Russia Sanctions Resurface, New Lending Guidance, and Europol's EU Terrorism Report

In this week's episode of This Week in AML, John Byrne and Elliot Berman discuss the renewed push for a bipartisan U.S. sanctions bill targeting Russia and compare its approach to the European Union's existing sanctions framework. They also examine new guidance from federal banking agencies on lending to non-work authorized.

The conversation explores a notable difference in the Federal Reserve's proposed AML program rule, highlights key findings from Europol’s latest EU Terrorism Situation and Trend Report, and reviews a Transparency International report examining the illicit finance risks associated with cryptocurrency and stablecoins.

John and Elliot also discuss developments involving a high-profile IRS lawsuit and Florida's proposed designation of certain organizations as terrorist entities.

Russia Sanctions Resurface, New Lending Guidance, and Europol's EU Terrorism Report - Transcript

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

John Byrne: Good morning, Elliot. I'm good. You and Joe will be doing this next week, because as my daughter Jen is getting married in Milwaukee on the 25th, so we're very excited about that. Been for a while, and we're gonna be in town there for the next for the full week. So very excited about that, and so that's top of mind with all the other things that we talk about at least for this week.

Elliot Berman: Looking forward to joining you on the 25th. I talked to Joe yesterday, and he's looking forward to being the other voice. He says he can't fill your chair.

John Byrne: Oh, he could easily do that. I appreciate you guys doing that.

A lot going on as almost every news program and even late night talk show program says when they're talking about politics and policy. One of the things I'm sure people are aware of by now is South Carolina Senator Lindsey Graham suddenly passed away over the weekend.

It's relevant in that he was a strong supporter of Russian sanctions, and just yesterday a bipartisan group of senators unveiled their Russia sanctions bill, and they've urged Congress to quickly pass it. The legislation, this is, I'm reading from a story in CNN, it's meant to pressure Moscow and deprive , it of its revenue for its war against Ukraine.

It's been in the works for more than a year. So it's a 60-page bill. It's got mandatory sanctions on Russian political and military leaders, including Putin, as well as oligarchs, state-owned enterprises, foreign companies that support Russia's defense industrial base. According to this story, the White House seems supportive, but we know that can always change, so we'll be watching that and see what happens.

Elliot Berman: I went back and looked at the 20th EU package, which they adopted in April, and did a very quick down and dirty side-by-side to try to figure out, how much are they aligned and how much are they different from what's in the current version of the proposed bill.

I would say the common themes are that they both focus heavily on trying to disrupt the shadow fleet and on digital assets because both of those are viewed as significant circumvention channels. How they go at it, quite different. A lot more in the US approach using tariffs in the secondary sanctions component whereas a more direct approach in the EU.

Again, we're comparing a proposal to something that's active. But interesting the fact that it was floating around for a year and couldn't get to the floor, and and then the death of a long-serving senator suddenly makes it appear. Politics is a funny business.

John Byrne: Yeah, that's for sure. The banking agencies late last week issued a guidance document, and they characterize it as following the executive order on restoring integrity of the American financial system. Banking agencies, the OCC, the FDIC, and NCUA have issued guidance that reminds supervised FIs to apply existing safe and sound credit risk management practices when lending to borrowers who are, quote, "not legally authorized to work in the United States," parenthetically now called non-work authorized borrowers.

They advise that because it can present elevated credit risk because of their ability to generate income, employment continuity, and financial stability. Because all those things may be more uncertain. So that was just issued. I think you mentioned offline that it's very similar to what the CFPB did fairly recently, right?

Elliot Berman: Yeah, CFPB back at the beginning of June came out with a statement on ability to repay and immigration status. And it was a reminder to creditors of their obligation under truth in lending to consumers for dwelling secured transactions. So that statement, again not a regulation, but a statement really focused on mortgage lending.

The new one focuses on consumer lending more generally. We'll see where this all goes. I don't know that there was really anything surprising in either one. I guess as I think back to my days in sitting in the loan committee for a bank I worked for, without this kind of guidance, these are the kinds of things that you would always try to evaluate and, likelihood of ability to repay, including stability of earnings and things like that.

So I, I'm not sure there's much new here. I'm also not sure why the Fed did not join in this guidance.

John Byrne: Interesting, yeah ...

Elliot Berman: they are a bank regulator as well. They directly regulate what are known in the US as state member banks. So those state chartered banks that become members of the Federal Reserve. But don't know what it means. Maybe guidance is coming from them in a day or two, so we'll have to see.

John Byrne: Related to that, our good friend Dan Stipano partner at Davis Polk, put out a piece about the Fed's AML program rule and pointed out that while it's very similar to the other agency program rules. Unlike those proposals, the Fed does not, in theirs, include a requirement to consult with FinCEN before initiating significant AML CFT supervisory actions. Which is very interesting because obviously, that was a pretty dramatic shift in exam oversight that's in that program rule, and Dan points out that it is not in the Fed's proposal.

Elliot Berman: Yeah you and I have known Dan a really long time. He's a very knowledgeable guy and I always knew he was a lot smarter than me, but when this popped up it was like, oh, I wasn't careful in my reading and didn't see this . Good pickup. Don't know, not clear what it means. They didn't make any statement about why that provision was left out in their overall program rule commentary. So we'll see if it stays out, if it comes in. Hard to know.

John Byrne: We talked about this before jumping on board here, that Europol has put out their European Union's terrorism situation and trend report, and that's an annual publication, so it was just out the other day.

Are there items in there that jump out at you? Obviously, a lengthy report that everybody should take a look at obviously, specifically those that have businesses in Europe. But again, this is designed to look at the different types of terrorism in the EU, and what are the trends and data on all of that. It's a great... More than a training tool, a great awareness tool as, as well.

Elliot Berman: 100% agree with that. And as you pointed out, it's an annual report. And again, situational, I think is important. They're really talking about what's happening on the ground. The high level findings are summarized near the front end of the report.

This is all 2025 data. They talk about the number of terrorist attacks that were reported. There were 45 reported by 10 member states, and that there were 486 suspects arrested. One thing that I thought was interesting they ascribed to the category jihadism 24 of the reported attacks, so a little more than half. And about two-thirds of the reported arrests.

They talk about the terrorist threat remaining high. They also talk about and I'm quoting here, "Most terrorist attacks and plots involve lone actors or small self-initiated cells using relatively simple attack methods."

They talk about the and I'm quoting here again, "A complex and shifting geopolitical context continues to fuel violent extremist narratives." So the more confused and noisy things are, the more it helps with extremist groups- doing their recruiting. And they talk about the online environment providing a a rapid pathway for terrorist groups or terrorist ideologies to spread.

So I agree with you, more than a training tool, great awareness tool, and while it's speaking specifically about the EU, which is a pretty big group of countries, these trends are not unique to the EU and would apply wherever you are.

John Byrne: Again, related to illicit finance, a report issued by Transparency International, the US they talk about what they're calling crypto's dirty money problem and what they argue Congress - must fix. So they've been opposed to the CLARITY Act in its current composition and some other areas. But the report itself goes into detail, and you should take a look at it. How it has enabled terrorist financing, and they talk about the use of it by Hamas, Al-Qaeda, ISIS, and some examples there.

There's a section in there that suggests in their view, that digital assets are particularly attractive to illicit actors for what they're calling six important reasons. One is the speed of transactions, which we're well aware of. Another is obviously the pseudonymity of this. Blockchain addresses are public, but the person behind the address may not be known.

They say a corrupt official does not need perfect anonymity. That's the second one that that they say moves this. Borderless access, of course, and FATF has repeatedly warned that uneven implementation of virtual asset standards could create cross-border vulnerabilities.

Regulatory arbitrage going through offshore platforms, weakly supervised services. Obfuscation tools, so mixers and chain hopping they mention. And then dollar-like stability, which they think actually it can be used in a negative way. They say stablecoins allow actors to move value in digital form without taking on the volatility of Bitcoin or other assets.

And again, they go back to FATF. FATF has warned that stablecoins' characteristics can make them attractive for misuse in money laundering, terrorist financing, and sanctions evasion. Other resources on TI's website that touch on these issues there's fact sheets about the CLARITY Act. They also have commented about FinCEN's proposed rule for stablecoin issuers under the GENIUS Act.

A lot of information there if you're following the advocacy pro and con regarding cryptocurrency.

Elliot Berman: And if you look at the stablecoin provisions in the US laws and you look at the EU and the UK's approach to stablecoins, they're very different. And this is through the lens of not making those platforms convenient or easy for for terrorists or money launderers or corrupt officials to use.

We have in the US in the last 18 months put out the welcome mat in front of the door that says stablecoins in a way that is good for legitimate businesses. But the cost in terms of the risk, changing the risk profile in my opinion has gone the wrong direction, and certainly not the direction of EU, UK and FATF's guidance.

John Byrne: Just a couple of other things. The Washington Post reported, many media out- outlets reported this that the the lawsuit against the IRS, which we've talked about, and what is now considered a scuttled proposal for the $1.8 billion payout fund, the judge in that case said that was filed for an improper purpose.

And so again, you could read the actual decision by the judge, but this was on Monday. This particular judge, Kathleen Williams, suggested that Trump's attorneys and top DOJ officials who signed off on the agreement could face professional sanctions, and that includes the acting Attorney General, Todd Blanche, who the nomination hearings are happening as we record this.

This order from Williams is particularly extraordinary. Thirty-five former federal judges had petitioned her to reexamine the deal. Interesting, we're gonna be following that, and I would assume that Blanche will be asked about this in today's hearing. So by the time you hear our conversation, that will be reported by various outlets.

Elliot Berman: The judge indicated in her order that she was forwarding to the respective bar associations of the two lawyers who represented the the president and and the Trump organization in the lawsuit, as well as acting Attorney General Blanche's for disciplinary review. As you said, pretty extraordinary. I'm not saying it never happens, but there has to be a lot of tough questions before a federal judge will refer, a lawyer to their licensure granting organizations for disciplinary review.

What else you got, John?

John Byrne: That's really it, although something did pop up late yesterday that we didn't get a chance to talk about. This is reported by an organization that works with humanitarian and other groups. According to this report the governor of Florida, DeSantis, announced July 1st that he was gonna designate certain Muslim and anti-fascist groups as terrorist organizations using that authority granted to him under a new Florida law that took effect on July 1st.

And according to the story, DeSantis said he would seek designations of the Council on American Islamic Relations, a well-known organization, the Muslim Brotherhood, and Antifa among others. Within hours of that, the ACLU and the Southern Poverty Law Center has sued on behalf of CAIR which is a leading US Muslim civil rights nonprofit.

It's interesting because the... including this in terms of these designations will certainly impact whether or not financial institutions believe they have the ability to have account relationships. And so to have domestic groups designated under this law, which is happening in other states, by the way, typically I think only red states, is gonna continue to challenge the need for humanitarian and charity organizations to get funding to areas that need that funding.

So this'll definitely bear watching.

Elliot Berman: Yes. Past is not necessarily an indicator of the future, but a number of the efforts in this space that have been passed in Florida have been struck down. So there was a pretty big package of things. They didn't go through as a package, but there were a fair number of bills that moved through the Florida legislature with the urging of Governor DeSantis.

And most of them to this point have not withstood challenge in the courts. So that doesn't mean these won't or will, but it'll be interesting. Just 'cause you want it doesn't necessarily mean you get it.

John Byrne: Hey, and one other thing with Elliot, in my class that I teach at George Mason last night, the topic was corruption. And we did talk about another Washington Post investigative piece, and this was showing that Donald Trump's sons have invested heavily in defense technology stock as, of course, the increase being proposed by this administration I read today, $350 billion to the Defense Department. The article is very lengthy.

It's an investigative piece. A lot of the investments are clearly not illegal, but could be conflicting in terms of having information. One could argue that you know with certain administrations there's gonna be an increase in defense spending, so that alone is not enough. But the piece goes into pretty aggressive detail of what they are both doing in terms of being on boards of directors and the monies that they've made thus far.

So again, another piece we've talked about this when it's happened with folks on the Democratic side as well. But I think it's important that when these investigative articles come out, take a look at. There's charts in this one. This is was posted July 13th, so it's in the July 13th edition, front page of the Washington Post.

Elliot Berman: John I know you've got at least one really interesting podcast scheduled for recording. You wanna talk a little bit about that?

John Byrne: Yeah. Later this week Tess Davis from the Antiquities Coalition is gonna sit down with me and talk about a number of things. We mentioned the Rome Statement last week or the week before in terms of the issue of illicit funds coming from the sale and stealing of antiquities.

But also, the Antiquities Coalition has done a number of things in the past six months. So we want to catch up with her and see what's going on. I know they were very supportive of the art legislation in the Senate, which got a little bit of plug about a month ago when Senator Fetterman from Pennsylvania issued a press release that should be moving.

So we're gonna check in with Tess. Tess does a lot of work on a global scale. And all of that is related to illicit finance in the art and antiquities industry. So looking forward to catching up with her on Friday.

Elliot Berman: Yeah. And then we'll get that posted to our website, shortly after your recording.

This month's webinar is on AI and financial compliance. It'll live stream on July 22nd at 1:00 PM Eastern Time. Our colleague Joe McNamara is moderating a great panel. I think you'll find it interesting. There's still time to register at our website, amlrightsource.com. And John, I will actually talk to you in person next week, but you and I will not be on the show together.

John Byrne: Take care, stay safe, and we will talk soon.

Elliot Berman: You too. Bye-bye.