FinCEN Director Outlines Transformations in AML Compliance

This week FinCEN’s Acting Director, Him Das, delivered remarks at the ABA/ABA Financial Crimes Enforcement Conference. In the speech, he spoke about the shifts in emphasis of Bank Secrecy Act regulations over the past 30-plus years. John and Elliot discuss those shifts and look at the three new areas of focus outlined in Acting Director Das’s remarks: new threats, new innovations, and new partnerships.

FinCEN Director Outlines Transformations in AML Compliance TRANSCRIPT

Elliot Berman: Hi, John, how are you today?

John Byrne: Hi, Elliot. How are you doing?

Elliot Berman: I'm okay. So I saw that earlier today, the acting director at FinCEN, Him Das gave a speech at a conference. The ABA, American Bankers Association, American Bar Association, Financial Crimes Enforcement Conference. I wondered if you saw either saw the speech or saw the remarks on their website.

John Byrne: I did see the remarks. Obviously, you and I have a long history with that program. Having helped create it as far back as 1989. It was always important to have the FinCEN directors, whoever he or she was at the time, speak to the bankers and the lawyers. So this continues in 2022, but obviously, like in 2021 done virtually.

I did notice there was a couple of things in there [that] sort of struck me. One is I can just a quick aside. I can remember when Stan Morris was the director. We asked Dan, I mean, we asked Stan if he would speak to it's, you know, I forgot how many years it was by the time. I think it was ten years. So I think it was after the Money Lauder Control Act 86 was, and this was in 96.

So ten years in is the BSA. He was a little taken aback by that premise, of course, believed it was talked about it. Him Das, in his prepared remarks, at least is very clear and transparent about the importance of revisiting the infrastructure. Not just congressional direction from the AML Act that was signed earlier this year, but also a lot of the things that FinCEN started in terms of looking at innovation, looking at whether or not things can be more efficient. So definitely embracing the notion that change is coming is how I looked at it.

Elliot Berman: Yeah, I agree. I mean, he talked about the fact that you know the purpose of the earliest reasons for the Bank Secrecy Act, which was, you know, disrupting or countering financial flows related to drugs, and then how it changed as a result of the Patriot Act. You know, disrupting money flows to groups, and I'm quoting here "like Al Qaeda."

He goes on to say, you know, it means the act never anticipated the challenges of the 2020s, digital assets, strategic corruption, an explosion of kleptocrats hiding their wealth in American shell companies.

Or artificial intelligence that could help us recognize these crimes and others. He then goes on from that kind of quick history, which I think is, as you point out, very insightful. So he's really talking now. He says where we are; [it] is really best told in three chapters that could be titled new threats, new innovations, and new partnerships. What'd you think about that way of sort of looking at where we're headed?

John Byrne: Well, obviously, it makes sense that he calls out the fact that there are now listed priorities, which we've talked about before. He also mentioned that Vincent is looking at including other aspects of the real estate industry in an advanced notice of proposed rulemaking, which is way overdue. But, you know, embraces that they are asking the public for their comments. On innovation, you know, I think FinCEN, OCC, and the other agencies have been pretty open about the importance of it, but also that it doesn't always answer every question.

I think they've done a lot of things, like have open exchanges with the vending community, that is, innovation. They talk about technologies, and this is from the prepared remarks. He says, "AI, blockchain, machine learning all have the potential to automate the work that needs to be done, but it's not as simple as flipping a switch."

So I think that's important. Then the other part of it that I continue to really appreciate is on partnerships. Obviously, our community has been all about working closely with law enforcement for these past couple of decades. What he identifies in the remarks, though, is new partnerships.

Obviously, things like we understand that the community wants to know what's happening with the data that you provide. We need to do a better job there. The old adage about improving feedback, but also, you know, expanding that partnership to new entities, to FinTech, not just traditional banking and all these things that, you know, in 1996 we're not on anybody's radar.

Elliot Berman: Right. Well, in 1996, probably the closest thing you had to a FinTech was some of the companies that were providing core processing systems and involved in running some of the national and international payment systems. But we didn't think about them in the same way people think about it when you say the phrase FinTech now.

John Byrne: Right. The other parts of this offense does deserve credit for, and we've talked about it, is a number of the reports they've done. They did a ransomware trends report. They obviously have some required reports under the AML act, but there are some reports that have occurred over the course of the past year.

We'll continue to give filers, users of information better information because of things like ransomware. The cyber-world was really not part of FinCEN's mission in the beginning as well. So there's a lot more to go here. So I think the way he's characterized these threats, innovation partnership, all those items are really important.

I would imagine that his comments were well received and not just seen as comments. I think they've proven certainly also under the previous Director Blanco. He was all about working groups, stakeholder dialogue, all those sorts of things. It sounds like that's going to continue with this activity.

Elliot Berman: Yes. It'll be interesting as an aside to see at what point a permanent director is proposed and acted on by the Senate because I think that a Senate approval could be wrong, but either way, there needs to be a proposal. So interesting always good to hear actually from the directors of the various agencies, because these kinds of speeches are often written, you know, parts of the overall roadmap to understanding what they're thinking and where they're focusing.

I don't mean to equate them, but you've been a great advocate for using regulatory pieces about organizations that have problems and use those as roadmaps to understand how to improve your program. If you're looking for a more strategic view rather than a tactical view, I think speeches from agency heads or senior staff are equally valuable because they are sharing with us kind of where they're looking and where they're trying to push the entire process.

Useful to keep track of, and as you said, most of the agency websites have a process by which you can sign up for new postings. So you don't have to troll the website. You can get a ping when they do that. 

John Byrne: Yeah, no, that makes a lot of sense. So you wanna do the plugs? Obviously, we have a couple of webinars coming up this month.

Elliot Berman: You do the webinars, and I'll do the other stuff.

John Byrne: So we're doing something different this month. We're working with the local chapter of ACAMS. It's based in the DC region. They're doing a live stream conversation on betting in AML.

As sports betting comes to what we call the DMV, the District of Columbia, Maryland, Virginia. That's January 24th at noon. Then on January 27th at one we're, we'll be running the next edition of our AML Voices webinars series, Why Transaction Monitoring Isn't Working Like It Should, and What Can Be Done To Fix It. So that's on January 27th, at one o'clock. Information on both of these events are on our website.

Elliot Berman: Yes. If you enjoyed today's edition of This Week in AML, we urge you to sign up and get it served to you from SoundCloud or Spotify, or Apple podcast, or wherever you get your podcasts. Also, on our website and on all of those platforms as well you'll find other pieces of our AML conversations series, a variety of podcasts, both video and audio on a wide range of topics. So, John, it was good to talk to you, and you have a great weekend, and we'll talk next week.

John Byrne: Stay safe, Elliot, take care.

Elliot Berman: Yeah. You too. Bye-bye.