In this episode of This Week in AML, Elliot Berman and John Byrne unpack a range of pressing developments in the financial crime prevention space. They begin with reflections on the U.S. government shutdown and its ripple effects, then dive into the newly released Trafficking in Persons Report—highlighting the disturbing use of AI in human trafficking. The conversation continues with FinCEN’s recent requests for comment on AML/CFT compliance costs and paperwork reduction, including insights into Section 314(a) data. They also explore AUSTRAC’s warning to Australian banks, the EU’s crackdown on beneficial ownership transparency, and the NYDFS leadership transition. The episode wraps with a look at declining U.S. money laundering prosecutions.
Human Trafficking, Compliance Costs, and Global AML Shifts Transcript
Elliot Berman: Hi John, how are you today? Okay, Elliot.
John Byrne: As we are recording this, uh. In the US the, um, government has been shut down. We don't know for how long. News reports suggest that roughly 750,000 federal workers are expected to be furloughed and some actually might get potentially fired. I, and many others have, relatives and friends in government, so let's just hope this is not long term. Because when you don't have the government working in any jurisdiction, obviously things that need to get done aren't getting done.
Elliot Berman: One of the reports I read said there really isn't a shutdown playbook because every one unfolds in its own way. So we'll see if this is short or long, and again whether there's movement over the issues that brought us to this point.
John Byrne: Last one that was done was done during the first Trump administration and I believe it was 18 days long. So, we'll, we'll see. I wanna start with something, I know you have comments about this as well 'cause we have commented that the State Department, uh, under, uh, secretary Rubio dramatically cut the amount of staff involved in crafting the Trafficking in Persons Report, that is a mandated annual report to the public and to Congress each year. And, uh, this report had not yet been released. I think it was due back in June. It has just been released. It's available on the State Department website.
I know you have some comments. I just wanna have people focus on some of the things in there. They talk about different jurisdictions. They talk about different ways in which trafficking occurs. There is a section in, uh, this edition that talks about how traffickers use AI to weaponize and enhance their operations.
So they do a number of things, uh, that the report has uncovered, including using translation tools to craft, uh, what they're calling culturally nuanced messages. That, uh, sadly resonate with victims in their native language. They can be used to automate and scale grooming of potential victims via chat bots, optimizing manipulation tactics through natural language processing and sentiment analysis.
So there's a whole bunch of things, obviously deep fake photos, video manipulation, voice and video generation. So, uh, there's a lot of other things in the report, but just wanted to call out since we do talk quite a bit about AI. This is one of the negative uses of artificial intelligence.
Elliot Berman: 2025 marks the 25th anniversary of the passage in the US of the Trafficking Victims Protection Act. And that is the legislation that mandates this report. So that's worth, uh, marking.
There were a number of other interesting things in the report. One that caught my eye was a focus on the fact that healthcare workers and organizations are often the first point of contact with a trafficked person. And that more training, um, to equip healthcare systems to identify and respond to human trafficking can be a valuable tool. So again, not something really for our audience, but as we continue to pay important attention to this really terrible situation throughout our industry and globally. Something to think about.
John Byrne: A quick aside on, uh, anti-trafficking organization that we've worked with and have participated in number of our webinars. Polaris has, uh, put out some recent information via blogs and other things on their website. So when you get a chance to take a look at that, you talk about the, uh, the hotline and some of the other things that Polaris is known for.
So, uh, because we've just talked about this report take a look at what Polaris, one of several large organizations that are involved in anti-trafficking, but they certainly are one worth paying attention to. So polaris.org is the website.
Elliot Berman: Where would you like to go next, John?
John Byrne: FinCEN has issued a number of requests for comment this week. So maybe talk a bit about that. One of them is there's a proposed survey on the cost of AML/CFT compliance but only as it pertains to non-bank financial institutions. So they list them on the website, casinos, card clubs, MSBs, insurance dealers, and precious metals, credit card operators and loan and finance companies.
What's interesting about this, it's a survey to, uh, determine the cost of compliance and reading from the from the release responses will aid in understanding the financial impact of these regulations and will be used to shape deregulatory proposals consistent with the executive orders of the Trump administration.
These comments are due by December 1st. I think this is only the beginning. I think there'll be similar requests for comments for traditional banks. Obviously we all believe that the need to make BSA/AML more efficient. This will bear a lot of watching. Interestingly enough, crypto companies are not included in this description here, so, I just thought we'd highlight that. Anyway, so that, uh, is, uh, just released and you have until December 1st to comment on that that request from FinCEN.
Elliot Berman: The only point I would make beyond what you said is that I hope, but I'm not sure hope is going to get us there, that there's a recognition that cheaper or less expensive doesn't necessarily mean equally effective.
And I'm a little concerned that in any, march to deregulation that effectiveness gets lost in the, in the background. And as I've said a number of times when you and I have talked about these issues, we could be setting ourselves up for an equivalent in the credit markets of 2008, 2009. So we'll see. You and I may still be in seat and able to talk about having been right or having been wrong. We'll have to see.
John Byrne: So two other things. Uh, FinCEN issued another request and this is on the paperwork reduction one. This is something that, that, uh, is done in conjunction with, with OMB, but this is looking at among other things, 314a. Did you see that one?
Elliot Berman: I did. There were five specific areas that the, uh, FinCEN requested comment on. So, i'll read them, whether the collection of information is necessary for proper performance of the functions of the agency, including whether the information has practical utility. Whether the accuracy of FinCEN's estimates, of the burden of collection, of the information, so in these OMB Paperwork Reduction Act notices, the agencies estimate how long each function takes in hours and minutes. So, they're asking for comment about their estimates. Ways to enhance quality, utility, and clarity of the information to be collected. Ways to minimize the burden of collection of information on respondents and then, uh, estimates of capital or startup costs and costs of operations, maintenance and purchase of services to provide the information.
And then there's a long laundry list of other things that can be commented on that I won't bore everybody by reading 'cause it goes on for about a page. These are very normal. You get 'em for the CTR form, the SAR form, all that other stuff. But it'll be interesting to see what FinCEN does with all of this stuff.
John Byrne: There is in that notice a chart that I thought was interesting and this is, um, table number two. This is the section 314a requests and responses per year. So going back to 23, 24 and to date 25 with some estimates, uh, since we're not finished with 25. So the number of, uh, 314a requests, a three year average is 116 per year.
Average number of subjects in, uh, those requests are five. The number of, uh, FIs that get the requests almost 13,000. And the total responses to this are almost, uh, 7.5 million. So it's clear at least that there's a lot of responses to the request. And the request could be either be hits or non hits.
But I thought that was interesting that definitely 314a is an active part of, uh, what law enforcement through FinCEN seeks in terms of information gathering.
Elliot Berman: I'll be interested to see if there's any comments from local law enforcement agencies, because they, again, law enforcement's the endpoint consumers of a lot of what goes on here.
John Byrne: Now, the last thing we've seen from FinCEN thus far this week as we're recording, is a issuance of the real estate reporting form coupled with the delay of the rule until March 1st, 2026. So the order postpones the reporting requirements for the real estate industry that were added under AMLA to quote, provide industry with more time to comply consistent with the administration's agenda to reduce compliance burden still quoting, while still adequately protecting the US financial system from money laundering, terrorist financing, and other serious elicit finance threats, unquote. I'll just leave that there. Anything on say about it?
Elliot Berman: The original, uh, effective date was December 1 of this year. I think the form release is late and so there only would've been two months to get your collection process tuned up. So now they're giving the industry five months, which feels okay. It might've been a little more facetious if they'd have pushed it out to the end of 26. To me, I think this sort of was an effort at the balancing point.
I've looked at the form. There's no big surprise there. I'm not sure why it couldn't have been released in July, for example, and then December 1 would've been fine.
John Byrne: I think watch this closely and see if that rule does go into go into effect. But based on what you said earlier regarding our concerns, our collective concerns I'm paraphrasing about resources, aUSTRAC did something interesting that is relevant to the theme that you raised. So why don't you tell us about that?
Elliot Berman: AUSTRAC, which is the Australian FIU the equivalent of FinCEN in Australia they warn banks that it will escalate oversight if it sees AML compliance and control standards slipping. And this is in the context of the large banks in Australia over the last number of months announcing reduction in force of about 6,000 total across those banks.
Brendan Thomas, who's the chief executive of AUSTRAC, said, and I'm quoting here we are closely watching the impact of staff reductions in the banking sector. If we see a decline in staffing or investment in anti-money laundering capabilities or banking sector improvements start heading in the wrong direction, AUSTRAC will escalate its regulatory response. And resources is something we've talked about a lot. When things are going well in their financial crime prevention spaces, often executive management will say we probably could cut back a little bit there. And, uh, here the regulator is basically saying, we're watching. So I think it's a good reminder.
John Byrne: But very interesting and related in terms of what's going on in the US. We've talked many times about the pausing of portions of the Corporate Transparency Act. The EU just, uh, announced a what I guess can be called a, a crackdown, um, 11 EU states face infringement over beneficial ownership. So they've launched infringement proceedings against 11 member states for missing the July 10th deadline to provide full access to data under the 6th AML D irective.
So the countries include Belgium, Denmark, Germany, Estonia. Greece, Poland, Slovakia, Sweden, Italy, and Cyprus. And according to one analysis, what was required is information on who owns the companies, the trust, similar arrangements, access for regulators, banks, and quote, anyone with a legitimate interest and accurate up to date data across national registers compliance with various privacy rules.
So, thought that was, uh. That was an interesting move by the EU. Anything you wanna add to that?
Elliot Berman:The 6th AML D irective includes the establishment of what's called the European Single Access Point Omnibus Directive. It's built in there. And what is that? That is a hub where all of the beneficial ownership registries of the constituent countries have to go into that. And as part of the 6th AML Directive, all of the member states have to transpose the elements of the directive into their country laws. And so these 11 countries have not yet done that. This was one of the first deadlines.
It could just be these are all caught up in their own legislative processes. It could be that there actually is some pushback in some of those legislatures about the elements that you spoke about in terms of access.
John Byrne: According to the press release from the EU, it said that they have two months to reply. If they fail to do so, the commission may pass to a next step according to the, uh, note here and issue a reasoned opinion unquote. So we'll see.
Elliot Berman: Yeah, exactly. I saw that, uh, Adrienne Harris who's the head of NYDFS is stepping down. Did you see that?
John Byrne: Yes. And it's interesting, you very rarely hear focus on any state regulator, but certainly Harris has gotten a, a lot of very positive press for the proactive nature of that department. The same week that was announced, they also issued guidance for virtual currency customer protections in the event of insolvency.
So that guidance document came out as well. But, um, I have not read, and maybe, you know, have they appointed an interim at this point? Because I assume the governor does that right?
Elliot Berman: Yes. , Kaitlin Asrow who leads DFS's Research and Innovation Division will take over when Harris leaves the post starting October 18th. The governor's office has not said anything that I could find, but Asrow's been with the with the department for quite some time is respected. So I don't think it'd be a big surprise if she is appointed to head the department, which probably would give people comfort.
John Byrne: Right. Yeah. So that's all I have on my end.
Elliot Berman: I just wanted to mention is I saw an an article, uh, that was taking a look at court records and determined that US money laundering prosecutions have dropped by 24% so far in 2025 compared to the same period in 2024. The analysis in that article was that some of this drop may be attributable to the fact that many investigators in law enforcement their efforts have been redirected to immigration related issues causing case investigations to slow down and therefore not get all the way to a prosecution. I know you're shocked.
John Byrne: Yes. There's gambling going on in Casablanca.
Elliot Berman: Exactly. Captain, here are your winnings. Talk about,, some of the things you've been working on.
John Byrne: We've interviewed a few, a few folks. Some of those have not been posted yet. I interviewed Tom Vartanian, I think we mentioned that last week, and that'll go up in the next week or so. Also, each year I teach a class at George Mason graduate school on money laundering. And I get a couple of the students whose papers are pretty exemplary. We post them on our website and on LinkedIn. And so two of those have already been posted. One more to come and to ask folks to take a look at that. I think it's always so important to encourage the next generation of, uh, hopefully AML professionals.
Still efforting a couple of other interviews I did in interview a few folks on physical security issues. That's an issue we don't typically cover that much. But this this organization has done a lot of work in that space. So I thought that was, that was important.
And as always, if you have themes, individuals, companies that you want us to talk to, please reach out to either of us. We're more than happy to schedule those.
Elliot Berman: Last month's webinar Enhancing Your KYC program, uh, should post, uh, by the beginning of next week to our website. And on October 23rd, we'll have a our next livestream webinar, 1:00 PM Eastern Time on AML Compliance Best Practices. You can sign up for that at our website.
So, John, I know you're traveling to Milwaukee and you're gonna watch a Brewers Game live, so you travel safely and enjoy the game, and I will talk to you next week.
John Byrne: Thank goodness for sports to keep us, uh, keep our minds active on other things, right?
Yep. Bye-bye.