This week, Elliot Berman and John Byrne break down major global developments shaping financial crime compliance. From AUSTRAC’s latest report on terrorism financing risks in nonprofits to FINTRAC’s role in a major Canadian corruption investigation, the conversation highlights how financial intelligence units continue to prove their value.
They also explore growing international coordination efforts—including AMLA’s push to standardize suspicious transaction reporting across the EU—and key insights from the Wolfsberg Forum on innovation, AI, and information sharing.
On the U.S. front, the discussion turns to regulatory tensions in crypto and prediction markets, new enforcement actions impacting fintech-driven banks, and the ongoing debate around meaningful BSA/AML reform.
Plus, a major Bitcoin ATM operator files for bankruptcy amid tightening regulations, and the episode closes with a thought-provoking look at AI governance—from enterprise strategy to global ethical considerations.
Global AML Shifts, Crypto Crackdowns, and the AI Governance Debate - Transcript
Elliot Berman: Hi, John. How are you today?
John Byrne: I'm good, Elliot. It's continued to rain here. You would think we're in Seattle at the past five days, but everything is real green, so that part's good.
Elliot Berman: Yeah, we haven't had much rain. We had some warm days. Now it's heading back to more seasonal, so I think tomorrow it's gonna be in the upper 60s.
Today it's in the mid-70s. We had a very rainy April, and we've had a very dry May, but we're still ahead because it was so wet in April. It was raining all the time, and it wasn't raining, a 10th of an inch. It was coming down in torrents.
John Byrne: You guys had flooding and stuff.
Elliot Berman: Absolutely.
John Byrne: Us are enjoying the 27-year end of the Knicks not being in the NBA finals.
You got a couple things international first. I know you want to mention AUSTRAC, FINTRAC, a couple of the other FIUs that do a lot of really good work.
Elliot Berman: So let's start with AUSTRAC. They published a report on terrorism financing risks in their nonprofit organization sector. They make a point of this right at the beginning, this is not a national risk assessment. But what they are doing in addition to the national risk assessment is periodically publishing sector reports, and this one is on the nonprofit sector.
It's worth a read. They talk about changes since the last time they did a sector report in this space in 2017. And they talk about how funding platforms have changed and and how that is impacting the ability to detect when an NPO is being used either knowingly or unknowingly, to fund terrorist activities.
I recommend people take a look at it. Even though it's from AUSTRAC's perspective, their statistics and everything are all about Australia, I think that the themes in there are really useful, and people will find it worthwhile.
John Byrne: What about FINTRAC?
Elliot Berman: FINTRAC was noted as being helpful in a corruption task force investigation that was handled in Canada. This was led by the Peel Regional Police. Peel is a region in Metro Toronto that happens to include, among other townships or cities, Mississauga, where we have our office in Canada. Data collected by FINTRAC was used in this investigation that led to a number of arrests.
The focus was on the South Asian community and an effort to disrupt criminal activity targeting those folks. Were a number of arrests and it was a multidisciplinary task force, but FINTRAC data was a key factor. So a reminder that the data collected at the national level by FIUs is valuable in various investigations.
And then the last one that I wanna throw on this pile is that AMLA is getting ready to launch a public consultation on the EU-wide STR alignment. This is one of the many activities that AMLA is driving as they make anti-money laundering, anti-fraud, anti-terrorism financing unified across the EU and getting all the nation states using this STR in the same way, providing the same depth of information.
The technical specifications are being worked on, and they'll be put out for public comment in I think in July is the target time.
John Byrne: Couple of other things internationally. Wolfsberg in partnering with FATF, the Egmont Group the UNODC, IMF, IFC, all these organizations, over 100 leaders gathered last week at the annual forum that Wolfsberg had. More than 20 countries were represented and it was all about how to be effective through innovation. So there's a long series of quotes and references to issues. One of the comments from the outgoing president of FATF quoting here, "The FATF has long recognized the importance of fostering dialogue between the public and private sector working collaboratively, from the outset helps us shape how we collectively think about effectiveness and risk-based decisions." The forum focused on three systemic global challenges to disrupting financial crime. How many obliged entities continue to grow, so from fintechs to digital asset service providers.
Examples of the power of private to private information sharing, and finally, what they're calling the advent and accessibility of AI, which we'll talk about in a little bit, which is rapidly, according to this, increasing efficiency and effectiveness of private and public sector capabilities. You can find more information on the Wolfsberg website.
Our friends at the Organized Crime and Corruption Reporting Project, among many things, reported an investigation from a series of leaked chats and documents that show the Russian administration, their role in a false flag vandalism attack and election interference campaigns in Europe and beyond.
An interesting piece. The documents point to something called the Social Design Agency. That's a Russian PR firm that was already sanctioned by the US and the EU for previous influence campaigns. So they have some of that there. So those that continue to say that Russian interference in elections is a hoax you need to read this. I think that's important.
And then finally, from international organizations, the Basel Institute on Governance came out with a report. The title of it is How Stronger Borders Can Create Smarter Corruption: Lessons from One of Europe's Most Strategic Border Crossings. And so they look into Bulgaria and some of the issues of corruption there.
The article it's not a report, it's an article. So the central finding of the article looks at how criminal networks, smugglers, businesses, and corrupt officials adapted to Bulgaria's EU integration. Another interesting piece. The longer we do this, Elliot, the more complicated corruption, terrorism, money laundering, and sanctions are to root out and pay attention to. That's for sure.
Elliot Berman: Agreed. I found this article from Basel really interesting because as you just pointed out it talks about this major crossing between Bulgaria and Turkey, which is a connection between Europe and Asia. It's always been a very busy trade portal. And the discussion in the article about how Bulgaria handled and experienced corruption prior to joining the EU in 2007, and how as it adopted the more stringent and more up-to-date regulations and processes at that border crossing as it joined the EU, as you pointed out, corruption didn't decline, it adapted.
And I think that is a really interesting lens to put on how criminal organizations and others are adapting even as we bring on more and more technology. It's not that all of these things are gonna solve the problem. Ideally they're gonna make it more difficult for the criminals, but it's not making them go away. That's I think something we all have to keep remembering.
John Byrne: I agree. Couple other things I want to highlight. There was a New York Times investigative piece on the 24th of May. The headline is How Prediction Markets and Crypto Firms Steamrolled a Watchdog Agency. That agency is the Commodity Futures Trading Commission. The article goes into great detail regarding their oversight, or lack thereof, of the cryptocurrency space and the prediction market space.
I think it's worth looking at. This is an area where there's constant debate. The value proposition regarding digital assets and prediction markets and those sorts of things without regulatory oversight can be more than problematic. So I think that's an issue. I'm not smart enough to figure out what those guardrails should be, but this is a really important area of focus, and I think we should take a look at that. So again, New York Times covered that on the 24th.
Elliot Berman: And the article talks a lot about the lobbying efforts by various organizations representing some of these industries in pushing for the CFTC to be the principal federal regulator. As our listeners know from our conversations over the last number of years, there's always been tension between various regulators and who was going to be a single federal regulator responsible for virtual assets predictive markets, and other things like that?
Or were we gonna stay, I guess I'd say fragmented, maybe more following depending on what it was, who should be the regulator. But there's no question that this article tells a tale about regulation that if you've been involved with regulation as long as you and I have, just makes you shake your head.
John Byrne: There's a publication that I believe is free. We subscribe to it. It's called Fintech Business Weekly, so I do read it on occasion. They did an article looking at a recent consent order. The institution is Community Federal Savings Bank, CFSB. Single branch bank located in the Woodhaven neighborhood of Queens.
The article goes into detail regarding the growth of that organization. They had less than $140 million in assets in 2017 to $900 million in 2024. So how did that all happen? They added some additional fintech partnerships. They list the organizations that they worked with. They also worked with a number of crypto digital asset programs.
And the enforcement action from the OCC, the first part of this was a formal agreement back in 2014 from the OCC. That agreement stemmed from issues from the bank's board and management oversight and some BSA issues. They terminated that agreement in 2020 and it was, according again to this article, was functionally replaced with a more narrowly tailored agreement that no longer included BSA/AML in its scope. And then it was terminated approximately two years later in 2022.
So the author of this piece reached out to CFSB in mid-2024, and they said they weren't currently under any enforcement action back then. Then last week the OCC released a consent order that said it was entered into this April. According to the author, the enforcement action is notable in an environment where the OCC has been far more active in terminating existing consent orders versus entering new ones.
The enforcement action focuses narrowly on BSA AML issues, and again, reading from the piece, contains what he's calling the unusual clarification that the regulatory action is, quote, "Based on concerns largely unrelated to the customer's involvement in digital asset activities." So an interesting piece.
Again, small bank, pretty dramatic growth. It tried to participate in banking as a service. I think it's worth a read. If you get a chance to read the article, great, but also go right to the consent order and see what's in there as well.
Elliot Berman: The consent order is interesting. A lot of it follows the format that you're used to seeing. There's a requirement for an action plan. There's a requirement for very stringent board oversight. There are a lot of identified problems in terms of growing its infrastructure as it grew its business base.
They were doing a lot of stuff with cross-border, payment platforms and things like that. They're very interesting, and I think you mentioned this and it was in the article, but I noticed it when I read the consent order, and that there are no business restrictions. And having represented clients who entered into agreements like this with regulators over the years, I can tell you that if you've had problems with your internal controls related to a certain line of business in your organization, you generally had some restriction on growing that until you'd resolved all your problems.
That is not listed in this consent order, so I found that very interesting. There's a SAR look-back. It's a very comprehensive order and it'll take a long time for these guys to do all the things they're supposed to do. And we I saw that the FDIC also issued a consent order.
This is for a much smaller bank, Covington County Bank in Collins, Mississippi. It's a small town, 2,400 people. It's a small bank. And when you read that consent order, there aren't a lot of findings of fact. There's just all the things they have to do, but it's pretty clear they had a, total program failure.
John Byrne: Just a quick aside I'm gonna be interviewing Sara Beth Felix for our May look-back. She has commented on this and the previous consent order that we mentioned, so we'll get her take on those things as well. So yeah, I agree with that.
I believe we mentioned last week, that the House Financial Services subcommittee, I don't remember which the subcommittee it was, holding a hearing on AML BSA reform. And so that hearing went on last Thursday. I watched some of it in real time, but then went ahead and looked at the statements for the record. I will just say a couple things about this. When you get a chance, look at the hearing record. There were four witnesses. There was a witness from the Atlantic Council, there was a witness from the Cato Institute, TRM Labs had Arie Redbord. They talked a lot about the value of technology in this space.
And the Bank Policy Institute. Having come from the banking industry and bank trade associations, the six-page statement to me was a rather vague comment on AML reform. Certainly some attacks on regulators, and we've all talked about the need to improve supervision.
But the, quote, "recommendations going forward," didn't move me much. they talked about CTR threshold increases. They talked about changing the CTR to put in unused data fields. Okay. Which ones? So that wasn't discussed. They talked about SARs saying that there's an over-reporting because institutions face penalties for inadvertent omissions.
Do they really face penalties? Bottom line is, Elliot and I talked about this offline, if you really want to improve the BSA system, the way you do this is you get all the stakeholders together, you look at these forms and together say, "What does law enforcement need? What are considered burdensome to filers?
What is useful, what is not useful?" And go through that process and make decisions on improvement based on that. There's been some half-hearted attempts in the past, but this, I think there's time to do this now, 'cause there seems to be an appetite for improvement.
That was one. The other statement that I saw was from the Cato Institute. You can just imagine what they said. They want to see, and I'm reading from their testimony, "The largest option for Congress is to repeal the Bank Secrecy Act regime, because even without reporting requirements, issues like know your customer, transactional repression, de-risking, de-banking all tie back to the laws."
So he wants to get rid of those. "Therefore, a full repeal would be the most comprehensive step. Let banks decide what information they need, who they do business with, what risks they take, and when the government should be alerted." Yeah, that's gonna work. So anyway, that was the Cato Institute. Look all kidding aside, the system needs to be improved.
AMLA started that process. It got stopped. And I think that, now is the time to create a commission, not the BSA Advisory Group, something that I favor and actually helped write the legislation that created it, but I think a broad-based commission with stakeholders, could really get something done and could be bipartisan.
Finally, the Atlantic Council had some very interesting recommendations in their piece. Read through it. It's a 15-page statement. They talk about how to improve information sharing, but also the beneficial ownership gap, that's how they call it, and then the concerns with not including investment advisors, real estate, and what they're calling professional enablers inside the BSA AML infrastructure.
We have the opportunity, Elliot, to make some changes here, but let's do it intelligently.
Elliot Berman: I absolutely agree with that. Last one I had is that a company called Bitcoin Depot, which is the largest Bitcoin ATM operator in North America, last week filed for Chapter 11 bankruptcy protection. And they indicated that they're gonna wind down their business and their network.
Their network has over 9,000 ATMs. That represents about 25% of the Bitcoin ATMs operating in North America. There are about 38,000 Bitcoin ATMs globally. And so their 9,200, represents a meaningful portion of the total number of ATMs. Their CEO was quoted as saying they were filing because they were faulting a regulatory landscape he said was becoming markedly unfriendly to Bitcoin teller machines and the companies that run them.
He talked about states imposing increasingly stringent compliance obligations, including new transaction limits and in some jurisdictions outright bans on Bitcoin teller machines. At least two states in the US have outright banned them. As you and I have talked about in prior episodes these Bitcoin ATMs have played an important role a lot of frauds. Particularly it seems targeting people like you and me who are over 60. I thought it was interesting that they've just decided instead of fighting the regime or actually doing the right thing and figuring out how to make the machine safer and less fraud effective they're going out of business.
So be curious to see if anybody picks up that slack in that industry.
John Byrne: I want you to mention before I close on my end, you did an interview with one of our leaders on artificial intelligence that's been posted.
Elliot Berman: It went up this week, and I spoke with Abhishek Mittal, who's our chief AI officer.
We had wide-ranging conversation about current trends in AI. I think for folks who are following what's happening in AI it's really good. If you don't feel like you're up to speed, it's also a nice introduction.
We're gonna continue to do additional thought leadership content on AI. Less about the technical side of it and more about the business application and where things are going. I think there's so much noise in this space that it was nice to talk to an expert who wasn't hyping it, he was explaining it. And I think people will find that really interesting
John Byrne: I would add to that something that I would never thought we'd be covering just because it's not connected to our world. But I think as everybody knows at this point, Pope Leo issued a 42,000-word encyclical about artificial intelligence, looking at it from a truly global perspective, not about economic competition.
He believes there should be moral standards for AI. Reading from part of it, this is the section where he covers responsibility, transparency, and the governance of AI. He says the following, "The use of AI is never a purely technical matter. When it enters processes that affect people's lives, it touches on rights, opportunities, status, and freedom. Important and sensitive decisions concerning employment, credit, access to public services, and even a person's reputation risk being fully delegated to automated systems that do not know, quote, 'compassion, mercy, forgiveness, and above all, the hope that people are able to change,' unquote."
He talks about some harmful uses there. I'll end with this line. "Entrusting an algorithm in practice with the power to select who is worthy or not, without anyone bearing responsibility for that judgment is to hand over the task of redefining the boundaries of human possibilities. In this process, political responsibility is also lost, not just empathy toward those excluded, which can after all be simulated. The exclusion of the vulnerable becomes cloaked in a veneer of neutrality and objectivity, against which it becomes difficult to raise objections." Anyway, I would offer, no matter what religion or non-religion you're part of, this is safeguarding the human person in the time of artificial intelligence. I think it was announced on May 15th.
Elliot Berman: John, I know you already mentioned that you're gonna be talking with Sarah Beth. that'll go up on our website next week. And by the time people hear this episode, our May webinar will be completed, which is on global financial access. But that'll be available on our website probably by the end of next week or very early the following week.
And information about our June webinar on fintech regulation will be available at the website again beginning of next week. And I know you're gonna be traveling. Maybe we'll have a chance to get together while you're here in Milwaukee. You have safe travels, and I will talk to you next week.
John Byrne: Take care. Stay safe. Let's hope this war ends.
Elliot Berman: You too. Bye-bye