AUSTRAC, FinCEN Real Estate Report, UK Fraud Support and AML Enforcement, Arrest in Spain

This week, John and Elliot discuss comments by the AUSTRAC CEO, FinCEN’s proposed real estate reporting form, a new UN report on trends in financing terrorist fighter’s activities, a new Commerce Department report on investigations of export control and anti-boycott violations, the arrest of the Spanish Police AML Chief on corruption charges, and several other items impacting the financial crime prevention community.

AUSTRAC, FinCEN Real Estate Report, UK Fraud Support and AML Enforcement, Arrest in Spain - Transcript

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

John Byrne: I'm good, Elliot. You and I are live from the headquarters of AML RightSource in Cleveland. A couple days of meetings, and so we get a chance to talk through in detail some of these issues that we're covering. Today there's a bunch of things we want to quickly highlight and reference upcoming programs and that sort of thing.

I'll just start off with something that we just saw before we began to record, and that's Department of Commerce has just issued their report. This is a November report. It's actually Investigations of Export Control and Anti Boycott Violations. They call it Don't Let This Happen to You. It's a close to an 80 page document.

They explain their enforcement process. They explain voluntary self disclosure issues, that sort of thing. There's an intro from the head of the agency. They're basically reminding people of the importance of anti boycott and related laws and regulations and the close partnership that they need to have with the private sector.

So I thought that was pretty interesting. Again, about an 80 page document. There's examples in there of both the seriousness of administrative and criminal enforcement outcomes and also some strategies to better prepare here where the resources are and the information. So just posted in the past couple of days.

Elliot Berman: We also saw from FinCEN a proposed form for real estate reporting under the residential real estate rule that was published several months ago and becomes effective on December 1 of 2025. The form is out it's worth a look. Comments on the form are being taken through January 13th of 2025. It is what you would expect, capturing the data that the rule contemplates being captured, who was involved in the transaction, who was the facilitator of the transaction, and details about the transaction. So that's worth a look. That's on their website.

John Byrne: Reminders are also out there from FinCEN, IRS and others regarding filing of your reporting with beneficial ownership information. I would just say as a quick aside, we talked about this yesterday, FinCEN actually has a television commercial about this that we saw during several of the football games over the weekend.

They have done quite a bit of outreach and communication. I don't think there's any question about that. It definitely will be interesting to continue to monitor the reporting requirements there.

Elliot Berman: And on their beneficial ownership landing page on their website. They also have links to explainers and how to videos and things like that. There's definitely a strong effort on the part of FinCEN to make the registration process successful and not to be overly burdensome for people. And I can speak for myself. I have an LLC. I think I've mentioned this in earlier conversations. I went online and it was pretty straightforward.

I filled out a lot of government forms online and this one worked pretty well and the questions were pretty clear and the drop downs were helpful. So I think once people really give it a whirl they'll find that it's pretty straightforward.

John Byrne: Another report issued recently, the United Nations Security Council's Counterterrorism Committee Executive Directorate issued a report that's available on their website. The report is the Evolving Trends in the Financing of Foreign Terrorist Fighters Activity for the decade from 2014 to 2024. It's a short 14 page document. They walk through a number of activities over the past decade, various resolutions and different types of responses to the financing, including bank cards issued with false identities, increased use of prepaid cards, continued use of Hawala like services, so they list that.

They also make it clear that since 2018, there's been a diversification of destinations and origins for funds and fighters, so they talk about that, and then they toward the end, they list the present and forecasted trends, so evolving geographical and tactical shift, and that includes decentralization of financing methods and further convergence with organized crime networks. These are things that we've certainly have seen as well. Again, this document just released on the UN website and I've seen it posted by some of our colleagues in the AML community on LinkedIn as well.

Elliot Berman: Also being reported across a number of information sources in the space is that Spain's national police AML chief has been arrested in connection with numerous raids that were linked to a 13 ton cocaine seizure. It appears that they found 20 million euros in cash hidden in the walls of this person's home. Additional funds were found in his office. He and his wife was also a police officer are in custody. And it appears now that he has been working with drug traffickers for over five years. So obviously a very serious problem, given the fact that he was the senior person in the Spanish police related to anti money laundering and anti fraud.

John Byrne: In addition, AUSTRAC, which is actually the very first FIU created back in 1990, I think right around the time FinCEN was created. So I'm pretty sure AUSTRAC was first and FinCEN was second, but in any event, the CEO, Brendan Thomas, spoke to a group of regulators a couple of days ago, outlining his view on what's been happening with oversight of the financial sector, but also what to expect in 2025.

So just a brief series of highlights. He talks about that they've seen programs that are being tailored to mitigate changing risks, but more work is needed, particularly with smaller banks and the non banking lending sector. He also has been encouraged to see investment in new systems and technology upgrades to increase financial prime compliance. And makes it clear that make sure businesses don't lose focus on tackling financial crime now while waiting for system upgrade. The age old issue when you're doing an upgrade, are you going to be critical as a regulator of the institutions that might miss something during those parallel attempts?

Hopefully that's not the suggestion there, but that's always something that our FI colleagues talk quite a bit about. They expect a lot of change because there's a proposed reform that we've talked about, I talked about specifically earlier this year with Aub Chapman about the AML CTF proposed change to their regimes in Australia and the AUSTRAC CEO says that they're committed to supporting everybody throughout that process, obviously, and they are making internal changes at AUSTRAC, which is interesting, including what they're calling a new education and industry engagement branch.

So similar to what FinCEN's been doing with all its coverage around the country. Not just about beneficial ownership information reporting requirements, but the fentanyl crisis and that sort of thing. Interesting series of comments here just shows obviously that AUSTRAC faces a lot of the same challenges that we certainly see here and in other jurisdictions.

Elliot Berman: Yes. Two things from the UK. Metro Bank, which is one of the so called challenger banks, the online banks that were formed in the last 10 ish years was fined 16 million pounds, it's about $20.5 million, for failures in its transaction monitoring systems and processes. They have been struggling with their AML compliance going back to 2016, continuing to struggle with figuring out how to meet the regulations in the UK and be sure that they're protecting the financial system from being abused.

We've seen this in a number of other of the online banks in the UK and UK regulators are continuing to be vigilant. But so far, the challenger banks have not all been able to get up to top level and then an additional thing, the UK Serious Fraud Office, or SFO recently received a significant budgetary increase of about $12 million. They are responsible for enforcing new anti fraud rules that are coming into effect in the UK and there is a new obligation on the part of business organizations, it's called Failure to Prevent Fraud. And that'll go into effect on the 1st of September of 2025.

And some of the key elements there, which are not necessarily universal across the globe are there'll be a penalty available if they conceal vital information from consumers or carried out deceptive behavior in financial markets. So there are bits and pieces of that are also true in the US and in other nations. But it's interesting. John and I have talked a lot over the last six months about the emergence or re emergence, if you will, and acceleration of fraud. And this is an indication that it's being taken seriously at the highest governmental levels.

John, what else do you have?

John Byrne: That's really all I have on my end. We have a webinar coming up next Tuesday and the title of it is to address all of the issues FinCEN has been involved in through 2024 and what's coming up in 2025. So you can still register on the website for that. I'm still efforting a few interviews with folks that I hope to iron out in the next couple of weeks.

I will say that we are still watching the ramifications of this year's U. S. elections because it does matter who gets placed in certain agencies. There's a lot of discussion about sanctions being severely changed, perhaps, in terms of focus. We've seen some articles about that. I think that's something to look at.

And it's going to be interesting to see some of the pending requirements on the AML community to see whether those continue. And we don't know who's sitting in what chairs and committees, and that's always relevant because of hearings and oversight and that sort of thing. So that's something we will continue to monitor for folks and report on that as we get more solid information.

Elliot Berman: And I will give everyone a teaser. Our December webinar will be on new trends in AML compliance programs. And so we have a great panel of folks lined up for that. And you'll be able to register for that webinar after next week's webinar. And we'll give another shout about that on our show next week.

So John when we leave here, you travel safely.

John Byrne: And you do the same.

Elliot Berman: Thank you. And be well.

John Byrne: Take care.

Elliot Berman: Bye bye.