Regulatory Ripples: FinCEN Testimony, OCC Guidance, and Global AML Shifts

In this week’s episode of This Week in AML, Elliot Berman and John Byrne unpack the latest regulatory developments. They begin with FinCEN Director Andrea Gacki’s recent testimony before the House Financial Services Committee, highlighting key takeaways on beneficial ownership data, SAR/CTR streamlining, and real estate’s role in money laundering. The conversation then shifts to new FinCEN guidance on geographically targeted MSB reporting and financially motivated sextortion.

John and Elliot also dive into the OCC’s controversial statements on SARs and debanking. On the international front, they explore new Wolfsberg Group guidance on stablecoin issuers, FATF’s collaboration with Interpol, and Transparency International UK’s push for beneficial ownership transparency in offshore financial centers.

Regulatory Ripples: FinCEN Testimony, OCC Guidance, and Global AML Shifts - Transcript

Elliot Berman: Hi John. How are you today?

John Byrne: I'm good, Elliot. Glad we had a chance to connect in Milwaukee last weekend, that was a nice, time. Milwaukee was, uh, great weather was nice. So good chance to visit my daughter and her fiance and hang out for a couple days. It was great.

Elliot Berman: It was good to see you too. So, a lot going on this week. Probably makes sense to start with, uh, FinCEN Director Gacki's testimony to House Financial Services. Uh, what'd you think?

John Byrne: So it was a two hour hearing. I've read the, the, uh, statement for the record. And we've seen some analysis from various publications.

Couple things struck me. Obviously they highlighted their various priorities that we've talked about. Counter narcotics, uh, the illicit opioid trafficking. Trade-based money laundering, evasion of Iranian and Cuba sanctions was discussed. Certainly human smuggling is another issue that, uh, you know, that's something that we've seen.

So all those things were discussed in the hearing, but a couple things struck me besides giving them an update and, we'll, we'll talk a bit about some of the guidance documents that that just came out. But they are according to reports and according to what Gacki said, they're gonna be eliminating all the data that had been submitted through the beneficial ownership requirements 'cause those actually are not required as we know it no longer covers domestic entities. So that's, uh, that's gonna be basically emptied outta the system.

Although remember the CDD rule still is in existence, so I thought that that was important. And then several folks that were, in the hearing room have indicated to us that several of the members of the committee seemed to focus on questioning why information regarding real estate was related to money laundering issues, which is fascinating because I think we all know that it is.

So I thought that was interesting. And then also some of the members talked about what Gacki has in the written material, and that is there's gonna be a continued attempt to try to streamline SAR and CTR reporting. You can go online and read the statement. It's also on the FinCEN website besides the House Financial Services website. Uh, but as we just mentioned, also there's several, uh, guidance documents that have come out in the past week. You wanna talk about a little, little bit about those?

Elliot Berman: Yeah. Before I get to those, I, I just want to raise the question, maybe those members of the committee who couldn't connect the dots between real estate and AML are the same ones who struggle to connect the dots between art and, uh, money laundering. Could be, could be, could be. Uh, yeah. Two guidance documents.

I think our listeners will remember that back in March, FinCEN issued a geographic targeting order for the southwest border. That was the one that identified a number of zip codes in, um, California and Texas where MSBs were required to file currency transaction reports at a $200 threshold. That GTO expired this week and is being replaced with a modified one that will run for another six months.

And this new one requires MSBs to file starting at a thousand dollars occurring in specific county and zip codes. And those counties and zip codes now stretch across Arizona, Texas, and California. For those uh, listeners who are at FIs who provide services to those MSBs, just be aware of that. It's not a direct obligation to do anything by by the FIs. But just aware of that change.

And then FinCEN issued a notice on, uh, financially motivated sextortion. And like many of their other notices, it's got a lot of information in it, red flags case studies. And this does align with, uh, one of the current focuses, which as you mentioned is human smuggling in child exploitation. They go into a fair amount of detail explaining what financially motivated sextortion is. They talk about the terrible impact it has, particularly on young people. Uh, they talk about the number of, uh, suicides of victims.

They highlight in, in fairly good detail the payment methods that the people who are being, extorted are using. And this is useful in attempting to detect whether that's happening through your organization. They go into some detail about AI, deep fakes and how they are changing the landscape.

Well worth reading. There's also then in specific instructions when you're filing a SAR related to this kind of activity, what information to put in which boxes so that it pops to the top of the list as they look at SARs being filed any time period. Definitely, uh, worth a read and a conversation in your organizations and in your teams, so that people are up to date.

John Byrne: So, since you mentioned suspicious activity reports, um, also want to mention that the OCC, only the OCC, not the Fed or the FDIC issued uh, several statements this week. Uh. Arguing that they're trying to depoliticize the federal banking system. We've talked about the, uh, executive order before that was labeled guaranteeing fair banking for all Americans.

So the Comptroller Gould said a couple things. That they're working to root out bank activities that unlawfully de-bank or discriminate against customers on the basis of political, religious beliefs or lawful business activities, none of which is, uh, more than anecdotal, by the way, I wanna add my humble opinion.

Also, the same statement said the OCC regarding CRA, the Community Reinvestment Act is considered a bank's past record and current policies and procedures to avoid engaging and politicize unlawful banking. When the agency evaluates the applicable statutory and regulatory factors for licensing activities, de-banking considerations are also assessed in determining a bank's CRA rating.

Like I said, the other agencies have not done this, so that's out there. The other part of it that really struck, struck me and many in the AML world that have lived with suspicious activity reporting requirements since they started, uh, was this was the related bulletin.

This is 2025-23, protecting customer financial records. So they make a statement about the executive order. And they restate the premise that I take issue with that banks unfairly looked at the January 6th criminals and reported that activity to the federal government and suggested that these were not, uh, illegal activity. So I'll leave that to. You to discuss, uh, when, when you feel like doing that.

But, but here's, here's the thing that I wanna focus on. This particular order says banks should ensure compliance with the right to financial privacy act before disclosing the customer's financial record. Absolutely true. Subpoenas, search warrants obviously fill that gap, but also, uh, the SAR requirements are that you don't need a search warrant or a subpoena to fill out a suspicious activity report.

And they say that banks are also reminded to ensure the proper use of voluntary filings. Now, as somebody who helped craft the civil safe harbor back many moons ago, I think I know what I'm talking about when I mentioned this and here's the language that all AML professionals need to look at and try to figure out what it means. A bank on a voluntary basis may also file a SAR with respect to any suspicious transaction that it believes is relevant to a possible violation of any law or regulation, but who's reporting is not required.

True. Second statement. However, banks are reminded that they should not use voluntary SARs as a pretext for improperly disclosing customer financial information or to evade the RFPA. And here's the kicker. A bank should only submit a voluntary SAR where It identifies concrete suspicious activity such as activity that could form the basis for filing a SAR except that it's under the applicable threshold.

That last statement is not in any statute. It's not in any guidance. It's not in the FFIEC manual. I'm just gonna put my flag in the ground here. It's gonna be really interesting to see how the regulators are going to be looking at SAR reporting going forward.

Elliot Berman: That's true. I find this latest uh, wave of things, uh, coming out of the government in general, but particularly outta the OCC to be kind of head scratching.

John Byrne: I'll just add that folks that we know, former government officials, have indicated to us that they've never seen this agency being as politicized as it is, as well as some of the other agencies. Again, we'll leave that to the AML community. Decide for yourselves.

Elliot Berman: I think the other thing to remember for those listeners who are in organizations that are, in this case, governed by the OCC, so national banks, that are also actively looking to be acquirers. Your CRA rating and your CRA activity is one of the factors that's considered you mentioned that licensing, but it's also considered in merger and acquisition reviews.

And approvals. So if this turns out to to turn into something of a real battleground in terms of how it's evaluated and you start to see significant regular downgrades in the CRA ratings that will affect some organizations who want to be acquirers. , That's gonna take time 'cause it has to work its way through the various regulatory cycles.

John Byrne: All right. So internationally, a couple things going on. We've seen, um. FATF in connection with the Egmont Group, and Interpol and others have launched a handbook on international cooperation against money laundering, so that information is available.

We also saw that the Wolfsberg Group doing a lot of good good guidance. They've been very, very active, particularly this year. But they issue guidance on the provision of banking services to stablecoin issuers. Um, what other international things have you seen?

Elliot Berman: Well, I wanna go back to those two, but I did see that, um, OSFI, which is the office of the superintendent of financial institutions in the UK, they, uh, gave a notice to Vanquis Bank related to its failure to comply with sanctions. And it was interesting they didn't fine them. But a designated person, as it's called in the UK, someone who was on a sanctions list was allowed to withdraw cash from a transaction account after they'd been put on the list.

There were some challenges here. It was a timing violation. It reminds us that sanctions compliance, while it's often done overnight in the batch in some organizations really is a real time challenge. Some of these events happened very quickly after, um, the designated person was put on the list.

So just a caution to everybody, not those just in the UK to think about how the timing of your scans and those things work in terms of being able to, uh, manage account activity and other things with, uh, people who show up on sanctions list.

The Wolfsberg Group stablecoin guidance I thought was really interesting given how how much activity is going on around the globe with stable coins. It lays out very nicely things to think about. It reminds, uh, financial service providers that these, if you're providing, uh, services to a stablecoin issuer, that is really a type of correspondent relationship. But there are various components of the stablecoin business that you really have to pay attention to and understand the distinctions.

There, those, uh, providers may have operating accounts with you, reserve accounts where the funds are held to back the stable coins and then settlement accounts where those accounts are the ones that are dealing directly with the owners of the stable coins. So a lot of good data in there. I a hundred percent agree with you that Wolfsberg's been very active , on some very timely topics.

John Byrne: Transparency International, the UK issued a report or guidelines for implementing what they're calling meaningful access to beneficial ownership data in the UK's offshore financial centers. Um, so a document that bears, no matter where you're located, uh, uh, take a look at both the policy context, their methodology, and their guidelines. I think that's important despite the fact in the US obviously there's been some major changes in terms of beneficial ownership, and that'll be, uh, you know, something that will we'll be checking as we go forward.

But anyway, throughout the document they give you the premise for why they're doing this. Uh, just referencing a couple quick things here. Secrecy in the UK's offshore financial centers continues to facilitate corruption, tax evasion, and economic crimes on a global scale, according to the report, causing widespread harm while also leaving these jurisdictions dangerously overdependent on a single opaque and volatile sector.

So the guidance is, uh, focusing on the technical mechanisms required to increase transparency and reduce financial secrecy. However, they make it clear it's important to acknowledge that these reforms cannot happen in isolation. So again, excellent report from, uh, the Transparency International folks in the United Kingdom.

Elliot Berman: John I know you're working on some, uh, additional content. Do you want to tell us about that?

John Byrne: So as recording today, the, um, interview I did with, uh, a Ashleigh uh, sub, uh, Ashleigh, don't get mad at me. Montgomery Subramanian- Montgomery from the Charity and Security Network. We had a, a excellent conversation about NGOs and their struggles and challenges that got posted.

Um, also did an interview earlier this week with, um, a expert in the, uh, sort of the tech data space. Deborah Geister, Debbie Geister. So that's gonna get posted and I got one coming up. Uh, I do wanna, uh, give a heads up. Tom Vartanian, who I've interviewed a few times, he's written several books on internet issues and financial reform and, uh, financial disasters, uh, over time. An excellent former bank lawyer in the government in various roles.

He did an op-ed piece in The Hill, which obviously is a Washington publication talking about his concerns about the Genius Act and some of the things related to crypto. So Tom and I are gonna talk in depth about that in a couple of weeks. So looking forward to that as well.

Elliot Berman: And our September webinar, which will be Thursday the 25th at 1:00 PM Eastern Time, is on enhancing your KYC program. I've got a, a great panel of experts, uh, who I think our listeners will really enjoy learning from. And so I, uh, remind everybody that you can.

Register for that at our website. And just a sneak preview in October, our webinar topic will be AML compliance best practices and we'll give you more about that as we move forward. So John, you have a great week and I will talk to you next week.

John Byrne: Take care. Talk soon.

Elliot Berman: You too. Bye-bye.