Basel AML Index 2022 – Moving Backward (Archive Edition)

This episode originally aired on October 7, 2022. 

This week, the Basel Institute on Governance published its 2022 AML Index. The index assesses countries’ money laundering and terrorist financing risks and capacity to counter them. John and Elliot chat about how the index is constructed, what it says about the state of the global response to these risks, and other key take-aways from this year’s report.

Basel AML Index 2022 – Moving Backward Archive Edition TRANSCRIPT

Elliot Berman: Hi, this is Elliot Berman from AML RightSource. John Byrne and I have taken the weekend off for the holidays. But we wanted to bring you an Archive Edition of This Week in AML. We've selected the Basel AML Index 2022 episode from October of this year. We think you'll still find it valuable and hope you enjoy listening to it over the holiday weekend. We'll be back on January 6th with new additions. We hope you enjoy the holidays and have a happy new year.

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

John Byrne: Hi, Elliot. How are you doing?

Elliot Berman: I'm good. Earlier this week, I was in San Francisco with my son celebrating his birthday and going to game five of the NBA finals, which was lots and lots of fun.

John Byrne: Nice, nice.

Elliot Berman: Yeah. But while I was away, I was keeping an eye on what was happening in the regulatory world. And I saw that FinCEN issued an advisory on elder financial exploitation. Did you see that?

John Byrne: I did see that. It's this great example of, what we, the AML community, are gonna have to consider in terms of the priorities, you know, that was passed under AMLA that was issued back in June of 2021 a year ago.

And obviously, we're awaiting final regulations. I've actually been on some conference calls and some preps for some conferences about how to address this. And obviously, you have to wait for the regs, but this is a great example of what might be expected by the regulators in that fraud is one of the major priorities.

And this is certainly a major part of the fraud attack against the elderly. So even though there are whole sorts of frauds under that umbrella, if you will, I would imagine that looking at this advisory, the takeaways being some of the red flags, new typologies, and some of the other advice in here. Being aware of this in your institution makes a lot of sense.

So, long a winded way of saying, yeah, I only saw it, but I think it's certainly consistent. Does show that they have had a plan, but I think this is part of their plan to roll out advisories under some of these priorities, even though it doesn't specifically say that in this.

Elliot Berman: Yes. And this is a topic that FinCEN has talked about in the past. There was an earlier elder financial exploitation, EFE as they call it. About 11 years ago, if I recall correctly, some of the numbers in terms of the magnitude of the problem were pretty stunning. They cite that millions of older adults lost more than three billion, with a B dollars to financial fraud annually as of 2019. And which is the most recent available statistics. I'm sure that number has not gone down. ,

John Byrne: Right. And then the other stats, in the same advisory, they said the federal trade commission, which is relevant here, cause there are other agencies besides FinCEN that care about this. They said that, yeah, older adults now account for 35% of the victims associated with filed fraud reports when the consumer, when they actually listed an age. So that makes sense just given as we both know how the community is aging. So I think that makes a lot of sense. And the SAR increase over time has been pretty phenomenal.

So I put that towards FinCEN doing those. As you say, the previous advisory. So making people aware of it, and as you become more aware, then obviously you're looking for these things and can be more specific in your filing. So that's another reason why, but also COVID has really brought out the worst in a lot of people.

Unfortunately, there are a lot of good people out there, but a lot of criminals have been thriving through COVID and just ratcheted up the ability to go after victims.

Elliot Berman: Yes. So to help look at trends and topologies, the way this advisory is constructed, FinCEN splits things between elder theft and elder scams. And maybe, you know, just a way to make it happen, but obviously, one of the key things that the scammers are trying to do is access personal identifiable information because that has its own value to sell it or to you on the second black market or use it to perpetrate theft.

There are a number of case studies that are laid out in this advisory and a long list. And it's unfortunate that there is such a long list of red flags. Some of them are behavioral. There's about a dozen behavioral, and then there are another dozen related to financial red flags, which I would definitely recommend to our listeners. These aren't new. You know, one of them is dormant accounts with large balances, begin to show constant withdrawals, you know, it's the gee, you know, what happened to, to Mr. Smith or Mrs. Jones? We haven't seen her or him for a while, and all of a sudden, there's activity.

Those have been things that we in the traditional financial services industry have tried to pay attention to for a really long time. But the scammers are becoming more sophisticated. And as you mentioned earlier, you and I, among them, there are more people who don't feel elderly, but certainly, the older part of the population is growing as the baby boomers age through their working years and into retirement.

John Byrne: I moderated a panel earlier this year with several bankers on this topic. And I was not as familiar with the myriad of adult protective services agencies in states to make sense of it. They exist. I just didn't really put two and two together. And they talked a lot about how they work closely with that.

You know, if those agencies exist in the state, in addition to filing SAR, and actually some of these banks had very robust programs to seek out some of these indicators and red flags to make sure that what was happening was a legitimate transaction. And it just led me to something that I actually raised at the time.

And that is I am familiar with a relative who is elderly, and the issue and it sort of struck me. Hearing about and running that panel and talking about what we're talking about today. This particular elderly relative had the inability to write her name cuz of arthritis. Lack of mobility.

So one of her daughters obviously was on the account with her. So the daughter would come in with her and, you know, you have to help the mother sign checks or sign papers, whatever it is. And you look at that. Separately or the way I just described it. It certainly, you know, makes sense. But then you look at some of these other cases and the typologies listed there on housekeepers that come in and take advantage of people that live alone and all that. So it's a hard job for the financial sector to figure all this out. So this advisory, I think, gives you a lot to look at, and none of them in and of themselves should mean that fraud has occurred, but it just makes you just more aware and more diligent.

But there are things you have to weigh. And I think that's a pretty interesting area, and FinCEN has done a great job here by putting this out.

Elliot Berman: Agreed. I know that many states have reporting obligations in their state banking laws or in other parts of their state statutes for financial services providers and others to report perceived abuse or theft from the elderly to law enforcement or some kind of social service or both structures. So that's something to pay attention to. And another thing is you look at the financial red flags. Some of this is the kind of thing that automated systems can help catch.

But some of these things still happen in the bank lobby, and well-trained branch staff is still an important part of the detection and protection process. And banks do this. This isn't like, oh my goodness, we never thought of that. Clearly, they understand that, but I think it's just a reminder that a combination of people and technology always is the best set of defense to try to make sure that legitimate transactions are what's flowing through the institution.

John Byrne: Yeah. You know, one more thing just struck me as we were talking. When I ran ACAMS, we gave an award to a banker who sadly has passed on. Her name is Karen, Karen Cornell. And Karen was with Laconia, a savings bank in New Hampshire. And she worked on her own time to get the New Hampshire legislature to pass an elder abuse statute, and this was, you know, 7, 8, 9 years ago, whatever it was. But we recognized, or she recognized back then, the importance of doing that. And to your point, many states do have those obligations.

Now at the time, there weren't that many. So she took, I believe it was a law that was either in Massachusetts or another neighboring state and said, we need to do this in our state. And that was because that savings bank was working really hard to try to figure out how to protect the elderly way back then.

So I just wanted to mention that, you know, a lot of times our community gets criticized and sometimes rightly for enforcement actions and that kind of thing, but super proactive people exist in the AML community. And that's just another strong example of that. 

Elliot Berman: Yes. So John, shameless plug time, we have a webinar coming up a week from today.

Today, when we're recording on Thursday. So this is June 23rd, 1:00 PM Eastern time is the live stream, and it is about customer risk rating models. We've got a great panel being moderated by Chuck Taylor, our colleague here at AML RightSOURCE, and we think it's gonna be a really valuable how-to.

We've got some bankers who are gonna contribute and give us insights into not only the how but also the why. And you can sign up on our website. John, what else do you have in the hopper?

John Byrne: I interviewed Tom Vartanian last week, this week, actually. We'll post it next week or the week after. He's the Executive Director of the Financial Technology and Cybersecurity Center.

And he's a clear banking expert. He's been doing banking law for over 40 years, and Tom is a very compelling presenter but also, you know, very sharp about regulatory gaps and issues in cyberspace. So I think you'll find it particularly compelling and useful. That'll be out in the next week or two.

So that's coming up, and I'm planning next week to interview some folks that are connected with the Wolfsburg group. So that's on my list of issues coming up.

Elliot Berman: Okay. Well, thanks, John. Have a great weekend, and stay safe. I know you're gonna do a little travel, so be careful with that.

And we'll be back with everybody next week.

John Byrne: Take care. Elliot, stay safe as well. You too. Bye-bye.