OCC Layoffs, AI Regulation, and a $6.9 Billion Sanctions Evasion Scheme

In this week's episode of This Week in AML, Elliot Berman and John Byrne examine how workforce reductions at the OCC could affect bank supervision at a time when new national bank charters are on the rise. They also discuss the OCC's updated cybersecurity supervision framework and its implications for financial institutions.

The conversation then turns global, highlighting a new Egmont Group report on strategic intelligence, the role of Financial Intelligence Units in combating money laundering and terrorist financing, and lessons organizations can apply to their own compliance programs.

Additional topics include emerging state-level AI regulation in New York and California, and allegations that a Kremlin-linked fintech network used forged documentation to move billions through the global financial system.

OCC Layoffs, AI Regulation, and a $6.9 Billion Sanctions Evasion Scheme - Transcript

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

John Byrne: Hi, Elliot. It's a week of speeches at the UN and we're still at war, and our president has threatened to annihilate Iran. It's been interesting in seven months, things have not changed on the international stage that much, and we've talked about not that part of it, but sanctions and all, all those other related issues.

By the time you hear this, who knows? We'll just keep plugging away. But I'm gonna start off with something on the domestic side related to the the OCC and the Office of Comptroller of the Currency has now begun a series of layoffs. This is a report from Bloomberg through the National Treasury Employees Union.

It's a longstanding union, the NTEU, in the government. And they have made overseeing, a number of units of large banks. I remember when I spent a few years at Bank of America, the OCC staff literally was in one of the buildings and they were there on a daily basis.

The OCC now has begun sending RIF notices to employees and about 50, many of them in policy positions, were included in the layoffs. What else about that struck you? Part of the reason we mention this is because as our clients face examinations and oversight will the lack of staffing impact policies and procedures and all the work that goes into compliance?

Elliot Berman: That's clearly an issue. In addition, and we've talked about this on a number of episodes, in 2026 alone the OCC has approved either fully or preliminarily at least a dozen new national bank charters, either trust charters or full charters. And so as this group of new operators comes in and gets up and running some of them with maybe not a huge amount of experience in the traditional banking world, it's interesting that their primary federal regulator is reducing staff.

We all know on the industry side that it can be a real challenge to do more with less. And I think the government side isn't any different. You can't just work faster. What you end up doing is choosing what not to do, and we'll see we won't see immediately, but we'll see down the road whether doing less actually has an adverse impact on the overall safety and soundness of the financial system.

John Byrne: Related to the OCC quick hit, if you will. They issued a bulletin to update what they're calling their Cybersecurity Supervision Work Program, and the only reason I mention that, they say that they're not adding any new procedures nor changing anything. It's an alignment shift in terms of structure.

But this paragraph jumped out at me. It said, "The CSW," again, the Cybersecurity Supervision Work Program, "does not establish new regulatory expectations, and banks are not expected to use this work program to assess cybersecurity preparedness. The OCC continues to encourage, but does not require, the use of a standardized approach to assess and improve cybersecurity preparedness, and banks may choose from a variety of tools and frameworks available."

Just gonna let that lay there. So that's on the OCC website issued earlier this week.

Elliot Berman: I really don't know what to say to that, so I'm gonna leave it at that too.

John Byrne: That's exactly right.

Elliot Berman: There we go. Where would you like to go next?

John Byrne: Let's jump more globally, and that's there's a new report from the Egmont Group. The Egmont Group, is the FIUs around the world. And this new report is on the role of FIUs in what they're calling the preparation of strategic intelligence.

And so they talk to FIUs throughout the membership, and it looks at how you develop that intelligence, how you integrate it into frameworks, and how it's used to identify, emerging money laundering and terrorist financing risks. So it gives you practices, challenges, and opportunities to improve that.

So again a good training tool. It's for an FIU, but obviously we have some mirror FIUs within the financial sector. So looking to see what the FIU is from Egmont's perspective, what they think makes sense is a good use of this resource. This was posted on the Egmont site. That's where you can find it, egmontgroup.org.

Elliot Berman: It is an interesting report. The report is the result of a survey- questionnaire that they sent out to FIUs around the globe not all of whom responded. But they had an interesting cross-section who did, and focused on a lot of interesting things.

I agree with you, I think it's worth a look. And it does talk about where there's a statutory obligation for the national FIU to do strategic intelligence versus those places where it's not in the statutes. And that they see that places where it's not in the statutes, it's more difficult to get resources and things like that.

So I think that's was an interesting takeaway. This is part of their information exchange working group through the Egmont Group, and they put out reports on a regular basis. We've talked about some of the other ones too. Again Wolfsberg, different group, but and different focus, but these national groups in addition to FATF are really good resources. And for those of you in our audience who have not taken advantage of them we definitely recommend it.

John Byrne: You had something on Romanian organized crime that you were highlighting before we recorded today.

Elliot Berman: Yeah. So there has been an interesting problem and this is in the benefits space. People who receive SNAP benefits, most states give people a card to access their benefits so they can either use it at the food store or in those programs where cash is available, they can use it for ATM withdrawals. And this is not limited to the Romanian crime rings, but Romanian crime rings in the US seem to be leading using skimmers.

So I think we've talked about skimmers on ATMs, but also skimmers on point of sale terminals to capture information, take that card information and then create fraudulent cards and then access the benefits. It's interesting, some of this happens because in almost every case, the states are issuing electronic benefit cards using the old technology of a magstripe on the back of the card rather than a chip.

And there are states that are working to upgrade that, but it's a big issue because issuing the chip cards, there are still many merchants, smaller merchants who haven't upgraded their point of sale terminals to deal with chips. Law enforcement has arrested a number of members of the group over the years around the country, but have had limited success in terms of their prosecutions. And it's a reminder that this is in some sense an old style fraud/money laundering scheme, and yet it's still going strong.

This may be something for those of you who have a large retail sales clientele in your organization. You may wanna look this up and decide whether you wanna provide an alert of some kind to your clients so that they're aware to watch for this.

John Byrne: The vice president, through this fraud task force that he runs is removing close to 760,000 individuals from the ACA coverage, claiming fraudulent enrollment. So they announced this earlier this week. They say it would save an estimated $2.2 billion in taxpayer funds. And they are apparently also gonna do some additional verification on about another 400,000 that they suspect of being fraudulently enrolled. We'll con- continue to watch this. Again, his task force is called the White House Task Force to Eliminate Fraud.

Elliot Berman: It's a little less than five percent of the people enrolled. We'll see what comes of it. It seemed that some of the criteria for putting enrollees on that list, I was scratching my head to try to figure out where the fraud was. But we'll see.

John Byrne: Yeah, to be accurate here, the CBO actually had previously estimated that there were about 2.3 million people in 2025 who improperly claimed eligibility, so for the tax credits, by overstating their income. So there was information here that led the task force to the conclusion that they referenced this week.

Elliot Berman: Yes. AI is hot as always. The discussion is changing a little bit as I think all of our listeners are aware. Even some of the major AI vendors are now recommending a slowdown and more cautious adoption. At this point, Congress has taken no action and the House is out. They needed to leave town to avoid a different action, so they're off campaigning 'cause they're up for re-election.

But as we've talked about in the past, when Congress fails to act, and there's a sense of urgency the states start to act. So this week Governor Hochul from New York announced next steps to regulate major AI developers and protect New Yorkers. And last week Governor Newsom in California signed a piece of legislation related to control-

John Byrne: Executive order, actually.

Elliot Berman: Executive order. Thank you. Yeah. Yes, that's right, executive order relating to AI controls. The details of these we'll leave to everybody to go look at depending on, where they are and what would impact them.

But I think the big point here is the larger, states with more sophisticated regulators are going to be taking action as they've done in other cases where Congress doesn't act, even though these might be spaces where historically we have seen federal action versus state-by-state action.

John Byrne: Yeah. I actually, I did an interview in my capacity working for Marquette Center for Peacemaking with a doctor of data science at Marquette just the other day. And he talked extensively about some of the challenges with AI production. And one of the things I wanted to mention is according to Newsom's executive order again, reading from the press release, not the order itself, he made some comment about creating a kill switch to stop production.

The professor that I spoke with said that's fairly unlikely. They can pause development, but a kill switch, and we've heard others have mentioned that same thing, according to him at least, is not a thing. So I just think it's important that, as you say, with no federal oversight, states are gonna be doing things, but we have to report these things accurately.

I don't mean us particularly, but whenever these things are happening. Going back to the New York one, one of the other things I just wanna highlight real quick, this was legislation that they were implementing, and one of the parts of it that makes sense to you and me as not experts in AI at all, report critical safety incidents to the New York office within 72 hours, and as required to other government authorities.

So that's in the legislation. And so things like that besides safety issues and other transparencies, but if there's an incident, like there is a hack, a ransomware, there are requirements for financial institutions and others to report to government entities. That's also included in this New York legislation.

That may be a concept that drifts into any sort of federal oversight whenever that happens, if it happens.

Elliot Berman: Yeah. There was also a report in the Financial Times and other places too that Standard Charter, Citigroup, and other international banks have handled billions of dollars for a Kremlin-backed fintech company that tricked its way into the global financial system through a vast document forgery operation.

So this group is A7, and we talked briefly about A7 a few months ago. They are an alternative to the Western payment system. Which has been set up as a sanctions evasion tool. Maybe not strictly for that purpose, but it's certainly being used that way. And one of the things that has happened as a result of sanctions is Russian payments have been restricted from using the SWIFT payment system. And what A7 did is through a variety of shell companies and what is described as an industrial scale forgery operation to produce counterfeit invoices, has accessed the SWIFT system when they shouldn't be able to.

And many of the payments relate to war-related goods, including military equipment and purchases by Russia's security services. So the value of this activity is estimated to be about $6.9 billion. So I think when it starts with a B, it's real money. And it'll be interesting to see where this goes.

John Byrne: Sticking with Russia Joe and I mentioned this in our conversation last week. That was the revelations that an individual named Umar Kremlev, a Russian oligarch with close ties to Putin, in fact, got a medal from Putin, spent hundreds of thousands of dollars on celebrations surrounding Donald Trump Jr.'s May wedding in The Bahamas. They rented the private island, paid for fireworks displays.

So we talked all about that, but what's happened this week is very interesting because party affiliation being what it is, a Republican senator is actually demanding in a letter to the Senate Judiciary Committee to investigate the president's son on this issue and other business dealings and benefits that he may or may not have received.

This is Senator John Curtis of Utah, so he sent the letter to the chair. Chuck Grassley is the chair of the Senate Judiciary Committee and wants all of this investigated, and actually wants subpoenas issued. So we'll see if that actually happens. But he cites not just that issue with Kremlev, but the cryptocurrency ventures, overseas properties, property projects that involve foreign leaders, the defense investments that they have.

I think it's also important, we mentioned AI before. I don't have the exact percentage, but I understand that the Trump stock holdings, close to 35% of those are in AI. That's from their own disclosure. In any event, the fact that this is out there and still resonating even with some Republican members of the US Senate is interesting and will bear watching going forward

Elliot Berman: What else do you have, John?

John Byrne: Yeah, the, the last thing on my list was something that I know we talked about various sanctions issues related to the Trump administration in places we wouldn't have expected. And there is some information that the US will actually sanction the International Criminal Court as an institution, as opposed to just certain staff.

They've done it with the staff, but now as an institution. Again, this is a report from an academic, so we haven't verified it. But they're also considering designating that court as a terrorist or terrorist-supporting body. Which obviously would be more than dramatic. I think as we all know, the ICC is, oversight f- with the ICC would be with Putin, who has been declared a war criminal, Netanyahu the junta in Myanmar, all those areas.

But in any event watch that space carefully because as I understand how this works if all these things happen, there needs to be some sort of counter-reaction from the EU and even Canada. So there are something called blocking statutes. I'm not an ICC expert by any stretch, but in any event, this is to sanction the International Criminal Court, the entire institution.

When this was posted a few days ago, have not seen an update yet or any other media coverage of this. But since Trump is at the UN this week and meeting with China's Xi tomorrow, I think tomorrow, there could be more announcements on this. But in any event, this is a space that does impact the AML community even if it is tangentially.

Elliot Berman: By the time you hear this episode, two things will have happened. The first is that our September webinar will have live-streamed, and so you can watch toward the end of next week for the recording to post on our website, and that's about best practices navigating the evolving global compliance landscape.

And then your interview with John Roth will have posted, and that was interesting. It had several topics, but I think the one that is most interesting and probably least covered, at least by us in the past, is the importance and the value of inspectors general in US federal agencies. I've listened to it and I recommend, folks, that you find it and listen to it. That'll be on our website by the time you hear this.

And then in October, John, I know you're gonna do a best practices in managing your high-risk customers as our webinar, and that's gonna li- that's gonna stream on October 22nd, and you've got a really good panel lined up. So I think people will be able to sign up for that. Anything else, John?

John Byrne: By the time this posts the New York Giants will still not have an answer for their quarterback going down for the season. You hate to say your team is done after the second game of the season because we had optimism this year, but it is what it is.

So no, I don't have anything else, other than stay safe and don't have two Rams defensive players nail your knee.

Elliot Berman: I'll do my best to avoid that. I look forward to talking to you next week, and have a good week.

John Byrne: Take care.

Elliot Berman: You too. Bye-bye.