FATF Insights, Sanctions Gaps, and Emerging Risk

In this episode of This Week in AML, Elliot Berman and John Byrne cover a wide range of pressing financial crime topics. They discuss FATF’s latest report on combating online child exploitation, the UK’s Economic Crime Survey findings on sanctions awareness and fraud, and updates from FinCEN on cartel-linked gambling establishments. Other highlights include enforcement actions against elder fraud, tariff evasion prosecutions, and regulatory changes at the Federal Reserve. Tune in for expert analysis and actionable insights for compliance professionals.

FATF Insights, Sanctions Gaps, and Emerging Risk - Transcript

Elliot Berman: Hi, John. How are you today?

John Byrne: Good, Elliot. Nice seeing you last week. Even watching our Marquette team lose. But it's always nice to get a chance to see these games in person, so that was fun. This may be one of these years where, eh, it's a rebuild, but we'll.

Elliot Berman: Yeah. It's early, but they clearly have some holes that have been left by graduations . It'll be interesting to see whether they can continue their approach of not using the portal and having their student athletes not use the portal to leave. They're a rare exception in that space.

John Byrne: We have a lot of international issues can jump around here. The investigative journalists that we always talk about, the Organized Crime and Corruption Reporting Project, they posted that a sanctioned Iranian tycoon by the name of Ali Ansari, accused by the UK government of funding the Islamic Revolutionary Guard, the IGC owns a 33.7 million pounds mansion on exclusive London Street.

Of course he does. The mansion was not among those previously reported linked to Ansari, which includes a dozen other houses and registered to an Isle of Mann company that he owns. Going back to issues of shell companies and reporting I think that's pretty important.

Sticking internationally earlier this week was actually was World Day for the Prevention and Healing. This is pretty lengthy from sexual child sex, sexual exploitation, abuse, and violence. FATF reminds everybody the critical role that financial intelligence can play. And so there are references in the report to that. It's a growing global threat as we know.

Financial flows enable perpetrators to profit and evade justice and their report provides both information regarding that and then what they're calling actionable recommendations for the private and public sector. So the report, again, available on the FATF website.

Elliot Berman: Yes, and in the report they zero in on two particular types of online child sexual exploitation. One is livestream sexual abuse of children, and the other is financial sexual extortion of children. They do a deep dive, case studies, as with many of the things that have come out of FATF, detailed and drawing on their global network of information. Strongly recommend that one.

The UK has a group called the Money Laundering Steering Group, which is a private sector body. It's made up of leading UK trade associations in the financial services industry. And they have come out with a recommendation that Money Laundering Reporting Officers, which I think is essentially the equivalent of our AML Officer position in the US that, MLROs should have an increase in authority and access to information.

Currently in many organizations, folks in that position are not really in charge and are often don't have much standing in the organization. And this steering group is recommending that change. So that there's more prominence, more credibility, more authority, and more access to data. Again, they issue guidelines, but often those guidelines do make their way into regulation.

John Byrne: Also I think we mentioned that this was out last week, but not these particular items, but the Economic Crime Survey from 2024 in the UK from their Home Office. I know we mentioned some of this, but I wanted to just highlight two things.

One is that sanctions awareness is low. So according to the report, just 17% of businesses knew that the sanctions regime applied to them. And they further discussed that many struggle to interpret and implement controls. How that can be possible in 2025 I leave for other experts, but the fact that sanctions, which always get discussed, certainly here in the US and I think internationally as well, the fact that the uk determined that it continues to be low. 17% of businesses, Elliot, that seems awfully low.

Elliot Berman: I agree. Although I think if you took a survey in the United States of citizens and said, so do all these sanctioned programs apply to you? They all go, nah. When of course the reality is they apply to every citizen.

There were other interesting facts in the report. Bribery remains persistent. 27% of UK businesses reported fraud in the last 12 months and affected firms faced an average of 16 incidents each. Yet only 15% felt at risk showing that many underestimate the threat.

So interesting. I would highly recommend people take a look at it even if you're not in the UK because I don't know that their statistics are gonna be radically different from others. And it's quite comprehensive. You can find that on UK.gov. And you're looking for the home offices economic crime survey for 2024.

John Byrne: After we recorded last week FinCEN provided an update on financial support to the Sinaloa cartel. They found transactions involving 10 Mexico based gambling establishments to be, quote, a primary money laundering concern. So they issued that finding and a notice of proposed rulemaking that identifies the transactions involving those 10 establishments. So when you get an opportunity, take a look at the FinCEN website for more information on that.

Elliot Berman: In the Netherlands, their FIU , has been involved in a years long investigation into money laundering and a total of about 81 million US dollars involved. But the FIU there has come out and said that the STRs that were filed were, critical in first bringing the money laundering activity to their attention, and then in supporting what was a pretty complex investigation. And again, many of these were just STRs is talking about large sums of cash that seemed to be disproportionate for the volume of the business. And ultimately both the company and four of its principles were convicted.

I think the president or CEO is serving 10 years. So again, not that, those of us in the community need to be reminded that SARs and STRs are valuable. But this was a real life case study.

John Byrne: The Department of Justice issued an annual report on activities combat elder fraud and abuse. And among other things, it shows the DOJ has pursued 283 enforcement actions with over 600 defendants for schemes that stole or sought to steal over $2.36 billion, over a million older Americans.

And they some of the takeaways from the report. They argue that there's a need for tailored fraud controls, cross border and crypto linkages, demand attention and opportunity, as they call it, for proactive leadership by partnering in public awareness efforts and training and victim support initiatives. Some of that which is definitely currently going on. I think it's pretty clear we know much more about elder abuse than we did five years ago, and I think some of that is certainly, previous law enforcement agencies in this one raising awareness, but also some private sector efforts as well.

Elliot Berman: Two things that caught my eye in the report. One is that there's a Transnational Elder Fraud Strike Force and is working in a coordinated way with foreign law enforcement. And one of the statistical reports was that 36% of the scams were of foreign origin.

The other thing is a the report does a deep review of activities by DOJ in the nursing home abuse space. So we often focus primarily in our work on the financial frauds and schemes and things like that. But the other part of elder abuse is poor care and other kinds of active abuse in the nursing home space. And dOJ in the report talked about a number of investigations and prosecutions to try to stem that problem. There's also some good information in the report about how to report those kinds of things.

John Byrne: Also saw from Treasury, they announced the sanctions of a former Canadian Olympian and as they call notorious narco trafficker by the name of Ryan Wedding. And Wedding along with nine individuals and nine entities closely associated with him. He's actually on the FBI's 10 most wanted fugitives list and considered to be extremely violent and hiding out they believe in Mexico. I guess his background a as a snowboarder isn't gonna help him there to stay away from law enforcement.

Elliot Berman: Somewhat unlikely. You and I think talked maybe offline a few weeks ago about the whole question of whether we're gonna start to see prosecutions related to tariff evasion.

And we actually did see an announcement that I believe it was the US attorney's office district of New Jersey. But there was an indictment that an Indonesian jewelry company and its co-owners and two of its employees were involved in this very complicated scheme that initially was before all the tariffs kicked in, was trying to avoid duties.

And then when the tariffs kicked in, they restructured the scheme to avoid having to pay the tariffs. They evaded more than $86 million in duties and tariffs on more than $1.2 billion in jewelry imports into the US. Something to take a look at. It was, again, quite complicated on how they were trying to move things and from one country to another, and then mischaracterize them so they would fall outside the definitions of the various things.

But I think the question is, are we gonna see tariff evasion schemes? The answer, not surprisingly, is yes.

John Byrne: And you'll have to bring those actions between changes in tariffs. 'cause some days their tariffs are high, some days they're eliminated. So it depends on the whim of the tariff expert.

Elliot Berman: That's true. Another thing, and this is more broadly in the regulatory space. As the other major bank regulators in the US have done the Fed, which in addition to being in charge of monetary policy, does have a bank regulatory component to its mission. Has announced changes to its approach to bank regulation.

It's announced a 30% cut in staff at the supervision division in Washington. There's also been some change in the approach. There's been a lot of concerns by experts, former members of the Fed supervisory area and things like that, that the new standards being set and the reduction in staffing will make it harder for risks to be identified early and therefore interdicted before they become a major issue.

If that is more systemic, that is the kind of problem that at least theoretically could lead to another larger financial crisis in our financial system. So something to keep an eye on. If you are Fed, governed either at the bank or the holding company level, you also should be looking at it because their expectations are changing and how you both structure your compliance programs and prepare for examinations will change too.

John Byrne: That's it on my end. By the time you listen to this, we will have run our November webinar that will be done Thursday the 20th. So you'll be able to listen to recordings of that in the weeks to come. Also we have posted an interview that I did with Dan Tannebaum, who's a sanctions expert. On a whole series of issues.

And then there's one coming up in the next couple of weeks with the folks from what's called the Human Security Collective and some of the issues that they're grappling with. And we are efforting additional podcasts with folks on some themes and topics that we would like to get recorded before the end of the year.

As always feel free to reach out to either of us and offer some recommendations on what you'd like to hear about.

Elliot Berman: And by the time you hear this, you'll be able to register for our December webinar, which will stream on the 18th of December at 1:00 PM Eastern time for an hour, and it is gonna be a financial crime compliance year in review.

And John, I know you've got a great panel. And during the planning call yesterday there was clearly gonna be plenty to talk about. So I urge people to do that. And lastly, John and I are going to take off next week for the holiday and hope you all enjoy the holiday as well. But we've already recorded a special edition of This Week in AML and it will post on Friday after Thanksgiving. So if you're sitting around in a food coma and waiting for the next football game, you can tune in and catch a fresh This Week in AML.

John Byrne: And it will not be about Marquette's difficulty getting back on defense, we promise you.

Elliot Berman: No. We'll do that one for Christmas. How's that?

John Byrne: Happy Thanksgiving everybody.

Elliot Berman: And to you too, John, and I look forward to talking you, talking to you in December.

John Byrne: Sounds good.

Elliot Berman: Bye bye.