This week, John and Elliot discuss a program rule comment letter from The Wolfsberg Group, new guidance on corporate compliance programs from the US Department of Justice, proposed anti-corruption legislation in the US Senate, the FBI’s new online Crime Datta Explorer, and several other items impacting the financial crime prevention community.
Program Rule Comment Letter, DOJ Compliance Guidelines, Corruption Update, and FBI Crime Data Explorer - Transcript
Elliot Berman: How are you this week?
John Byrne: I'm good, Elliot. We're now in October and it's Cybersecurity Awareness Month, and just as a plug, as we're efforting to do some interviews, if anybody listening to this has some suggestions for some good experts in the cyberspace that they'd like us to reach out to, feel free to send either Elliot or myself an email, we'd be happy to pursue that.
A couple things. One is that October 8th is the deadline for filing comments to the Federal Banking Agency's Notice of Proposed Rulemaking for the AML Program Rule, which we've talked about quite a bit. I thought it would make sense to kick off our conversation with , the fact that the Wolfsberg Group has filed their comments.
We've talked a lot about the Wolfsberg Group. We've also interviewed Alan Ketley and others. Their comment letter was really interesting on a couple of levels. I'm just going to give you the quick synopsis, but you should read it. They said that the rule they believe is has the potential, and I'm quoting here, to generate a paradigm shift to bring about more effective outcomes and better oversight of the financial system, thereby protecting the economy people and communities from financial crime related threats, unquote. I agree with that. I've thought since we saw the proposal from FinCEN and the FBAs that it was well crafted. There's obviously some issues that practitioners have to figure out. But they also stressed that they want to see a flexible risk based approach and that any changes would also mean there should be changes and revisions to the FFIEC exam manual, which is a practical comment, and then the rollout of examiner training, which we've talked about for quite a long period of time. But I thought that their comment letter, as all comments that they make as an organization, was compelling, straightforward, and pretty interesting from my perspective.
Elliot Berman: I agree and you and I talked about this before we started recording. One of the many recommendations they had, which related in part to the manual is the fact that the implementation time period in the final rule, they recommend be two years.
And the reason for that is for all the FIs to be able to, of course, update their programs, implement updates, but also for the manual to be fully reviewed and updated so that it aligns with the final rule and that get out early because how programs get revised will in part be driven by the changes to the manual.
John Byrne: That's right. And in the past, changes to the manual have been fairly slow, and this isn't a criticism, it's just recognizing that you have all these banking agencies and FinCEN working together, and you have to make decisions on wording and tone and that sort of thing. So we get that. But I think you're right that should make this even more of an imperative.
So related to that, we didn't have time to cover this last week, but the Department of Justice in September updated what they call their evaluation of corporate compliance programs. And so this is how the Justice Department from a criminal standpoint will look at institutions that they are prosecuting and make decisions on whether or not the corporate compliance program is not simply adequate, but how it's crafted.
And so it's a 25 page document. I just wanna make just one minute on one section of it because we've talked about this quite a bit. And that's the tone at the top, but also as they call it, commitment by senior and middle management, which I think is a really interesting and certainly relevant area adjacent to the tone, because the tone just being at the top of the house, as it were, but not throughout the organization you're not going to have the strong organization that you look at. In that section, they talk about, as I said, conduct at the top, which means board of directors and executives to set the tone.
How is that done? And then a shared commitment. So what actions of these senior leaders and middle management taken to demonstrate their commitment to compliance, compliance personnel, including remediation. And then oversight. What compliance expertise has been available on the Board of Directors, which is consistent with what the AML program rule is talking about, by the way so going back to the DOJ section, they say, have the Board of Directors and or external auditors held executive or private sessions with the compliance and control function.
So there's a lot of other aspects of what DOJ looks at. They look at resources and funding, experience, the qualifications, how compensation is designed, but just urging folks to take a look at the evaluation of corporate compliance programs and stuff that DOJ website just updated last month.
Elliot Berman: And this white paper covers a substantially broader spectrum. This is not just AML and not just financials. There are compliance programs of various kinds across all kinds of corporate companies and corporations in the United States that do have potential criminal penalties for failure to meet the expectations.
And this is DOJ who would manage criminal prosecutions how they're going to look at compliance programs. But I think it's a great document for those of us in financial services to take a look at to see how what we're used to is part of the expectation for other parts of the economy, but also how to build our programs to avoid the risk of criminal prosecution.
John Byrne: I think that's right. And just one other thing I just want to mention quickly, the FBI has sent out a press notice that for folks to take a look at what they call their Crime Data Explorer. It's an interesting part of their website in which you can look at particular crimes on a quarterly basis whether they've increased, decreased, that sort of thing, and they looked at everything from violent crimes to property crimes, to things like identity theft, human trafficking, and what have you. It's on the FBI website. It's their Crime Data Explorer, and it's national data broken down also by state and region. So it's a really useful tool for anybody in our space that's trying to make a determination of where the risks are increasing, where they're stabilizing and perhaps where maybe they're being reduced and what that means in terms of your response to that.
Elliot Berman: Very valuable tool, I think, putting a lot of information that gets talked about a lot in sort of fragments in a single place. Kudos to the folks who are putting that together and maintaining it, but also great tool. And as you did, I recommend people take a look at it. Put it in your resource bucket in case you need that.
You pointed out something to me that I was not familiar with. Did a little reading and just want to share this with our audience. There is an organization called Blue Shield International. They recently published their annual report for 2023. I was not familiar with this group so I'm going to read a little bit from the beginning of the report.
This section's titled Blue Shield, A Worldwide Movement. And it goes on to say, the Blue Shield is a worldwide movement of NGOs whose mission is the protection of the world's cultural property and is concerned with the protection of cultural and natural heritage, tangible and intangible, in the event of armed conflict, natural or human made disaster. So that's a pretty big mission statement.
But they do a lot of interesting things. There are major organizations that we're all familiar with, the International Committee of the Red Cross, UNESCO, a portion of NATO, an organization called Cultural Emergency Response that's involved. But they do a lot of interesting things and I think it's worthy of folks to take a look at this annual report. You can find it just by searching Blue Shield. International. And seeing how they're constructed and the kinds of things they're focused on.
They do advocacy to try to influence policy so that governments will take on these kinds of responsibilities. They try to do coordination activities. They have field teams that are actually out on the ground in the middle of conflicts and disasters. It's a very interesting effort from a very diverse group of folks, so I strongly recommend that people take a look at that.
John Byrne: That makes sense. Hey we've also talked quite a bit in our world about corruption and bribery, so two things I wanted to highlight. One is we mentioned when it happened, the Snyder v. U. S. case earlier this summer, which really narrowed the scope of what can be considered an illegal gratuity, in my view, a poorly drafted decision.
Senator Jeff Merkley, who's a Democrat from Oregon, has put out a bill to outlaw state and local officials from accepting gratuities for official acts. Referencing a story in The Hill last week, but also on Merkley's website. So this, again, bill just introduced, obviously there's not a lot of time in the Congress. My guess is this will come back up. But this is in response to the fact that, experts have said that public corruption standards or safeguards are changing. So I think that's important. Again, Senator Merkley's legislation, take a look at it on his website.
And then something that has never happened before. A sitting mayor of New York City has been indicted late last week on five federal charges related to bribery, wire fraud, conspiracy. and soliciting campaign contributions from foreign nationals, a 57 page indictment.
By the time you're listening to this is information that's a week old, so I'm sure there's been some other activity during this week, but I thought it was definitely something that we should mention. This is Eric Adams, the mayor of New York City, who has denied all of this, but I gotta say, some of the text messages that have been released by the prosecutors it's going to be an interesting case. Let's put it that way.
The US Attorney said in his description of this late last week that the mayor is engaged in a long running conspiracy. That the mayor took contributions, even though he knew they were illegal, and the contributions were attempts by the Turkish government to buy influence.
So very interesting case, Elliot, and obviously it's gonna be something more than simply worth watching. Several of his leadership team have already resigned. I think the police commissioner, the head of the health department, I think the school board person, and I could have the categories mixed up a little bit, but a lot of leaders have stepped down because they seemingly are all involved in some aspect of this. So I thought that we should definitely mention that since corruption is an issue that our community pays a lot of attention to.
Elliot Berman: I would just want to go back to Senator Merkley's bill. It's called Stop Corrupt Gratuities Act. So no question about what he's trying to do there. Unfortunately, we're seeing allegations of foreign influence at a variety of levels in the US. Had Senator Menendez and some of that was international influence. Mayor Adams is a foreign government. It used to be, at least my view was, it used to be that local government corruption had to do with maybe a construction contract or something like that in the locality. But now it seems, maybe because of globalization, local corruption is seeming to have not all the time, but more often than I would have thought an international flavor to it.
John Byrne: That's right.
Elliot Berman: Coming back to the Congress for a moment. And we talked about this back in January in our webinar on human trafficking, Senator Gillibrand a Democrat from New York, introduced a bill in the Senate, Trafficking Survivors Relief Act of 2024. Again, as you pointed out, the Congress is on a short time clock now, so it's unlikely this will be acted upon this year.
But this is about the whole issue of trafficked persons often committing crimes as a result of their being trafficked, and then difficulty after they get away from their traffickers in getting back to any kind of a normal life because of the Illegal activities they were forced to participate in.
And this law would be intended to relieve trafficked individuals of the shadow of their prior criminal activity that occurred because they were being trafficked. An important topic. Hopefully at some point Congress can take a breath from other things and take a look at something like this so that this important issue can be dealt with.
John Byrne: Sounds good. I'm efforting a conversation with a former DHS official. We're just trying to figure out a schedule for that, and that'll focus on his work in the anti trafficking space. As I mentioned, it's Cyber Security Awareness Month. The Treasury Department issued sanctions against members of a Russian based cyber criminal group. It's actually called the Evil Corp. There you go, right? And they did that in conjunction with the United Kingdom and Australia. So I just wanted to mention that.
Elliot Berman: And our October webinar is the 24th of this month. It'll live stream at 1 p. m. Eastern Time. You can register at our website and it's about the question, Is Fraud the new AML? I think we talked last week, there's certainly a growing regulatory expectation that fraud programs will have many of the elements that are clearly required for AML programs. And so we're going to dig into that with some great experts and our Chuck Taylor moderating that.
And then a teaser for November. We're going to be looking at a review of all the different things that FinCEN has been working on this year. And as you and I have talked about them as they come out one by one, it's a pretty good sized stack and worthy of an overview. We'll give people more details as those become available.
John Byrne: All right, Elliot, sounds good. You stay safe the rest of the week, and we'll talk again next week.
Elliot Berman: You too. Bye bye.