BIS on Export Regs, Environmental Crime Report, US Canada Sanctions, and Making Contributions Safely

This week, John and Elliot discuss a new report from the FACT Coalition, Money Laundering from Environmental Crime: Typologies and Trends in Countries in the Amazon Region, new guidance issued by the Bureau of Industry and Security about compliance with Export Administration Regulations, new sanctions issued by the US and Canada against a sham charity fundraising for the PFLP, a reminder from IRS about the Tax-Exempt Organization Search (TEOS) tool and making safe charitable contributions, and several other items impacting the financial crime prevention community.

BIS on Export Regs, Environmental Crime Report, US Canada Sanctions, and Making Contributions Safely - Transcript

Elliot Berman: Hi John, how are you today?

John Byrne: Good morning Elliot, doing well. I want to thank you again for hosting me at Lambeau on Sunday. It was a place I'd always wanted to go to and despite the heavy rain for part of the game, it was definitely a fun experience. So thank you so much for that.

Elliot Berman: It was my pleasure. Lambeau is a special place, even in the rain. It's a little better without it.

John Byrne: Yeah, it's hard to describe the combination of people parking on lawns that everybody that reads about Lambeau knows, and the fact that it's bench seating throughout the stadium, but you fortunately are one of the many that bring adjustable chairs, so it's not crazy. But almost like a college stadium, and the Packers, they just walloped the Cardinals, obviously, so that was good.

Elliot Berman: Yes, it's always nice to see a win. Okay, where would you like to start? I know we've got a lot of things that we can talk about this week.

John Byrne: Because we had done a podcast interview with folks from the FACT coalition a short time ago, I wanted to mention that the report that they referenced, Money Laundering from Environmental Crime, Typologies and Trends in Countries in the Amazon Region, has been delivered, and it is available on many websites.

Julia Yansura, who we were able to interview. She's the main author of this piece. And again, it's a combination of folks from the FACT Coalition, the World Wildlife Federation. The UN coalition that deals with these issues as well. Twenty page report. Some of the key findings in their study, which looks at the Amazon region, as we mentioned.

Most cases don't currently, they say, follow the money. Of the 230 cases analyzed, only one in three appear to have included a parallel financial investigation. The US is frequently involved. They say shell and front companies remain a significant challenge, which, as we know, is the case throughout the world, and that convergent crimes play a role. So they say among cases analyzed, corruption was the single most prevalent convergent crime mentioned. So again, Environmental Crime Typologies Report from the FACT Coalition, available on their website.

Elliot Berman: Interesting report in detail. Your interview gave us a little bit of insight, but the detail in the report is very valuable and I think there's good learning there for law enforcement and groups like that where they end trying to track down the goods, whether that's illegal mining or wildlife trafficking or forest products, rather than follow the money. And disappointing, but not surprising, the connection to corruption.

John Byrne: A couple of other topics that are connected because they deal with fundraising and charities. On the one side, the US and Canada announced that they targeted a key international fundraiser for foreign terrorist organizations through OFAC. And I'm probably not pronouncing it right, but Samidoun which is a Palestinian Prisoner Solidarity Network, a sham charity that serves as an international fundraiser for the Popular Front for the Liberation of Palestine.

They were designated as a foreign terrorist organization, and especially designated global terrorists, by the State Department way back in October of 1997, and again in October of 2001. This again, coordinated effort with the Government of Canada, so we wanted to mention that. And related to charities was an announcement from the IRS. Mentioning that because, sadly, the way people take advantage of folks whenever there's a disaster.

They wanted to say that it's happening again. So the announcement from IRS is that after Hurricane Milton and Helene, IRS cautioned taxpayers about scammers who use fake charities to gather sensitive personal information and financial data, and they remind people that there's a TEOS tool, the Tax Exempt Organization search tool on irs.gov that will help you verify the legitimacy of a charity, check the eligibility to receive tax deductible charitable contributions and search for information about the organization's tax exempt status. And they give you tips which obviously include always verify, be cautious about how you get the information, don't share too much and don't give into pressure.

So I thought it was important we reference that. Sadly, we have to do that every time there's some sort of disaster.

Elliot Berman: Yes that's a tool that's regularly updated tied into the other databases that the IRS creates related to exempt organizations and an important stopping point when you're making a contribution, or thinking about making one, to a charity with which you don't have familiarity.

John Byrne: So what do you got?

Elliot Berman: The Bureau of Industry and Security in the Department of Commerce, which manages the export administration regs, put out some new guidance about Export Administration Regs, or EAR, and recommendations on steps financial institutions can take to minimize likelihood of EAR violation.

So the first thing I would say about this it's an important reminder that when we think about sanctioned screening, there is also a consolidated screening list that's put out by BIS, and it's important that that kind of screening be done as well. Certainly at onboarding and then periodically afterward as it changes. And that's one of their recommendations, that FIs screen customers at onboarding and later against the consolidated screening list. Also they suggest that if you have customers who routinely deal with EAR items that you consider having them certify that they have a compliance program and that they do the necessary due diligence to know that they're not violating those rules and regs.

And then lastly, consider establishing a risk based set of procedures to detect and investigate red flags after transactions and to take action to prevent EAR violations before proceeding with any transactions involving the same customers or counterparties in the future.

So I think a lot of organizations are doing this. Some organizations may say it doesn't really apply to me. But it really depends on your customer base and where they do business. Knowing your customer in detail about what their business is, what they do, which relates to exports, and things like that is very important and the guidance I think is well written and worthwhile take a look at. And you can find that at BIS.gov.

John Byrne: So our friends at the Organized Crime and Corruption Reporting Project issued a scoop. And the scoop is alleged Hong Kong crypto swindler tied to a Singapore Money Laundering Syndicate. And this individual, Su, W E I Y I, faces charges of theft in Hong Kong in relation to the 2022 collapse of the cryptocurrency platform, Atom Asset Exchange.

And according to the reporting, corporate records show that he has business partners linked to money laundering, online scams, and human trafficking investigations in Singapore and the Philippines. These are just allegations, but the reporting goes through in detail the charges, the original case from Hong Kong police against Sue Weiyi, but also all the information from these corporate documents as we just mentioned.

He's listed as an owner of two Hong Kong companies, along with another individual. That other individual co-founded a firm in the Philippines, which was raided by police in 2023, as part of an ongoing investigation into crypto investment scams and human trafficking. So more in the story. This is on the OCCRP website and again, alleged Hong Kong crypto swindler tied to Singapore money laundering syndicate.

Elliot Berman: So another thing we saw was a report of a conviction of a former DEA agent for protecting drug traffickers. And this fits in our corruption bucket. A former DEA agent in Buffalo, New York, was convicted last week. And the charges were that he used his position to protect drug traffickers he believed were associated with organized crime, tipping them off about investigations and falsifying DEA reports.

He was accused of taking at least a quarter of a million dollars in bribes. And this is part of a pattern. He's among at least 16 DEA agents brought up on federal charges since 2015. Many of the cases resulted in prison terms, including two former DEA supervisors sentenced in a Miami bribery scandal involving intelligence leaks to defense attorneys.

The big lesson here for DEA is better vetting and better agent supervision, but disappointing. Maybe that's an understatement. You and I have a lot of interaction with our partners in federal law enforcement and we know them to be fine upstanding folks who are trying to do the right thing and this unfortunately casts a little bit of a shadow over the good guys and that's very disappointing.

John Byrne: Since this is Cybersecurity Awareness Month, I wanted to mention very briefly, there's an op-ed piece by Tom Vartanian, who we've interviewed several times over the course of AML Conversations and actually AML Voices as well, I believe.

He's the Executive Director of the Financial Technology and Cybersecurity Center. He wrote a book that we reviewed a couple years ago called The Unhackable Internet. His op-ed piece is in The Hill. It's a congressional related publication and it's entitled The Internet's Worst Zero Day Could Drain All of Our Bank Accounts.

And he references a situation recently where 20,000 customers logged on to find their money in their accounts at Bank of America had disappeared. But by the end of the day it was returned. He used that as a jumping off point to talk about the need for legislation. He believes that the financial sector does probably the best job proactively of dealing with cyber related topics, but even saying that, he said that there's a few items that that he references, and these are a couple.

He said, nothing breeds anarchy like anonymity, which I think is an interesting statement, and I would not disagree with that. Second, no civilized society can function without some form of governance, and he talks about that. And then third, without enforcement, only responsible people act responsibly, and they're what he calls no cyber cops, or even an 800 number that we can call it stop, pursue, or arrest cyber burglars.

So he's obviously putting his stake in the ground for hopefully protective legislation and strong rules in the next Congress. So this is from Tom Vartanian. The views are obviously his, not on behalf of The Hill, and The Hill is a regular publication of Congress, so you can find that on the Hill.com.

Elliot Berman: On October 7th, the UK financial landscape changed with the effectiveness of new payment system regulator known as PSR rules. And those rules existed, but they've been modified, they now require that banks reimburse victims of what are known as authorized push payment frauds, up to 85,000 pounds, which is a little over 110,000 US dollars. It also gives the banks the power to delay the payments for up to 72 hours and in the case of a fraud the obligation to repay the victims within five days.

These are clearly customer protection rules. But the question that comes up when something like this gets put in place is, will they actually reduce scams? And that's something that I think we'll figure out as we see them unfold. Clearly, it's gonna redistribute the exposure to losses. But it's likely to cause new criminal models to emerge. As we know, the bad guys are constantly evolving what they do to respond or stay ahead of regulatory things. And one of the things with the slowing payments to 72 hours, there's a huge push in the payment space, has been for now a dozen years at least, to make payments faster.

ACH payments in the US, which are basically an overnight batch process now, there's an effort and it's, happening for same day and even I wouldn't say instantaneous, but very quick turnaround on payments both on P2P platforms and in more traditional payment platforms. This change slows things down a little bit, which is a way to take a breath and figure out what's going on. But on the other hand is moving in the opposite direction of where the technology is going.

Something to be aware of for those of you who are directly impacted, you probably know more about this than I do but wanted all of our audience to know, because sometimes things that germinate in one part of the financial system globally end up spreading around.

So be interested to see if something like this pops up in the US.

John Byrne: Elliot, I do have one more item. FinCEN just announced the renewal of their real estate geographic targeting orders. You remember that requires US title insurance companies to identify the natural people behind shell companies in non-financed purchases of residence real estate.

They're effective as of October 16th, and it will end on April 14th of 2025, and the there are also a reminder that in August of this year, FinCEN issued a final rule requiring certain industry professionals to report information to FinCEN about non-finance transfers of residential real estate to a legal entity or trust. So they remind everybody that the nationwide reporting framework will replace the GTO as it goes into effect next December 1st of 2025.

And then we would also be remiss because I know there's frequent listeners to our program. We appreciate that for the past couple of years. And one of the things we continue to say and stress, whenever there's any sort of consent order, civil penalty, or criminal penalty against a financial institution. It is a good piece of advice to look at that information. What is the key challenges that your institution might face? No matter what size, because the themes are relevant, even if the size of the institution is not.

Obviously, a lot of very smart folks opined on last week's major announcement, and we would simply add that take a look at all of the postings from FinCEN, to DOJ, from the banking agencies and what they called out and look at your own institutions or your clients institutions and see are there areas where you believe you need improvement. And that's always a good piece of advice that we got early on and we pass on to you folks on a continued basis.

Elliot Berman: John, I know that you're moderating next week's webinar. Do you want to talk about this for a moment?

John Byrne: Sure. The webinar Is Fraud the New AML. And it'll be a combination of discussions regarding definitions, issues regarding governance, policy, training. What these three experts that we have joining us will recommend. And also a conversation regarding the oversight of the CFPB, which, frankly, we haven't done a lot in that space.

I'm very interested to hear these experts talk about exams from that agency and what that entails, but also the challenges of when fraud and AML are very distinct within an institution, when there's actually one oversight the way it's set up and what are the give and takes of all that.

So I know you're going to find that very interesting. It's next Thursday at one o'clock Eastern time.

Elliot Berman: And you can register for that at our website, amlrightsource.com. So John, I know you're heading back to Virginia you have safe travels and you and I will talk next week.

John Byrne: Sounds good. Take care.

Elliot Berman: You too. Bye bye.