This week, John and Elliot discuss remarks by the president of the Basel Institute on Governance on its new priorities in addressing corruption, environment, and climate challenges. They also reviewed the FATF 2023-2024 Report, new expectations from the FCA on fraud reimbursements, progress on the EU’s new anti-corruption legislation, congressional hearings on debanking, turmoil at the FBI, and other items impacting the financial crime prevention community.
Basel, FATF, FCA, EU, FBI, and Debanking - Transcript
Elliot Berman: Hey, John, how are you today?
John Byrne: Well, Elliot we could talk about something as mundane as Marquette's on a two game losing streak which is never great but it's college basketball, so it's not the end of the world, but I thought we'd start off with as we started to talk about last week, what's going on in Washington, D.C., I think it's essential because it does impact the AML community in a variety of ways.
And as we do this, everybody should remember that since that fire hose is on every day. By the time you listen to this on Friday, there could be adjustments. But I want to mention a couple of things, particularly because of our strong partners at the FBI, everybody knows by now that they want the names of all the FBI staff that were involved in some fashion in investigating the January 6th rioters insurrectionists. Which is talk about the conversations that occurred during the campaign about weaponization of the government, these same folks, that's exactly what's happening.
So we've talked to a number of our friends and colleagues in the law enforcement community and there's a number of lawsuits to prevent the release of that information publicly, because there's no way you can trust if those names go public, that there won't be doxing and other issues and wanted to mention besides the lawsuits.
A letter was sent to House and Senate leaders of both parties from a number of organizations, which include the Federal Law Enforcement Officers Association, the Federal Agents Association, the Society of Former Special Agents, and includes Judge William Webster, who's a former director of the FBI and the CIA. So this letter went out two days ago, and I'll just give you a snapshot of it. The subject heading is ensuring that the FBI can continue to effectively protect America.
And they're asking House and Senate leaders they want to raise these concerns about recent actions taken by officials at the Department of Justice that threaten the careers of thousands of FBI special agents and risk disrupting the Bureau's essential work, 5,000 names were sent in, by the way. Put simply, the special agents, as they say in the letter, who risked their lives protecting this country from criminals and terrorists are now being placed on lists and having their careers jeopardized simply by carrying out the orders they were given by the superiors of the FBI.
There was a separate other letters sent to heads of the various agencies. Again, there's lawsuits pending. There's also, as we know, because you and I have friends and colleagues that work for the federal government, there was also email sent to everybody within the government, telling them to either resign and get paid through September of 2025, or there will be other potential personnel issues. That's also illegal.
And there's also lawsuits dealing with that as well. And then the last thing I'll mention, and we'll continue to move on, basically the closing of USAID, an organization created back in 1961 to work with countries that need help from humanitarian issues, like medical supplies and other things has been closed. They are going to move that under the Department of State, Rubio has already said that's going to happen. And it's clear from what we've been reading in the past week that by pausing the funding from USAID, people are already being harmed by this. We've talked about this in the de risking space, but it's important here too.
So a lot is happening, Elliot, and while we'll obviously cover the more mundane AML issues that go on from and again, at the end of the day, our community can't survive without law enforcement partners. So I think this is an important time for the U.S.
Elliot Berman: I agree. I know that one theme that we saw this week in a couple of different places is corruption. I think the Basel Institute on Governance came out with a statement on that. You want to talk about that, John?
John Byrne: The president of the board, Dr. Peter Maurer talked about, in a speech he gave late last week in Lichtenstein, new priorities for addressing corruption, environment, and climate challenges. And so during this meeting, the Maurer talked about the need for what he's calling bold collective action across borders to tackle these issues. Part of what he said was the following, while the political focus on environmental issues and the protection of natural resources in the past has brought many positive results, we also have seen how corruption and financial crime have become drivers of environmental problems by standards aren't adhered to, illegal trade and financial activities lead to exploitation of nature, and climate legislation is manipulated.
That speech is available on the Basel Institute on Governance website that Peter Maurer gave on the 4th of February.
Elliot Berman: In the corruption space it's important to also be paying attention to what's happening in the EU. They're in the process of working toward an updated anti corruption framework. Their last anti corruption framework was, updated in 20 08, they did some things in 2003 and in 1997. So this would be a major update and it's working its way through their approval process.
They're looking at five key changes. The raising of awareness to help step up corruption prevention. Really communication a see something, say something kind of approach. Expanding the definitions of criminal corruption beyond the traditional ones. Introducing minimum criminal penalties and sanctions for the new offenses to ensure a level playing field in all the member states. Like in the AML space, looking for a way to get all the member states having the same rules. There's a lot of discussion in this process about extending the statute of limitations because corruption often doesn't surface for a long time and the investigations are particularly complicated.
And across all the member states looking to have a uniform and longer statute of limitations. And then one we see all the time, ensuring that law enforcement and prosecutors have appropriate investigative tools and resources to fight corruption. More on this as it moves through the process. I would say this is something likely to be effective in 2026 but the new language I think we'll see sometime mid year 2025.
John Byrne: Staying internationally FATF has issued their 2023-2024 annual report. And that was during , the Singapore presidency of Raja Kumar. And some of the highlights there are the transparency and beneficial ownership, which is going to be a challenge here, folks, improving global transparency standards, amendments to the FATF standards on NPOs, ensuring that measures to protect and safeguard the NPO sector are targeted and proportionate, that governments do not suppress civil society through over application of FATF standards, something that we've talked about in these conversations, but also I've interviewed folks in that space throughout the past couple of years. Women in FATF and the Global Network, promoting gender inclusivity through a new initiative to inspire the next generation of women leaders. Responding to the risks in the global financial system and prioritizing those and that's cyber enabled fraud, exploitation of crowdfunding, asset recovery, the focus to asset recovery globally, and then on virtual assets, a big issue, of course publishing a list of jurisdictions with materially important virtual asset service provider activity and the steps they've taken to encourage global implementation of FATF's requirements. The FATF annual report now available on their website.
Elliot Berman: And another international item that we saw the FCA in the U. K. issued what they call Dear CEO letters about the expectations on authorized push payment fraud reimbursement. You and I have talked a lot about fraud in the last 12 to 18 months. And I think the consensus across the anti financial crime community is that fraud is a growth industry and something we all have to continue to keep very focused on.
Last year the UK created some new rules that require financial services providers in the UK under certain circumstance to reimburse their clients who lose money to frauds that run through the organizations. And this letter is a reminder that payment service providers and banks and other financial services providers have some requirements that they have to follow as it relates to these authorized push payments. It's something that's authorized by the account holder and is outgoing.
Some frauds play on this capability by tricking customers into sending money to the fraudsters. The reminder from FCA is to have effective governance arrangements, controls, and and data to protect, manage, and prevent the fraud, to regularly review their prevention systems and to maintain appropriate customer diligence controls at the onboarding stage and on an ongoing basis to identify and prevent accounts being used to receive proceeds of fraud. The money goes out, but it has to go somewhere and tracking where it's going is really critical.
John Byrne: Since you mentioned fraud, we should also mention that in the past week, the Consumer Financial Protection Bureau, CFPB the staff has been told to cease work and Treasury Secretary Bessant he's now in charge of CFPB. And what does it mean from a fraud perspective? Several regulations that were in the pipeline are now not going to go any further. And that's on overdraft fees. That was set to take effect in October. And removing medical debt from appearing on credit reports.
The goal here is to shut down the CFPB. Congress created it, so there has to at least be some process. But when you talk about fraud, Elliot and I, before this year began, certainly were prepared to talk more about the CFPB's relationship to our community in terms of fraud prevention and detection. It's going to be very interesting to see what happens going forward.
Elliot Berman: John, you wanted to mention the pending publication of the TRM Labs report.
John Byrne: We just posted the interview that I did with Ari Redbord last week and Ari talked to me about his take on issues in the crypto space for 2025, but also a high level summary of the 2025 TRM Labs crypto crime report. The full report is going to be available on Monday, February 10th. Ask everybody to pay attention to that.
Ari's also very active on LinkedIn. He's following very closely the digital assets working group. Some of the announcements recently by the CFTC and the SEC regarding cryptocurrency. So it's a smart follow if you get the chance to follow Ari Redbord from TRM Labs.
And the last thing I wanted to mention just very quickly by the time you listen to this, the hearing will have occurred. There's a hearing this week on the House side and Financial Services. This hearing is designed to look at the de risking issue, which they're now calling de banking.
The subject of the memorandum from staff to the committee is, they're calling this Operation Choke Point 2.0, the Biden Administration's Efforts to Put Crypto in the Crosshairs. So there's four witnesses that are going to talk about their perceived inability to get banking access because they are in the crypto space and digital asset firms and employees and digital asset firms.
It's gonna be interesting to see what evidence they produce in this . , but I think everybody that's in our world understands the pejorative nature of the term Operation Choke Point when you're trying simply to make risk based decisions on account closure, account continuing, account opening. So there's going to be a lot more about this going on. The Senate is very interested in this issue as well. So take a look. The hearing is, I believe, on Thursday of this week. So by Friday, you'll see some of the outputs from that hearing. But that's going to be an issue for all the risk managers listening to us today.
Elliot Berman: John I know you're working on this month's webinar, which is Thursday, the 27th, it'll live stream at 1 p.m. Eastern time. You want to tell us a little bit about that?
John Byrne: We're going to give updates on the issue, the broad issue of corruption, both domestically and internationally. We have two excellent panelists Jonathan Lopez, a former DOJ lawyer who's now in private practice, and Gary Kalman from Transparency International. Both have appeared on previous programs for us, and we're going to talk about a series of Issues that fall under the corruption umbrella. Remember, that is one at least currently the eight priorities issued by the Treasury Department back in 2021. We'll look forward to talking to you. You can send your questions in during the program. If you want us to cover some issues feel free to send Elliot or myself some of those questions by email, be happy to address those as well.
Elliot Berman: Sounds good, John. And I know we have other things in the pipeline, but we'll talk about those next week as they firm up a little bit and you have a good week and I will talk to you next week.
John Byrne: Hang in there. Talk to you soon.
Elliot Berman: Stay safe. Bye bye.