This week, John and Elliot discuss a release from the G7 on preventing the evasion of Russian sanctions and export controls, reported payments for Yevgeny Prigozhin made through Western banks, FATF’s report on its recent mutual evaluation of India, the Financial Conduct Authority’s recent insights on fraud, and several other items impacting the financial crime prevention community.
Sanctions Evasion, FCA on Fraud, FATF on India, and Illegal Prigozhin Payments - Transcript
Elliot Berman: Hey, John. How are you today?
John Byrne: I'm good, Elliot. Spent a week in Missouri last week with the Missouri Bankers AML, BSA conference, a lot of good discussions, continued increase in check fraud got talked about as well as Treasury checks as a method of moving illicit funds, which was something I knew about, but we had a presentation from the Postal Service about that, and that was really fascinating. We also had the opportunity to have a pre-recorded conversation with Guy Ficco, as our audience knows, the current IRS:CI chief, and at some point in the near future, we will be posting that for folks to take a listen to some of the things that Guy mentioned for the bankers there in Missouri.
Elliot Berman: While you were gone our friend and colleague Joe McNamara sat in with me and we had a good session. But it's good to have you back. And what are you looking at this week?
John Byrne: So a number of things. One that received a lot of focus from our sanctions community. The G7, earlier this week, announced industry guidance on preventing the evasion of export controls and sanctions imposed on Russia. As we've talked about sanctions for a long time particularly sanctions against Russia, there's been a lot of debate on how easy is it to avoid those sanctions.
So this joint document from the G7 includes the following areas of priority for the group, and that's items that pose a heightened risk of being diverted to Russia, red flag indicators of potential export control or sanctions evasion, and best practices for the industry to use to address these red flags and conduct enhanced due diligence.
So this is posted on the Department of Commerce website. The Assistant Secretary for Export Enforcement Matthew Axelrod, who we have had at our forum, in the past said the following, "preventing Russia from obtaining the components it needs to power its deadly missiles and UAVs is a top priority for G7 members."
And this guidance is designed to respond to Russia's changing evasion tactics. So I thought that was a pretty major announcement this week.
Elliot Berman: And the announcement includes red flags identifying them, but also giving a lot of detail. So for those folks who already have a robust program, this is good to use as a self check. For those of you who aren't sure whether your program is adequately robust this is a nice way to take a look and say, okay, am I, catching these? Am I paying attention to all of these kinds of things? And do I have some escalation process?
Interesting read. This is a joint piece among a lot of organizations globally. So European Commission Canadian Border Service Agencies, and many others. Recognition of sanctions enforcement being really a, global challenge.
John Byrne: So sticking with global issues, the Soufan Center, which was founded by Ali Soufan, the former FBI agent, counterterrorism expert, had what they call a Global Security Forum back in May. And they've released their report from that May discussion. And you can find it on their website.
Just a couple of quick key findings that I thought I would highlight. Amidst shifting geopolitical rivalry states must recognize that terrorism will remain an enduring challenge. The growing influence of emerging technologies presents complex challenges to international peace and security. They also mentioned that third party mediators have an important role to play.
As global instability presents a greater need for international dialogue and mediation efforts, there are other items as well. It's a 40 page document. Again you can find it either by Googling GSF, Global Security Forum or go to the Soufan Center website. So again, just more information that's valuable in terms of our continuing challenge of dealing with global security threats, which constantly challenge us, obviously.
Elliot Berman: Yes, and if you're searching for the report at the Soufan Center, Soufan is S O U F A N. Another thing from an international perspective is the Egmont Group which is an international organization created to combat money laundering. They have a secure platform where they share information, has suspended the country of Colombia's access to the information sharing platform because one of the commitments you make as a country if you access the platform is that the information is confidential and won't be shared. But the president of Colombia shared some information that came out of one of those reports that was accessed on the platform, and at least for the time being they'll no longer be able to access it.
There's 177 member countries in the Egmont Group, and the suspension is pending a further investigation. The downside is that Columbia puts important information in, and for their own anti money laundering efforts, gets important information out. So hopefully they'll straighten this out. We talk about information sharing a lot, and maintaining the confidentiality of that information is often a key component, and here the Egmont Group was appropriately serious, about the fact that If you participate, you have to participate within the framework.
John Byrne: You also identified one of the many things that FATF produced in the past couple of weeks that relates specifically to India.
Elliot Berman: Yes. So FATF when they do an assessment of a country will put out a public report. And they put out their public report about their most recent review of India. It was generally positive, although there was still recognition that there's distance to cover. And for those of you who do business in India or are located in India that report's now available on the FATF website, and I'd recommend that you take a look at it so you'll see Where they are and whether or not there's things that you should be concerned about as you're working with them.
John Byrne: Yeah. As we continue to look at global issues, the acting director for OFAC this week is in both Columbia and Mexico. And they'll be of course publishing the speeches and the outcomes of these meetings. But these various meetings are designed to work closely with the sanctions compliance communities in both those countries.
So in Bogota, the acting director, I believe it's pronounced Palluconi, I apologize if I get that wrong, will do the keynote there for the US Colombia Joint Summit on Sanctions and AML Compliance. And in Mexico City, the Association of Banks in Mexico will host the acting director for an OFAC compliance workshop.
These things, while not seemingly that exciting as a effort do produce a lot of good, policy discussions and good best practices and information and sometimes even guidance. So we'll follow up on this in the next couple of weeks, but again, these are meetings both in Colombia and Mexico dealing with the continuing challenges of sanctions.
Elliot Berman: Yeah, they also create the person to person relationships. You and I talk a lot about partnerships. Partnerships not only hinge on policy, but they also hinge on personal relationships. Going and meeting face to face, the senior officials and their staffs some of that partnership and relationship building happens at these outreach meetings as well.
The director of the specialist directorate at the Financial Conduct A uthority in the UK, Andrea Bowe, gave a speech recently about next steps for tackling fraud and financial crime.
You and I have talked a lot about fraud lately, and we know from our colleague Chuck Taylor that many of his bank contacts are actively talking about fraud, and it seems to be on the rise again, maybe it never was on the wane, but certainly with various new techniques and things like that, it continues to expand and not just in the US.
The highlights of the speech, and I recommend that you go to the FCA website and search for it, collaboration and collective effort are key. And we've talked about that. Partnerships the sharing of ideas, lessons learned, data exchange, and intelligence are critical to staying ahead of the evolving threat.
And, mule activity, which sometimes in this electronic age we don't focus on as much. A lot of fraud activity still involves, physical people doing physical things. And collective efforts in that space was something that was emphasized in the speech. But I think this is a good source, interesting overview.
John Byrne: The Financial Times this week reported that J. P. Morgan and HSBC had unwittingly processed payments for companies in Africa controlled by then Russian warlord, Yevgeny Prigozhin, the one that was assassinated by or at least alleged to have been suspended by Putin.
Leaked documents obtained by the Center for Advanced Defense Studies, that's a Washington based think tank, show that in 2017, a Sudanese company controlled by Prigozhin made purchases of industrial equipment from China that passed through large Western Banks. Again, according to the same story, it says there's no evidence that these banks were aware that they were handling transactions that are commissioned by what was called the Wagner Group.
HSBC declined to comment, but did say they remain committed to combating financial crime. So interesting story in the Financial Times published on the 24th of September.
Elliot Berman: Lastly Dara Daniels, who's associate director of the research and analysis division at FinCEN testified before the subcommittee on National Security, illicit Finance and International Financial Institutions late last week. And, I think it's worthwhile to take a look at her speech.
She spent a lot of time talking about fraud and scams how they detect them, how they share that information through their various alerts, which you and I talk about pretty much whenever they come out. It was focused a lot on virtual asset investment scams, but also on other frauds. Again, commend folks take a look at that. You can find it on the FinCEN website. And again, her name is Dara Daniels.
John Byrne: Actually, I have one more item. Earlier this week, Secretary Blinken was in a meeting in New York on what they called Transforming Humanitarian Response for the 21st Century. This meeting was with the World Economic Forum and the International Development Bank. Because we've talked a bit about de risking and the issues that humanitarian groups face, I just wanted to focus folks on the fact that the State Department continues to make this a broad policy push dealing with humanitarian needs and issues.
One of the things that I thought was important from Blinken's comments, he said, that we have to include a broad range of voices to deal with this. Humanitarian organizations, of course, but civil society, multilateral development banks, private sector, and of course, people that are affected by these crises.
Just another example of how the US government has been certainly making it a priority to continue to be able to support humanitarian causes. And as we've talked about before, the bank regulators didn't come to the table as quickly as we'd like, but they're there now and they've said, that institutions need to do what they can to ensure that they are processing payments and dealing with these issues and making informed risk decisions. Just again another part of the continuing push to help in conflict areas and other areas around the globe.
Elliot Berman: Very important stuff. By the time you hear this episode, our September webinar will be complete. It's on using adverse media monitoring in your KYC and EDD program. The full recorded version will be posted on the website by the end of next week. So look for that.
And October, we're doing a session entitled Is Fraud the new AML? And we'll be looking at the increasing expectation by regulators that many of the things that we're used to doing in our AML programs are becoming an expectation in our fraud programs as it relates to risk assessments and gap analysis and other things like that.
We've got some great experts and our colleague Chuck Taylor will be moderating and you'll be able to register for that when you hear this episode. John, anything else?
John Byrne: I want to highlight that our good friend Dennis Lormel received a Lifetime Achievement Award from ACAMS during their ACAMS Vegas conference this week.
Dennis, as we know, first head of TFOS at the FBI, and since he's retired from the FBI, has been engaged in training and advocacy and ton of work for the AML CFT community. So well deserved award for our colleague and friend, Dennis Lormel.
Elliot Berman: Well deserved and glad that Dennis is getting the recognition that his fine work commands.
You have a great week and I will talk to you next week.
John Byrne: Sounds good. Take care.
Elliot Berman: You too. Bye bye.