FATF Plenary, OFAC, ABA Litigation, DOJ, and Payment Fraud

This week, John and Elliot discuss key outcomes from the June FATF Plenary, OFAC enforcement actions, the DOJ’s evolving stance on white collar crime, the ABA’s lawsuit challenging executive orders targeting law firms, a request for comment from the US bank regulators on payment and check fraud, and other issues affecting the financial crime prevention community.

FATF Plenary, OFAC, ABA Litigation, DOJ, and Payment Fraud - Transcript

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

John Byrne: Hi, Elliot. Good. My wife and I are headed out for a two week vacation, so I'm looking forward to getting off the grid for a bit. Before we dive into all these issues that we're gonna talk about in the AML and related areas, we want all our listeners to know, we are certainly well aware of all that's going on between Iran and Israel, the horrific assassination of a Minnesota former speaker and the shooting of a state senator and his wife. The unjustified, my view, attack on Senator Alex Padilla last week by Homeland Security and other agents at a press conference. We're aware of all those things going on.

We're just trying to stay as focused as we can on our areas of immediate concern. But we are, again, very well aware of all that's going on. And as we record this middle of the week by Friday, who knows? So we're staying as focused as we can.

The one item I think we should spend a little bit of time on before we talk about some of the other specifics we mentioned last week that the FATF plenary for June, ended on Friday. So a number of things, as with every plenary there were announced eventual reports that'll be done later in the month. There was updates on the gray list and things like that. So I have a couple things I wanted to mention about it, but I'll let you go first. What were some of the plenary items that stuck out at you?

Elliot Berman: As we indicated a week ago it had been reported before the plenary that Bolivia and the British Virgin Islands would be added to the gray list. And that did happen. And the countries that came off the gray list were Croatia, Mali and the United Republic of Tanzania. Of course, North Korea, Iran, and Myanmar continued to have their negative status and no change was made to Russia's current status.

John Byrne: This was a joint plenary meeting with MoneyVAL. That was not unusual and that makes it over 200 jurisdictions and observers that were part of these consultations and discussions. So they approved additional changes to the FATF standards on cross-border payments. That puts that in line with the G20 initiative to make payments faster, cheaper, more transparent, accessible.

They approved the Council of Europe MoneyVAL's mutual evaluation of Latvia, and that was the first evaluation under the new round of mutual valuations. And that is to assess how effective countries are combating money laundering and terrorism and related topics. Number of reports, as I mentioned, and resources that'll come out later this month or in the coming months.

One is related to more information on the risk-based approach, which is a constant challenge for all of us. And then updated guidance to support financial inclusion. That's also an issue that they continue to talk about. And then there'll be new FATF procedures that are designed to prevent what they're calling the misapplication of measures to protect NPOs from abuse. And that's related to financial inclusion.

So again, a number of things besides who's no longer being monitored, who's now on the gray list and those sorts of issues. But again, a number of reports coming out and when those reports come out, we'll certainly talk about them.

Elliot Berman: Yeah, it was obviously a pretty packed agenda. Where would you like to go next?

John Byrne: Just yesterday and it's just the first step, but the Senate Banking Committee passed what they call the GENIUS Act. And this is on crypto, stable coin, and crypto related topics. So again, it just passed yesterday with bipartisan support. And so it will be worth looking at in terms of those that are involved in the crypto space and the oversight space. So I thought me mention that. Just a couple other quick things I have in front of me here.

There was a settlement agreement between OFAC and UNICAT Catalyst Technologies. That's a $3.8 million settlement. A Texas based company that sells catalyst products. Thirteen apparent violations of the Iranian transaction, that sanctions regulation, and one of the Venezuelan sanctions regulations.

And then also, and this happened I think it happened over the weekend, but certainly after we recorded last time. The American Bar Association filed suit against the Trump administration on their executive orders. Specifically the executive orders they're designed to punish and pressure law firms. Actually the lawsuit was Monday morning. According to the lawsuit, since this is a quote since taking office earlier this year, President Trump has used the vast powers of the executive branch to coerce lawyers and law firms to abandon clients, causes, and policy positions the president does not like, unquote.

And so this is a major, major announcement. The Bar Association had quote, complained in public and had some statements early on when this happened, but an actual lawsuit had not happened until now. So again, they're calling this a law firm intimidation policy. Of course, the White House says that the lawsuit is frivolous. And we'll see how this makes its way through the courts.

Elliot Berman: Yes. And some of this was related to the First Amendment and also to issues related to separation of powers. A lot of truly knotty legal issues in there, but we'll see where this all goes. You mentioned, an OFAC settlement. OFAC also levied fines against GVA Capital. And GVA capital worked with a Russian oligarch. They used proxies to continue to work with this person even after it was clear that the assets should not have been managed and this person was on the SDN list. The fine is $216 million, which is the max that was available under the applicable regulations. Similar to the one you spoke about. OFAC is active in enforcing sanctions evasion where they can detect it.

John Byrne: The Justice Department announced it was declining prosecution of a private equity firm following that firm's voluntary disclosure of sanctions, violations and related offenses. The Justice Department did this in consultation with the US Attorney's Office in the Southern District of Texas. The equity firm is White Deer Management, LLC. And again, that firm voluntarily disclosed its sanctions violation. And so there was a decline to prosecute.

And then related to the Justice Department, this was late last week after we had recorded. The head of the Justice Department's Criminal Division, Matthew Galeotti, sorry if I mispronounced that. Spoke at something called the American Conference Institute in New York. And it was a combination of the written remarks, a combination of discussing how the Criminal Division is gonna handle white collar crime going forward.

And then the memorandum that we did talk about last week that put some clarity, but at least some focus on what they are going to do regarding prosecution of corruption related topics. But I wanted to focus on something that I thought was particularly interesting besides the fact that there was an update on FCPA matters and others.

There was a broader statement. So he made a broader state statement regarding white collar crime prosecutions that I thought was, in my view, particularly ironic but let me just read for you part of the speech. Part of the speech is, be conscientious about what, when, and how you appeal the decisions of trial attorneys and AUSAs. White collar and corporate Defendants are fortunate to have sophisticated counsel. We do not begrudge defense counsels for zealously advocating for their clients, and we hold our prosecutors to the highest standards. These are central tenets of our system. But there's more. But seeking premature relief, mischaracterizing, prosecutorial conduct or otherwise failing to be an honest broker actively undermines our system. It also will be counterproductive to your appeals. Coloring arguments that may carry more weight, especially when made judiciously at the appropriate time. Clients deserve your wise counsel about how to handle the most significant and sensitive matters. And in the overwhelming majority of cases, that's what they get. We should all strive to keep it that way.

I'll just leave that statement there.

Elliot Berman: So let's go on to the federal bank regulatory agencies. So the Fed, the OCC, and the FDIC are seeking comment to address payments and check fraud. And you and I have spoken a lot about that. There's been a lot both in the popular press as well as in the in the press that we focus on in the financial crime prevention community about the continuing increase in frauds, but particularly as it relates to payment systems and checks.

And the regulators are looking for input on five areas for potential improvement in collaboration. And I'll just read the bullets real quickly. External collaboration among the agencies, federal Reserve banks, and industry stakeholders. Consumer business and industry education by the agencies and Federal Reserve Banks to educate about payments fraud. Regulation and supervision to mitigate payments fraud, including opportunities the Board may have related to check fraud. Payments fraud data collection and information sharing. And Federal Reserve Banks operator tools and services to reduce payments fraud.

For those of you who don't live in the payment space. The reason the Reserve Banks and the Federal Reserve Board mentioned more often than any other regulator is that the Fed is much more directly involved in the payments processes in the US than either the FDIC or the OCC. It'll be interesting. It's out for a while. I'm sure there will be some kind of report coming out of, what they get back. You can see the details of the request and how to make comments that's all in the Federal Register. But it is an important area given the ever increasing fraud challenges in those areas.

John Byrne: That's all on the, on my end. I do wanna mention that we were able to post the interview that I did with Adam Hirsch that's available on our website and on LinkedIn. He's the senior economist at the Economic Policy Institute. And Elliot, I'm efforting a couple of conversations, I think I mentioned this before. But I've set one up for mid-July with the Antiquities Coalition and then working with an expert in the mortgage fraud space to show those connections to money laundering and other financial crimes. So those are a couple of interviews I have. scheduled for July.

Elliot Berman: Our June webinar on effective risk assessments is June 26th. So there's still time to register for that. You can do that at our website. And then we'll be doing one on artificial intelligence in July. And we'll give you more information about that in the coming weeks.

And John, while you're gone, I'm gonna have a couple of guests in the other chair. So next week it'll be the head of Financial Crime Advisory here at AML RightSource Jenny Jonas. And the week after that, it'll be our partner in crime Joe McNamara.

You have a great trip and we'll be here when you get back.

John Byrne: Sounds good, Elliot. Stay safe. Take care.

Elliot Berman: You too. Bye-bye.