In this episode, Elliot Berman and John Byrne discuss a fast-moving week across the global financial crime landscape. They unpack the Charity & Security Network’s shadow report ahead of the U.S. FATF evaluation, the UK’s proposed updated “debanking” rules, and recent European regulatory developments—from Poland’s MONEYVAL review to the Dutch Central Bank’s call for proportionality.
The conversation also covers international efforts against cultural property trafficking, Sweden’s new red‑flag guidance for funds transfer providers, FinCEN’s geographic targeting order in Minneapolis, and the White House’s announcement of a new DOJ Division for National Fraud Enforcement. Elliot and John also discuss upcoming legislative conversations around raising CTR and SAR thresholds.
Global AML Pressures, Policy Shifts, and the Expanding Fraud Landscape - Transcript
Elliot Berman: Hi John. How are you today?
John Byrne: Hey Elliot. I heard somebody say in another context that, if they were still doing, and this was a political thing, if they were still doing programming, they always had to take a week to get ready for programming. Depending on what the issue was, whatever. Last year and going forward, they'd have to do changes every day.
You know, we started doing this years ago. We could safely say middle of the week. Yeah, these are the four or five topics. We got like 10. I don't think we'll cover 'em all, but there's also gonna be 10 more before the end of the week. And this is not just US related, obviously it's also global, but man, so much going on.
So, uh, let me just start with, uh, our friends at the Charity & Security Network. Been involved with them on, uh, several issues, but they issued what they called a shadow report. Remember the US uh, is being evaluated and so the actual onsite evaluation will be in March of this year for the us and this shadow report is a 40 plus page document by the Charity & Security Network and others giving some insight to the evaluators. And so you should take a look at it. You can just go on their website, but I will just reference this.
In their conclusion they say the US risks reversing significant progress on bringing the US financial system and regulatory bodies into full compliance with FATF standards and recommendations. Heightened executive actions and political rhetoric, portraying large sections of the NPO sector as agents of terrorism and resulting directives for law enforcement entities to dedicate significant resources, uh, toward investigating and criminally charging those. Are among other things counterproductive.
Again, a lot of detail in that report. A number of us were part of those, uh, round tables, uh, stakeholders providing our thoughts on this. This, again, focused on the NPO sector, but valuable to all of our AML professionals out there.
Elliot Berman: And their recommendation is that FATF assessors consider rating the US as partially compliant on Recommendation 8, which is the availability of banking services and NPOs. Uh, we'll see where that goes. It's their chance to speak up, the FATF assessors will do what they're going to do, but, uh, I think they certainly receive input beyond, just what they do on the ground. You have talked, we both talked, but you particularly have talked for a while about, it'll be interesting to see what the final determination is. And that would be at the October plenary, is that right?
John Byrne: Uh, I believe so. Yes. I believe that that would be be the case.
Yeah. Uh, sticking internationally, the, uh, UK Treasury issued a notice this week regarding again, the term that I can't stand de banking. This particular press release mentions that they'll be, these have to be approved by parliament by the way, but new rules will require banks to give customers 90 days notice before closing accounts and provide a clear explanation.
These changes according to the Treasury, will prevent banks closing accounts without a clear reason, while giving people and businesses the time and information needed to challenge decisions. But you had said, when we talked about this before recording, that this is simply an expansion of current rules, right?
Elliot Berman: Well, the 90 days is an expansion. They have a current rule for 60 day notice, so this is a, a longer notice period. They also, as you mentioned, it's gotta go through Parliament, but they expect it to pass. And their anticipated effective date is, April 28th. And it wasn't clear, but the language in the notice struck me as meaning that it would be effective for new accounts being open. 'Because it referred to the contract, which I thought of as account rules, the phrase we use here in the US. So it's not perfectly clear this covers everybody, but will cover people going forward.
John Byrne: One other quick point, those of us that are listening to what the UK is doing would ask the logical question, well, what happens if there's been a filing of a suspicious transaction report or something like that? These measures will be subject to certain exceptions and they say, for example, to enable payment service providers and other banking organizations to comply with their obligations under financial crime law. So that, that is mentioned in the press statement.
Elliot Berman: Yep.
John Byrne: What else you got?
Elliot Berman: A couple other things in Europe. So MONEYVAL, which is one of the regional members of FATF did its review of Poland's AML program, and they found some gaps in Poland's activities as it relates to newer technologies.
They were complimentary about the progress that Poland has made, but they noted that, they did not have in place a specific requirements so that obligated institutions had to assess. Money laundering risks of new technologies or business practices before releasing them. They were concerned about some of the way Poland is dealing with VASPs, virtual asset service providers. And the plan is to keep them under its enhanced follow up process where Poland be required to report back progress in a year. I would say good trend, but not all the way there yet.
And then the Dutch Central Bank DNB called for more proportionality in how banks apply the rules. They put out a report of a study they did, and the conclusions of the study were that they were seeing banks be more conservative than they would expect a risk-based approach to be in how they dealt with customers and transaction issues related to potential money laundering.
So they felt there was disproportionate pressure on customers and they're looking for banks to try to find a more as they said, proportional approach.
John Byrne: In addition to that sticking internationally, the United Nations Office on Drugs and Crime, put out a, document going into detail on what is actual trafficking in cultural property. Describe what it is, why it's important, how it works, and what are some of the challenges? And then they mentioned what the office is doing to combat trafficking and a couple things that they mentioned that says they're supporting member states in implementing , the UN Convention against transnational organized crime, including efforts to prevent, investigate, prosecuted, trafficking of cultural property and related offenses.
They also are actively promoting the 2014 UN International Guidelines for Crime Prevention and Criminal Justice responses to those same type of crimes. And they talk a lot about cooperation and information. So this information is available on the United Nations website. And again, they give you some examples of what happens when there's trafficking in these, elicit trades. It, uh, results in the loss and destruction of, uh, irreplaceable items, but also it further enables criminal activity. I thought that was a interesting description from the UN on an area that we are able to focus on because our friends at the, uh, Antiquities Coalition and others that have been working really hard on these issues for a number of years.
Elliot Berman: In Sweden the Swedish police who head up the Coordinating Body for AML and CFT, published a new guide on red flags for funds transfer providers. And it's a really well done piece. When I clicked on it, I was thinking, okay, this is gonna be in Swedish and it's not gonna do me any good, but it was in English, at least the copy I was able to access and it's about 24 pages long.
It has red flags. It also has a lot of explanations, I think for folks who are looking just for a nice encapsulation. Granted, it looks at it from the perspective of the Swedish rules, but a lot of the red flag things are easily transportable. It really doesn't matter where you are.
They look at red flags from four different perspectives. Customer behavior, customer identity, customer transactions, and customer response to questions. The red flags were really good pieces for training frontline staff. The people who would be dealing with customers when they ask for ID, and get pushback or they are asking other questions, source of funds questions and things like that, and what they might be seeing.
So, I would recommend that people take a look at that. I'd also point out that it doesn't matter where you are on the globe we have the same issues. These are the same things you and I have talked about in the US for years. We see it happening in other places in the EU, the UK, and in the far East. So, these are very common issues, but this was a nice piece that I would commend to people.
John Byrne: Moving back to the US this started last week. The Treasury through FinCEN has issued geographic targeting orders focused on Minneapolis or Minnesota and specifically Minneapolis. There's a press statement from the Secretary of the Treasury Bessent yesterday suggesting that he's taken decisive action against Somali fraud in Minneapolis.
We'll just remind folks that there's been a number of investigations and prosecutions of various fraud schemes in Minneapolis prior to the past few weeks. So it's been an ongoing issue. Certainly the amounts are a lot higher than people have expected.
But FinCEN issued an FAQs on the geographic targeting orders and generally this would involve money transmitters and banks in the counties of Hennepin and Ramsey, Minnesota. This goes into effect February 12th through August 10th of this year. There's a reminder of what is a GTO. Obviously we're well aware of that in our community and what are covered businesses required to do.
How do you determine whether you are covered by this? What information is available? And so that's all part of the FAQs. I would, also mention that as I said before, this has been an ongoing challenge for law enforcement. And the Bessent statements reflect current activity.
I dunno if you want to add anything to that, Elliot?
Elliot Berman: Just for clarity, they identify the counties, Hennepin and Ramsey. That's the metro Minneapolis, St. Paul area. There are a lot of financial services companies there. , Traditional banks, but also, money transmitters and things like that. The GTO itself is not radically different from the ones that were issued along the border, although those were focused on MSBs, and the ones that have been in place in areas of Florida and other large metropolitan areas around the country.
I guess my one comment would be there's fraud in a lot of places around the US. And while this is a serious problem and an investigation that's been going on since 2022, if we're gonna do this, then there's a lot of places we could do it if we're really serious about fraud.
John Byrne: I'd be remiss if I didn't mention thatBessent's initial statement on January 9th was blaming this entirely on Governor Tim Waltz, who, as we know is a Democrat, saying that welfare fraud has spiraled outta control. Billions of dollars intended for feeding hungry children were diverted to benefit Somali fraud rings. Again, the same administration that's cut SNAP benefits. I think that's important to recognize and as you point out, fraud is one of the major priorities identified back in 2021. It's still a priority, but it seems to be a targeted priority in my view.
Elliot Berman: Yeah. And on the fraud front and there's been an announcement interestingly by the White House rather than DOJ or the Attorney General, that a new Department of Justice Division for National Fraud Enforcement is being spun up.
The focus is to combat rampant and pervasive problem of fraud in the United States, the DOJ's new division for National Fraud Enforcement will enforce the federal, criminal and civil laws against fraud, targeting federal government programs, federally funded benefits, businesses, nonprofits, and private citizens nationwide. The new head of that division, which will be an assistant attorney general, will, also be required to publish national fraud priorities.
John Byrne: Plus the DOJ is seemingly busy with their reported criminal inquiry into Federal Reserve chair Jay Powell. Uh, Jay Powell got ahead of this and announced on a video on Sunday, that this is his view, a simple pretext because the administration isn't happy about where interest rates are going.
Earlier this week every former Fed chair plus former Treasury secretaries issued the following statements, a short one, so I'll read it to you and you can you can find this online. The Federal Reserve's, independence, and public perception of that independence are critical for economic performance, including achieving the goals Congress has set for the Federal Reserve of stable prices, maximum employment, and moderate long-term interest rates. The reported criminal inquiry into Federal Reserve Chair Jay Powell, is an unprecedented attempt to use prosecutorial attacks to undermine that independence. This is how monetary policy is made in emerging markets with weak institutions with highly negative consequences for inflation and the functioning of their economies more broadly, it has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success signed by Ben Bernanke. Tim Geitner, Phil Graham, former chair of the Senate Banking Committee, Alan Greenspan, and a number of other economic luminaries. So I just leave that out there.
Elliot Berman: Yeah. Let's talk about this month's webinar.
John Byrne: So we are fortunate, we're gonna have three experts to discuss the ongoing challenges of human trafficking. It is obviously human trafficking awareness. Month. We've done this in a number of other Januarys previously, and so we wanna continue that. So we're hoping that folks will watch it live.
It'll be recorded and you'll be able to see it later, but watching it live so you can, uh, give us your questions for the panelists. And that's on January 22nd at one o'clock Eastern time.
And this just in also may occur next Thursday, we have it on a good source that the House Financial Services Committee may be considering proposed legislation by Congressman Loudermilk, that has been out for quite a while to raise the reporting thresholds for CTRs and suspicious activity reports.
As you remember, the CTR threshold increase would go from 10 to 30,000, which the potential every five years to go even higher. And the SAR requirements would be more limiting in terms of the dollar amounts. And there also would be an increase in thresholds for MSB reporting from one to 3000, which doesn't impact the GTOs by the way, I should say.
So it's gonna be interesting to see the debate around that. A lot of financial institutions have suggested that this would reduce burden. I would've agreed with that statement decades ago. I'm not so sure now. Although, to be fair, I have talked to a number of small community banks in some of my travels, and they've suggested that they definitely could see a decrease in burden for their filings. For the larger ones I'm more skeptical, but it'll be interesting to see Elliot that, and I wonder if law enforcement who in the past as opposed to changing the thresholds will be vocal this time around. I suspect probably not.
Elliot Berman: And we will see that unfold. If there's, news on that front, by the time we record next week, we'll certainly share it with everybody.
So John, you have a good rest of the week and I will talk to you next week.
John Byrne: Take care. Stay safe.
Elliot Berman: You too. Bye-bye.