This Week in AML

Lots to Talk About this Week

Another very busy week in financial crime prevention. John and Elliot discuss several items, including new sanctions, a letter from the House and Senate to Treasury and FinCEN, and a financial trend analysis issued by FinCEN.



Lots to Talk About this Week - TRANSCRIPT

Elliot Berman: Hi John. How are you today?

John Byrne: Hi, Elliot. I'm good. Thanks. Since people have been so excited to hear our college basketball takes throughout the year which obviously has been slanted because of who we support. It was nice to see the Big East end up winning the championship with University of Connecticut winning their fifth since 1999.

And then selfishly I wanted to mention that the top 25 rankings for next season, most of them have Marquette two, three, or four, which is really exciting. So can't wait to do that, but obviously wanna do that and again, I didn't mention the women's champions, LSU. I think there was more folks watching that final women's basketball final than a typical NBA playoff game. So that's really great for women's basketball as well.

Elliot Berman: Yes. And we're not gonna go into any detail, but the NBA playoffs will be starting very shortly and. America's pastime, baseball got started this week.

John Byrne: Hey, look, it's easy when we can talk sports, everybody that listens, it's always better than politics, religion, and other things. But now we'll have to shift gears a little bit. A lot going on this week as it was the past couple of weeks. I think we've definitely started a trend of covering several topics.

What I wanted to mention, is a number of policy statements and other issuances from the government and in no particular order, but I wanted to start with something that, as we are recording this just came out. OFAC has done a tremendous amount of work in the sanction spaces.

Everybody knows they've actually updated their website. They did that I think last week. So if you haven't had a chance, to look at their updated website. I think that would make sense. I know those of you that do sanctions every day already have, but for those of us that focus more on AML I think looking at the website and how more user friendly it is would make sense.

But among many of the things that Treasury has announced through OFAC, the recent one that we focused on because of its broad global connection is sanctioning Genesis Market, which is considered one of the world's largest illicit marketplaces, specifically sanctioned for its part in the theft and sale of device credentials and related sensitive information.

So the action was coordinated with DOJ and international partners around a dozen countries. The Under Secretary at Treasury of terrorism and Financial Intelligence, brian Nelson, said that Treasury will continue to work closely with our law enforcement partners on this. But the key here is local, federal, and international to de disrupt this kind of activity. Take a look at that announcement when you get a chance.

Elliot Berman: Yes. Another one that we wanted to mention is, FinCEN recently issued a financial trend analysis document which goes into a lot of detail and it's focused on business email compromise in the real estate sector, and it covers the period of all of 2020 and 2021.

There's a lot of valuable information in there, some red flags that you can discern into topologies. But it's interesting to see, business email compromise, which is a major fraud scheme, is tying into closing transactions and related real estate transactions, which is a space that you and I have talked about a number of times and written about a number of times as it relates to being a n opportunity for hiding illicit funds.

So it's interesting to see those come together. It's a very detailed analysis and I would, I recommend that when you're looking at fin at the Fin Send website this will come up near the top of the new items and it's a worthwhile reap.

John Byrne: Yeah. And by the way, business email compromise is one of the many topics we're gonna be covering in depth at the AML Partnership Forum later this month.

And there are still seats available. We're limiting attendance because it's gonna be an engagement between law enforcement and the private sector with no press, with no exhibit halls, but there'll be a session focused specifically on business email compromise among other things. So go to the website, take a look at that and register before it closes down.

Going back to Treasury, the IRS has a new commissioner Danny Werfel. And there was a swearing in ceremony just yesterday. And Janet Yellen, the Secretary of the Treasury spoke at it and mentioned a number of things, but one that was relevant to our world that we wanted to mention was the priorities regarding enforcement.

She mentions in her swearing in ceremony statements that the tax gap before there was investment in the IRS between taxes owed and those

actually paid was around $7 trillion. Much of that was cuz the IRS didn't have the resources to audit wealthy taxpayers and complex businesses. But now that's gonna change cuz they have some stable discretionary funding and they're gonna invest in data and analytics beyond what they already do.

And the technology is gonna be, as she says, complimented by hiring more top talent, including accountants and attorneys. So obviously a direction to new Commissioner Werfel that this enforcement is extremely important. So take a look at that when you get a chance. Obviously we've done a lot of interviews with our IRS:CI partners, and this is just another element of the work that great agency is able to do.

So Elliot, the next thing that I saw was a letter from the House and the Senate to the Treasury Department regarding the beneficial ownership proposal you saw that as well, I assume.

Elliot Berman: I did. And we talked about this last week, I think about the fact that the FinCEN had announced that they were going to update the proposed form to remove a section that allowed filers to say they didn't know who their owners were. And the House letter speaks specifically to that, acknowledges that there's been that announcement, but also goes into some detail to talk about the fact that the proposal that is out does not align with the congressional intent of the enabling section in the original legislation.

John Byrne: So while we did mention the Senate last week, this letter is signed also again by the, House and Senate members. So yeah, you're right. They do focus on the unable to identify language. But they go further than. And they also reference, as you say, it's pretty detailed. They also talk about the FFIEC manual the, what the banks are required to do at a minimum there.

So this is really interesting. So I, this just came out yesterday, so obviously too early to see any response from either FinCEN or Treasury. But obviously there's a lot of pressure. To be fair, I do agree with the concept that that escape hatch shouldn't be there. But some of what's in the proposal because of how Congress crafted the direction to them.

It's not all FinCEN's fault, I don't think on this particular issue I think they probably threw up their hands and said, we just can't figure it. out Now they got some cover to be much more specific, I assume, in their proposal.

Elliot Berman: Yes. Again, I'm not sure that the calls by FATF, and the Wolfsburg group and and others including major trade banking, trade associations for a do-over on the proposal and a different structure in terms of access. I don't think that the current proposal meets the level of transparency that some of those international standards groups really are calling for.

John Byrne: It's interesting too, I guarantee you obviously this is bipartisan, the letter both sides have different views on how this should work. So I think there's gonna be some continued concern. Access is a big issue for the financial sector, but access was also severely limited by members of Congress in the way this is, so this is gonna be interesting to see how this plays out.

And I agree with you. I think Wolfsberg, I think FATF, I think what's going on in the EU, all of that is a pressure point here because they gotta get this right. Because it's taken so long to put this together to begin with. So this is interesting. If I'm FinCEN and I'm Treasury, I'm just like all rightfolkes, come over and talk to us. Let's have a, an extensive dialogue on what you're looking for. They can't modify the rule based on that. But I would want more meetings. I know the Administrative Procedures Act doesn't allow some of that stuff. I know how that works, but this is, they gotta get this right and this is really interesting.

Elliot Berman: Yes. The other thing that's interesting is the implementation date is January 1st, 2024. Am I correct in that?

John Byrne: Yeah, I think that's right. Yeah. Yeah.

Elliot Berman: We are now inside of nine months to that deadline and it's building this and training everybody and getting everybody to understand what they have to do and how they have to do it. Seems to me to be more than a nine month project.

John Byrne: Yeah, I, I agree. I would be remiss if we didn't mention two other things very quickly. With all the loan fraud that went on during and after the pandemic with PPP loans.

There was a story in the Washington Post today, Wednesday the 5th, that said that the Inspector General I believe I'm correct on this, of the Small Business Administration is concerned that SBA is not going to try to get funding or the some of the loans that have not been paid back that were under like a threshold of say a hundred thousand dollars.

And that's interesting cuz there's been a lot of fraud at all levels. So just something to look at cause I know a lot of our clients were obviously raising their hands right away when the loans were issued saying there's going to be fraud. And they were a hundred percent right.

I think that's something to watch. And then the second thing that Elliot and I wanted to mention very briefly, we've talked to a number of our clients and I'm sure people on the call are well aware that the continued increase in elder abuse is at a dramatic level. And so there's been a tremendous amount of cases there.

Obviously, there's a lot of conferences to cover it and talk about it and all that, but I thought it was just something we should highlight, it's obvious, but we keep hearing more and more about it.

Elliot Berman: Yes. And as many of our listeners know, in addition to doing the right thing for our clients, there are also many states that have elder financial abuse reporting obligations and things like that.

If you haven't talked to your front of the house folks over the last number of months about this, it's probably worthy of a tune up. Last item just a few things that are coming up. John, you mentioned the AML Partnership Forum. Seats are still available. Amlpf.com. And then right on the homepage, you can click on a registration information button and proceed to that.

That's the 26th or the 28th of this month at the Mayflower Hotel in Washington. And our next webinar is on tech enabled managed services. That's April 20th, 1:00 PM Eastern Time, and you can register for that at the amlrightsource.com website. John, anything else you wanna throw into the hopper for this week?

John Byrne: I'm working on an interview, actually, we'll do the interview tomorrow.

A former Treasury official, Ryan Wallerstein has created a daily free newsletter, at least it's free now, called The Illicit Edge, and it has a whole host of links to articles, guidance documents on global issues impacting the movement of illicit funds. So I'm gonna talk to Ryan about that. If you get a chance, just Google Illicit Edge, I think you're gonna find that information valuable, but I'm gonna talk to him about his Treasury career and some of the things that he's focused on that become so important to all of us to stay current with everything that we're trying to, we're trying to navigate.

Elliot Berman: That sounds interesting and we'll post that down the road after you record . John, you have a wonderful week and I will talk with you next week.

John Byrne: Sounds good. And folks, we we didn't mention it, but obviously the the indictment of the former president on business record fraud is out there. Should take a look at the statement of facts and the issues. That's obviously a fraud related topic.

We'll see how this all plays out but that's also obviously an active part of this week's information. So take care, Elliot. We'll talk to you soon.

Elliot Berman: You too. Bye-bye, John.