlier this week from a penitentiary where he was supposed to serve 45 years in prison. Again as we are attempting to, uh, deal with narco terrorism transnational criminal organizations. The fact of this, pardon is baffling to say the least.

And I will say today, prior to the recording I will, uh, just put it this way, I was watching a report where a member of the Senate was asked what he thought of this pardon? And the answer was, I haven't had a chance to do research on that, so I don't wanna opine on something that I'm not aware of.

The reporter followed up with the specifics, and this particular individual said, I'm sorry. When I don't, uh, have enough research, I don't respond with a point of view. I find that also extremely interesting. I'll just leave it at that.

Elliot Berman: I don't know what to do with that.

John Byrne: There's nothing you can, there's nothing you can do with that. I should also say that right before we recorded Trump also pardoned of Democrat, uh, former, uh, representative Henry Cuellar, who he and his wife were convicted of bribery. And was, uh, uh, supposed to be serving I don't remember what the prison sentence was and he was pardoned as well. So again, uh, bipartisan pardoning, I suppose is the way to look at some of what's been going on.

Elliot Berman: Alright, so let's go international first. A bunch of things going on in the EU. I would say the most interesting is that the, uh, European Commission has, uh, decided to add Russia to the EU's AML Blacklist. This has not been publicly announced, but there have been several leaked reports and it's the result of members of the European Parliament requesting that Europe really focus on its own blacklist and not just follow FATF.

As we know, FATF has not blacklisted Russia since the invasion of Ukraine. They have suspended their membership, but that doesn't have the same effect. Uh, it'll be interesting to see what happens here, and this will apply in the EU to, uh, financial institutions, uh, real estate firms, insurers, and others.,

John Byrne: Staying with the EU a report I just was able to see is that the EU has, uh, clinched their deal to phase out Russian gas imports by 2027, and that will end the, uh, the block's 57 year energy relationship with Moscow. They struck this agreement early this morning to phase out this, as I said, by 2027.

And according to one of the the Finnish member of Parliament, what happened today is historic achievement with Europe, showing that we will never again be dependent on Russian gas, and there will be a permanent exit from it. And that's obviously related to what you just, uh, referenced.

Elliot Berman: Yes. The EU also has taken down an organization called Cryptomixer, which is a, uh, cryptocurrency mixing service suspected of helping cyber criminals, launder stolen funds. And, uh, according to a press release from Europol Cryptomixer has mixed over 1.3 billion in Bitcoin since it's creation in 2016.

For our listeners who aren't familiar, crypto mixers scramble crypto from different users. This obscures the origin of the destination to the funds, so making them more undetectable.

And related to that but this is in the US, an organization called Samourai Wallet was announced by the US Attorney's O ffice in the Southern District of New York that the two founders of that organization, uh, were sentenced one to five years, one to four years. The interesting thing about this is that this cryptocurrency mixing application was explicitly designed to hide illegal financial transactions. A number of years ago, these two fellows sat down and said, there's an underserved market here and we need to build a product to serve that market.

And went on to the Dark Web and other places to actually solicit users of their service. So this was a money laundering project, not someone who got into it by mistake. So kind of interesting.

John Byrne: Switching over to Canada. A couple things to reference. One is FINTRAC updated its compliance guidance on politically exposed persons. Obviously a lengthy document that you should read. Couple things I just wanna highlight that they, expand the definition of a domestic politically exposed person, something that we don't see here in the states, obviously. And they also explain who is a foreign politically exposed person and the compliance requirements that go with that.

They also do add in, um, international organizations. Actually the definition is quote, head of an international organization, unquote. And there's also some requirements with that. Family members are referenced in there as well. Pretty lengthy document. I've looked at some things. Somebody that we follow on LinkedIn that I think folks should follow if they don't already is Matthew Coughlin.

Matthew's really great at explaining some of these things that he goes through, and he gives you his take on, uh, some of the highlights there. But that's the one aspect of, , what we saw with, um, FINTRAC that I wanted to highlight. And there was one more Elliot. ,

Elliot Berman: Yeah. They published a new operational alert related to laundering the proceeds of online child sexual exploitation.

John Byrne: Yes. Right, exactly.

Elliot Berman: An important document for people to read. I know many of our listeners are not in Canada, but I think many of the documents that come out of FINTRAC. have good instructive sections for us regardless of where we're located. Because many things like this problem are global problems and the commonalities are much more than the inconsistencies.

That would be another one to look at both on the FINTRAC available on the FINTRAC website.

John Byrne: Coming back to the US. A couple things to highlight. On the Senate side uh, Senator Elizabeth Warren, Chris Van Holland sent a letter to the Treasury and others. Uh, this is related to what we've talked about, uh, since it occurred, and that is the pausing of the Corporate Transparency Act, or at least, uh, I wouldn't call it the pausing, the, uh, elimination of domestic entities having to report under the Corporate Transparency Act. Holland and Warren are making the connection that there is the need to reinstate those requirements because of the Chinese money laundering networks that everybody on both sides of the aisle has highlighted it as a major concern for law enforcement and national security.

Elliot Berman: The issue that they specifically mention, a recent situation that used over 100 shell companies to launder, multimillion dollars worth of narcotics proceeds. So the connection there is, uh, Corporate Transparency Act was intended to demystify shell companies and make them ineffective as a place to hide, uh, illegal gains.

And yet while we're worried about Chinese money laundering organizations, which have essentially turned money laundering into a service. We're taking apart , bipartisan supported tools. So we'll see where that goes.

John Byrne: You wanna mention, uh, what FinCEN did, they issued an alert, and then I wanna reference a couple of OCC items after you do that.

Elliot Berman: Sure. So they issued a new alert on cross border funds transfers involving illegal aliens. So, uh, the alert focuses on the effort to prevent exploitation of the US financial system by illegal aliens seeking to move illicitly obtained funds including by moving them cross border.

This is related in some ways to the, um, geographic targeting orders to MSBs along the southwest border. They noted that they previously cautioned that bad actors have used low dollar cross border funds transfers to facilitate or commit terrorist financing, narcotics trafficking, and other illicit activity.

They did acknowledge that many remittances that go cross border are legitimate. And, uh, like most alerts, they indicated that if you file a SAR related specifically to this, there's particular language they want you to put in Field 2. You can see the alert for that. Worth a quick read. It's only two pages, so not in depth, no red flags. Not a lot of distinction between what it's targeted at, and the large volume of legal remittances, that are flowing.

John Byrne: The Office of Comptroller of the Currency and their current Comptroller, Jonathan Gould has testified before the House this week. And you can take a look at the written testimony, but a couple things the OCC has done in the past two weeks that warrant reference. One is, uh, Bulletin 2025-37, and this is, uh, amending the examination procedures for community banks. And so there's reference throughout the bulletin that they're attempting to reduce burden on community banks, and they do make some statements suggesting there's less of a risk with community banks regarding, uh, certain activities in the financial crime space.

I leave for others to debate that question. But the highlights, if you will, of the bulletin include giving examiners discretion to place reliance is appropriate on independent testing that forms a basis for conclusions for exam procedures. Allowing them to carry forward prior cycle examination conclusions for one cycle for the training and BSA compliance officer pillars In instances where there's not been a significant change to the bank's risk profile.

Which is also interesting 'cause as we know, risk assessments need to be done on a fairly regular basis to determine if you're adding new products or new geographic regions that could expand your risk profile. And then whether the extent to perform transaction testing or limit testing to analytical or other reviews.

Before I mention anything else, , jumps out at you Elliot?

Elliot Berman: If the idea that community banks present less risk because they don't pro present systemic risk, I guess I would agree with that. But there are community banks that fit in that definition now that are pretty big.

John Byrne: Right.

Elliot Berman: And we have seen both procedure or process issues across the spectrum of banks, both size and geography, but there have been some significant money laundering events happening through banks and I've said before, a lot of this dialing back of regulations may be setting us up for the next banking crisis, it probably won't be mortgages, but it'll be something. Maybe it'll work on the ground, but I'm not convinced yet.

John Byrne: So interestingly enough, the other thing that they did that, that you highlighted for me, uh, around the same time is they will no longer collect information through the money laundering risk system, the MLR system.

And according to the bulletin, they say they're immediately discontinuing the mandatory data collection. They believe there's alternative less burdensome means of assessing banks money laundering are terrorist financing risk, and they think it's no longer necessary. They said this is part of the OCC's ongoing commitment to appropriate risk based supervision.

So again, this data will no longer be available. Take a look at the bulletin to see what alternative methods they are actually referring to. I guess the last thing to mention is Gould also put on the OCC LinkedIn page a statement on a report issued by only the majority of the House Financial Services Committee was not a bipartisan report on quote de banking unquote. You can check out the website and the report is under the auspices of the Chairman French Hill and the subcommittee chairman Dan Meuser. This is titled Operation Choke 2.0, Biden's Debunking of Digital Assets unquote.

Based on what's in the 53 page report, don't take our word for it take a look at it, that there was a targeting going on during the previous administration of entities that dealt with digital assets. And that because of the executive order that we've talked about earlier this year and other legislative policy discussions that this is going to be addressed completely going forward. I don't know what else to say about this. Read the report. I've said you to this group before, folks that listen to this. I think the whole de banking, uh, characterization is, uh, flawed at best.

We've worked very closely, Elliot and I and others with the de-risking issue that affects our partners in the humanitarian world. That's not mentioned anywhere in this report. It is solely focused on digital assets. And so, uh, take a look at the report. We will certainly do follow up conversations about that, about this going forward.

Elliot Berman: OFAC in issued a, uh, $4.6 million penalty on an individual for violating Russia sanctions and reporting obligations. I think it was last week that it came out. The interesting thing about this is it involved a piece of real estate owned by someone who was on the SDN list related to an oligarch and they were added to the SDN list in March of 2022 in the wake of the Ukraine invasion.

The interesting thing was when the property went into foreclosure, OFAC sent a notice to the local county registered deeds saying, this is blocked property. And they put that in the public record. The person who bought the property would've been aware of that. They then proceeded to go and get a mortgage on the property to do rehabbing and made a statement to the lender that they had free and clear title, which of course they didn't 'cause it was blocked property and then later sold the property without disclosing any of that to the buyer.

It was very weird to me that someone would just keep plowing ahead after getting a subpoena, a cease and desist order, all this official stuff from OFAC and just plowed straight ahead. So now they have the maximum statutory penalty of $4.6 million. And the aggravating factor, of course, is the continual intentional violations.

One of the articles that I read about this commented that this does continue to show that there is sanctions risk that's relevant in the real estate space related to blocked persons and blocked assets. So, I think an oddball, but an expensive oddball.

John Byrne: Last thing real quick. Maybe we'll talk more about this going forward 'cause uh, there are some meetings in the next couple weeks dealing with the de-risking issue, financial inclusion issue, financial access issue as it relates to humanitarian groups that we've been working on for quite a while. But wanted to just mention that last week, the UN H uman Rights Office issued a report entitled Ensuring Respect for Human Rights while Taking Measures to Counter the Financing of Terrorism. So this report was long awaited and it talks about the definition of terrorist financing. Financial intelligence issues. It also looks at the impact on nonprofits and humanitarian groups. But they also talk about the nexus of terrorism financing and trafficking in persons. Excellent analysis of something that's, it's a pretty I'll call it a pretty nuanced area of focus in CFT, but, uh, it's something that obviously continues to challenge everybody.

And again, this report had been long awaited. I did an interview with folks from the Human Security Collective a couple weeks ago that's been posted. They talk about the concerns with Recommendation 8 from FATF. So this report is sort of consistent with the issues related, from that conversation.

Elliot Berman: John, I know that you're gonna be moderating our December webinar on the 18th of this month, and people can still register for that at our website. And it's gonna be a year in review. So people should, uh, sign up and join that. And I know you got a couple of, uh, interviews scheduled for podcasts. You wanna talk about that?

John Byrne: Yeah, I'm actually efforting a few of them. We will have one with, uh, the very famous in the AML world, uh, Sarah Beth Felix, who I've asked and she's kind enough to agree to do this and we're gonna do it next week. Give her take on the year in review. Elliot and I will do ours separately at some point as well. But Sarah follows all aspects of the AML community in terms of regulatory issues. So I wanna get her take as a both a practitioner and she's also a banker. So that's coming up.

And then I have what I hope will be something that folks in the AML space who might not think this is a spot that's directly connected to us, but I believe that it is. I'm going to be talking to a professor from Marquette University later this week on the whole issue of justice and peace and how it relates to both national security and accountability. So that's this week as well. And as always, if you're interested in doing a sit down , with us, please feel free to reach out.

Elliot Berman: John, you have a great rest of the week and I will talk to you next week.

Sounds good. Take care.

You too. Bye bye.