This Week in AML

Happy New Year and Welcome to 2024

This week, the US Beneficial Ownership Registry went live, Senator Menendez was charged with additional allegations, export enforcement is back in the news, the US Department of Justice received new authority in foreign bribery cases and much more. John and Elliot discuss these and their meaning for the financial crime compliance community.


Happy New Year and Welcome to 2024 - TRANSCRIPT

Elliot Berman: Hi, John. Happy New Year. How are you?

John Byrne: Happy New Year, Elliot. How are you? How's family?

Elliot Berman: Everybody's pretty good. Had a nice quiet holidays and and now we're back into it.

John Byrne: Sounds good. A lot happening this week and you and I talked offline about I wonder what we can identify. And then obviously a bunch of things popped up. And while we record this midweek, even more can happen, but things that touch on bribery, corruption, money laundering, national security, all sorts of issues. Why don't we just jump into it.

One of the things I want to highlight. Great partner to the private sector has been Homeland Security Investigations, and I think by now our community knows this, but they have a publication called Cornerstone, and actually their 48th issue just dropped this week, and it focuses on Chinese money laundering organizations, and a couple of specific examples and some red flags.

So just wanted to mention that. The highlight of Cornerstone's focus on Chinese money laundering is the use of counterfeit Chinese passports. Apparently a major action that they've identified by working closely with the financial sector and other places that they use these to open up bank accounts to move illicit funds, of course. But also to commit bank fraud, fraudulent mass marketing, and other financial fraud schemes. It's another way to have check kiting. Again, as we know from last year, in talking to some of our partners in law enforcement check fraud is still a thing, as they say. This is one area that's interesting.

They talk about how these organizations will reach out to US residents, and they become money mules, and some of them are intentionally money mules. So you should read that, but I'll just highlight a couple of the red flag indicators that they close the section with. And that's that the Chinese passport that are used to open the account contains a forged or counterfeit identification page and visa stamp. The same photograph used for both the passport and the visa image although purportedly issued years apart. And as we all know, we don't always look the same after several years.

Bank accounts open with different identities and passport numbers, but the same physical address and, several others such as account holder attempts to avoid filing a CTRs and attempts to even bribe bank branch officials. Very interesting piece.

I would also say that at the AML Partnership Forum, which we'll talk a lot about before it occurs in March, we will have HSI putting together a panel specifically on Chinese money laundering organizations because, as we've just said a major issue.

Elliot Berman: Yes, indeed. Another thing we saw is that the US Beneficial Ownership Information Registry has gone live as of the first of the year. I did go out and clicked around a little bit. There's a couple of different pathways that you can do that that you'll see when you go to do it.

John Byrne: Yeah, that's important. Also some changes to the final regulation that I know the AML community will be very interested in if they haven't already seen this. Because one of the key concerns of related to access of the information was it was very limited. So the section on financial institutions that are subject to CDD requirements, what they've done here based on comments from all of you, trade associations, groups, and individual institutions. The Final Access Rule broadens the definition under applicable law, and it includes, and I'm quoting part of this here, any legal requirement or prohibition designed to counter money laundering, or the financing of terrorism or to safeguard the national security of the US to comply with which is reasonably necessary for an FI to obtain and verify beneficial ownership information of a legal entity customer.

So that's really important because before that it was simply to deal with the CDD requirements. And I know if this had not changed, the question of utility would have continued into 2024. So I thought that was a major thing that was immediately identified by our own Chuck Taylor, who, works with the Midsize Bank Coalition. And I know they they made their voices heard on this too, as this rule was being promulgated.

Elliot Berman: Yes, a good change, and I'll put in a plug for your plug. You're regularly telling our listeners how important it is to send in comment letters because they actually are read, and often make a difference, and this is a perfect example of where both of those things happen, we'll continue to remind you to comment and hopefully you'll be motivated by the fact that this was a rational and effective change to make the registry more useful.

John Byrne: Now, you saw something on the area of exports, which we've started to unpack here at RightSource with some of our content, but why don't you tell us about that?

Elliot Berman: The Department of Commerce, there is an assistant secretary for export enforcement. And the office of the assistant secretary issued an export enforcement 2023 year in review. And as you mentioned, we have started to talk about export controls side by side with sanctions because they do some of the same work, but go at it in different ways.

I'd urge people to take a look at this release. It's broken up into a number of sections, they review litigation, many of which are criminal cases. They talk about enforcement, technologies and things that they brought to bear, changes in their regulations, they also talk a lot about another thing we talk about, which is partnerships, both interagency, academia, industry, and foreign governments.

You and I spoke about the joint alert that they issued with FinCEN in 2023. They highlight that, and they talk about other joint alerts that went on after that first one. They talk about their best practice guidance that they published and other things. No one thing in here, but I think it's important to keep export control on our radar. In a couple of pages, they do a nice job of encapsulating things, which is a good reminder for all of us, all of the different things that export control gets involved with.

John Byrne: Somewhat related, there was a piece in the Risk and Compliance Journal from the Wall Street Journal that highlights something that we didn't talk about but knew that was in the NDAA late last year, the defense bill. And that is gives the Justice Department the ability to bring criminal charges against foreign officials who demand or accept a bribe from a US citizen or company or, this is important, or within a US jurisdiction, so they can now prosecute foreign officials who demand or accept these bribes to try to secure a business and that's always been a gap in dealing with foreign corruption.

So this is going to be considered a major change. It was in something called the Foreign Extortion Prevention Act. And one of the organizations that we've worked with in the past Transparency International, they are quoted as saying that this particular change is the most consequential anti foreign bribery law passed in almost 50 years. So they think that enforcement is going to be something that is going to complete the circle, if you will, because there's always been reluctance, but this will help with money laundering, wire fraud, and all those sorts of issues. So pretty interesting.

We'll see when there are some cases brought, but I thought the fact that also, apparently, not only Transparency International, but the Chamber of Commerce supported these changes. So whenever you get organizations like that working together, A, you've got a really good chance of getting things done but B, that tells you the breadth of concern across party lines, if you will. So that, that was an interesting change. Again, we were aware of it but this article highlights the value proposition. They talked to some stakeholders who obviously agree with that.

The last thing that we have here, I want to quickly mention this, and that is that those of us that have worked in the area of trying to navigate marijuana banking, we know that the key issue has always been the no matter what laws get passed, no matter what financial institutions need to do, as long as marijuana stays as a Schedule 1 controlled substance and making it illegal at the federal level, it's going to present issues.

Another group that writes quite frequently about Capitol Hill, called Punchbowl News, got their hands on a letter that was sent in late December. This letter was sent to the House of Representatives, and it was from DEA, saying specifically that they are in the middle of conducting their review to decide whether they should deschedule this particular drug.

And if that happens, it will definitely assist financial institutions in making their decisions. So I wanted to highlight that as well. So Elliot, even though there's no time frame on DEA's action, the fact that they took the time to write the letter saying it's under review tells me it's not going to be like the whole of 2024. So we'll see what happens, but we'll continue to watch that. And then if it does happen, certainly get some subject matter experts that we've worked with in the past in the community and do a webinar for our folks. There was one more item I know we wanted to mention before we close this regarding corruption. So I'll turn it over to you.

Elliot Berman: Thanks. Senator Bob Menendez, who's a Democrat from New Jersey, has been previously indicted related to influence peddling and related things. There was a superseding indictment, which is part of the federal prosecutorial process where you add in additional counts, that was issued some time ago and yesterday the federal grand jury that's hearing case, issued a second superseding indictment against the senator.

And I'm quoting here from an NBC News website story. The new allegations say Menendez made positive statements about Qatar to help a New Jersey developer get a multi million dollar investment from a company tied to the country. Again, the grand jury is finding additional bad acts by the senator related to his connections with foreign governments, and folks in the US who are attempting to do business with those foreign governments.

John Byrne: So we'll continue to watch that as we watch a lot of other court actions in 2024 that will be relevant to the areas of corruption, bribery, and fraud. It doesn't look like there's gonna be any lessening of these issues. Not just here in the States, but globally. And we know that from watching our friends, as we mentioned earlier, from Transparency International, Global Financial Integrity or the Basel AML Index, on all the issues that relate to corruption, which is tied into financial crime. Interesting times.

Elliot Berman: Interesting times, indeed. John, I know you are organizing a webinar for later in the month. You want to tell everybody about that?

John Byrne: Yeah, this is Human Trafficking Awareness Month I think as our community knows. And so on January 25th, we'll be holding a one hour webinar from 1 to 2 Eastern time. And we have a great panel. We have a representative from Polaris. We have someone from the private sector who has worked on this issue. And then we just learned this week that we will have also a representative from Homeland Security Investigations. So a great group of folks. Their names and titles will be up on our website.

And if you have questions in advance of the webinar, pop us a note. We'd be happy to put that in the list of things we ask our experts to talk about.

Elliot Berman: Yes, and you can register at our website amlrightsource.com. I also want to put in a plug, John, you wrote a great year review blog post about 2023, and we're going to publish that on the website on Monday, January 8th.

So, for those of you who listen to our podcast on Fridays, when it posts are over that ensuing weekend, go quick and look. And for those of you who are listening to it later, it's still out there and worth a look. John, you have a great rest of the week, and I will talk to you next week.

John Byrne: All right, Elliot, stay safe. Take care.

Elliot Berman: You too. Bye bye.