This week, John and Elliot discuss FinCEN’s Financial Trend Analysis, on fentanyl-related illicit finance, the OCC’s disclosure of an email breach, the Department of Justice’s announcement of a change in focus of its policy on prosecuting crypto crime, the fines against Revolut Bank, the increase in real estate by oligarchs in New York, and other items impacting the financial crime prevention community.
FinCEN on Fentanyl, OCC Email Breach, Crypto Enforcement, Revolut, and Oligarchs - Transcript
Elliot Berman: Hi John. How are you today?
John Byrne: I'm good Elliot. We were both on a town hall call at RightSource and one of the interesting statistics that our continued growing company is that we will have over 6,000 employees worldwide at some point in 2025 and maybe closer to seven by the end of the year.
So it's a pretty amazing growth of, AML, sanctions, CFT, managed services that we've been proud to be part of. So I thought that was an interesting statistic and we appreciate anybody out there that's a client that's listening to this. We thank you for your work with us and we will continue to do the best we can with these great analysts and managers and we really we're so proud of the staff.
Elliot Berman: Agreed. I think when I joined the company there were about 550 employees, and I know there were fewer when you joined the company.
John Byrne: Yeah, that's right. A lot as we said on today's town hall everything seems to change every 24 hours. Obviously, we're not gonna talk about the tariff issues. We let people smarter than us discuss that. That's all I'll say about that, but there are some things both in the US and internationally that we wanna highlight.
One, the Department of Justice is making what I consider to be a pretty major change in how they handle cryptocurrency crime. They're gonna no longer bring charges against exchanges, dealers, mixing services, and wallet providers, quote for the acts of their end users unquote. And this came from the Deputy Attorney General Todd Blanche, and if that name sounds familiar, he was Trump's lawyer in one of the fraud cases in New York.
So prosecutors aren't gonna be allowed, in most cases to charge violations of AML laws and other statutes that would equate cryptocurrency products with securities or financial derivatives. It's gonna be fascinating to see this. That's a change from the previous administration. I have seen some postings on LinkedIn and it's interesting to me some of the comments aren't as concerned about this as I think financial crime professionals should be. But again, I'll leave that to others to figure that out.
But in a related US based case that I wanted to highlight in local paper in South Carolina, the cover story title is targeting the elderly scammers in Beaufort County South Carolina in 2024, were able to get over $3 million scamming the elderly using cryptocurrency ATMs. Very interesting story. As you've seen with pig butchering and ransomware and other issues, somebody will get an elderly person on the phone say that there's a warrant out for that person's arrest unless they withdraw a certain amount of money or bail money. And some people sadly fall for this. And not only do they want the money, they want it converted to cryptocurrency at an ATM in order to obtain a court date. And if you don't, you're considered, you're evading law enforcement.
So what I found interesting, again, this is a local issue, but in Beaufort County alone that's where Hilton Head is and some other cities. There were in 2024, 62 cases, and over $3.1 million in cash were converted to cryptocurrency. So the question would remain would the Feds go after something like this especially, with cryptocurrency ATMs. So I think this is gonna continue to be a fascinating change of priorities with this administration regarding crypto, because as we know, it is a method of moving illicit funds. We'll see where it all takes us.
Elliot Berman: Yes. On the one hand you have the view of regulation by prosecution, as the reason for stepping back. And on the other hand, you have the acceleration of the use of cryptocurrency. As we heard in our recent webinar on virtual assets that it continues to be used by both appropriate financial actors and and bad actors. And sifting through and figuring out what's what is part of the investigative and even prosecutorial process.
John Byrne: So a couple things going on in the various agencies. I know we wanna highlight the treasury Department and FinCEN specifically issued some statistics on fentanyl related sars. I don't know if you have that up in front of you there.
Elliot Berman: I do. They looked at 1,246, I guess is the number SARs that were filed, that checked the fentanyl box in 2024. They identified about $1.4 billion in suspicious transactions. They looked at a number of different touch points.
The fentanyl supply chain. It clearly leverages the US financial system. Fentanyl trade has foreign touchpoints, which of course we know. A lot related to the cartels in Mexico, particularly CJNG and the Sinaloa Cartel. Talked about how e-commerce is playing a role in the Chinese precursor chemical sales component and a number of other things.
I think one of the, things that you can see connecting some dots is one of the things they mentioned is money laundering schemes going from simple to complex and they talk about MSBs along the border. Which I think probably had some influence on the recent geographic targeting order that we talked about.
John Byrne: And also what's interesting additional findings from FinCEN's analysis is that the cartels and associated chemical brokers use front companies. Is that something that the Corporate Transparency Act was designed to deal with? I think so.
Elliot Berman: I did see that. And I'm sure that some of those front companies are created not by foreign actors.
John Byrne: Absolutely. So sticking with federal agencies we saw a notice from the OCC. That they told Congress that there was a major information security incident. So they said reading from the press release from the finding is the result of internal and independent third party reviews of OCC emails and email attachments that were subject to unauthorized access.
Interesting. In February, they learned of unusual interactions between the system administrative account in an office automation environment and OCC user mailboxes. And I'll leave it to others to read the rest of it. But they did report the the incident to the Cybersecurity and Infrastructure Security Agency, CISA.
And I know that you were asking a question about that when we decided we were gonna cover this.
Elliot Berman: Yeah. CISA is one of a number of agencies whose budgets have been reduced and whose staffing has been reduced. And in my opinion, they're a very critical agency because they're the principal agency in the US government whose responsibility is to keep us meaning the US safe from Cyber intrusion. And yet we're looking at both budget reductions and staffing reductions. So I said to you jokingly, and I realized it was just a joke, when they reported to CISA was there anybody there?
On a many of these topics that we've talked about that touch the financial crime space directly or indirectly the seeming misalignment between some of the proposed changes in governmental structure and funding and these critical issues that also seem to be important. So we'll just get to see week to week how it unfolds.
John Byrne: And in talking about gaps in oversight there's an article in a publication that's called Airmail, which I think some folks are aware of. The author, former editor, Grayden Carter. He runs that particular publication. But the article in this week's edition is entitled the subtitle is The Oligarchs Are Back in Town and Hunting for Swanky Real Estate lured by the laissez-faire attitude toward corruption and money laundering, given what we've talked about several times in our conversations. So it's clear that there's going to be an increase in the purchasing of real estate, I'm sure by cash from outside the US. It can be an area which we've seen where Russian oligarchs have done that in the past, just given the fact about the CTA that we've talked about.
But also just about prosecutions of money launder related cases. This is the first time I've seen someone take a look at this and there's actually some good quotes in the story. One from the head of the track program at George Mason, where I teach Dr. Louise Shelley, who just says, this is open season and there'll be no guardrails, I'm paraphrasing. But I would take a look at that. Those of you that are paying attention to what's going on in terms of anti-corruption and money laundering.
Elliot Berman: A hundred percent. The Justice Department did announce the arrest of Joel Vargas-Escobar and he was indicted in the District of Nevada and charged with racketeering conspiracy that involved 11 murders. He's a reputed high ranking MS 13 leader and had been a fugitive for a while. Definitely the kind of person we don't want running around. I think they found him in New York, if I'm not mistaken.
John Byrne: And there's something from the Financial Conduct Authority from the UK that I know you wanted to highlight.
Elliot Berman: Yes. They published recently their annual work program for 2025/ 26. It's a comprehensive report. I think if you're in the UK or are in any way interacting in the UK where the FCA comes into play, you should take a look at it. They have a crime fighting responsibility. They have consumer support, responsibility. And a regulatory responsibility.
They talk about becoming a smarter regulator, more efficient, more effective. Supporting growth in the industry. Helping consumers navigate their financial lives with a focus, and this is good for you and me John, on helping people save enough for their later years. Which I thought was interesting, I can't think of a governmental agency in the US who has that focus. And then fighting financial crime, which of course is the main reason you and I get together every week.
So again long report. I think well laid out and well thought out. And I think the themes are very similar to the ones we see and talk about all the time. About regulators shouldn't just do what they've always done in the past. They should figure out how to focus, they don't use the phrase, but their approach to things should also be risk-based.
Not only should the financial service provider compliance programs be risk-based, but the regulatory enforcement approach should be risk-based. Spend your biggest amount of time and energy on the highest risk things as opposed to treating everything comparably and many other things. So I commend people to taking a look at this report. It's worth a read.
John Byrne: That's great. One other thing on my end here, the acting commissioner of the Internal Revenue Service is resigning. Melanie Kraus. She served as acting head since February, and she's resigning because of a deal done with the Treasury and Homeland Security to share immigrants tax data with ICE agents for the purpose of identifying and deporting people illegally in the US.
The agreement would allow ICE to submit names and addresses of immigrants inside the US illegally for cross verification of tax records. Something that obviously has never occurred before. The IRS has been the target of Trump and others for quite a while and Elon Musk. But this one, several people, again speaking not on the record, but this was in all the papers as they say the past two days. And this is somebody making the decision to not stay for this activity. So I thought we would mention that you can read up on it again in any of the papers that you subscribe to.
Elliot Berman: Another one that I think is worth noting is Revolut Bank, which is a bank that operates in the UK but it is actually chartered in Lithuania. And it's an online bank. It was fined 3.5 million euros, which is about $3.8 million for failure in money laundering prevention. And it followed a routine inspection that identified violations and shortcomings and monitoring of business relationships and operations. And that's from the Lithuanian Central Bank, which is their regulator.
Another bank, of the same type Starling Bank which also operates in the UK, was fined 29 million pounds last year. FCA in that case accused the bank of quote, shockingly lax controls against financial crime. Many of these, online only organizations particularly the ones in the UK have been slow to come up to what I'll call full speed on their compliance programs. And this is another indication that they're still struggling a little bit.
John Byrne: All right that's it on my end. Working on a couple of podcasts. One, we'll deal with a crime report from Europe. We're can do that interview tomorrow. So you'll see that in a couple of weeks. Our webinars each month have different topics and themes. The one we are doing this month is on cybersecurity. A lot going on in that space. And as we always ask if there's other people issues, topics you want us to cover, please feel free to reach out.
Elliot Berman: I wanna give everybody a little flash. Our colleague Joe McNamara has done a blog post, which is gonna post on our website on Monday the 14th. His reflections on the recent AML Partnership Forum. John, you and I have talked about that a lot over the last few months in preparation and then afterward on our podcast.
John Byrne: That sounds good, Elliot. You have a good rest of your weeks. Stay safe.
Elliot Berman: You too. Enjoy the Nats game.
John Byrne: Not supposed to tell people that. All right. Take care.
Elliot Berman: You too. Bye-bye.