This Week in AML

Wildlife Trafficking, Canadian Crypto ATMs, Dubai Real Estate, AI in the US, and More

This week, John and Elliot discuss a new report from the OCCRP about global bad actors using Dubai real estate, the World Wildlife Crime Report from the UN Office of Drugs and Crime, a report from FINTRAC on virtual currency ATMs, a report from the Bipartisan Senate AI Working Group, and more. 


Wildlife Trafficking, Canadian Crypto ATMs, Dubai Real Estate, AI in the US, and More - TRANSCRIPT

Elliot Berman: Hey John, how are you this morning?

John Byrne: Hey Elliot, I'm doing well today. Started my summer class that I teach at George Mason University, a graduate class on money laundering, terrorism, and corruption. And we started off mentioning that corruption is the through line for all financial crime.

And there's always something going on in terms of cases. And we mentioned specifically the Senator Menendez case that's going on in Manhattan as we speak. He's been charged and his wife has been charged with a number of counts of money laundering and various frauds. I'll just say this. Those of you that are fans of The Daily Show, you may know that Jon Stewart is back and does Monday nights. Monday night's show, he did probably five minutes on corruption, talking about Menendez, but also other aspects of it. It's definitely worth a watch. I'm sure you can find it on social media.

But Bottom line with Menendez is they found gold bars in his house, they found cash in boots, cash in the linings of his congressional jackets. Pretty interesting to see how there'll be a defense. Interesting to watch. Talk about a politically exposed person. I think it's pretty clear. At least from the evidence thus far, what we have there.

Elliot Berman: Yes and we'll talk about corruption in some other contexts as well during this conversation.

John Byrne: Hey, I should mention, in terms of that, specifically Secretary of State Blinken is in Ukraine, and on the Secretary State's daily press briefings his conversation yesterday was in Ukraine with a group called the Civil Society to talk about the anti corruption measures that Ukraine has been putting in place. So again, a relevance there that, as we know, corruption is a global issue.

Elliot Berman: Indeed. So where would you like to start?

John Byrne: Let's let's come back on this side of the pond, as they say. The Treasury's OFAC office yesterday designated one Russian individual and three Russian based companies for attempted sanctions evasion. And that particular event they said could have unfrozen more than $1.5 billion worth of shares belonging to the oligarch Oleg Derispaska. So that, that was issued by OFAC yesterday.

And then I know that Treasury's FinCEN put out a put out a proposal the other day related to CIP. And you took a look at that, right?

Elliot Berman: Yes, so it was joint with the Securities and Exchange Commission, the SEC, and it is a proposal to extend the CIP requirement to investment advisors. And this is a companion to the pending notice of proposed rulemaking to bring certain investment advisors who have not been subject to the overall anti money laundering compliance requirements in.

It is trying to track as closely as it can to the existing CIP requirements. One of the places it gets a little interesting is definition of customer, because, in the investment advisory space many customers take many legal forms. And so there was a fair amount of discussion in the proposal about would an investment advisor need to look through a trust that is the client to look at either the grantors or the beneficiaries? And generally the answer was no, but there was a strong component of risk based if there's a determination of a higher risk, then there might be a need to look through.

I think from my seat, it's a perfectly expected next step. If you're going to add these groups to have a program, then a CIP requirement makes perfect sense. Otherwise, if you don't know who you're doing business with how can you have an effective program? It'll be published this week in the Federal Register, and then we'll have a 60 day comment period.

John Byrne: Yeah, it's it's going to be interesting. I got to say FinCEN is being very aggressive and very active in a lot of areas. I know we've said that before, given all they have on their plate, I think that's to be commended. Because of all the things that many considered to be gaps in the AML infrastructure, so I think that's important.

The other thing I wanted to mention is we've talked before and actually done podcasts with my buddy Kevin Hall from the OCCRP. They just issued a series of reports, called Dubai Unlocked, and really very interesting, and I've only started to really scratch the surface, but this is a whole series of reports from a number of journalists, the case they make that Dubai is clearly a hub for money laundering and they come up with the actual rationale why they believe that to be the case.

So very lengthy series of stories. I think they only started just to release them, but I'll just make a quick reference here. It's a global investigative project. And this is from property data that was obtained by a number of journalists. I think over 140 journalists, over 74 media outlets.

So they were able to identify a number of real estate owners in Dubai who were accused of criminal activity, drug traffickers, money laundering, terrorist financers. For example, they found property owned by alleged Australian drug cartel members, sanctioned Hezbollah financiers, and relatives of West African politicians suspected of looting funds from oil countries.

Some live in Dubai, others just take rents from there. It's so much that gone on. So a really interesting break. I think there'll obviously be responses both internationally and I assume domestically from the reporting here, but just another great example of the importance of investigative journalism.

We just saw this, so I'm going to effort to see if we can't get, Kevin or some of his colleagues to sit down and have a conversation about some of these things. But very interesting areas and again, focus on the real estate sector, which we know has been a prime area for the movement of illicit funds.

Elliot Berman: Yes. And you can find the report on the OCCRP website. And I recommend people take a look at it. Part of it has a virtual tour of various parts of Dubai showing where these alleged bad actors, and I say alleged to be generous, but many of them have been chased, if you will, to this safe haven and which buildings they live in. This is a very detailed report as the OCCRP stuff always is. I strongly recommend you take a look at that.

John Byrne: And again, Dubai Unlocked. You can probably just Google that and get to it. Again, go to the website. It's, the acronym is for the Organized Crime and Corruption Reporting Project. Again, they do excellent work and this is a story that's going to have, as they say, going to have legs.

Elliot Berman: Yeah. OCCRP.org will get you to their website.

John Byrne: And Elliot, you and I talked briefly before the call the Senate, in a rare bipartisan manner, released a report, they call it a roadmap on directionally how to handle AI policy. So it was just issued. It's bipartisan, it's after a series of meetings with private and public sector folks. They created an AI working group.

So there's a whole series of recommendations in there. Some are Legislative recommendations. Some are simply these are directionally how we should handle policy responses, everything from privacy, liability issues, export issues, intellectual property. It runs the gamut.

I just wanted to reference two things very quickly. They call it an AI working group. So that's the working group under this umbrella They asked the relevant committees within the Senate to develop legislation that would expand the use of modern data analytics and supply chain platforms by DOJ, DHS, and obviously other relevant law enforcement agencies, specifically to combat the flow of illicit drugs, including fentanyl and other synthetic opioids.

And then also to work with the executive branch on information sharing across borders to protect against the forced transfer of American technology and promote open markets. Again, a whole series of things in there. And I know you identified a couple of things up front that were worth mentioning too.

Elliot Berman: Thanks. Right from the beginning, it says as members of the working group, we're steadfast in our dedication to harnessing the full potential of AI while minimizing the risks of AI in the near and long term. So that's their big theme, which makes sense.

How do you use this new technology which has been hailed as an amazing breakthrough on the one hand and the near end of the world on the far other end. And I'm sure the answer is somewhere in the middle. But the other thing is they go through a long list of recommendations right up front that have to do with existing laws and directives that need to be fully funded.

It's not just we need to do a lot more new things. It's also we need to be consistent in funding the things that are already available. As you pointed out, a comprehensive document. I would expect to hear more from this group. My sincere hope is that it does not just fade away after this and hopefully, because it's bipartisan, no matter what happens politically there'll be recognition that this kind of an endeavor is really critical to have sustainability.

John Byrne: All right I know that we obviously had an early webinar in early May, that we're really excited about how that went, and also, we'll obviously be posting that I think next week as well. And that was the one we did with Guy Ficco and Don Fort. And what's coming up in June?

Elliot Berman: In June we're going to be looking AML compliance expectations in the EU and the UK and the US. What are the common themes and what are the key differences? And Judith Barendse, who's a Senior Vice President here at AML RightSource is going to lead a panel of folks with insights on that. It is the 27th of June at 1 p. m. Eastern time.

There are a couple other things that you and I saw this week that it's worth touching on before we sign off. One is FINTRAC, which is the financial investigation unit for Canada came out with an interesting report on the role of virtual currency automated teller machines in laundering illegal proceeds.

And I think it's worth a look. They analyzed SAR data mainly three of the large urban areas in Canada, Montreal, Toronto, and Vancouver. And came up with topologies and guidance about how virtual currency automated telling machines are being used to launder money and why it's a serious issue.

And while this is Canadian data, there's nothing in here that says this is only happening in Canada. One of the things that I was reminded of was, this is about taking cash, turning it into a medium that you can move, which would be the virtual currency, and ultimately the goal is to convert it back to fiat currency at its end point, whether those are Canadian dollars, US dollars, or some local currency in another country.

I'd recommend that people take a look at this. Don't worry about the fact again that it's Canadian data, but just think about it because virtual currency ATMs are popping up all over and it's important to be aware of this. They also point out that like many other things virtual currency ATM operators are money service businesses in Canada, and they have a reporting and record keeping obligation.

And there are of course, operators who ignore that obligation. On the other side, if you're at a financial institution and you're banking ATM operators, being aware of whether they have a program and all of those other things is also important. So I'd recommend people take a quick look at that.

John Byrne: It's probably safe to say that Canada has been pretty aggressive lately in the AML space.

Elliot Berman: I agree. And and they do it well, I think, so they're another great source. Keeping track of what FINTRAC's talking about, is a good way to have your finger on the pulse of what's happening globally.

And then the UN Office of Drugs and Crime put out one of their research papers. It's called World Wildlife Crime Report, and it's about wildlife trafficking. And again, long, comprehensive report. But I think the key thing that I took away from it is, and you mentioned it right at the outset, a lot of what allows world wildlife trafficking to continue to flourish is corruption. And they make the recommendation that in addition to going after the traffickers for the actual trafficking, to go after the corrupt structures or corrupt officials that allow it to happen or facilitate it is another way to work to stem the flow of illegal wildlife trafficking.

John Byrne: Yeah. And that report, the World Wildlife Crime Report is obviously on the UN website. It's in their Office of Drugs and Crime. That's where you'll find the report and just released the past week.

Elliot Berman: And you had one more, John. Yes, you wanted to talk about taxes.

John Byrne: Oh yes. Senator Coons from Delaware has introduced a bill that would make it clear that hostages, when they return to the U. S., do not have to pay back taxes. I didn't even realize this was a thing until the legislation was dropped and there was a floor conversation between Coons and others. I think this is again, pretty broad bipartisan support for this, not blaming the IRS on this one. It must be just something that's in the the regulations that they have to follow. But the notion that Americans that are being held hostage have to, when they return to the states, have to be concerned about back taxes is something I think we all, we'll all agree we should give them a pass. So I would assume this legislation will move again, bipartisan support, but I have to admit, that was not something that I had on my list.

Elliot Berman: Me either. John, you have a great rest of the week, and you and I will talk next week. We're actually going to see each other at the end of the month.

John Byrne: That's right. Yeah. That's right. That sounds great. All right, Elliot, stay safe.

Elliot Berman: You too. Bye bye.