This Week in AML

Europol Report, New Sanctions, Problems at Merrill Lynch, and More

Europol recently issued its 2023 Terrorism Situation and Trend Report. The US Treasury issued new sanctions against a top Serbian security official. Merrill Lynch was fined and more. John and Elliot discuss the many goings-on this week in financial crime prevention.



Europol Report, New Sanctions, Problems at Merrill Lynch, and More - TRANSCRIPT

Elliot Berman: And how are you today?

John Byrne: Hi Elliot. Good. Quick little point of personal privilege if you don't mind. I know, my mother-in-law passed away last week. Lois Chapman, 95 years old, a great long life. We were able to have a family event, a family viewing on Saturday where everybody came.

And then we're gonna do a celebration of life. In the next month. But just somebody who super generous, engaged with her grandchildren and her children, always wanted to know what their lives were about. Sad of course, but very happy we had the opportunity to see her in her last day. Just wanted to mention that we all go through it and it's part of the circle of life that we deal with, but it was actually really comforting for so many to be able to spend some time, and for the past couple weeks to to see her and say goodbye. So I wanted to mention that before we dive into this week's issues.

Elliot Berman: Certainly sorry for your loss. You and I have talked about it extensively, but also as you just described it, it sounds like a life well lived.

John Byrne: Yes, absolutely. Absolutely. So a number of things going on and coming up. I wanna mention one item that we will certainly cover next week. There's actually going to be a hearing in the House Financial Services, their subcommittee on National Security Illicit Finance and International Financial Institutions, and it's entitled The Potential Consequences of Sen's Beneficial Ownership Rulemaking.

So that hearing I can predict will be fairly critical of the process. And so there'll be a lot of interesting conversations on whether or not this rulemaking is going to have to be recast or what's going to happen there. So something we should all look to and we will talk about that more next week.

But I also know that you're working on a blog post that you're going to post. A recent executive summary from Europol and their partners in the European Union and it's a terrorism situation and trend report. What's some of the highlights from that?

Elliot Berman: First, for those of our audience members who aren't familiar with Europol, and I'm quoting here from their website, their mission is to support EU member states in preventing and combating all forms of serious international and organized crime, cybercrime and terrorism. And they also work with non EU partner states and international organizations, including, the US.

As you mentioned they recently, toward the end of June, published this year's Terrorism Situation and Trend Report, referred to as T E-SAT and it's an annual report that they publish. This is the 2023 report covers activity in 22. And what they do is they gather in information in a variety of categories from the member states about activity.

They identified a number of key findings, which I won't go into in a lot of detail cuz it's pretty detailed. But the thing to know about the report structurally is they looked at jihadist terrorism, right wing terrorism, left wing and anarchist terrorism, ethnonationalist and separatist terrorism, and other forms of terrorism and extremism.

And they're tracking through time the number of events, the magnitude of the events, in cases where there were fatalities, the number of fatalities the number of apprehensions and prosecutions both successful and unsuccessful. And there are a number of things that they focused in on, including the impact of technologies and things like that.

I think in many ways the most interesting part of the report is they actually do a forward looking piece. Where they are really looking at potential future changes to the terrorist landscape. Which I think all of these things are valuable. As you mentioned, we're working on a more detailed dive into this as a blog post, which I think will plan to put up on our website over the next several weeks.

So I'd urge our listeners to keep an eye out for that. But you can download either the executive summary or the entire report, by going to the Europol website and it's easy to find because it's, their hottest item. If you just put it into a search engine Europol terrorism report, it pops up at the top of the list.

So I'd encourage people to take a look at it. So many of these documents, it's helpful to use to do some training, also to consider whether the kind of red flags and other issues that pop up in the report are things that you are focusing on with your financial crime prevention program.

They also, I skipped earlier, but they also talk in a fair amount of detail about what's going on in the terrorist financing area, which of course is the place more likely, but not only that most of our listeners would likely have a chance to see it because of the transactions flowing through their companies or institutions.

John Byrne: Oh, that's great, and people should look for that. Two other things quickly. The Treasury Department, as they do on a regular basis, issued a press release on another sanctions. This one is a of a official that's linked to corruption in Serbia and Aleksandar Vulin has been designated because of what he's done to facilitate Russian activities in Serbia and in the region he's been implicated in, transnational organized crime, illegal narcotics, misuse of public office, a whole host of things. So that's there on the Treasury website.

And then we just learned as we go to record today the Cybersecurity and Infrastructure Security Agency, CISA, has just issued an advisory, and this is also explained on the White House website as well as the FBI. And the issue is in June of this year, the federal civilian executive branch identified suspicious activity in their Microsoft 365 cloud environment. They don't say what the agency is, but they say the agency reported the activity to Microsoft and CISA and it was determined to be from Chinese hackers.

So Politico has reported on this with comments from China, but from the press release from CISA and the FBI , this provides guidance to infrastructure organizations to increase their monitoring. So the whole report is included there. And they just say in the tail end that organizations that identify suspicious, anomalous activities should contact Microsoft to proceed with mitigation actions as well as to CISA and the FBI. Reported in a number of places today and wanted to to highlight that as well.

Elliot Berman: Yeah, cybersecurity, as we've said many times, and as everybody knows, you just can't let your guard down. And even staying with the biggest providers with all of their focus and efforts, it's still a rocky environment out there.

John Byrne: And you flagged something. There was a penalty against Merrill Lynch that we've just seen. Do you wanna briefly highlight that?

Elliot Berman: Sure. Merrill Lynch, the broker dealer has agreed to pay a $12 million fine to regulators. It failed to file according to the report, 1500 suspicious activity reports , over more than 10 years. And apparently the reason the reports were not filed is that rather than having the threshold in their, it doesn't say this, but presumably in their monitoring system at $5,000, which is a simplistic way of saying what the SAR filing threshold is, it was set at $25,000. And this went on from a for a period starting in 08 - 09, and going until 2019.

So they are paying both a FinCEN fine. And a an SEC fine $6 million each. The interesting thing to me is I'm sorry, I think I said FinCEN, it's FINRA and that fine is in addition to the SAR filing failures, also other weaknesses in their program.

As we were talking before we started recording, the thing that struck me is how does a threshold error like that not get picked up either by internal audit, in an earlier FINRA review or by your own ongoing program review? Checking, double checking thresholds just seems like it would be part of the checklist of what you do. Not every day, but periodically. And certainly I would expect a comprehensive internal audit to pick up something like that.

John Byrne: No, that, that makes perfect sense. So take a look at that when you get a chance. Just wanna mention that again on July 27th, we'll be doing a webinar talking about the outcomes from the June FATF plenary. I have a couple of podcast interviews lined up. One will be on sanctions and another one will be covering the the world of antiquities issues. So we're looking forward to that. And then I just wanted to mention, you and I got contacted from our Director of Global Training, Mike Schidell, who reminded us that July is Wild for Wildlife Month.

And so wildlife trafficking being an issue that our clients and our community pay attention to is something that we've certainly highlighted in the past with blog posts. But Mike reminding us that this is the month for that people should take a look at what we've produced and other relevant sources on an issue that obviously is environmentally sensitive. It affects the movement of illicit funds and variety of issues that way as well.

Elliot Berman: Yes, and I mentioned last week and wanna mention again that we've launched a new podcast series called AML Conversations the Solutions Series, and it focuses on, how-tos in various areas. The first sequence of them is related to how to select and implement a transaction monitoring system. And the second episode in that part of the series is going to post next week. We urge you all to watch for that. And if you didn't listen to the first one, it's already available on our website. Also on SoundCloud and wherever you get your podcasts.

We look to bring you more in that series. We're also in the process of putting together what we think will be a very informative section of the series focused on artificial intelligence. Helping all of us understand what it is and what it isn't, and how it can be a useful tool in financial crime prevention.

John Byrne: That sounds good, Elliot. Have yourself a good rest of the week and we'll connect again next week.

Elliot Berman: Sounds great, John. You have a good week too. Bye-bye.