FATF Plenary, GAO Reports, EU & UK Russia Sanctions, and a BOI Update

This week, John and Elliot discuss the results of the February FATF Plenary, GAO reports on BOI, and Assessing Progress on Countering Criminal Activity, new sanctions issued by the UK and EU against Russia, the latest on the requirement to file BOI with FinCEN, priorities of the Acting Comptroller of the Currency, and other items impacting the financial crime prevention community.

FATF Plenary, GAO Reports, EU & UK Russia Sanctions, and a BOI Update - Transcript

Elliot Berman: Hi, John. How are you this morning?

John Byrne: We're in the same city, but different locations and what we needed, given all what's going on in the world was a 30 point win by Marquette last night. So that was fun to do that.

Elliot Berman: It was a lot of fun. For a while we couldn't figure out if they were going to be able to get it into fourth gear, but they definitely did in the second half and we had a good time.

So lots going on this week, like every week. Wanted to start out with something that dropped just after we recorded last week. And that is an update on what's happening with the beneficial ownership information reporting deadline. FinCEN sent out a notice indicating that because of the current status of the appeal that the requirement to file information is now back on, but they announced new deadlines.

So for most companies, it's a 30 day delay starting with the date of the notice. And that would take us to March 21st. They also indicated that during that period, they are going to review the process and see whether there are ways to make the requirements less burdensome and that kind of thing. More to come on that.

Also, as it relates to the Corporate Transparency Act there are appeals in two different circuits in the U. S. courts related to the issue of whether the CTA is constitutional. And a number of members of Congress including ranking member Maxine Waters have filed amicus briefs in those appeals courts explaining their view of why the CTA is constitutional.

John Byrne: In the amicus brief one of the sections says the following. Anonymous shell corporations harm the United States national security, foreign affairs, foreign interstate commerce, tax interests. And those shell companies often operate in multiple layers to hide their true owners in violations of key sanctions, money laundering, and tax laws. It seems like even this administration will support it in some fashion the CTA. We'll see. But these court cases have to be reconciled.

We're going to jump to international something that we just chatted before we started recording and I did not mention this and I apologize, but it's the Basel Institute of Governance does such really good work and they posted something this morning under the category of the EU's anti-corruption directive and they are talking about the draft EU directive.

And so I just point people to look at that and part of the things that they mention is why this is so important is the line that shows up in this description, with the U. S. recently indicating its retreat from the global fight against corruption by freezing enforcement of the Foreign Corrupt Practices Act and dissolving its kleptocracy units, amongst other things, the stakes surrounding these EU negotiations have somewhat risen. So I did want to mention that as well.

And then, as we talked about last week the February plenary ended when we posted our conversation last Friday, so we didn't have a chance to talk about it and a lot of good information on the FATF website. This is the second plenary under the presidency of Elisa de Andro Madrazo of Mexico. A couple of things that were important that they referenced in the summary, but you should go through and look through everything else.

That the plenary agreed to changes in the FATF standards to better support a risk based approach and financial inclusion, which we'll mention again in a second, and also finalize d their report on combating financial flows related to online child sexual exploitation with a report was approved for publication in the next month.

They removed the Philippines from increased monitoring, but they did continue their suspension of the Russian Federation. So wanted to mention that. Anything about the plenary you want to mention?

Elliot Berman: You mentioned that the Philippines were removed. They added Nepal and Laos both of whom, in their most recent reviews, had issues that put them in the category of, needing further attention.

John Byrne: And so on financial inclusion, first they did make some adjustments to the recommendations regarding that. So take a look at that. But the consultation on the updated guidance is out for comment now. The plenary approved this. And so FATF has put out a public consultation document. They want views and comments on the updated guidance to improve whatever they might have missed or some other issues that stakeholders want to mention.

They are trying to look at issues like measures to enable provision of financial services in non lower risk situations, such as conflict zones, as well as mitigating measures to address the risk with non face to face interactions, including application of AI technology, so it's out for comment. The stakeholders are invited to respond by April the 4th. FATF has been very transparent in their consultative process. And so anybody listening to this, who's got any interest in this space has the opportunity to comment individually or through any organization, company, or firm that they belong to.

Elliot Berman: Staying international, both the EU and the UK have issued new comprehensive sanctions packages against Russian interests, including Russian banks. For the EU this is their 16th set of sanctions since the Russian invasion of the Ukraine. And interesting that these are coming out while there are talks going on that don't include all of the parties to the conflict to see if some resolution can be reached.

But the international community is still very focused on who was the aggressor and who's the aggrieved party.

John Byrne: I never thought when we started doing this or any time in the AML space that I would be saying the following, but that UN resolution the countries that voted against it, North Korea, Russia, Belarus and the United States. That's not only a depressing change in policy, it could potentially impact sanctions even though, as you just said, that's outside the U. S., that's going to continue. A vote by the U. S. against the condemnation of Russia for clear invasion of Ukraine is disappointing is an understatement.

And actually Trump said the other day that he knows some Russian oligarchs. And they're pretty good people. We definitely have some struggles to figure out what we should be doing as practitioners, but also from a policy standpoint. How engaged should we be? Again, I never thought I would be commenting on this, as and you feel the same way. We're strong supporters. Of Ukraine, Ukrainian people and all that's gone on there that they've had to deal with and they were clearly invaded by Russia and anybody that says the opposite is not just misinterpreting what happened, they are out and out providing a falsehood.

Elliot Berman: So John, I know that there was a GAO report that you pointed out to me. Do you want to talk about that?

John Byrne: I definitely would, but it left my screen. I think there are two of them. So I know one had to do with a scorecard to figure out how the agencies are doing regarding the tracking of illicit finance. And so typical GAO, they obviously listed the conclusions, what each agency said, so it's definitely worth taking a look at, because it's a difficult area, we've always thought that trying to track terrorist financing and whether things work was always something that we have to, there's not easy metrics, but anyway, yeah, That's one report.

And I know you said that there's a separate report on the CTA or on the beneficial ownership rather.

Elliot Berman: On the beneficial ownership side, GAO went in and took a look at how FinCEN has set up the information sharing, so with law enforcement and that kind of thing, because there is a provision in the CTA and in the regulations about protecting the confidentiality of the information.

And they did what I would call a baseline review so that as they go in periodically and see how things are going, they understand what the plan was from FinCEN's perspective and what they could expect to see. That's one of the many steps that happens when you get new regulations and GAO when they do their reviews they need a baseline.

On the other one that you mentioned I found that interesting because this was about the idea that the agencies need to assess progress in countering criminal activity. And the conclusion was that they could do better. The point being that each of the agencies involved, sets out certain criteria, goals and things like that. And part of the assessment here by GAO is that those same organizations don't always use those criteria that they set out at the beginning to track how they're doing.

And the agencies that they specifically had recommendations for were Treasury, National Security Council, State, and USAID, which may or may not have anything to do in the future depending on where everything comes out with that. Like all of the GAO reports you and I have talked about and recommended to our listeners, comprehensive, thoughtful. I think clear and understandable is important because you can really get lost in the details of this stuff, but I think they do a very nice job of creating transparency and clarity.

John Byrne: We talked about this the other day, but I don't think we mentioned this last week on a conversation, but I know you wanted to highlight Rodney Hood's recent comments regarding the state of banking, but before you do that the Social Security Administration has just issued a notice warning people about Social Security scams. And they have on March the 6th, it's called National Slam the Scam Day, and this is designed to provide a lot of focus and spotlight some of the various social security scams.

And so they say signs of scams include an unexpected problem or offer of a prize or a benefit, pressure to act immediately. A request for unusual payment, like crypto or gift cards or gold bars. Report the scams as soon as possible is what they say, and a lot more of these are listed on the Social Security website under their scam alert fact sheet. So I did want to mention that because we're always looking at different areas of fraud and how to be more aware of how they occur and what to do if we think they've occurred.

Elliot Berman: It's probably every week we talk about the fact that fraud is an ever expanding space. There are now organizations that are offering fraud as a service. It's become a business line, which is a little mind bending. So the new Acting Comptroller of the Currency Rodney Hood, he's the head of that agency and that agency governs all of the national banks in the United States.

He gave a speech recently where he outlined five key priorities, financial inclusion noting that 40% of US households are unable to obtain a $400 emergency loan. And it's estimated that 70 million people are credit invisible.

One size doesn't fit all. So talking about tailoring regulation to bank size and complexity, and we've certainly had that conversation in the AML and financial crime prevention community for many years, we've always talked about is how do you do the right amount.

Raising the BSA reporting threshold which is an interesting one because there's been a lot of discussion about that over the years. But this is focused less on currency transaction reports and more on the triggering amount for filing a SAR, which currently is $5,000. Timely mergers, which is not really in our bailiwick, but that has been an issue for many years, about how long it takes to get a merger approved.

And then clarity on fintech partners. This would be in two places. One is just working with technology partners to improve services the other is the whole banking as a service. His focus seems to be more on bringing new technologies to bear in traditional banks. About sandboxes for testing and things like that. And having the regulators be able to be up to speed and on board with what's going on, which is a complicated dance. Some organizations that are either very tech forward or some of the very large ones that just have more resources, they're doing lots of things that are over the horizon and keeping the regulators up to speed and the regulators having the right experts in the agencies, that's a challenge.

John Byrne: That's right. On my end, by the time you listen to this, we will have had our February webinar. It's on corruption. And obviously at some point the recordings will go out. And do you want to mention what's coming up in March?

Elliot Berman: Yes. We're going to talk about the risks related to virtual assets. Again there are risks related to every financial product and to the extent that of that virtual assets, whether it's cryptocurrencies or other virtual assets are a financial product or a means of payment they have risks. And John, I know you've got a a great panel that people will love to hear.

In terms of February you should be able to find the recording by the end of the week of March 3rd, on our website. So John, you're running to the airport to catch a plane. So fly safely and we will be back talking next week.

John Byrne: All right, everybody stay safe. Remember to support our law enforcement partners through these tough times. All right, Elliot, take care.

Elliot Berman: You too. Bye bye.