This Week in AML

Sanctions Evasion, Sanctions Cooperation, and Other News

John and Elliot explore how intermediaries are helping evade sanctions and bring luxury goods to Russia. They also discuss new cooperation between the sanction teams in the US and EU and touch on other financial crime prevention news.


Sanctions Evasion, Sanctions Cooperation, and Other News - TRANSCRIPT

Elliot Berman: Hi, John. How are you this week?

John Byrne: I'm good, Elliot. Yourself?

Elliot Berman: I'm good too. Karen and I are going to take a couple days and get away leaving tonight back on Friday night. So glad we're recording here on Wednesday and our listeners can hear this on Friday.

John Byrne: Yep. Halfway through the week and already a lot of stuff going on. We're not going to talk about them this week unless it gets traction going forward but the Durham Report was released. I urge people to actually read reports. Having read the Mueller Report from beginning to end, unlike many commenters, I come away with a different view than some. And I would say the same for this, because obviously our colleagues at the FBI are front and center, so they should read the report.

There's also been some news stories about potential selling pardons for money and that's gonna be interesting. It's a civil case, but also something that touches on corruption in our space. There was an article in the New York Times, I believe, over the weekend that you flagged that talks about my characterization weighs around sanctions for oligarchs. Generally, what did the reporters find with that?

Elliot Berman: They found that there are a fair number of intermediaries operating in countries that are not subject directly to any of the Russian sanctions. Dubai was mentioned prominently, who are assisting in the purchase of luxury goods, vehicles and other things, and then helping them get transported to Russia.

And essentially, and this is my word, not the article's word, laundering the goods through , a third country that is not directly subject to the sanctions. It's troubling. I guess I, I'd love to say I was surprised, but I'm not. And it's interesting. It's a challenge for the US because we consider Dubai to be a key strategic ally in that part of the world. There are major US naval operations that are headquartered in Dubai. It'll be interesting to see, and maybe we won't see it visibly, whether any pressure is put on Dubai to shut down some of these intermediary markets,

John Byrne: Right. And so oftentimes when journalists are ahead of the game in terms of their research and reporting, there are effects, and that's similar to another thing we wanted to flag. We talked about this a couple of weeks ago. A series of economists and other academics were talking about how

the sanctions programs have a major gap and the gap is what you're referring to in this Times story, that is the lack of strong partnership in other jurisdictions that have sanctions.

And so the Treasury just announced yesterday the bilateral partnership between the US and the EU sanctions teams. So there was a meeting late April with OFAC, the European External Actions Services and the European Commission Director General for Financial Stability, the Capital Markets Union.

They have several tech meetings in Brussels, but the coming out of the meeting is to enhance and share sanctions expertise. I think that sort of goes directly to the concern that, we could have strong sanctions, Europe could have strong sanctions, but if they're not collaborating with one another, there's gaps there.

And they say that this is specifically directed at Russia, in terms of their response to the illegal war against Ukraine. They talk in the press statement the partnership is shared common values, which has always been the case and collaboration, as we mentioned, and they're going to continue to work together going forward.

So again, just an announcement of more partnering, which in and of itself doesn't seem that exciting. But given the fact that it's, I think, almost a direct response to the criticism from several weeks ago in major publications, I think that's something to note.

Also the same day yesterday, the Treasury sanctioned yet another Russian actor. This one is someone who was involved in ransomware. That was specifically directed to attack police and US critical infrastructure. So there's indictments against Mikhail Matveev, I think, is how they pronounce it. And State Department has announced an award up to $10 million for information that leads to the arrest or conviction under our Transnational Organized Crime Rewards Program. So this was another identification of key actors is specifically dealing with impacting our critical infrastructure, our police departments and that's and that sort of thing.

Elliot Berman: I saw both of those. I want to go back just for a moment to the to the EU US bilateral partnership. There was another sentence in the press statement from Treasury that caught my eye, and I'm going to quote here, the teams also explored methods to ensure that sanctions do not prevent

humanitarian trade and assistance from reaching those in need and that persons and sanctions jurisdictions preserve their internet freedom.

And I thought that was interesting. We have talked a lot about de-risking and the challenges of NGOs being able to get humanitarian assets on the ground in places where they're needed, but where there are conflict zones and are often subject to various sanction programs. It was good to see that this is a problem that is recognized at the highest governmental levels, both in the EU and in the US and that this partnership will, among many other things, work to make those problems less onerous.

I don't have any expectation they're going to go away. But if you recognize there's a problem, you can start working on the problem.

John Byrne: Excellent point. And then we'll typically save this for the end, but since you mentioned it, we're close to doing a interview with the Treasury Department official on their de-risking strategy. So they've agreed In principle to meet with us sometime in the next couple of weeks. I'm looking forward to that and drilling down with some questions and giving the Treasury a chance to deal with some of the criticisms that they're aware of and perhaps some of they're not.

But I really appreciate the fact that they are looking for avenues for us meaning the AML community to hear more from them on this issue. That is so important to not just humanitarian groups, but money service businesses and obviously other correspondent banks systems where de-risking is a major challenge.

Elliot Berman: Several other follow ups and new items. One is at the end of March, you and I had a conversation about artifacts in museums that had questionable histories, how they got there. In the last week or two, the Metropolitan Museum of Art in New York, which has been the subject of specific investigative reporting, announced that it was establishing a provenance research team to review its current collection and work through determining provenance of the artifacts in the collection and also to screen new items as they're offered to become part of the collection.

So just to follow up there, I think that's a good step forward. There was a lot of press about the Met Gala with the undertones of lots of pizzazz, where's the noise about the issues that have been raised about the collection and I think this was certainly responsive to that. It's a lot of work, though. That

group has a mountain to climb given the size of the collection. But it'll be interesting to see what, if anything, gets announced as they move forward.

And the other one is yesterday, Sam Altman, the CEO of OpenAI, was testifying in front of a congressional committee and he told the Congress members that they should create an agency to regulate and license AI platforms. So first powerful statement from the person who was one of the inventors of some of the AI products that are now flooding the market and that people are raising concerns about.

John Byrne: I thought it was interesting that it was a seemingly bipartisan hearing. In fact, I heard Senator Blumenthal, the Chair, say this morning on a news program that in his words, if you closed your eyes and heard the questions and comments, you couldn't have told who was a Democrat and who was a Republican, which never happens anymore. So that part is interesting, but one of the things that Altman suggested was potentially a new federal agency, which, given everything else that's going on, it sounds like a high bar, but that was something that apparently even the Republicans thought at least to issue licenses would make sense, but I think Altman also mentioned from what I can glean from the transcript that he thinks, and I think we do too, this is a global issue. So it's not just a question of a federal agency in the US, but obviously something that needs to be addressed globally.

Elliot Berman: I have been pondering where would you put it? One could argue that, it becomes an agency or a bureau or a sub piece of Commerce, in the US. To the extent that it has national security implications, I suppose it could fit in other places as well. But the most interesting parts are the one you just mentioned, which is that this does seem to be a matter of bipartisan concern, which means there's the possibility. If not probability of action.

And secondly, that the person from the industry, as opposed to coming and giving long winded explanations, how they can self regulate is saying, no you need to regulate this. That's another powerful accelerator for action. So it'll be interesting to see what happens and we'll keep paying attention. John, I know we've got a webinar coming up that you're working on. You want to tell everybody about that?

John Byrne: May 25th, 1 o'clock Eastern Time, private public partnerships and how they enhance detection, prevention and reporting of financial crime. We have an excellent panel. Don Fort, our advisory board member, former IRS CI chief and Tom Fattarusso, who's a SAC in New York, is going to talk about a particular project of IRS's, the Global Financial

Institutions Summit. We also have Marilu Jimenez, who runs her own company FINCAdvisors out of San Juan, but she does work not just in Puerto Rico, but nationally and internationally. And she's had a lot of experience working closely with public sector partners from HSI, DEA and others. And is going to talk to us about how that works.

So that's, next week, 1 o'clock Eastern, May 25th. And then, as I mentioned earlier, we are working efforting to get a conversation with the Treasury Department on their de-risking strategy, so we're looking forward to recording that in the next several weeks and posting that for everybody, and then I would just let folks know that these conversations, plus many podcasts are available on our website, AMLRightsource.com as well as information that people should take a look at.

Elliot Berman: You can go to that same website and sign up for next week's webinar. John, you have a great rest of the week and weekend, and I will talk to you next week.

John Byrne: Take care.

Elliot Berman: Bye bye.