Fentanyl, Trouble in Charlotte, AMLA’s Top Priorities, and Crypto

This week, John and Elliot discuss a large fentanyl bust at the southern border, a fraud case, and an AML case in Charlotte, remarks by the AMLA Chairman about the organization's top three priorities, activity at the House Financial Services Committee about cryptocurrency, a paper from the Basel Institute for Governance on the importance of asset recovery in the current environment, and other items impacting the financial crime prevention community.

Fentanyl, Trouble in Charlotte, AMLA’s Top Priorities, and Crypto - Transcript

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

John Byrne: Good, Elliot. I was thinking maybe at some point we rebrand this to This Week in Chaos, but for now it's still This Week in AML, so everything's good.

Elliot Berman: Yeah I'll do some checking and see whether somebody else is already doing that podcast.

John Byrne: So a bunch of things all over the map. Literally all over the map. I thought it would make sense. Let's stay geographically in one space. There's been a number of actions in the Charlotte area that made the news for different reasons. One is an IRS -CI press statement. And this is from the Charlotte Field Office. This is a fraud case that was just announced a couple days ago. A Charlotte man was sentenced to prison for his role in what's called a multimillion dollar bank fraud scheme. That was announced by the US Attorney there in the Western District.

This person was sentenced to 12 months and a day in prison, followed by two years of supervised release and had to pay restitution the amount of $1.5 million. And these were for conspiracies to commit wire and bank fraud. And there were three co-defendants in this case and each pled guilty. One of the individuals also pled to a money laundering charge.

This was basically a fraudulent loan scheme that the defrauded, they say at least 17 federally insured financial institutions of close to $17 million. A whole series of false statements including false employment, income information, false tax returns, all of this intended to get loan proceeds.

In any event, this is a storyline from the Charlotte office. And then I know you have another story that does touch the Charlotte region. Another bank related issue.

Elliot Berman: Yeah. Rough times in Charlotte in the last week or two. So two people from China and one from California pleaded guilty in Federal District Court in Charlotte for using a number of suburban Charlotte banks to launder drug trafficking money as part of, as reported, a $92 million scheme. Various components here, a Chinese money laundering organization deposited more than $700,000 in Charlotte area banks.

The three folks pled guilty. They used a number of suburban banks, including branches of Bank of America. I know we've talked a lot over the years about the fact that money laundering can happen anywhere, it's a reminder to everybody be on the lookout.

John Byrne: IRS also announced in conjunction with the DEA a major bust according to the press statement over 400 kilograms of fentanyl. And this was fentanyl, cash, firearms and vehicles across multiple states. In Albuquerque, New Mexico, Salem, Oregon and Layton Utah, as well as Phoenix, Arizona.

A whole series of state, city issues here. But this is DEA working in conjunction with IRS-CI. IRS-CI, as we've said many times, such an important law enforcement agency for the AML community and financial crime and other areas. So another, commodation for IRS-CI and the great work that they do. And again, in conjunction with DEA, of course.

Elliot Berman: FinCEN issued an alert on oil smuggling schemes on the US Southwest border associated with the Mexican base cartels. And that is an alert, it has details in it of course.

John Byrne: It's got methodologies and typologies that as all alerts do. And that alert was issued with an OFAC sanction action against some of the same Mexican individuals and companies.

Elliot Berman: Exactly. But worth a read. And then also as all the FinCEN alerts do, it includes red flags. I'm sure many of our listeners get the announcements from FinCEN when they posted something, but if you haven't seen this, definitely important to take a look at.

John Byrne: So sticking with the US government and some activities. I know there was some news that was reported by AML Intelligence, and that there's been more than suggestions, but there's definitely reporting that TD and Binance may no longer have monitors for the cases that they were involved in.

Elliot Berman: Just a reminder for our listeners in, large complex compliance failures. It is not unusual as part of a settlement agreement or some other kind of regulatory issuance that one of the requirements for the company is to have an independent monitor. Those are often lawyers who are on site with a staff and are monitoring the actual activities on an ongoing basis. DOJ appears to be stepping back from the need for monitors. So if that's the case, as you mentioned, the two big cases out there in the last year or two that have monitors in place are TD and Binance.

John Byrne: And sticking with agency issues relating to enforcement. In a publication called Radical Compliance, I wanna give them credit, there's a story from a few days ago that, the OCC is settling charges with two former top audit executives at Wells Fargo for their oversight failures during the bank's fake account scandal of the 2010s.

So they announced the deals late last week. The former chief auditor at Wells had his fines from the OCC cut from $7 million to $100,000, and the executive audit director had his fines cut from $1.5 million to $50,000. These proceedings were failure to exercise proper oversight. There was evidence of fake account scandals that we read about through the 2010s.

And back in 2022, there was a report issued by the administrative law judge that stated that all of the individuals included failure to provide credible challenges to all the activity.

Elliot Berman: Yeah, and it's interesting. If you're an internal audit, you're not in the line of operations. On the other hand, you have obligations to identify through your processes and then report appropriately. So generally, in a larger organization, the chief internal auditor will report to to the board audit committee.

In reading all the materials there does not appear to be an indication that there were reports filed that were rebuffed at the board level. And the administrative law judge's report was quite comprehensive and talked about a lot of circumstances where the audit staff was alerted to some of the problems as they were actually occurring.

I remember, John, that you were in Milwaukee when the story about these fake accounts broke. And we were sitting at a restaurant 'cause we were going to a Marquette game. We were sitting at a restaurant. And reading the story on our phones and shaking our heads really?

John Byrne: Yep. That's all I'll say about that. AML intelligence who does a tremendous amount of great reporting, also sponsors several conferences. I guess actually today was the opening of their or yesterday, I apologize, I got the dates wrong. The European Anti Financianal Crime Summit, and at that summit, the keynote speech given by the chair of the EU's AML Authority, AMLA listed her top three priorities. I know you had referenced that.

Elliot Berman: Yes. Her three key pillars for the organization are ensuring harmonized EU standards for financial firms, fostering closer cooperation between businesses and regulators, and direct supervision of EU's 40 biggest financial firms. The statutory work at the EU level that created this new regulatory agency had as one of its goals, the first of the pillars, and that is across the EU member states have their state level laws and enforcement be consistent. AMLA the organization also will be a top level umbrella, FIU.

In other reporting, we've read that the FIU at the EU level is meeting with their counterparts at the member state level to harmonize the work they do and also put in place processes for better information sharing both up and down. So these three pillars make a lot of sense. They're doing something from scratch, so that's a little tricky, but they're certainly getting the support it appears from the member states to move forward.

John Byrne: Another, international issue connection with the states Credit Suisse Services, AG admits, this is from a press release from the Department of Justice in the US, admits to conspiring with US taxpayers to hide assets and income and offshore accounts, and admits that Credit Suisse actually breached it's prior plea agreement. So they pled guilty and were sentenced this week to conspiring to hide more than $4 billion from the IRS and at least 475 offshore accounts. Certainly not the time to be cutting staff at the IRS. I would add parenthetically.

The guilty plea by the Swiss Corporation is a result of years long investigation by various parts of US law enforcement and they've now agreed to cooperate with the Justice Department in other ongoing investigations about the issues that they had in Singapore and other places to evade US tax and reporting requirements. Once again, IRS-CI was involved in this as was DOJ. Under the resolutions Credit Suisse is required to cooperate fully. There's no protection for any individuals, and pursuant to the guilty plea, they will pay a total of $510 million in penalties, restitution, forfeiture, and fines. And this press release can be found on the DOJ website.

Elliot Berman: And just a reminder Credit Suisse because of a wide variety of challenges and investigations and operating issues, ultimately was merged into UBS at the behest of the Swiss banking regulator. So from a UBS perspective. This is, one more problem that they inherited.

John Byrne: That's right. One other thing on my end back in the US yesterday. The ranking member, the House Financial Services Committee, Maxine Waters decided, to not join a joint hearing that was so supposed to be held between House Financial Services and the Agricultural Committee to deal with cryptocurrency related issues. In large part because she wants to focus on what she says are the corrupt actions of the Trump family in terms of enriching themselves with crypto related value.

I would just say a couple things that from the press statement and then I'll mention legislation that, she is going to propose, she said in March Trump's World Liberty Financial announced the launch of it's stablecoin, just before the House committee was scheduled to vote on legislation. And as she mentioned, stable coins are a type of crypto that claim to maintain a constant or stable value that are used in most crypto transactions.

Nevertheless, again, quoting from the press release, the Republican's bill did nothing to address Trump's conflict. Instead voted to hand Trump the authority to write the rules over his and his competitors stable coins. Now Congressional Republicans insist on pushing forward crypto market structure legislation. And she asks members to keep in mind, all of this is occurring against this unprecedented backdrop.

The only thing I'll mention, obviously it's for folks to come to their own conclusions, the legislation that is being considered right now only by the minority of the House Financial S ervices, is a bill that would establish digital asset prohibitions with respect to government officers and employees. So basically if you were a covered individual according to the legislation, you couldn't own a digital asset, serve as an officer or director of a digital asset, issuer or issue, sponsor, promote for direct or indirect compensation, any sale or marketing or trading.

Now a covered individual according to the legislation, would be the president, the vice president, members of Congress, and then a broad category, broad in terms of definition, spouse, child, son-in-law, daughter-in-law is determined under applicable common law. And then they define digital asset. Again, legislation in the House or Senate in the United States now and usually all the time if it's done by the minority, stands very little chance of even getting a hearing. But I thought I would mention that 'cause there's a lot of debate going on about the cryptocurrency environment. And I think this is a relevant conversation for people to be having.

Elliot Berman: Last thing I have this week is from one of our favorite sources and that's the Basel Institute on Governance. They have taken note of the fact that not only has the US drastically cut its funding of foreign aid projects, but that other countries have already reduced or are looking at reducing their overseas aid budgets. That includes, cited in this article., The UK, France, Switzerland Belgium, Germany, the Netherlands, and Sweden and that's not a comprehensive list.

But they tie it interestingly to the importance of increased responsibility to recover stolen assets because the UN Convention. Against Corruption, which has a section about the confiscation and return of proceeds of corruption and money laundering go back into the financial systems of the impacted countries or locations. And this piece makes a connection about the importance of maximizing efforts to identify, confiscated, repatriate, the proceeds of corruption that have been stolen from aid dependent countries, so that those funds could flow back. In my opinion not a total substitute for the aid losses, but certainly a funding source to help address critical needs.

Again, a worthy look. And you'll be able to find the link to that in the description of this week's podcast on our website. John what else you got going?

John Byrne: I did an interview last week with the general counsel and assistant counsel for the Jewelers Vigilance Committee that we will be posting shortly, and that's a conversation with them about how they handle AML in sanctions. Obviously they're not traditional financial institutions, so appreciated that.

And I'm efforting a follow up conversation with folks from the Antiquities Coalition. That probably won't be, we won't have that sit down until probably June. A lot going on in their space. I want to update the community on what's going on there.

We have our May webinar is on sanctions. Sanctions and sanctions related topics. So sanctions, things incur in that space virtually every day. So we do have themes of what we plan to cover, but obviously things can change between now and when we run the webinar.

Elliot Berman: And that webinar is May 22nd. As with most of our webinars, that'll live stream at 1:00 PM Eastern Time, and you can, register for that at our website. And you can't register for this one yet, but our June webinar, which will be June 26th, is going to be looking at the latest on effective risk assessments.

So John, I will talk to you next week, and you have a good rest of the week and weekend.

John Byrne: And to all our mothers out there have a wonderful Mother's Day on Sunday. Everybody take care.

Elliot Berman: Absolutely. Bye-bye John.