EU Sanctions, FATF, AUSTRAC, and NYDFS

This week, John and Elliot discuss new Russian sanctions from the Council of the European Union, new UK AML requirements for art dealers, a call to action from FATF, Interpol, and UNODC, AUSTRAC’s second public consultation on new AML/CTF rules, an alert from NYDFS about scammers impersonating crypto service providers, and other items impacting the financial crime prevention community.

EU Sanctions, FATF, AUSTRAC, and NYDFS - Transcript

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

John Byrne: I'm good, Elliot. As I mentioned class that I teach at George Mason University grad school starts this evening. Since it's on money laundering, terrorism, and corruption, like our, This Week in AML, don't necessarily know from week to week what articles and what issues we'll cover, even though we do have a syllabus, so this'll be an interesting eight weeks. So I'm looking forward to interacting with these students.

So why don't we just jump into internationally a couple things. I saw that FINTRAC, the FIU in Canada, were officially recognized by the Royal Canadian Mounted Police in an investigation where an individual pled guilty to two terrorism related charges. Raised over $15,000 through crowdfunding platform, which again, we've talked about that as a red flag in the past, using crowdfunding. And contributing over $35,000 to the benefit of Daesh, which as we know is a listed terrorist organization. According to the note from the Mounties, this is the largest terrorism financing conviction to date in Canada in terms of the monetary value.

That was one item we wanna mention and then because, as we are recording this, things continue to go back and forth regarding Ukraine and Russia I thought it was important to recognize that the the Council of European Union issued their 17th package of sanctions. Continuing to respond to Russia's war of aggression against Ukraine. According to the note from the Council, an additional 17 individuals and 58 entities were sanctioned. A port access ban on 189 further vessels in Russia's shadow fleet and further export bans according to the press release.

That package of sanctions is part of a broader set of EU measures that also target Russia's hybrid activities, human rights violations in Russia, and the use of riot control agents by Russian forces in Ukraine. And that information is obviously available on the website, europa.edu eu Sorry.

Elliot Berman: As you and I talked about when it was happening, and as our listeners will recall earlier on during the Russian Ukraine war these packages were often coordinated with US action and UK action and UN action. And while these are in the same topic area, shadow fleet, and energy and others this package came out with EU action alone, so far. We may see coordinated action, but again, early on, some of the sanction releases occurred on the same day. So we'll see where that takes us in the future.

John Byrne: Got some more items, but why don't you go ahead. What do you have?

Elliot Berman: Staying with Europe the UK has new responsibilities by art dealers in terms of having to comply with sanctions reporting rules. These kicked in on May 14th. You and I have talked a lot and we continue to talk a lot about the risks, the art market provides and the fact that it is mostly unregulated in the United States and there doesn't seem to be an appetite to push that forward. In the UK and other parts of the world that's not true.

And this is a case where increased due diligence on riskier of clients will be required. And it was an action by the Office of Financial Sanctions Implementation, which is OFSI. That's part of the Treasury in the UK. And there's a long list of guidelines that if you're impacted by these or you're concerned that a client may be impacted and whether or not they're following the rules you go to OFSI's website and take a look at all of these things.

These responsibilities even include transactions that have already begun. And if the art dealer feels that they would be covered, then they have a requirement either to report and also to freeze assets. Interesting to see that other parts of the world are viewing the risk profile of art dealers differently than we are so far in the US.

John Byrne: Yeah, that's not an understatement, but close. Also, since you mentioned Europe, earlier this week was the first day of the 34th year session of the Commission on Crime Prevention and Criminal Justice. And a call to action from leaders of FATF, Interpol, and the UN Office of Drugs and Crime. So this meeting was held in Vienna. And the statement is, they're calling it a call to action, to define innovative and scalable solutions to combat economic crime. They've called for greater efforts to fight crime and terrorism.

FATF specifically said that they're are tightening standards for asset recovery, which is an essential part of dealing with terrorist funds. Later this year, these organizations will join with the Egmont Group of FIUs and release what they're calling practical guidance for practitioners on key avenues of international collaboration.

Again, a statement, a purpose, a mission if you will, but still important. Especially given some of the chaos going on in certain jurisdictions regarding what laws and regulations are gonna actually be enforced and or implemented.

Elliot Berman: I thought what was additionally interesting in that statement was they spoke about the importance to fight crime and terrorism by cutting off the profits that enable them. So it seems obvious, as follow the money is still really valid and important. And as you mentioned about asset recovery, they noted that almost 80% of the over 200 countries that are involved in FATF directly or indirectly, are at a low or moderate level of effectiveness on asset recovery.

So lots of great things happening globally where countries are working hard to do the right thing. But asset recovery is something that I would say globally we're still struggling with.

John Byrne: I agree. Absolutely. Also happening outside the states we did an interview on the first public consultation way, way back some point last year. But the second public consultation on new AML/CTF rules have been issued by AUSTRAC for public comment. So they've made changes to the first exposure draft, which again we talked about .

And according, , to their notes, they said updates that they want public comment on include, allowing delayed initial customer due diligence in a wider range of circumstances, providing greater flexibility in determining the lead entity of reporting groups, clarify definitions relevant to value transfer and travel rule requirements. And also a couple of new requirements in the second exposure draft, reportable details for threshold transaction reports and suspicious matter reports and information required for enrollment and registration applications. The comments are due in June. I don't have

Elliot Berman: June 27th.

John Byrne: Yeah, thanks. June 27th. And so the information on all of this is available on Austrac austrac.gov au.

Elliot Berman: Coming to the US, the New York Department of Financial Services has put out an interesting notice. They're urging customers to use caution before responding to outreach from individuals who may be falsely claiming to represent virtual currency entities. They note that with the increased number of people participating in the virtual currency markets that there are more fraud efforts by people reaching out and try to trick customers into believing they're receiving legitimate calls, emails, and texts from virtual currency company and then trying to grab personal information so they can impersonate a genuine communication from the consumer service provider. And then use that information to request transfers of the customer's virtual currency assets into another account that's controlled by the scammer.

In some ways, just a parallel to what we're used to in what I'll call the non-virtual currency world. But not surprisingly, as people end up trying to use new forms of payment and investment the scammers follow them.

John Byrne: Transparency International issued to report. What they're calling the top 10 most frequent asset locations by the number of cases. So this is where monies get hidden. And based on a quick look at the chart here the first is the British Virgin Island. United Kingdom is second. The US is third followed by Switzerland. And this is broken down into the categories within the categories are bank accounts, high value assets, real estate assets.

A lot of those are in the US by the way, and UK. Investment funds. And legal entity registration, those sorts of things. So there's also other articles, but basically they give you how and where Dirty Money finds what they're calling a new home, what their research tells you. And they looked at a number of areas where companies did this, real estate, bank accounts very interesting, always useful.

TI does a really good job of giving those of us in the AML/CFT space. Sanction space as well. Certainly some information which can be used in training and increased due diligence. Again, Dirty Money's Hiding Spots - How Corruption Funds Disappear Overseas and that can be found on TI's website.

Elliot Berman: You and I have talked many times about elder financial abuse and there was an interesting article recently in the Miami Herald about a former New York financier who moved to Miami in 2020 and ended up stealing over $8 million from his mother.

It's incredibly sad of course. He's going to face 20 years in prison and a forfeiture judgment of $8.4 million. But more importantly, I think this case is a reminder that when we think about elder financial abuse, while outside actors are certainly in the mix caregivers and relatives make up the biggest group of abusers.

And as our listeners are thinking about what their organizations are doing to detect and interdict elder financial abuse it's important not to overlook family members.

John Byrne: Absolutely. And we've actually done a few programs in this space. I'm sure we will continue to do that, and that's actually one of the areas of, focus for this Trump administration's Justice Department is elder abuse. So that's a good thing.

And there's some other items there. But I want to jump to an investigative journalism piece from ProPublica that was just published late last week under the title, The Trump Administration Leaned on African Countries: The Goal Was to Get Business for Elon Musk. So the highlights of the reporting include State Department conducted a months long campaign to push a small African country to help Musk's satellite internet company, records and interviews show. Working closely with executives at Starlink, the US government has made a global push to help expand Musk's business empire in the developing world.

Diplomats said the events were an alarming departure from standard practice because of both the tactics used and the person who would benefit most from them. So the article and the reporting is, again, it's from ProPublica, so propublica.org, you can find more information related to that investigation.

Elliot Berman: One more international item. BaFin, which is the, German financial regulator published a decision that concerns a case where an obligated entity, a payment institution, was penalized for failing to establish and maintain a proper business organization, including an adequate data processing system, ensuring compliance with AML requirements, such as the requirement to detect suspicious transactions.

The unusual thing about this was that  BaFin's contention in filing this penalty is that the organization filed too many, what were referred to as unfiltered, STRs rather than really filing the ones that were suspicious and worthy of law enforcement's attention. And this is the first time that  BaFin has penalized an organization for it. So it's certainly a wake up call to organizations who just push them through and file them without really determining whether they're suspicious.

John Byrne: We reported last week that, the head of the Criminal Division at DOJ spoke to, I believe it was SIFMA, that outlined their anti money laundering approach going forward about white collar crime. They formalized that in a eight page memorandum.

I wanna give credit to Moneylaundering.com the ACAMS publishing arm. They reported on this, earlier this week and the description is that DOJ's Criminal Division is directing federal prosecutors to pursue more cases against quote, drug traffickers, professional money launderers, sanctions and tariff evaders and parties involved in any one of six other quote, high impact unquote crimes. There is quotes in there from a colleague of ours in the webinar space, Les Joseph, who said that ending investigations of sophisticated financial crime schemes prematurely could lead to ill-informed indictments and ultimately result in case dismissals or even deter federal prosecutors from targeting them in the first place.

I think as everybody knows, who follows the AML space, Les who is now an independent contractor was many years at Wells Fargo. And before that was Deputy Chief of DOJ's Asset and Money Laundering Section. So obviously Les believes that this focus is going to impact other types of investigations. The head of the criminal division said they'll do more targeting of networks and institutions including , those that engage in Ponzi schemes, healthcare fraud, benefits fraud, and fraud against the elderly, as I mentioned before.

So this again, will be interesting. As we also reported on several months ago, this administration said they will no longer enforce the Foreign Corrupt Practices Act, other corruption related guidance against US companies. So we're gonna see how all this plays out. But you should go on the website. I think the memorandum should be available, but I wanted to give credit to ACAMS for reporting on that this week.

Elliot Berman: John by the time our listeners hear this episode this month's webinar will have live streamed and been recorded, and that should be available on our website for people to see if they missed the live stream by the end of next week. And then in June June 26th at 1:00 PM. We're gonna talk about the latest on effective risk assessments. People will be able to sign up for that now.

And I know you're always looking to do some new and interesting podcasts. So anything in the pipeline.

John Byrne: I have just scheduled a conversation. In early June, so right after Memorial Day with an economist who's going to talk about protectionist issues and trade related issues and how it can enable corruption or further enhance or enable is a better word, corruption. So doing that.

And then Sarah Beth Felix, who is well known to the AML community and is very active, not just on LinkedIn but in the conference environment and just is really great. She's agreed for sit down that we'll probably do late next week. So that'll get posted a bit after that. And, we are looking to have more conversations about cryptocurrency and other hot topics. So please continue to give us your suggestions. We'd love to have just more topics, more themes, more interesting folks to interview.

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

John Byrne: All right, stay safe. Take care.

Elliot Berman: You too. Bye-bye.