This Week in AML

Lots of Reports this Week

This week Nasdaq issued its 2024 Global Financial Crime Report, the UN Office of Drugs and Crime released a report on casinos, underground banking, and money laundering, and the Anti-Defamation League published a report on the use of cryptocurrency exchanges by US extremists to foster their fundraising efforts. John and Elliot discuss these reports and their meaning for the financial crime compliance community.


Lots of Reports this Week - TRANSCRIPT

Elliot Berman: Hi, John. How are you today?

John Byrne: Hi, Elliot. Things are good. We got a little bit of snow out here in Northern Virginia and not Milwaukee cold, but it was about three degrees this morning. So we're sharing some of the weather that you guys have had.

Elliot Berman: If I could send it somewhere else, I would.

John Byrne: Yeah, I hear you. Last week we talked about how busy the week was because of all these reports and this week that trend continues and I just think, just a quick point we always talk about how long you and I have been doing this, but I think it's important to stress that when reports come out that are directly relevant or adjacent to the landscape that AML professionals take a look at these things and figure out either map what the reports talk about to their own policies and procedures or learn something about their systems, gaps or strengths based on these reports.

So there's a whole host of different subjects here, but I would argue they're all relevant to our community. So let's just jump into it. One of the things I just wanted to highlight and I haven't read the report yet but I've seen the headlines. NASDAQ came out with their Global Financial Crime Report, and you can see some of this is up on LinkedIn, and you can order it from NASDAQ.

Just a couple points they talked about that I thought are worth mentioning. They said $3.1 trillion of flow of illicit funds globally and $485 billion in fraud losses globally based on their analysis. They talked to who they call anti financial crime professionals about their greatest concerns and based on their survey, and you can check out how they approach the data, the scope and all of that, but they said 52% real time or faster payments fraud was the greatest concern.

Money mule activity, which we know has been on the rise, second at 47%, and then as you look down, they have terrorist financing, drug trafficking, human trafficking is at 18%, elder abuse still very high at 27%. Again, these are global concerns. And then, just very quickly they do have a series of other responses that folks have made, and under the category of industry collaboration, I'll just end with this, they said respondents underscored the importance of public private partnerships, as well as private information sharing between banks to keep ahead of financial crime threats. Something that obviously we not only have talked about, but that's why we worked with many others to create the AML Partnership Forum because the importance of partnerships.

So if you're interested in more about this, NASDAQ's 2024 Global Financial Crime Report available on their website.

Elliot Berman: John, I want to take the opportunity that you just provided to remind folks who listen to us that if they'd like to come to the AML Partnership Forum this year, it's in Washington, D.C. at the Mayflower Hotel, March 18 through 20. And if you go to amlpf.com, you can register for the event now. So we'd encourage you to do that. As you pointed out, it was created for the purpose of bringing industry and federal law enforcement together to form stronger public private partnerships.

John Byrne: You also flagged a report that focuses on East and Southeast Asia from the United Nations Office on Drugs and Crime. What was the highlights of that report?

Elliot Berman: They were talking about a number of things, but the big focus is how the online and physical casinos in East and Southeast Asia have become a a target for transnational organized crime organizations, to infiltrate and also to test cyber attack techniques and things like that, using online casinos as targets. And it's a comprehensive report I would urge you to take a look at it. It's well worth it.

They talk about, and I'll just hit a couple of the section headings here, evolution of cross border gambling in Southeast Asia, casino and junket based underground banking and money laundering, so there's concern about those kinds of things. Convergence between online gambling, cyber fraud and human trafficking. And that's a theme, I think, John, that you and I have seen coming on more and more as we talk about any one of those things, online gambling, cyber fraud, or human trafficking, how that convergence has been continuing over the last number of years.

And it's a significant part of the report which I would urge people to take a look at. And then lastly a growing indication of generative AI use, deepfake fraud, and other malicious technology. And again, that's another issue that has been of deep concern, and we're seeing more and more of it.

John Byrne: In the terrorist financing and terrorism space, you also highlighted there's a case in New York that we thought we would quickly mention.

Elliot Berman: Yes back a year ago, January of 2023, a six count indictment, was issued charging Victoria Jacobs, who's an Uzbekistan native, with using cryptocurrency to fund Syrian based terror groups and launder supporters contributions. And the trial has started this week.

I think the thing that caught my eye more than anything else is this is a New York State case. So we've generally seen the cases that you and I have highlighted for our listeners being somewhere in the federal court system, but this is a support for an act of terrorism and money laundering case under New York state law.

And New York is by no means the only state that has such laws, but it's interesting the Manhattan District Attorney's Office is prosecuting this case. I think it's a harbinger of things to come where we'll see New York and other, at least of the bigger states, with the resources to take on these cases even just at the state level.

John Byrne: Another issue that we continue to grapple with, and that is how legitimate charities that are designed to help humanitarian groups and to get funding for utilities, water, medical supplies, and conflict zones have difficulty because there have been some misuses of charities and some false charities created.

So it's important for AML professionals to understand sort of the scope of this. And so any report that comes out and talks about where there are issues, you need to distinguish that from legitimate use. And that gets me to a report issued this week from the Anti-Defamation League. The title is pretty dramatic, Virtual Money, Hateful Reality: the Cryptocurrency Exchanges Enabling Extremist Fundraising in 2023. So this is on their website.

And according to the report, they tracked 15 white supremacists and anti-semitic groups and individuals, as well as their donors, that moved at least almost $143,000 worth of crypto to and from 22 different virtual assets surface providers. So the report goes into detail about that, but from the executive summary, they say that besides the dollar amounts, it does include mainstream companies. The sample was limited to direct Bitcoin transactions of the exchanges examined. For example, Kraken processed the most extremist money with nearly $80,000 for white supremacists and neo nazis.

And then within their sample, there's a publication called Counter Currents, that relied most heavily on cryptocurrency, carrying out more than $61,000 worth of those transactions. And as of December 1st, the ADL says only one of the cryptocurrency exchanges examined in the study had any policies prohibiting the funding of hate or extremism.

And so the report, like we said, examines the activity of 15 organizations. And it reflects the broader landscape of what they're calling extremist cryptocurrency use, and they recommend that cryptocurrency exchanges should engage with both civil society groups and public sector partners to produce informed, transparent policies.

And that they ask governments, regulatory and government agencies, to take action here. Interesting report. While the dollar amount might not seem that dramatically high, it certainly talks about something that we have seen before, and that's the concern, in general, a high level about the misuse of cryptocurrency by those that are using it for illicit purposes.

Elliot Berman: Yeah, I think the dollar size is a result of this being a sample and not a comprehensive review. The other thing about the ADL study that caught my eye was connecting it to Treasury's work on domestic violent extremism in response to the administration's 2021 National Strategy for Countering Domestic Terrorism. So I think it's important to remember that there is a direct connection, and in some cases they are synonymous, that extremism, domestic extremism, and domestic terrorism can be very much the same thing in some cases, not necessarily all of the groups that were specifically cited in the ADL study depending on what actions they've actually taken but there's a very close connection there, and that's something that becomes a challenge for our community in terms of detection and reporting and for law enforcement on the investigation and interdiction side.

John Byrne: And just a couple of things coming up. We mentioned this last week. I wanted to point it out again that on January 25th, 1 o'clock Eastern Time, we'll have the next edition of AML Voices webinar. Human Trafficking 2024, the U. S. and Global Challenges for the Financial Community. We have an excellent panel, representatives from Polaris, from the private sector, and Homeland Security are going to give us both practical advice on current challenges, but also some predicted, predictions going forward. So that's important.

And then by the time our conversation gets posted, you'll also see on our website and on LinkedIn and other platforms, my interview with Jim Lee. And Jim goes through some recent BSA data, but also some of the highlights from the IRS work in 2023.

Elliot Berman: Sounds good, John. As always, there's plenty to talk about and plenty going on. In addition to the two things John mentioned, I'd encourage our listeners to come to our website. We work hard to make sure that there's a lot of timely, pertinent, and valuable content there, both to keep you informed and also to the extent that you want to use some of that in helping train your staff and things like that. So certainly take advantage of what's there. And if you have any ideas for topics that you'd John and I to cover, or find people to talk to about please just reach out to us. You can reach us at AMLRightSource and we'll be happy to investigate those things. John, you have a great rest of the week and I will talk to you next week.

John Byrne: Take care, Elliot. Stay safe.

Elliot Berman: You too. Bye bye.