New Terrorism Indictments, Cryptocurrency Fraud Report, FinCEN on Check Fraud, and Bitcoin ATMs

This week, John and Elliot discuss several federal indictments relating to terrorism announced by the DOJ, a Financial Trend Analysis on mail theft check fraud from FinCEN, a Cryptocurrency Fraud Report from the FBI, a Data Spotlight about Bitcoin ATMs from the FTC, and several other items impacting the financial crime prevention community. They also commemorate the 23^rd anniversary of 9/11.

New Terrorism Indictments, Cryptocurrency Fraud Report, FinCEN on Check Fraud, and Bitcoin ATMs - Transcript

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

John Byrne: Good morning, Elliot. We would be remiss if we didn't mention we are recording this on September 11th. And interestingly enough, besides the obviously somber occasion 23 years ago, the attack in New York, Pennsylvania, and in the Pentagon. You and I were actually on the phone.

We both worked for the banking industry in different capacities. And as we were having the conversation, got the information about the attacks. That day still rings with us all these years later. Not because of that, but because of what we've talked about many times with colleagues of ours, like Dennis Lormel, the first head of TFOS, all the work that the financial sector was able to accomplish after that horrific day.

So it's something that stays with us. And I know you have similar memories of that day and what happened afterwards.

Elliot Berman: Yes. And for those of our listeners who have come into the community since 9/11, one of the things that it also marked was a significant shift from the focus of the Bank Secrecy Act on financial crime, principally money laundering to a dual view, one of money laundering, but equally important, of terrorist financing. And prior to 9/11, terrorist financing wasn't in the vocabulary as it related to the Bank Secrecy Act.

John Byrne: That's right, and we're still proud today of the work of the financial sector who stepped up so quickly right after 9 11, working with Dennis and other law enforcement officials to provide necessary financial related information.

And of course, then the passage of the Patriot Act, which not all of the provisions worked the way they were designed, but certainly, as you just mentioned, the focus still today on terrorism continues for the financial sector. In fact, good transition here is a couple of the things I want to highlight. Sadly, it's still a major problem and topic and challenge.

These are from the Justice Department, and this is from the FBI, a couple of announcements in the past week. One, a Pakistani national was charged for plotting a terrorist attack in New York City. in support of ISIS. This was a Pakistani residing in Canada.

This person was arrested back on September the 4th and charged with attempting to provide material support and resources to a designated terrorist organization of ISIS. And then also, sadly, terrorism is not just a foreign issue. It's a clear domestic issue, as we've talked about constantly over the course of our This Week in AML conversations.

And the Justice Department also announced earlier this week that two individuals, one from Boise, Idaho, another one from Elk Grove, California, leaders of something called the Terrorgram Collective, and that's been described as a transnational terrorist group. They were charged with a 15 count indictment for soliciting hate crimes, murder of federal officials, and also to provide material support to terrorists.

And they were arrested last Friday by law enforcement officials. And according to the the press statement from the Deputy Attorney General, Lisa Monaco, she says, using the Telegram platform, they advanced, their heinous white supremacist ideology, solicited hate crimes, and provided guidance and instructions for terrorist attacks on critical infrastructure and assassination of government officials.

A big announcement earlier this week from the Department of Justice. So I urge folks to take a look at the full indictment. Obviously, indictments are merely allegations, but of course, the fact that this was a pretty lengthy description in the press statement, including the indictment, tells you how important Attorney General Garland and the DOJ staff feel about this particular arrest and indictment.

Elliot Berman: Indeed, there also were a number of announcements and releases this week that related to complaints related to crypto vis-a-vis financial crime. One of them was the FBI's Cryptocurrency Fraud Report for 2023, and that was issued by the Internet Crime Complaint Center, which goes by the abbreviation IC3.

You can find it on the FBI website. But just some highlights, in 2023, they received almost 70,000 complaints that had a nexus to cryptocurrency. They record $5.6 billion in losses. Most of those, interestingly enough, were related to investment fraud, about 70% of the total. And the losses represent a 45% increase since 2022.

So a very big jump. Clearly even though crypto has been around for a while, it seems to be moving more rapidly into the fraud space. And this won't shock you John because even though neither one of us has had a crypto event in our lives, the total count of complaints referencing crypto for people who were over 60 was almost 17, 000 and over $1.6 billion of the losses. The interesting thing that I saw is not just that investment scams are the largest, about 32,000 complaints, but bigger than the next three, which is personal data breach, extortion, and tech support.

The message in the report for folks is do not respond to online investment opportunities and things like that, where crypto is involved, from someone you don't know. It's not that all crypto investment is bad. That's not the IC3's point here, but there's a lot of dangerous activity going on in terms of the impact on people because it's a hot investment area and it's one of those get in while you can things.

The other thing in the crypto world that was interesting is the Federal Trade Commission, the FTC, issued one of their Data Spotlights. And this one focuses on Bitcoin ATMs and it's titled Bitcoin ATMs, a Payment Portal for Scammers. And over the last few weeks, you and I have talked a couple of times about things that included crypto ATMs as part of the scammers efforts to get their payments through those mechanisms.

Again, Bitcoin ATMs in terms of fraud losses are skyrocketing. From 2020 to 2023, there's been a tenfold increase in reported data and in the first half of 2024, $65 million worth of losses and they tend to be larger transactions. The median number based on the reports is $10,000, that means that half of the reported transactions were smaller, but half were $10,000 or larger.

This isn't nickel dime type of fraud. You can go find that report on the FTC website, and again as this continues to be a growing challenge for the industry being up to date on it so we can identify it if we can, but also help educate customers would be a good thing.

John Byrne: Couple of other things, two related to FinCEN, one is they've issued another series of FAQs. As you look at their website, the information they have on the Beneficial Ownership homepage is extremely comprehensive and detailed, so to the extent that you haven't paid that much attention to updates there, there's a whole series, as I said, of not just FAQs, but also descriptions on how to file, do you qualify for exemptions, that sort of thing.

Just a quick side note I'm president of a homeowners association. And we're told by our legal counsel in South Carolina, that we had an obligation to file. And obviously Elliot and I have been well versed in beneficial ownership related questions for a long time. And I'm like, really? I didn't, that I didn't realize. And of course, as you look in The FAQs, part of it is, are you incorporated in the state?

And our Homeowner's Association is. So we actually will be filing on behalf of the association. Again, not a big deal, but it does impact a whole sorts of areas of commerce and the economy, not just, financial institutions, not just, small business as defined by the Corporate Transparency Act.

Anyway, long winded way of saying there's a lot there. And so those of you that are either advising clients or need to respond to customer queries, a lot of great information on the BOI newsroom site but also their resource page.

The other thing that they issued, a FinCEN financial trend analysis, on check fraud relating to mail theft. And Elliot and I have talked offline, kidded, people still writing checks? There would be certainly a focus of our citizenry, young folks, probably haven't done that unless they've done it online. But unfortunately, still a big issue. And we've talked to people and had people present at conferences from the Postal Service.

Still a major issue. So this particular analysis is an update to an alert FinCEN put out in 2023. This was done in conjunction with the Postal Service. And then looking through some of the primary outcomes about stolen mail, they said 44% were altered and then deposited. 26% were used as templates to create counterfeit checks. 20% were fraudulently signed and deposited.

And so various methods of check manipulation are pretty sophisticated, and many tried to avoid interaction with bank personnel. 88% of all mail theft related check fraud reports filed from banks.

Obviously a lot of our listeners are paying attention to this. The analysis also include every state, including D. C. and Puerto Rico. So FinCEN again mentions that they continue to focus on fraud, which is one of the priorities, and mail theft related check fraud losses continue to impact people and their personal savings, their business accounts, and retirement accounts, as well as financial institutions who have to cover those losses.

So take a look at that, just came out. I'm sure there's a lot of other good information in there, and this will be, you can find this on the FinCEN website.

Elliot Berman: John, going back to the BOI information. Both you and I have our own LLCs and I don't think either one of them fits into an exemption. So I went online a few weeks ago and actually registered my LLC. And I have to say that the process was pretty smooth. I've been on a lot of government websites with a lot of drop down boxes, and this one seemed to move right along. I thought the labels of what you were supposed to put where made sense, and the flow felt like it was going the way I thought it might.

Granted, I'm probably a little more immersed in this than the average small business owner, but I hadn't seen the screens until I actually went to do it. So I think it's doable. You and I have had a lot of conversations about whether access to the information and all those other issues have come out in the best way possible, but just in terms of a process, I think that FinCEN, as you pointed out, has done a great job of getting a lot of information out there.

They've been doing lots and lots of outreach meetings in person around the country with senior officials and business organizations and banks and things like that. I think that, as we're getting to the point where we're near, one year I think it's, I guess FinCEN will have to say how well they think it went, but it seems like it's going better than I expected.

John Byrne: And they've done a tremendous amount of outreach, which is a tribute to them and such a small staff. I know you want to talk about an art issue in Canada, but right before we do that, related to Canada bordering Canada in the States is Michigan, and another press release coming out from DOJ, a federal jury convicted four pharmacy owners for conspiracy to commit healthcare fraud and wire fraud.

And at trial, there was individuals from Arizona, Ohio, Windsor, Ontario, all licensed pharmacists. They billed Medicare, Medicaid, and Blue Cross Blue Shield of Michigan for prescription medications that they did not dispense. The defendants collectively caused over $13 million of loss to all those entities. This was done by the FBI, Detroit office, and HHS were investigators in this case as well. And healthcare fraud continues to be another challenge in the fraud space for all of us.

Elliot Berman: So you mentioned the art world. The Art Newspaper is reporting that the and I'm quoting the headline here, the alleged leader of the biggest art fraud in the world was sentenced in Canada. A fellow named David Voss, who's been described as the principal architect behind a major forgery scheme peddling thousands of fake Norval Marrisseau paintings, was sentenced to five years in prison for fraud.

This has been ongoing for this investigation for a number of years. But there were more than a 1,000 paintings have been seized. They've also been out seeking assistance to find other paintings and reclaim them. Marrisseau is a member of the First Nations in Canada.

He died in 2007, but he was a very prolific and regarded artist, also heavily collected. The investigation has an unusual history. There was a documentary film about the forgeries that helped fuel the investigation, but it was prompted by a lawsuit launched by one of the members of the Canadian band, the Barenaked Ladies against a Toronto gallery for selling him an alleged forged Marrisseau.

And originally the court said no, but on appeal, the court said yes, they were liable and awarded him a monetary settlement. That prompted a documentary filmmaker to take up the cause and start looking into it. And the film, while it wasn't the only thing, it was one of the things that prompted Ontario police to begin an investigation.

So Voss was sentenced to five years and one of his compatriots was also sentenced to five years. And why is this something that we should be talking about? Because while there isn't a money laundering charge here it's important, I think, to remember as we wait to see if eventually there'll be regulations related to the art world, that the art world has lots of opportunities for things to not go well.

And some of them are going to have money laundering implications or other financial crime implications, not just fraud in terms of selling. I think it's worth noting. And this was a big one. Just amazing the number of pieces involved.

John Byrne: All right. So what do we got going for September in terms of the webinars?

Elliot Berman: The webinar in September is the 26th. It'll live stream at 1 p. m. Eastern Time, and it's on using Adverse Media Monitoring in your KYC and EDD program. We've got two wonderful experts, and I think it'll be a very valuable conversation for folks thinking about adding AMM to your process, or you've just recently done it, or you're doing it and you just want to hear from some smart people about ways to tune it, ways to update it, that kind of thing. I think it'll be very valuable. AMM has been around, but it's certainly evolving with more curated searching happening rather than just putting names into a search engine and see what pops up.

John Byrne: Sounds good. We have a couple of interviews that we've done that will be posted in the next few weeks. I'm efforting some additional interviews as well. Next week, I will not be here for our conversation. I'm going to be in Missouri. The Missouri Bankers Association does a BSA AML conference every year, and I've been fortunate to be involved with it for the past five or six years.

If we pick up any good information from that when I return in terms of trends and issues, we'll be talking with regulators, with law enforcement, and with experts in the AML CFT space. I'll bring that information back.

Elliot Berman: And I'll be doing our regularly scheduled podcast with our friend and colleague, Joe McNamara.

John Byrne: Sounds great. Stay safe. Let's obviously, I know it's a hack phrase, but it means a lot to you and me and others, and let's never forget 9/11 and the ramifications for the country, and for the various communities it impacted, besides financial, law enforcement, and everyone else that was severely impacted.

We have to continue to stay vigilant, and with what we talked about today, obviously there's still, unfortunately many terrorist related activities going on in which the financial sector has a role to play, and I think they continue to play that role very well.

Elliot Berman: Agreed. John you have a good week, and I'll talk to you in two weeks.

John Byrne: Sounds good. Take care.

Elliot Berman: You too. Bye bye.