In this episode of This Week in AML, John Byrne and Elliot Berman unpack several significant developments across the AML, sanctions, fraud, and compliance landscape.
They begin with the U.S. Senate's overwhelming bipartisan vote to advance new Russia and Iran sanctions legislation, then turn to FinCEN Director Andrea Gacki's recent congressional testimony, including her emphasis on fraud prevention, BSA modernization, SAR guidance, and the industry's ongoing uncertainty about AML priorities and effectiveness standards.
The conversation also explores Transparency International's 2025 achievements in advancing anti-corruption reforms worldwide and raises important questions about whether corruption will remain a formal U.S. AML priority. John and Elliot review FinCEN's new alert on financial student aid fraud, discuss the continued role of shell companies in fraud schemes, and examine a House Financial Services Committee report on scams and fraud.
Additional topics include Treasury's review of the SDN List, the growing industry around sanctions delisting petitions, the closure of crypto exchange BitMEX despite presidential pardons for its founders, the OCC's denial of Wise US's national trust charter application due to AML compliance concerns, and new reporting linking crypto-to-cash storefronts to money laundering activity.
FinCEN's Fraud Focus, Corruption Questions, and Crypto Compliance Challenges - Transcript
Elliot Berman: Hey, Jon. How are you today?
John Byrne: I'm good, Elliot. Thanks for joining us last weekend for my daughter Jenn's wedding. It was beautiful weather and real happy to see everybody, and we added a great family member plus his family, so a very exciting time for everybody.
Elliot Berman: It was my pleasure to be there. And it was a great time. And you're right, the weather was gorgeous. The venue was beautiful, right on Lake Michigan, and it was great. And saw a few other of our common close friends Rick Small and Dennis Lormel and some of the folks from the Center for Peacemaking, so it was fun all the way around.
John Byrne: Yeah. It was great. So the breaking news last evening, we're recording this on Wednesday. The Senate in the US cleared a hurdle. They voted to advance a Russian and Iran sanctions bill with an overwhelming bipartisan vote, 86 to 12, which is pretty amazing.
This was in part in response to a lot of work that Senator Lindsey Graham had done, so they talked about as a tribute to him. But like I've said, this is a very broad bipartisan bill. Ukrainian President Zelenskyy was actually in town for the memorial service, and so he was present and met with the senators before the vote.
The bill also does some interesting things. It gives Trump the ability to impose tariffs on the top five countries that buy Russian oil and natural gas. And it seems to have the support, probably based on that, of the White House. But the House is out for a couple weeks, and it has to go back through the House and Senate, so this may take a while.
But this is a pretty key hurdle for something that everybody has felt it was important, and that's a response to the Russian attacks against Ukraine.
Elliot Berman: Yeah. And you mentioned one of the key focuses is Russian oil, and that's been an ongoing theme in prior sanctions programs by the EU and the UK.
John Byrne: Yeah. Gas has gone up down the street here 60 cents in the past couple weeks you do see the impact of all that's going on in the world.
Elliot Berman: So where would you like to go from there?
John Byrne: As I was out last week, appreciate you and Joe doing the conversation. Andrea Gacki, the director of FinCEN, testified before the Financial Services subcommittee last week.
An update on FinCEN activity focuses almost entirely on fraud issues, which obviously is important. But from her opening statement, she also referenced modernizing the BSA regime and touted the fact that FinCEN did the SAR FAQs that we've talked about before. That there's a proposed rule from - from FinCEN and the other and the banking agencies the AML program rule, and she noted in her testimony the new, quote, "A new role for FinCEN in the supervisory process to promote," quote, "risk-based, reasonably designed programs and greater consistency in how banks are evaluated for," quote, "effectiveness." As we noted, the Fed did not have what I would call the gatekeeper provision for FinCEN before an enforcement action is finalized in their program rule. So that's gonna be interesting.
I did speak to some folks that were monitoring the hearing and one of the individuals that I talked to noted this, that Gacki was asked specifically about corruption, including domestic corruption. Would it be included once they finish the priorities rule. Remember, the priorities from 2021 have expired. Again, according to people in the room Gacki seemed to indicate that it may not be on the list, which would be more than surprising and even lazy media would figure out that corruption is not included in those. So we'll see if that's true or not.
But that was something that was noted during that conversation. 'Cause as you know, we've mentioned many times, the priority rule was never finalized and so banks and other financial institutions really have no direction on what they need to be doing regarding the priorities.
Some, some banks have factored that into their risk assessment, but not all of them have. In any event we think from talking to others that there may be a final rule before the end of the year, as well as a final program rule. So all that we'll watch carefully and if it warrants a separate conversation or a webinar, we'll do that, but we'll definitely let folks that listen to this know what we find out
Elliot Berman: And as you mentioned Director Gacki did not clearly say corruption would be included in her testimony. Her prepared remarks were silent on corruption.
John Byrne: Yes ... entirely.
Elliot Berman: Which maybe that takes us to a natural segue, and that is Transparency International has issued its Annual Report for 2025, and I'll let you talk about it in just a moment. But their goal is to reduce corruption to improve the common good. What did you see specifically in their annual report?
John Byrne: They touted in a good way what they're calling their wins in 2025, and according to what's in the report they helped drive over 60 policy and law reforms. They saw the EU finally ban golden passports after years of campaigning.
They said that their standards on political finance informed a UN Resolution 11-7, giving countries a roadmap to make it harder to buy influence. There's some charts in there. They are involved in fifty-three countries where their advocacy and what they call their legal advice centers provide free confidential advice to people that are affected by or who witnessed corruption.
They've done 67 research publications and studies. So a lot in there, and as we talked before recording, we're gonna make an effort to get some individuals from TI maybe to sit down for a conversation before the end of the year to talk about this and other issues related to corruption.
Elliot Berman: And now connecting back to FinCEN. In addition to Director Gacki's testimony FinCEN issued an alert on fraud schemes targeting financial student aid. They talked about the importance of financial institutions trying to detect, prevent, and report suspicious activity connected to such fraud.
They talked about the fact that fraudsters steal PII to create ghost students and then have those ghost students apply for aid. They also leverage complicit straw students similar to money mules actually, who obtain student aid. And then also they corrupt insiders at university financial aid offices to help them create these fraud schemes.
And of course there's information about coding your SAR filings if you do detect such activity. You can see that in the alert. I thought the most interesting thing, and maybe I'm just more attuned to irony as I age, but there is a section in the alert that talks about the use of shell companies.
And every time I see this in a FinCEN or a Treasury document, I scratch my head because we had the Corporate Transparency Act all set up and about to operate, and then we backed away. And yet we still are worried about shell companies, and I'm not saying that the Corporate Transparency Act would solve this problem, but I have to assume that some of the shell companies that are being used are domestic.
They are not international, which is the part of the Corporate Transparency Act that is still alive. Maybe we need a managing director of irony at the Treasury Department.
John Byrne: Related to that the majority on House Financial Services issued a report last week on fraud that similarly does not include any reference to front companies or shells being used to set up in one instance, fake crypto investment firms so they can trick victims out of their funds.
There's nothing in the use of US registered companies to open up accounts to move the proceeds of crimes. Again, this is an oversight report on fraud and scams, so it's connected to what you just referenced. I, I find this, no matter what side of the aisle does this, just issuing majority or minority reports it's not a great way to do policy.
It would seem to me, and in the old days, huh and I can't remember how far back, but there used to be just a report from the committee, and there, there could be dissenting opinions if there were some policy questions or challenges or disagreements. In the past, you would never have the Republicans do X, the Democrats do Y. That just didn't happen.
And, even if the Democrats take over the House, you would hope that they wouldn't continue this process because, again, it just doesn't seem to help. You're getting a report, but you're not getting some information in there that perhaps could amplify what you're trying to prove regarding frauds and scams.
Anyway, that's available on the majority's Financial Services majority's website
Elliot Berman: The Treasury Secretary announced it last in May that FinCEN and OFAC were going through a comprehensive review of the SDN list. And it was noted that over 3,000 names were designated in 2024 compared to 880 back in 2017. I guess my comment there is the US government across administrations from both parties have accelerated their use of sanctions in a very large way. And so the fact that more names were added in one year versus another is not surprising.
They purged 84 people and firms. I think the thing that everybody needs to understand is OFAC has managed the list and reviewed it on an ongoing basis for a long time. It just didn't do it with a lot of fanfare. They did identify a small number of duplicate entries, which they've also done in the past, and there have always been the troublesome entries.
The other thing that OFAC has done is they've opened a portal on their website that allows people who believe they're inappropriately on the SDN list to put in a request to be removed. And I know you heard about another thing about getting removed from the list. Do you want to share that?
John Byrne: Clearly, there's a transparent process. They actually call it the re-reconsideration portal, which sounds accurate, and I think you can figure out what they do based on that. But here's what we've been hearing from sanctions experts and that is that the delisting process, which needs to happen, as Elliot just mentioned, also now has created a cottage industry of lawyers that will go to someone on the list or a company and say, for a fee, we'll get you off that list.
And obviously you got to prove why the documentations and all of that- And this several people have likened it to the pardon process, which has become also a big cottage industry where lawyers are working hard to get their clients or potential clients a pardon or a commutation, which we've seen quite a bit of those happen in the past year and a half.
So bottom line is, yes, there should be an active process for removal, but, based on again what Elliot referenced and streamlining the petition process is definitely useful, but it definitely has added another fee structure to our friends in the legal community.
Elliot Berman: And speaking of pardons, so BitMEX, which is a crypto exchange whose founders had admitted that they had failed to implement a Bank Secrecy Act compliant anti-money laundering program, has announced that it is closing down.
The three of them were sentenced to $100 million fine in January of 2025 and were pardoned later in 2025 by President Trump. Prosecutors had accused them of violating the Bank Secrecy Act between 2015 and 2020 by failing to adopt an adequate program, including Know Your Customer.
They've alerted their customers who still have accounts to move their assets to other platforms. Even with the pardon, apparently it was easier to close than to actually implement a program.
John Byrne: Since I was out most of last week, what other things did you have since you were paying more attention than I was?
Elliot Berman: So a couple things. One you and I have talked a couple of times about the fact that the Office of the Comptroller of the Currency has been expanding the availability of the limited purpose trust charters. We've seen them granting either final or preliminary approval to a lot of non-traditional financial services companies.
Wise US, which is a subsidiary of Wise, which is a payment platform in the UK actually had their application denied, which is the first one that I've seen. The basis of the denial was that they've been operating in the US under MSB licenses from the various states in which they operate, and they recently signed a multi-state consent order relating to the deficiencies in their Bank Secrecy Act and Anti Money Laundering and Countering Financing of Terrorism program. It identifies program violations of state and federal law.
The OCC concluded that since Wise was, had a record of failing to comply with applicable MSB requirements and the application for the charter does not support a conclusion that the parent company would be able to comply with the additional requirements applicable to banks. I guess I'd say that's good news. I did a lot of chartering work when I was actively practicing, and the expectation when you applied for a charter was that you could show the ability to do all the things that the organization needed to do to be in compliance.
It's nice to know that the OCC is at least still looking at that because it feels like it's a lot easier to get a charter than it used to be, which might be okay, or whether that's pushing a problem down the road.
The other thing is back in November of 2025, the ICIJ did a long form piece as part of the Coin Laundry series, about the use of crypto to cash storefronts fueling money laundering. Now I can't find it, of course.
John Byrne: Oh, they did an update, from Canadian Intelligence that you had flagged that said crypto-to-cash services were knowingly facilitating money laundering.
Elliot Berman: Thank you. And that continues to be an issue and the reason we bring it to your attention is if you start to see things that don't make any sense but are in this realm you can look at the Canadian Intelligence report, you can look at the long form ICIJ report by Spencer Woodman from November of 2025. But I think this is just another reminder that while not all crypto is a problem, we're seeing many reports of it being used as part of money laundering and fraud schemes. And so it's something to be cautious about.
John, anything else that you have?
John Byrne: No. The interview that I did with Tess Davis on arts and antiquities has just posted you'll have a chance to listen to my conversation with Tess. That's coming up. And then we are always efforting new content and experts from the private and public sector. So if you have recommendations for who we could reach out to, please let us know.
Elliot Berman: Yes. And our August webinar is on risks related to virtual assets. We're gonna have a great panel and a really good discussion, so I encourage you to go to our website and register for that. And we have other interesting topics that we're lining up for the rest of the year, so continue to pay attention to that.
John Byrne: All sounds good
Elliot Berman: Okay, John, you have a good rest of the week, and I will talk to you next week
John Byrne: Take care
Elliot Berman: You too. Bye-bye