Europol & Money Mules, Treasury & NFTs, the EU’s New Rules, and More

This week, Europol announced a successful crackdown on money mule service providers. The BASEL Institute for Governance released a paper on informal networks and anti-corruption. The US Treasury issued an Illicit Finance Risk Assessment of Non-Fungible Tokens. The Council of the European Union approved its new AML/CFT regime. John and Elliot discuss these items and several others and their impact on the financial crime prevention community.

Europol & Money Mules, Treasury & NFTs, the EU’s New Rules, and More - TRANSCRIPT

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

John Byrne: Good morning Elliot hanging in there, how are things?

Elliot Berman: Good. Good. It was great to see you last week. Congratulations again on that award.

John Byrne: Thank you.

Elliot Berman: I know we've got a ton to talk about, so why don't you lead off?

John Byrne: We mentioned last week that we were recording before a verdict in the New York election integrity case. We all know by now, 34 counts, 34 guilty verdicts. I would just say this as we are also talking about Representative Cuellar, who's being charged with corruption, and Senator Menendez, also being charged with corruption. It's very important that in our community, that we continue to respect the rule of law.

And I would urge folks to go back and look at Attorney General Garland's testimony yesterday before the House about the importance of that. So that's all I want to say about that. But we would be remiss if we didn't mention obviously something that we alluded to last week, which had not been yet final.

So I just wanted to make that statement there. A couple of things. Europol has done a few things in the past couple of weeks, but one I wanted to highlight, because it's not just a problem in Europe, it's a clear problem here in the States. They announced a crackdown on money mule service providers that laundered over 10 million euros. And this particular operation that they described was led by Italian and Portuguese authorities, two networks of money mule recruiters that worked for a criminal gang that carried out cryptocurrency scams.

So law enforcement from Austria, France, Germany, Romania, Spain, and Switzerland were involved in the investigation. So they did a series of raids and they did 15 house searches and seized electronic devices, jewelry, and cryptocurrency. This continues to be an issue, money mules. A quick aside we did mention that AUSTRAC has put out their second consultative paper, so we're going to be actually doing some follow up content on that, but I also saw that AUSTRAC has issued guidance about money mules as well.

So clearly an issue that's global. So this the information on the Europol can be found on their website. So that's europol.eu. So I wanted to mention that. And then secondly, and staying internationally the Basel Institute on Governance, who we've talked about before, we've also interviewed several of their staff folks.

They just issued a report on informal networks and anti corruption. And an interesting report. It's not too lengthy, but 10 pages, I think. And they start off with the concept of one reason the anti corruption laws and policies are too often focused narrowly on individuals, they say, rather than networks of individuals.

So their research, they see high levels of corruption are rarely the result of individual behavior but it's within groups. And they talk about what is an informal network in the context of of governance. And so they say, informal networks quoting here, can have a darker side, whereby the benefits are reserved just for those within the networks.

For example, for citizens they use the example of in East Africa for the Global Integrity Anti Corruption Evidence Program, and they're related, they show that citizens pay bribes not only to solve immediate problems to get a license or something like that, but also to expand and cultivate their networks over a longer period.

And that amounts to a significant investment in time and money. They also talk about political elites. Networks can help win and maintain political power. That's something that we worry about here as well. And for business people, they say that also gives political figures access to profitable government contracts, special tax exemptions, and other financial benefits.

So the report is Informal Networks and Anticorruption. It's their quick guide series number 23, the Basel Institute on Governance.

Elliot Berman: I saw that and it was it's a good call out. Staying with things global. Bloomberg is reporting that Turkey, which has been on the FATF gray list, is making a concerted effort to get off the gray list at the plenary that'll be later this month. I think the plenary this time around is in Singapore.

As I think our listeners may know to get off the gray list, a country needs to have a certain number of votes at the plenary. And so it's unclear whether that's happening, but Turkey has made significant efforts at reforming the parts of its anti money laundering and terrorist financing regime that needed attention and they're hopeful that it will get off the gray list.

As long as we're in Europe, let's stay in Europe. We've talked about the fact that the European Union is in the process of creating an update to its regime that does a number of things, including harmonizing the various laws in the member states and creating an EU level FIU that'll coordinate the activities of the member state level FIUs.

The Council of the European Union, which is its legislative body took action late last week to approve those changes and the establishment of the FIU, which its official title is Authority for Anti Money Laundering and Countering the Financing of Terrorism.

But guess what? Just in case we hadn't used this already, it's going to be called AMLA.

John Byrne: There we go.

Elliot Berman: And so every time we say AMLA, we're right about something. It's already been established that the offices for AMLA will be in Frankfurt. And again, coordinating efforts across the member states of the EU. That's happening. Lots of development to occur. I don't think AMLA is supposed to be up and running until early 2025 if I remember correctly.

John Byrne: So moving back to the States our partners at IRS announced a former commercial airline pilot has been convicted by a federal jury of tax evasion. This was failure to file tax returns, filing false tax returns. This according to the evidence presented at trial, a commercial airline pilot who retired in 2016 filed fraudulent tax returns for several years, claim tax refunds that he wasn't owed.

What I found interesting about it was besides all the dollars and all the false filing is this particular piece of evidence. This person refused to pay his tax debt, took steps actively to evade the IRS collection efforts by quote, hiding his income and assets in bank accounts in the name of shell religious non profits, and then liquidating his retirement accounts and converting the funds into cryptocurrency. So again, this case was the result of an investigation by IRS CI, and prosecuted by the US Attorneys in that area in Minnesota.

And I just wanted to give a shout out to our partners at IRS CI for yet another successful case.

Elliot Berman: John, that could be a 10 episode Netflix miniseries by next season.

John Byrne: That's right. Before I hand it back to you, just real quick, we don't typically talk about introduced bills, but given all the active conversation in the States about judicial propriety. I just wanted to also add that Congressman Dan Goldman, who was one of the members of the of the January 6th commission, he's one of the lawyers there who now is a member of Congress. He's introduced a bill for Supreme Court ethics and investigations. And you can read the bill on his website.

This is in reaction to questions of whether or not the code of ethics that the Supreme Court is supposed to follow is actually being followed. Leave that for others to comment. But I thought this is important. There clearly won't be action in this particular Congress on legislation like this, but just another indication that there is a call for what everybody thinks is the need for more transparency and accountability in all three branches of government. So I thought I'd mentioned that as well.

Elliot Berman: And staying in the US and actually staying in the Treasury Department, FinCEN , late last week held several round tables in the state of Iowa. With Director Andrea Gacki and some of her senior team were on site. One was with local law enforcement representatives on the efforts to combat fentanyl trafficking and discussing all of the things that FinCEN is doing and how they can work interactively with local law enforcement all as part of Treasury's Counter Fentanyl Strike Force. And then the other roundtable was with the business community, and this was talking about the beneficial ownership registry and how smaller businesses can effectively register without it being a major issue. Two significant outreach efforts there by FinCEN.

And then Treasury itself published a illicit finance risk assessment of non fungible tokens, or NFTs. It's a lengthy document running to almost 30 pages. And available on their website. I think the key things to be aware of is at least at this point, the assessment says that NFTs and NFT platforms and I'm quoting here are rarely being used for proliferation financing or terrorist financing, but that NFTs are highly susceptible to use in fraud and scams.

So that doesn't mean that this won't change through time but it is at this point, it has not reached the point where it's being accessed on a regular basis across the entire universe. The assessment examined a number of mitigation measures that it sees in action, industry solution to help platforms and consumers identify potential scams, law enforcement authorities and public announcements, analysis of blockchain data, existing regulations and requirements for industry participants et cetera.

They also talk about the importance of continuing to raise awareness and for the government to continue engaging with the private sector to understand developments in the NFT ecosystem. Again, this is reasonably fast moving it was particularly hot in 2020, 2021 and early 22 when values were rising and falling very rapidly in the NFT space.

But they're still out there and they're going to continue. They're part of the entire virtual asset ecosystem. So I would recommend that people take a look at this risk assessment. As with the others, it has training value, it has knowledge value, and there's not a guarantee that we know what Treasury intends to do based on the risk assessment. We certainly can get some insights into what their thinking is today.

John Byrne: That sounds sounds great. Give us an update on the webinar for June.

Elliot Berman: Webinar for June is June 27th, and it's about EU and UK AML and CFT compliance compared to the US. It's going to be led by one of our senior vice presidents who has experience both in US, and in Europe Judith Barendse, and we'll have other experts on the panel, and I think it'll be useful for people, particularly for those of you who are either thinking about starting to do business in Europe or the UK, or already are doing business in multiple jurisdictions, including those. So something useful. And why don't you give people a sneak preview about what we're doing in July?

John Byrne: Sure, I'll do that in a second, but I wanted to remind folks that an interview that we did several weeks ago is live, and that's with several investigative journalists from the Organized Crime and Corruption Reporting Project, where they talked about Dubai Unlocked, an interesting discussion with three reporters there.

We're also going to, in July, cover the continued issue of Romance Scams, Romance Fraud, with an actual victim who's been doing a lot of work to try to help others, as well as several financial institution fin crime experts that have worked on this issue and one that's been in law enforcement, the others work closely with law enforcement.

We'll give you both an overview of the issue, some specifics, and some practical advice. And then I'm efforting, and I think we've been able to finalize this. I'll be interviewing this week, which we will post the next week or so, an interview with one of the experts in Australia on the recent AG's office in Australia with their second consultative paper that they put out for public comment to reform and change and update the AML regime in Australia. Stay tuned for that.

Elliot Berman: Sounds good. As always, there's plenty in the pipeline. And if any of our audience members, have a topic they want to hear us talk about certainly reach out to John or to me, and we'll be happy to take a look at it.

So John, you keep feeling better and I will talk with you next week.

John Byrne: All right. Take care. See ya.

Elliot Berman: You too. Bye bye.