FATF Plenary Outcomes, Crypto Crime Trends & Regulatory Developments

In this episode, Elliot Berman and John Byrne break down the major developments from the February FATF Plenary, including Kuwait and Papua New Guinea joining the Grey List and updates on evaluations for Austria, Italy, and Singapore. They also explore FATF leadership changes and the reiteration of Russia’s suspension.

The conversation moves into rising crypto-enabled human trafficking networks highlighted in a new report from Chainalysis, Cambodia’s large-scale crackdown on fraud centers, and several key U.S. regulatory updates. These include FinCEN’s new CDD “exceptive relief,” the rollout of a whistleblower portal, and the OCC’s proposed changes to the bank appeals process.

Elliot and John also discuss recent law enforcement actions, Supreme Court efforts to strengthen conflict-of-interest checks, and a Federal Reserve governor’s insight into how AI may reshape the labor market.

FATF Plenary Outcomes, Crypto Crime Trends & Regulatory Developments - Transcript

Elliot Berman: Hi John. How are you today?

John Byrne: I'm good. Elliot. As we referenced last week, it was the, FATF February plenary, and I know we both looked at some of the outputs. I think it's important to note two things up top that it's already been this the finale of the Mexican presidency of Elisa de Anda Madrazo. So she concluded two years. She's been a very strong proponent of helping clarify for nonprofits and humanitarian groups issues related to Recommendation 8 and other things. So I think that was one of her major priorities.

But they appointed the vice chair or the deputy, I don't remember how it's characterized, Giles Thomson of the UK. He'll be the incoming president in July. So I know there was some things that they did, but I just wanted to highlight those two quick things. What else did you pick up from the plenary?

Elliot Berman: They added Kuwait and Papau New Guinea to the grey list. They made some statements, as they often do on the blacklist countries, Iran North Korea and Myanmar. They also, reviewed the mutual evaluations for Austria, Italy, and Singapore. And those reports will be published. I didn't look this morning on the website, they may already be there.

John Byrne: No, it says April to May.

Elliot Berman: Oh, thank you. Those kinds of things that always get published afterwards, so thank you for that. They talked about a new paper on cyber enabled fraud. Something you and I have talked about many times, and we'll continue to do. And they talked about a few of the initiatives that are continuing coming out of this plenary.

John Byrne: Also they reiterated the FATF suspension of the Russian Federation, which started back two years ago. And related to that there's a multiple media outlets, including Reuters are reporting that Russia is demanding that European countries, who announced over the weekend that Alexander Navalny they did DNA testing and they found the presence of a toxin found in poisoned dart frogs in South America and not found naturally in Russia. And they said that Moscow had the means, motive and opportunity to administer the poison. This was a combination of Britain, France, Germany, Sweden, and the Netherlands, the a joint statement. So Russia came out today and they're demanding proof. So what a shock that they're demanding proof.

But again sadly something we all sort of suspected and not total confirmation, but there's certainly strong evidence that Navalny was killed by Russia.

Elliot Berman: Yes. Our friends in Canada at FINTRAC published a notification that they were imposing an administrative monetary penalty on Manor Windsor Realty Ltd. It's the second notification of administrative penalties in the retail real estate space in the last couple weeks. I think along with money services business businesses, this is a primary focus of FINTRAC currently.

The one this week was a you don't have a program penalty. The prior one had to do with failure to file a suspicious activity report. But the point is, and we've talked about this too in the US, we've dabbled with having the real estate space, actually have to have a program and, identify suspicious activity. But Canada's had it for a bit and they're focusing on it.

John Byrne: You also had highlighted prerecording about some crypto related items you wanted to reference.

Elliot Berman: Sure. So Chainalysis issued a report about crypto playing a growing role in human trafficking networks, which was something that came up in our January webinar that you moderated. They noted that crypto payments tied to trafficking rose 85% last year. The blockchain data is showing that much of the services are based mainly in Southeast Asia, although the paying customers tend to be in the Americas, Europe and Australia.

At the same time, I saw an article that the government of Cambodia, shut down nearly 200 scam centers in a huge fraud crackdown. They arrested 173 senior crime figures and 11,000 workers at these sites were deported in an effort to begin shutting down these places. This started in late 2025. My sense is that this is just the beginning of being able to try to deal with that. Crypto is becoming more and more a vehicle for global crime.

John Byrne: We've mentioned several times that the US is in the process of being evaluated by FATF and it'll definitely be a curious review given some of the changes. And late last week after we recorded, FinCEN issued an order granting what they're calling exceptive relief for certain requirements of the customer CDD rule. And just reading here from the release, it says, under the order, a covered FI is required to identify and verify the beneficial owners of a legal entity in only the following circumstances: one, when a legal entity customer first opens the account. Two, when the institution has knowledge of facts that reasonably call into question the reliability of previously obtained beneficial ownership information, and three as otherwise required based on the institution's risk-based procedures for ongoing CDD.

They're calling this a relief of burdensome and duplicative regulatory requirements. It's going to be interesting to see how this plays out in terms of exam oversight and also what the evaluators think of this change.

Elliot Berman: Well, and I think that third one as otherwise required based on the institution's risk-based procedures for ongoing customer due diligence is the wild card. Right?

Because will FIs be criticized that it's not truly risk-based, if they ask for beneficial ownership information on the opening of a subsequent account. , Is that really the intent of the rule? I don't know. It just seems to me that through the passage of time companies, even good companies that are not in any way trying to do anything nefarious, have senior officer and director changes, and the idea that what you got when you open the first account is still all you need to have to know who's owns it and who's running it. That feels to me to not really comport with how the world really works.

John Byrne: Right. I just saw something pop up from the FBI. And they announced that five defendants pleaded guilty in federal court for their role in what they're calling a sophisticated scheme involving stolen US Postal Service mail keys. This is in Miami for $1.7 million and stolen checks in mail. An announced plea in, in Miami late last week as well.

Elliot Berman: Couple other FinCEN send related things. One is they announced that they're launching a website for whistleblower tips on fraud, money laundering and sanctions violations. You can go to their website and read the release and find the link to this new whistleblower tip site. It's not a bad idea. We'll see what comes of it. Also there's been several reports that John Hurley, who is the Undersecretary of the Treasury for Terrorism and Financial Intelligence, so he's got OFAC FinCEN and the Executive Office of Asset Forfeiture reporting to him, will be leaving Treasury and will be nominated to be the ambassador to Germany. So would you like comment on that?

John Byrne: No. No, I'm good. I'm good. One of the Fed Governors Michael Barr gave speech on artificial intelligence. It's on the website. He did it before the New York Association for Business Economics. And it's whether or not AI, what, what it means for the labor market and the economy. So you should read through it.

It goes through potential issues for new entrants into the workforce. And this is just one person's view. He cites a number of papers in there. Just reading sort of randomly from some of the other items here, he said so far the literature suggests that while AI has yet to have a substantial effect on aggregate employment or unemployment, it may be starting to adversely affect some groups. In particular young people who are just starting their careers in some sectors. So he goes on to say, on balance this evidence so far is consistent with what we might expect under the gradual adoption scenario that he describes in the article.

Heavily sourced piece and he concludes that he expects that AI will boost productivity and living standards, and it may even lead to new discoveries. But widespread AI adoption will very likely lead to dramatic and sometimes difficult changes in the way many of us work and live, but the long-term benefits could be even more dramatic.

So I know a lot of people are talking about AI in terms of how it affects the AML community, but I thought it was interesting to see that he spent some time talking about how it could and does affect the labor market. 'cause that's obviously relevant to our listeners as well.

Elliot Berman: Right. There was also an announcement this week that the OCC is in the proposing a notice of proposed rulemaking that they sent to be published in the Federal Register. And this is about the bank appeals process. So the process under which a bank can appeal the outcome of an examination. It's a long, and as I told you, this morning somewhat wonky piece. But for those of you in the US who are examined by the OCC, it would be something to follow.

One of the things in the background materials that were published with the new proposal talked about the very small number of appeals over the last number of years. The reasons for that are not necessarily clear. One thing that caught my eye is a real difference is in the new rule there will be a clear review standard articulated. The Fed and the FDIC both have their own processes and they do articulate a review standard.

The OCC acknowledged that their current rule does not have that. So this will be a de novo review standard, which means that the reviewers, the appeals board, will be able to view all the facts from scratch.

So we'll see. This will take a while to work its way through the regulatory process. Probably won't see a final rule till early fall. And then we'll see what the effective data is, and it'll take a while for organizations to to understand it and decide whether or not they have something they wanna appeal.

John Byrne: Washington Post is reporting that, when we talk about the areas of conflicts and corruption, that the Supreme Court will be begin using software in mid-March to scan litigant's filings to identify potential conflicts that might require justices to step aside from cases. So it was developed by court staff and they're gonna compare information about parties and attorneys in a case list that's created by each justices chambers 'cause Supreme Court Justice are required to recuse themselves from cases of which they own stock in a party.

According to the story, only, Alito and Justice Roberts are the only justices that own individual stocks. So it'll be interesting. It's good to note that they're going along this line because obviously that's that's something that's problematic. I'd argue the same thing's problematic with members of Congress owning stock. I know that it's not necessarily controversial. Not everybody agrees with that point. But man, you know, if you're voting on something that you have a financial interest in, it's conflict. So it's good that the Supreme Court's trying to make adjustments there.

Elliot Berman: Yes. The, the key to all of those things, of course, is the disclosure that creates the database against which you run the conflict check, right? So there have been reports in the past of members of the court, maybe not fully disclosing things because they got to decide whether it was disclosable. We'll see if this is the beginning of change in that over time.

So, John we have our webinar next week about effective SARs. So that'll be the 26th. We have a great panel. You can still register for that at our website, and that will live stream at 1:00 PM Eastern Time. And John, what else you got going on?

John Byrne: We'll be sitting down with Sarah Beth Felix next week for the February conversation and working on some others. I know I've mentioned this a number of times, but one of the things, the partners that individually that we work with, the Charity and Security Network, they are working diligently regarding comments to the mutual evaluators regarding a concern I raised earlier that's been highlighted by the the FATF president and that's how humanitarian and charity groups are impacted in some cases by following the Recommendation 8, which is designed to deal with preventing, , detecting terrorist financing.

We are efforting a conversation with them so they can spell it out to our community. So our community better understands what their concerns are. Because they support, limiting terrorist financing, but there are some adjacent, impactful things that they've highlighted in the past. So working to, getting an interview with them on those topics, hopefully in next week or so.

And then next week I'll be traveling to Puerto Rico for the Puerto Rican Bankers 22nd Annual AML C onference. And I've been at most of them over the course of the past two decades. So be interesting to see some of the topics that they'll be covering. I'll mention some of those in a couple weeks when I, when I return back. But it's always a really good forum to share ideas. Not just about what's happening in that region, but internationally. So that's coming up next week.

Elliot Berman: And why don't you remind people about the AML Partnership Forum?

John Byrne: Yes, so the Partnership Forum on March 19th and 20th in Washington DC. A lot of information is available on LinkedIn through following me, following Elliot, following Joe McNamara and others from the steering committee.

We have a great lineup for the two days that we'll be discussing all sorts of issues that challenge all of us. Please take a look at the website and still plenty of time to sign up. Chatham House Rules, no press. We are encouraging active conversation and networking.

Elliot Berman: Yes, and the website address is amlpf.com. So John, I will talk to you next week before you leave for Puerto Rico. In the meantime, you have a great rest of this week and weekend.

John Byrne: Stay safe. Thanks.

Elliot Berman: You too. Bye-bye.