Reputation Risk, Russia, and Regulatory Shifts: The AML Landscape This Week

In this week’s episode, Elliot Berman and John Byrne cover a wide-ranging set of developments reshaping the global AML landscape. They open by marking the fourth anniversary of Russia’s invasion of Ukraine before diving into new regulatory, enforcement, and geopolitical stories affecting financial crime professionals.

John highlights the Federal Reserve’s request for comment on removing “reputation risk” from bank supervision and discusses ongoing litigation involving JPMorgan and the Trump Organization. The conversation then turns international: OCCRP’s newly announced Anti-Corruption Hero Awards, revelations of European-made parts ending up in Russian military drones, and the European Center for Not-for-Profit Law’s work on financial access for human rights defenders.

Elliot and John also examine Australia’s transition to a new AML/CFT regime and Canada’s new financial intelligence initiative focused on extortion. Additional topics include the Treasury Inspector General’s audit of FinCEN, IRS-CI’s latest BSA data usage report, and U.S. cases involving cyber intrusions and tax fraud.

Reputation Risk, Russia, and Regulatory Shifts: The AML Landscape This Week - Transcript

Elliot Berman: Hi John. How are you today?

John Byrne: I'm good. Elliot. Unlike some of our colleagues in the Northeast the precipitation wasn't as bad, but I know we both talked to people that are digging out. Eventually we'll be in back in the spring eventually.

Elliot Berman: Yes. We're slowly but surely creeping up on it, so we'd be remiss if we didn't mention that today is the fourth anniversary of the invasion by Russia of Ukraine. And unfortunately things continue to drag on and while there's been a lot of proclamations of there's gonna be peace, not surprisingly, peace is often, actually, almost always more elusive than war. No peace and still at war.

John Byrne: Yeah, I saw this morning they said that over a million Russians have been killed or injured. And obviously a large portion of Ukrainians as well. I think we still have to keep them in mind, like you, you are by mentioning this. 'cause it's it's something that unfortunately the media has not paid enough attention to because they go on to the next thing.

But yeah, it's important that we recognize that this is still going on. Okay.

We didn't talk about this just before we started to record, but wanted to mention that I finished my February interview with Sarah Beth Felix, and we talked briefly about the following, the Federal Reserve issued a request for comment on the proposal that the other agencies have done as well to remove reputation risk from its supervision of banks. We've talked a lot about de-risking, debanking, whatever.

The one thing I will mention is the quote from the vice chair Bowman, I take a lot of issues with. Here's the quote. Again they want to remove reputation risk from supervision of banks. Her quote is, we've heard trouble in cases of de banking where supervisors use concerns about reputation risk to pressure financial institutions, to debank customers because of their political views, religious beliefs, or involvement in disfavored, but lawful businesses unquote. Not remotely true. And I'll just leave it at that.

I noticed that there was an article related to this in The Hill, where they mentioned that the court case has begun against JP Morgan, and you remember JPMorgan closed accounts or didn't open accounts for Trump and other people involved in the administration after January 6th. The headline is that JPMorgan acknowledged it closed those accounts. They never did not acknowledge that. So I just want, sometimes we know headlines aren't written by the same people that write the articles, but gimme a break folks. It's gonna be very interesting to watch this and see where this turns out.

But I did wanna mention that because that case has started. It was reported in other publications as well, but I thought that was important. Because again, this is something that's going to impact all of us going forward. The reputation issue, this issue of de banking again, according to the article from The Hill, they also said in the court filing JPMorgan's former chief admin officer wrote quote, in February of 2021, JPMorgan informed plaintiffs at certain accounts maintained with their commercial bank and private bank would be closed. And obviously not anything more than that, which we've told everybody forever. It's because you can't disclose the fact that you might have filed a SAR R in any event. I think these things are connected and I think we need to watch these issues carefully.

Elliot Berman: They are very likely connected and I think this litigation between the Trump organization and JPMorgan Chase will go on for quite a while.

John Byrne: Yeah.

Elliot Berman: So we'll see how it unfolds. Where would you like to go next?

John Byrne: Let's go with international, A lot of international related issues.

Our friends at the Organized Crime and Corruption Reporting Project announced they created something called the Anti-Crime and Corruption Hero Award, and this is their first ones. And on their website they had asked for nominations. They picked two winners out of over 130 names that were submitted.

One was Ruth Lopez from El Salvador, the Chief legal Officer in the anti-corruption unit at Cristosal, a human rights organization. And they explain why they are awarding Ms. Lopez, that award. I think there's some really excellent information in there.

And the other one is Carmen, I'm sorry if I don't pronounce the last name correctly, Aristegui from Mexico. She's an investigative journalist. Again, according to the description here, that she is a long and distinguished career, in television and radio and digital media, and she's investigated corruption, abuse of power, and high level conflicts of interest.

And they again explain why she received the reward. It's in part due to a report that she put together and they conclude this, in one of the world's most dangerous environments for the press, she founded her own independent outlet. And despite constant smear campaigns and threats, she continues to hold power to account.

In any event, I thought that was worth mentioning because corruption is still a major issue for our community.

Elliot Berman: Staying with OCCRP they also, published a piece relating to the fact that they and a number of their reporting partners had identified that there are lots of European made parts that are ending up being used in Russian military drones attacking Ukraine. And for that to happen, that means there's sanctions evasion. The Irish government has now as a result of being made aware of this problem taken up the investigation. Another example of how investigative journalism really does make a difference.

John Byrne: An organization called the European Center for Not-for-Profit Law, and they have issued a policy paper on what they call Financial Access of Human Rights Defenders in Exile.

And that includes targeted recommendations to the EU governments and banks to ensure that defenders have financial inclusion in the EU. The policy paper, concludes with, and as you read the paper, that activists on the front lines of defending human rights and democracy are exiled and ensuring that they have reliable access to funding within the EU is essential.

So again, they can continue this important work. The policy paper analyzes from a survey, the results of those surveys and prepare the paper with those policy recommendations. So an interesting aspect. We talk a lot about financial inclusion, but one that they believe disproportionately impacts the various activists that are under the category of defenders of human rights.

Elliot Berman: Staying international with our friends in Australia, as our listeners know we've talked about the fact that the Australian, AML/CFT regime is transitioning from what's been there into a new one. And you did a great podcast a while back about where they were in the process of getting public comments and all of that. Now they're working on the transitional rules that will move covered organizations from the existing regime to the new regime.

And they're now in the public comment period. There's a transitional rules exposure draft 2026 that's available. . If we have listeners in Australia, they'll already know about this, but for others it's important to be aware of this because you may have customers that are there or you may have a small operation or something.

Plus I think it's really valuable to see what all the countries around the world are doing based in part on the influence of FATF and other things like that. So that's in flight and people should take a look at that.

John Byrne: You wanna mention what you've identified with Canada, with what FINTRAC has just announced.

Elliot Berman: I'd love to. They're looking at a multidisciplinary approach to prevent extortion across Canada particularly in the most affected areas like Ontario, British Columbia, and Alberta. And they're trying to do this by improving how financial intelligence is collected and shared, so that law enforcement can be better equipped to trace criminal networks and support investigations and hold those responsible accountable.

Some of the things that they're working on, prioritizing financial intelligence resources to tackle extortion again, looking for the right things. Launching the Countering Extortion Partnership with financial institutions, government and law enforcement. Another theme that you and I talk about all the time, which is public private partnership. Assigning financial intelligence experts to support police. Often those intelligence resources are not embedded at, certainly at smaller police forces. They tend to be at more of a federal level. And then providing financial institutions with clear guidance on how to detect extortion transactions, and publishing intelligence on how criminals move and hide extortion money. So I don't think there's anything surprising in the things they're gonna focus on, except that this is particularly focused on extortion.

The Treasury Inspector General, inspectors general do among a number of things, they're the internal audit functions for federal agencies as well. They have issued the third of a four-part audit report of FinCEN and this one is about FinCEN's management of BSA data. So they conclude that FinCEN didn't manage aspects of BSA data access, in compliance with applicable laws, regulations, directives, standard operating procedures or government standards. They identified eight particular problems and had 14 recommendations.

It seems to me that this is the kind of thing that often can happen in part when you don't have enough resources and we have talked many times about the fact that FinCEN, given its mandates is woefully underfunded and therefore under-resourced.

John Byrne: The IRS issued their fourth annual report of the use of BSA data. This is the 2025 version and just some quick highlights. 89% of their investigations had BSA filings that were associated with the primary suspect. 80% involved SARs, 67% CTRs. And, as the CI Chief Guy Ficco in his posting says, the filings are often the first indicator that something isn't right from refund fraud to employment tax evasion, narcotics trafficking, financial transparency allows IRS and law enforcement to follow the money and build strong cases.

And they say the cases in using BSA data have led to a 98% conviction rate. 42 month average prison sentences and nearly $500 million in restitution for crime victims. So again, wanna highlight the fact that IRS-CI has done a great service to the community by explaining the value proposition behind BSA data. And I think giving you these metrics clearly helps and we'll be interesting to see how these metrics get debated if the issue regarding threshold increases still moves in the US Congress.

Elliot Berman: Yeah, I was just looking at the currency transaction reporting piece of the infographic. It says 66% of investigations opened in fiscal year 25 had at least one CTR associated with a primary subject. And then below that it says the median cash in was $12,000 and the median cash out. It was $12,500 and change. So if we raise those thresholds considerably, many of these investigations wouldn't be triggered because the data wouldn't be reported.

John Byrne: We mentioned last week the, the FATF of plenary, and as you said during our conversation, that a lot of reports get published after that plenary in case people have missed it the FATF Annual Report from 2024 to 2025 is out. And it's on their website, which includes a detailed analysis of many of the issues that FATF has been working on in the past couple years. Evaluations of countries, all sorts of things that you expect from FATF. So that is now available for download on the FATF website, and I would argue a good international training tool as well.

Elliot Berman: And you pointed out to me about Matthew Bogdanos winning an award. You wanna talk about that?

John Byrne: I do. Matthew Bogdanos, by the way this isn't his claim to fame because his claim to fame is his acknowledgement, but he and I went to high school together. Haven't seen him since high school, but he's done really well. He's head of the Manhattan District Attorney's Antiquities Trafficking Unit, and he received what they're calling the 2026 Marica Vilcek Prize in Art History. That recognition is for a number of things, but it is designed to acknowledge the work of cultural heritage protection.

And he certainly embodies that with all the cases that he's brought during his time there. And I've always heard our folks at the Antiquities Coalition speak very highly about Matthew. But more information is available on the Antiquities Coalition website. US Colonel Matthew  Bogdanos, received the 2026. Marica Vilcek Prize in Art History, and that's because of his great work leading the Antiquities Trafficking Unit at the Manhattan District Attorney's Office.

Elliot Berman: Yes and they may not be the only, but they're the principal state level unit of that type.

John Byrne: Yes.

Elliot Berman: Homeland Security and the Department of State and and I think DOJ itself each have art and antiquities units, but I'm pretty sure that Manhattan DA is the only principal, state or local version of that.

John Byrne: Yeah, I'm sure that's true. Yeah.

Elliot Berman: Let's see, what else have we got? Wanna talk about the Nigerians?

John Byrne: It's an FBI announcement. Which as everybody's learning, we look these things up as we're talking. So you have that in front of you. Why don't you go ahead and reference that?

Elliot Berman: Yeah. So a fellow was sentenced to eight years in prison and it then three years of supervised release. And was ordered to pay about $1.4 million in restitution. He was arrested in 2024 at Heathrow Airport in the UK. At the request of the United States, and then he was extradited back here about a year ago.

He was indicted by a federal grand jury back in July of 2022, with one count of conspiracy to obtain unauthorized access to protected computers in furtherance of fraud and to commit theft of government money and money laundering. One count of wire fraud, four counts of unauthorized access, blah, blah, blah.

What did he do? He worked with others to steal money from the US government using taxpayers personal identifiable information, PII, to file fraudulent tax returns in the taxpayer's names. It also involved stealing PII from a Massachusetts tax preparation firm by doing phishing attacks on their computer system.

It just struck me, I had not seen this combination of things. Certainly we've seen other indictments related to filing fraud on tax returns in other people's names but I hadn't seen it coupled with actually a phishing intrusion into a tax preparation companies network.

John let's see, where are we? By the time you hear this episode, our February webinar, will have live streamed. But by the end of next week, you'll be able to review it on our website. And then next month and we'll give you the registration information next week, but next month we're gonna have a really interesting webinar about the coming changes to compliance in the EU. And our colleague Vesna McCreery is going to moderate that one. And it's gonna look from the perspective of what's keeping European bankers up at night about the transition to the new AMLA rules. For those of you who are either in the EU or are doing a lot of business there I think it will be well worth it. We're a little bit away from the timing of when those new rules will come into place, but certainly we're in the window where people are starting to think about, so what will this mean for me operationally?

What else you got, John?

John Byrne: I did my February sit down with Sarah Beth Felix, and we had some interesting conversations on some of the issues we've talked about, but some other issues that I know people will find compelling. So that'll get posted in a few days. And then on Monday I've scheduled an interview with, folks that are part of a coalition that continues to deal with humanitarian access to financial services in the wake of terrorist financing issues that banks face and regulators face, and how to navigate all of that. And they're, they, we talked about their shadow report a bit ago.

They're also planning to be advocates for that issue in front of the evaluators of the US for the FATF evaluation. So we're gonna have a conversation with a number of them on Monday. So that'll get posted in a week or so after that. Stay tuned for that. And as always, we're looking for more topics and themes and speakers that you'd like us to have one-on-one conversations with.

So reach out to Elliot or myself on that. We'd be happy to follow up.

Elliot Berman: I know you're heading to the Puerto Rican AML Conference, so you travel safely and I will talk to you next week.

John Byrne: Stay safe. Take care.

Elliot Berman: You too. Bye-bye.