GTOs in the Southwest, Debanking, Still More on the CTA, and Antiquities Looting in Latin America

This week, John and Elliot discuss the Geographic Targeting Orders issued by FinCEN, a letter from two senators to the US Treasury about the Corporate Transparency Act, a new report on the looting of Latin American antiquities by cartels, legislation introduced combat debanking, and other items impacting the financial crime prevention community.

GTOs in the Southwest, Debanking, Still More on the CTA, and Antiquities Looting in Latin America - Transcript

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

John Byrne: I'm good, Elliot. And as everybody always wants to know what's happening with our Marquette Golden Eagles because they've listened all season long, I'm heading out to New York tomorrow to see them in the Big East Tournament. They've slid the past couple weeks and not as strong, but they are still a top 25 team. So 40 plus weeks of being in the top 25. So that part's good. And we'll see what happens.

Elliot Berman: You drive safely and bring home a winner, and I'll be, watching at a distance rather than watching in a seat at Madison Square Garden.

John Byrne: It's hard to have a bad time at MSG yeah, I'm looking forward to that.

Elliot Berman: That's true. That is true.

John Byrne: What do you got?

Elliot Berman: FinCEN issued a Southwest border geographic targeting order. So GTOs as they're known as folks will recall, give FinCEN the ability on a limited time basis to direct organizations, banks, MSBs, others in specific geographies to take particular actions. And in this case it's a number of zipcodes in California and Texas. And it's related to and I'm quoting here as part of a whole of government approach to combating the threat of cartels and drug traffickers and other criminal actors along the Southwest border Treasury remains focused on leveraging all of our available tools and authorities to better identify and counter these criminal activities.

So for 179 days after the order is published in the Federal Register, which will likely be later this week, MSBs in these particular zipcodes in California and Texas will need to file CTRs with a $200 threshold in connection with cash transactions. That'll be interesting.

It'll certainly be plenty of work for the MSBs in those areas. Presumably all of them will know how to file a CTR. Otherwise it'll be quite a scurry. The thing that caught my eye is that there aren't any zipcodes in Arizona, which presumably also has MSBs. But there wasn't any explanation for how they chose the 30 zipcodes.

John Byrne: Yeah, that is interesting. Sticking with FinCEN related topics I know from talking to a few folks on Capitol Hill that there'll be a hearing in House Financial Services in the next week or so on FinCEN. And there's also going to be some activity in the Senate. And something that you highlighted to me earlier is that there's a new proposal that would attempt to end what is a term that I can't stand the debanking of crypto companies and conservatives.

That's the headline in the Wall Street Journal. We know it is de risking, making a risk based decision on whether or not to onboard or exit relationships. The article goes into great lengths there's a letter attached to it from Senator Scott. This particular legislation would prohibit banks from closing accounts or not onboarding accounts based on reputational risk. Again, I'd have to read the actual legislation to see how that's crafted because that sounds like that is ripe for litigation in all sorts of ways.

According to the article, they say some banks and industry groups have pushed back on the proposal, say encroaches on the right to decide with whom to do business, but several bank organizations, including the Bank Policy Institute are endorsing the legislation. By the way, is called the Financial Integrity and Regulation Management Act. According also to the story that JP Morgan and B of A are going to support the legislation. This is going to be interesting to watch because it's designed to deal with what they say was unfair treatment of political groups, conservative groups.

In Florida, they talk about gun dealers, and cryptocurrency companies. This is not a simple area of focus, as we both know, having worked in this space for many years. So it's really going to be fascinating to see, but it will be highlighted in the Senate with this legislation, and I'm sure at this FinCEN hearing in the next couple of weeks.

Elliot Berman: I'm interested to see, assuming it passes, how this actually ends up working on the ground. First, we'll go through a rulemaking, which will be interesting. If there is a statute and there is a rule, when examiners come in it will be difficult, I think, at times to say how you grade reputational risk or ignore it in the examination process. So that's a long way off. The statutes got to get through the House and Senate, and then rulemaking will take a while because it does. So we'll see. It's always fascinating to me how the idea of risk base gets thrown around from every possible angle. And this is in my view, an interesting angle about risk based.

John Byrne: Yeah staying with legislation, there was also a hearing this week in that same House Financial Services Committee. This was what they call navigating the digital payments ecosystem and the opening statements from Ranking Member Waters is fascinating. And I think people should take a look at it. I will just tell you that the headline is an attack on what's going on within the administration in terms of cryptocurrency.

Just reading from it she said that Trump started with meme coin scheme that scammed investors out of $2 billion while he and his family and other insiders pocketed $350 million. And just last week, the Executive Order to spend taxpayer resources to create a fund, a billions of dollars of crypto that would squarely enrich the President, Musk and others that already hold those crypto currencies.

Whether you agree with that or not. It is interesting to see a very specific listing of concerns by a Ranking Member Waters in today's hearing. There's definitely going to be some attempt by the ranking member to reintroduce legislation to deal with cryptocurrency and stable coins that she had worked with the previous head of the committee Congressman McHenry. So I think there's going to be a back and forth there, but I just wanted to reference that. And then I know that you saw something related to the administration on grants that were cut at the Defense Department. Do you remember that one?

Elliot Berman: Yeah. As everybody knows, just from being around the United States there's been a lot of activity in Washington to cut government funding for all different kinds of things. I think it's fair to say maybe a little more of a chainsaw than a scalpel. But I saw a report. This was by Fast Company and their headline the Trump administration just cut Defense Department grants that research terrorism and drug trafficking which the targeting orders are all about those things.

There's an organization called the Minerva Research Initiative. It's a program that's been funded since 2008 and it has helped in the past, fund university social science research projects related to national security. It was created under the George W. Bush administration and it's taken a look at things like, Russian propaganda campaigns, overseas effects of U. S. military deployments, and modern maritime piracy. But now that funding is being cut. It was about $22 million in annual federal funding. It doesn't seem like it was fraud or waste in my opinion, and not a lot of money.

But it's interesting that it focuses on national security including on terrorism, drug trafficking, when those are two of the focal points of national security, that seem to be important. We'll see whether they get their funding back. We've certainly seen a lot of back and forth about some of the cuts, but it just caught my eye.

John Byrne: Yeah. Sticking with that, the FACT Coalition has posted a a letter that was sent to the Secretary of Treasury on the CTA potential changes, and this comes, a bipartisan letter, actually, from Senator Whitehouse and Grassley, calling on Treasury to fully implement the CTA. To quote, prevent human trafficking, terrorist financing, border smuggling, drug distribution, and many other categories of criminal activity, unquote. And the letter goes further and asks for the legal basis for the Treasury Department's policy decision to categorically suspend enforcement of CTA's, reporting requirements for all U. S. citizens and domestic reporting companies.

So again, going back to what's going on legislatively or regulatory standpoint, policy standpoint, a lot of things are just all over the place. So you want to stay engage and pay attention to this. This will probably also get discussed. I would imagine in Senate Banking, when they have that hearing on de risking.

Elliot Berman: I expect that's true too. And this is an interesting letter because it's bipartisan, two members of the Congress, and it points out that the policy statement issued by Treasury is beyond the scope of the statute.

John Byrne: Right, which was something I think we raised when we first saw this, correct. Outside of the couple of issues that we've talked about legislatively, Wanted to highlight a group that we've worked closely with in the past the Antiquities Coalition. They just posted on their site and then on LinkedIn, a new report. And this is a report that links the Latin American cartels and cultural looting in Latin America. According to the study, it shows how Latin American cartels traffic art and antiquities across international borders. They mentioned a couple of key takeaways, including U. S. efforts to combat transnational crime must include they recommend cultural property, among other criminal assets that are stopped at the southern border.

And one of the things they talk about in the study is Raul Aturo Contreras Chavez, formerly indicted for drug smuggling, was found with 27 cultural and religious objects worth over a million dollars, stolen in an armed robbery from the Foundation for Fine Arts. and culture in Antigua, Guatemala. So this is just a whole series of stories on the cultural looting that occurs in Latin America. As we said before, the Antiquities Coalition does great work. They're both an advocacy group and one that highlights and spotlights the issues of stolen art and stolen antiquities and returning those items back to their rightful places.

Elliot Berman: An important study and stark reminder of the interconnection between traffickers of all kinds and all the ways they look for funding. I know you've done a lot of work with the Antiquities Coalition and this is another good example of them keeping us informed about key things.

John, did you see the statement by Ned Conway, the head of the Wolfsberg Group about transaction monitoring and the like?

John Byrne: He's fairly new there. And yes I did see that as an area that they want to focus on going forward. Wolfsberg does a lot of things, but that's certainly in an area where given the expertise with that group that it makes a ton of sense that they'll be doing it. So he put that on LinkedIn, but also you can find that information on the Wolfsberg website.

Elliot Berman: Yeah, and the things that they say they're going to continue to focus on are fraud and transaction monitoring, risk assessments, those kinds of things. And these are, again, basic blocking and tackling in the anti financial crime space. I think that even though there's a lot of chaos in the space many professionals are saying as a practical matter, we're going to keep our heads down and continue to do what we've been doing because we still have to deal with doing our best to keep financial crime from permeating our organizations.

John Byrne: And he replaced, and I forgive me for not mentioning it, Alan Ketley, who was kind enough to talk to us in the past on a number of things that Wolfberg has done, so he has replaced Alan in that role.

Elliot Berman: Yeah, I think that changeover occurred last November, if I recall.

John Byrne: Right, yeah. One more thing real quick, and this came up after you and I did our pre call. Another group we worked with is Polaris, the anti human trafficking group, and they've just posted that a piece of legislation that they support, the Traffic Survivors Relief Act, has been reintroduced in the House.

And they offer up that they need some support from the various communities that they work with, but they say in their posting that this is for the first time, if it can pass, a federal law that will give survivors of human trafficking a pathway. To clear their federal criminal records, because they say having a criminal record, even an arrest record without a conviction is a significant barrier to getting gainful employment, safe housing, child custody.

And so they advocate that this bill, if it passed, would protect victims and survivors of trafficking at the federal level. So they ask you to set up some meetings, do some letters, typical sort of lobbying that you'd want to do in a situation. So again, Polaris, great organization, done a lot of excellent work, but they've identified this as a piece of key legislation that they're urging folks to take a look at and hopefully support.

Elliot Berman: And you can hear more about that piece of legislation from its earlier iteration by listening to the recording of our January AML Voices webinar, which is available on our website which was focused on human trafficking.

We've got, so we've got one more chance to plug the AML partnership forum, which will be next week, starts Wednesday the 19th. There is still time and there is still space for people to register, go to amlpf.com and follow the prompts to the registration information.

John Byrne: Yeah. And remember, there's no press so all the conversations are done to further help with strategy and advice for both private and public sector. We'll be awarding several individuals, particular recognition for their work as private public partners.

Also, I'm having a fireside chat with Gary Kalman from Transparency International. We have a number of law enforcement panels. We'll be covering crypto, sanctions, and other issues. So it's still time for you to sign up register. It's in DC, easily located in the center of town. Go to the website and hopefully you can. If you can't come for the whole thing, you can come for part of the program.

Elliot Berman: And our next webinar is the 27th of this month, and it's on risks related to virtual assets. We've got a couple of great experts who are going to talk about those risks. Again, not saying don't do it, but just understand what the risks are and think about mitigation techniques.

John, what else you got? Anything?

John Byrne: No, we're good. Just gonna watch some basketball and I'll see you next week in Washington.

Elliot Berman: All right. You drive safely and have a good time at the game.

John Byrne: Take care.

Elliot Berman: You too. Bye bye.