FinCEN Ends BOI Reporting, Fraud Enforcement Expands, and Global Compliance Shifts

In this episode of This Week in AML, Elliot Berman and John Byrne break down FinCEN's final rule eliminating beneficial ownership reporting requirements for millions of small businesses and discuss what the move means for AML compliance, transparency, and financial crime prevention.

The conversation also explores the renewal of FinCEN's Minnesota Geographic Targeting Order and the growing debate over whether the U.S. is experiencing a true fraud crisis, including insights from Jonathan Rusch's recent analysis of federal fraud enforcement efforts.

Beyond the U.S., the hosts examine OCC concerns that led to the rejection of a European fintech's national bank charter application, the Luxembourg FIU's new authority to freeze fraud-linked payments, developments surrounding European beneficial ownership registries, Russia's reported sanctions-evasion payment network, and Australia's enforcement action against a major cryptocurrency ATM operator. The episode concludes with a discussion of a new de-risking resource for nonprofits.

FinCEN Ends BOI Reporting, Fraud Enforcement Expands, and Global Compliance Shifts - Transcript

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

John Byrne: I'm good, Elliot. How are things out there?

Elliot Berman: Things are good. We had rain this morning, but now it's sunny. It's the classic, "If you don't like the weather, wait a minute," as we have here in Wisconsin. But otherwise things are good. Karen and I are getting ready to spend a long weekend at Lake Louise in Alberta.

John Byrne: Wow.

Elliot Berman: Yeah.

John Byrne: That's a trip.

Elliot Berman: Yeah. We've always wanted to see it. And we were supposed to go on a longer trip that included Lake Louise earlier in the summer and just had some issues pop up, so we canceled that. But this'll be just the two of us, private tours and just for five days. But gonna take advantage of it. Hopefully we won't get a lot of smoke. You're up in the mountains, so you know, it could be 75 and it could be 55. Pack for two seasons, but we're looking forward to it.

John Byrne: So we're recording earlier than we normally do. We're recording on Tuesday, and what just popped up on my phone, which is very relevant to our conversation, this is a Treasury Department press release. FinCEN permanently ends beneficial ownership requirements for millions of small business owners.

So obviously just saw it, didn't read through it. We knew it was coming at some point. I'll gloss over the the question of how on the one hand Treasury through FinCEN does this, on the other hand they say that they're issuing alerts that are telling banks to watch out for shell companies. So little inconsistency there.

If you get a chance, look at the FinCEN final rule. It will delete information that was previously reported by US persons, and like I said, just popped up, so I'm not gonna read the whole thing to you, but that'll be something to take a look at for your AML oversight.

Elliot Berman: I feel better now that the information you and I put into the registry is gone.

John Byrne: It took me 10 minutes, by the way, to put the information in for my LLC. Will I ever get those 10 minutes back? I just wonder,

Elliot Berman: I don't know.

John Byrne: Since we are on FinCEN, why don't we dive into the other item I know we were gonna talk about, and that's the geographic targeting order in, drum roll please, Minnesota. So do you want to talk a little bit about that?

Elliot Berman: Yeah. They renewed the GTO which is not unusual. These things generally have a six-month life, so they do get renewed. I think you and I, over the last several years, have talked about the renewal of the ones along the southern border.

These specifically focus on financial activity in Hennepin and Ramsey Counties. Hennepin County is Minneapolis, Ramsey County is St. Paul. And I think it sets a $3,000... Yes, funds transfers of $3,000 or more to beneficiaries, recipients, or banks outside of the US. And again, this one will be effective again for 180 days. So we'll get a chance to talk about this again in February when it's renewed.

There wasn't a lot of change in what they're doing. But, I know you pointed out to me and wanted to talk about an article that was published by Jonathan Rusch who you recently talked to on our AML Conversations podcast, about the whole question of whether or not we actually have a fraud crisis. So I'll put this over to you. You can talk about the GTOs and then talk about Jonathan's article.

John Byrne: Yeah. So Jonathan's got a free substack, and this one is, as Elliot earlier just mentioned, is entitled, Is There a Federal Fraud Crisis?

And he's responding to this GTO and other targets from what I guess is a task force theoretically run by the vice president to deal with fraud. And a number of the fraud claims being made. Jonathan does talk about the fact that various previous administrations, Biden, Trump, Obama, had definitely done similar executive orders that prioritize various types of anti-fraud task forces and responses.

What was new about this was it's being run out of the White House directly. But Jonathan goes into detail and he's got numbers to back it up. He looks at what GAO has estimated. He's looked at some of the actual prosecutions. I'd say read through the whole thing.

I'm paraphrasing, but he concludes that, yes, fraud is an issue. We've all said that, we all believe that. But the exaggerated numbers, particularly those in Minnesota, he's skeptical, let's put it that way. But I think you should read this substack in conjunction with the GTO and other press statements, both out of the White House and out of the Secretary of Treasury's office.

I think that's only logical to do that. And like everything else, come to your own conclusion of what you think. Bottom line is fraud exists, no question. We obviously need the tools to deal with that. The question is, are we targeting the right areas? And I'll just add one more thing quickly.

There was a conference or roundtable in Arizona this week as well with a number of bankers and the Secretary of Treasury and I believe some Arizona officials. I'm not 100% positive on that. But he did meet with bankers, and in his written statement, a couple things I would just call out. And that is he talks about both the FinCEN advisory to identify schemes involving, he calls unlawful employment, labor brokers, shell companies, and other forms of financial exploitation.

He also mentions the administration's push to see to it that financial institutions do not allow extension of financial services to illegal aliens. But we talked about their executive order. I'll finish with this. He said, "Now, to be..." This is quoting, "Now, to be sure, we do not ask bankers to assume the burden of border enforcement, but we depend on banks to do what you do best: know your customers, identify risks as they arise, and report suspicious patterns before they metastasize into criminal schemes." Unquote. I'll leave it there.

Elliot Berman: And since you left it there let's go to the OCC, and that'll take us to Europe. The Dutch fintech Bunq applied to the OCC for a national bank charter. And it was announced this week that that application has been denied over significant compliance concerns.

We talked last week about another application that was denied, again with concerns about compliance and other things that was the payment platform Wise. So this one is significant to the company because this OCC charter was going to be a key part of their strategy to expand from the Netherlands and Northern Europe into the US.

This company had applied earlier and had withdrawn an application after they got an indication from the OCC that they were not gonna get an approval. They are continuing to look at this and say they'll pursue it. In 2025, they received a broker-dealer license from FINRA, which is the self-regulatory organization for broker-dealers in the United States. So they're clearly looking to offer investment and banking products in the US, but so far they haven't been able to get all the pieces together that they need.

And then in Luxembourg, they passed new legislation that gives their FIU the power to block fraud-linked payments. So up till now the FIU was receiving information about them but didn't have the authority to actually interdict the payment. And under this new legislation, which is already in effect, they're going to be able to make cashing out of accounts more difficult, according to Max Brawn, the FIU director. So an interesting authority that you don't see every FIU having.

What else you got, John?

John Byrne: Yeah, you also mentioned we talked last week about the EU and the Beneficial Ownership Registry. There's an update that there may actually be activity by Brussels just recently announced after missing the the deadline last week. This is I'm quoting here from the from AML Intelligence, " the European Commission said it may open a case against countries that have not yet completed the framework to grant journalists and civil society organizations access to the national beneficial ownership registry." It goes on to say that last week Brussels delayed issuing guidance to make sure they can harmonize rules across the block.

However, a spokesperson for the commission said the EU countries should not use delay as a justification for missing their own deadline. So I wanted to add that. And then staying outside the US Wall Street Journal is reporting that Russia has created a payment workaround that assists with sanctions evasion.

It's called A7. Reading from the Journal, "The state-backed payment network moves money in and out of Russia, defying US and European efforts to isolate Moscow from the global banking system. A7 helps Russia pay for everything from military drone parts, to luxury cars, to imported fruit, using a mix of crypto and more traditional banking methods." So that's reported in the the Morning Risk Report from The Wall Street Journal earlier this week.

Elliot Berman: Our friends at AUSTRAC have shut down a company called Cryptolinks network of 96 cryptocurrency ATMs in Australia for three months. And this was reported over this past weekend.

The move means that the virtual asset service provider can no longer operate its cryptocurrency automatic teller machines across Australia. They failed to meet, according to AUSTRAC, they failed to meet reporting requirements despite an earlier enforcement undertaking.

So it'll be interesting to see. We've talked about other challenges related to crypto ATMs in other parts of the world. And it continues to be a focus of regulators globally.

John Byrne: Sticking with crypto, The New York Times had a front page story earlier this week headlined Trump Crypto took $100 million from a businessman with red flags.

Gentleman's name is Guren “Bobby” Zhou. According to the report, it shows the ease with which investors with shady backgrounds and unknown motivation, can funnel money to the president. This was written by Russ Buettner of the New York Times.

Lengthy piece and talks about World Liberty Financial and how this Bobby Zhao gave $100 million to World Liberty Financial with buying tokens, and this was somebody who previously was a failed hardwood floor retailer in Britain. He's also been investigated for money laundering, and he was overseeing a small crypto startup. Anyway worth a read. Good solid lengthy investigative piece by the New York Times.

Elliot Berman: That's what I've got other than a few things we've got in the pipeline,

John Byrne: I got one more. This happened after last week's recording. The Charity and Security Network, our friends there, their trying to deal with this de-risking issue, the challenges that they've been working on for so long.

They've put out a new resource, and it's called Navigating De-risking: A Practical Response Guide for Nonprofits. So according to their announcement, the guide, and we've sent this around to some of our partners, the guide's a resource that outlines suggested responses to de-risking and tools to navigate financial access challenges.

It's supposed to help them move from just general complaints when they lose access or don't get support from the beginning, to documenting issue-specific responses that a bank, or a donor-advised fund, a money transmitter can meaningfully evaluate. So bottom line is, this is something that we talked about in the paper that we did with ACAMS and the World Bank eight years ago, and basically, if you have information as the financial institution, you can better make a decision regarding risk mitigation and whether the business is appropriate for the type of products and services that you have.

Similarly, the not-for-profit can better understand what the bank needs to mitigate risk and manage that risk based on their risk appetite, regulatory oversight, and their business model. So I think this is more than a good start. I think a lot of these conversations have been in place for a number of years, but I think this document shows that our friends at the Charity and Security Network know that if you give their members a template, you can have better and more meaningful communication, and hopefully some of these challenges can be withstood.

Elliot Berman: So John, I know that you're meeting with Sarah Beth for your monthly sit-down, .

is that this week?

John Byrne: Yeah, we're gonna talk later this week. Get Sarah's take on past couple of months of the summer. We've had some of these fines that we've talked about. I know she's got views on the chartering of banks, 'cause she's she's trying to do the same thing with the bank that she's operating or trying to operate in Vermont.

So I know she's got views on that. So we'll ask her about those things and her take both about the change in FinCEN, the GTOs, and now obviously the final rule on beneficial ownership, which again, we all knew was coming. Does this mean that some of the other things promised might also be in the pipeline? Meaning the priorities rules, the AML program rule, that sort of thing

Elliot Berman: Okay. And we'll get that posted to our website sometime next week. And then on the 27th of this month, we're gonna have our monthly webinar. As we've mentioned over the last couple weeks, it's gonna be on the risks related to virtual assets.

I had a conversation earlier today with the three panelists and I think everybody should sign up and tune in because it's gonna be really interesting. And it's gonna focus on things that many of us who are not working with virtual assets day in and day out are going to find, I think, enlightening and not often talked about in the more general conversations.

So I'd urge people to do that. You can go to AMLrightsource.com and sign up for that. And Joe is gonna join you next week for This Week in AML. I wish you guys good luck. I don't think you need it, and I will talk with you in two weeks.

John Byrne: Sounds good. Stay safe. Have a great time.

Elliot Berman: Thanks. You stay safe as well. Bye, bye.