This Week in AML

Strategy for Countering Corruption

The US Department of State has issued its Implementation Plan for the US Strategy on Countering Corruption. The five-pillar Plan outlines actions for the department, its agencies, and its domestic and international partners. John and Elliot discuss the plan and its impact on global anti-corruption efforts.



Strategy for Countering Corruption - TRANSCRIPT

Elliot Berman: Hi, John, how are you today?

John Byrne: Hi, Elliot. Really good. As I mentioned last week we were getting ready for my son's wedding and it went over very well on Saturday. Unfortunately it was supposed to be outdoors and a monsoon came through, but once we made a plan B to go inside, it worked out really well and happy to see friends and family.

So it was a nice weekend.

Elliot Berman: Great. I'm glad to hear that. And, starting of the football season, we don't have to go over all the scores and all the events, but if one is a football fan, no matter who you rooted for, there was something to pay attention to.

John Byrne: That's for sure. More to come as we go forward.

I'm not ready to say let's... jump into college basketball season. I'll give it a few more weeks before...

Elliot Berman: I was going to say they're already practicing.

John Byrne: No question. A couple of things that we want to spend the lion's share of our time today on the State Department's implementation of the corruption strategy issued by the Biden Administration, but a couple of other noteworthy items this week.

The GAO, the Government Accountability Office, released a report where they estimated that fraudsters may have stolen as much as $135 billion, which basically that was one out of every 7 dollars identified for jobless benefits was captured through fraud. And most of it has not been recovered. The Labor Department disputes the numbers. They think it's a little less, but the bottom line is I think everybody understands that there was major gaps in how this money was distributed. It's certainly, the blame is bipartisan. Everybody wanted to get money out to folks so that they could help them during a pandemic that we hadn't seen in a hundred years, but as our clients have said, they knew there was going to be a ton of fraud. And this certainly is one of the many evidences, if that's a word of this. Just came out the other day, it's been reported in the main press, but thought we would just reference that. That was one thing.

And the other thing, just real quick, Maxine Waters, who, as everybody knows, is the Ranking Member of House Financial Services. She sent a letter late last week to all the banking agencies and FinCEN, as well as the Credit Union Administration. Asking them to examine the CIP regulations the mandates created, right after the Patriot Act dealing with the information that has to be captured to comply with the CIP rule. And her point is that because it includes full social security numbers, that's in today's world, an additional risk for identity theft, fraud, those areas as well.

And she mentions in the letter's only a couple paragraphs but, she says she certainly understands why that's being captured to deal with identifying the customers so that you could do risk analysis and all of that, but she says it also it can enhance the hacking that have occurred in the past few years. She cites the Equifax one back in 2017, where almost 147 million data points on individuals, their SSNs were exposed; Morgan Stanley, Flagstar, and others. And she indicates in the letter that in light of all this, why can't the financial sector be simply required to collect only the four digits of a customer's SSN when you're doing third party identification?

And she asks that they reconsider the FAQs for CIP, as well as a change to the exam manual. And all of that. It's not co signed by others. It's just simply from the ranking member Waters, but I thought we'd just highlight that as something out there. I'm sure there will be a response at some point. She just sent the letter. I doubt they're going to make a major change at this point. But, given the fact that we do talk about cybersecurity pretty frequently, and technology has certainly changed in the 20 years since the rule has been issued, it certainly might be something that the agencies sit back and make a decision, perhaps, to alter or amend the rule.

Elliot Berman: Always good to take a look and see whether things can be modernized, so be interesting to see how that unfolds. I also had one. Recently FinCEN issued an alert on, and I'm quoting here, a prevalent virtual currency investment scam commonly known as pig butchering. It's a scam to get people to invest in virtual currencies and then not and then lose all their money.

We're going to be publishing a blog post about it over the next week or two, so you can watch for that. But worth taking a look at, like, all of the FinCEN alerts can have some value as a training tool and an awareness tool. And it does include red flags, so there is some help there.

But as you mentioned, the main thing we wanted to talk about today was the State Department issued their implementation plan of the US strategy on countering corruption. The strategy itself came out at the end of 2021, and it's the first ever national strategy on countering corruption. I'm assuming that you saw the report, John?

John Byrne: I did, and I think to remind folks, because we've talked about the strategy before, that the plan goes into the five pillars of the strategy, and those are to modernize and resource efforts to fight corruption, to curb illicit finance, hold corrupt actors accountable, preserve and strengthen the multilateral anti-corruption architecture, and improve diplomatic engagement in leveraging foreign assistance to advance these various policy goals. So they take all of those pillars and in it a whole series of subsets on how they would implement those plans.

So yeah, it's it's an interesting, it's a 40 page document. It's from the State Department, as we talked about offline, but they do interact with a variety of agencies, so there are interesting particular objectives and implementation. I'll just mention a couple quick ones and then obviously want to hear what you have to say about these as well.

If you look at the front end of this, they talk about enhancing research and data collection and analysis. Because, you can't fight corruption if you don't know what you're looking for, right? And so one of the things I thought was interesting, is they're going to provide embassies with guidance on corruption analysis, diagnosis, and data usages to inform the assessments, the program design, diplomatic reporting.

So if you give all these embassies in these various jurisdictions the tools that I think that certainly helps with the research. So again it's things like that in there and then just collecting data for reporting on progress toward the goals. So some of these, they tell you the timelines are quick. I think they say short, medium to long as things are ongoing.

But I think it's a pretty interesting list of items, but the one in the front end made it jumped out at me, and there was another one just real quick, and that is, back on communication. To strengthen the State Department's anti-corruption public communication. And this again will sound simplistic, but I think it makes sense, utilizing relevant social media, updating relevant webpages, broader public messaging, and conducting non-governmental partner consultations, and public engagement activities. What the government and others have done with human trafficking, constantly pushing out information.

If people are aware what happens when there's corruption, the impact that it has, maybe people will be more predisposed to reporting or doing some, proactive identification.

Elliot Berman: Yes. One that caught my eye was update tools available to promote the accountability of corrupt actors at home and abroad. And this particularly the abroad piece had to do with, so one of the activities is to engage in targeted bilateral diplomatic interactions to improve utilization of foreign assistance focused on the demand side of bribery and other corruption offenses. And to work with DOJ and Treasury and other federal law enforcement in similar efforts.

I think there's a recognition that corruption, while in one hand can be a hyper local problem, it, more and more these days, is truly a global problem where corruption in one place ends up having a connection to money laundering in another place or, other bad acts in another place. And we need to focus local, but we also need to act globally. And of course, State Department is the place where we do that the most.

So they are recognizing that they need to do it, and it's on a bilateral basis, not only bilateral, sometimes it's going to be more multilateral, but certainly they focused on that, and I think that is important and critical. and corruption, staying with the multinational approach, FATF talks about corruption, too. Because their financial crime reviews and things are not strictly related to money laundering.

John Byrne: So take a look at that. That report's obviously available on the State Department website. And I think it's always useful when these reports are posted to do a quick little summary for, internal use, whether you're part of a trade association or for your institution, for your senior managers, and maybe some editing from your, perspective on how it might impact your particular institution or client base.

Elliot Berman: Yes, and we'll link to the report and to the strategy in the description of this week's episode that appears on our website. So you'll be able to get to those pretty easily. John, what else do you have in the pipeline?

John Byrne: Later this week, I'm going to be interviewing an investigative journalist. We're going to cover some of the stories that she's been reporting on. Also, she had a previous career move where she was working for groups that paid specific attention to AML related topics. So we're gonna get her take on all that. So that's coming up.

Also as I think I've mentioned in previous this week's in AML conversations, we have in the past I teach a class at George Mason University at the graduate school, the Schar School of Policy on money laundering and terrorism, and when we have our final papers from the students, if a couple we deem publishable, we'll put them out on our website. Later this week the first one of a couple by one of our students and I think you're going to find it really fascinating. It's evaluating Norway's readiness and risk management related to the northern sea routes of Russia.

So it deals with crime. and corruption. I found it really both compelling and of such a fascinating angle. That'll go up later this week. And as I mentioned, again, I've got to call up that podcast with the investigative journalists. And we're working on obviously our webinars for October, but maybe you could tell us about Elliott, the September webinar.

Elliot Berman: Yeah, so we're doing one focused on fraud and managing an anti-fraud program in the current working environment. And that one is September 28th. It starts at 1 PM Eastern time and 6:00 PM BST. And you can still grab a seat. Go to our website, aml rightsource.com and you can register for it.

And then we're putting one together on sanctions. That will be in October, and that's October 26th. And registration for that will open on September 28th. And then lastly just a reminder, as we mentioned to you last week, John and I will be at the ACAMS event in Las Vegas at the beginning of October, and if you're there, we'd love to meet you and hear what you like about This Week in AML and hear how we can make it more interesting for you.

John Byrne: Yeah, just don't give me any grief about the Giants getting blown out by the Cowboys, and we'll have a good time.

Elliot Berman: We'll ask the people from Dallas not to wear their jerseys, and you'll feel better.

John Byrne: That's right. All right, Elliot, sounds good. Stay safe. We'll talk again soon.

Elliot Berman: You too. Have a great weekend. Bye bye.