Terrorism, Sanctions, Crypto, and Cybersecurity

This week, John and Elliot discuss the forthcoming  Crypto Crime Report for 2024 from TRM Labs, various sanctions focused on the Russian energy sector and cross-border payments between actors in Russia and China, civil money penalties against former senior officials at Wells Fargo, penalties issued against Robinhood by the SEC, insights from counter-terrorism experts at the Atlantic Council, and other items impacting the financial crime prevention community.

Terrorism, Sanctions, Crypto, and Cybersecurity - Transcript

Elliot Berman: Hi, John, how are you today?

John Byrne: Good, Elliot. It's chilly here in the northeast but obviously more importantly, our thoughts and best wishes are to the folks in California with the awful wildfires and destructions of homes and communities. And I know we obviously have some of our AML community out there. We hope everybody is safe as possible.

Elliot Berman: Yes, the devastation is really mind boggling.

John Byrne: A lot of things, as always, going on in DC. We're getting prepared for the inauguration on Monday, which also is Martin Luther King's birthday celebration. So a lot of activity here in the nation's capital.

And I thought I would just mention very briefly that this week, the former special counsel, Jack Smith, did issue his report on election interference. Folks should take a look at that. I think it's 150 odd pages and obviously the media to some degree is covering it but I would just urge folks to take a look at that because that's relevant from a domestic terrorism standpoint, from a national security standpoint. But the report was released earlier this week and it's out there for people to draw their own conclusions. Take a look at that if that's of interest.

Elliot Berman: Yes, as you're aware, there's another volume of the report related to the classified documents part of the investigation that is currently embargoed by the court pending appeals. So we'll see whether that ever is released.

John Byrne: Since we're talking about terrorist related activity, another thing that you and I saw earlier last week was several articles and blog posts on the Atlantic Council page. Atlantic Council is a well respected organization of international and domestic experts.

And this is about what the New Orleans attack tells us about terrorism in 2025. So a series of experts have talked about that and it's on their website. And they said that, as of the writing, the FBI said that the driver acted alone and was inspired by the Islamic State of Iraq and al Sham, ISIS. What does that attack reveal about ISIS and the state of global terrorism?

What are the policy implications for the incoming administration? A number of counter terrorism experts have their analysis on that site. So take a look at that when you have an opportunity.

Elliot Berman: An interesting blog post. You and I have talked about this a lot over the years the Atlantic Council is a great source for insights. They take a look at a lot of different things but they're non partisan, they have good experts, and I would add it to the list of websites to have bookmarked, and things to look at, and potentially to sign up for getting a ping when they post something new.

John Byrne: Totally agree.

Elliot Berman: Wandering around a little bit the SEC released notification that they issued a fine to Robinhood which is an investment platform under which there are several related broker dealers. There were a variety of challenges cited, but one of them was related to the failure to do timely suspicious activity investigations and reporting. And identifying it as a systemic failure. And this goes back to a period from 2020 to 2022. The company has indicated that they have righted these problems. But again, it's a reminder that it's not just traditional banks, but it's other types of financial service providers, including broker dealers that have obligations and are examined by their principal Federal Regulator for it.

John Byrne: Related to non traditional activity in the crypto space, the TRM Labs has published their annual crypto crime report. And this is for 2024, and just a couple of quick items here, and we're going to interview Ari Redbord, who's been kind enough to talk to us in the past about the report, but overall, they said illicit crypto volumes actually have declined, and the largest categories of illicit activity on the blockchain do remain largely the same as in 2023, but it will definitely be interesting to get his take on these numbers. And this is available on the TRM website.

So I wanted to mention that and then connected in the crypto space. The State Department published today a joint statement on cryptocurrency thefts by North Korea. And the statement was issued on behalf of the US, Japan, and South Korea. And just couple things to note, it's a new warning to the blockchain technology industry regarding the ongoing targeting and compromise of a range of entities across the globe by North Korea's cyber actors. It threatens all three countries, and of course, the broader international community, so a lot more information about those threats are in that statement that was issued today by the State Department.

Elliot Berman: Another topic that you and I regularly talk about is cybersecurity and New York's Department of Financial Services, which is the most robust state level regulator. Announced recently enforcement actions against two insurance companies, GEICO and Travelers Indemnity, related to cybersecurity events where customer personal information like driver's license information and other personal information was accessed.

And reminder that your institution may be focusing on its federal regulators, but depending on where you operate or where you're licensed, you may also have state level obligations that you should pay attention to. New York, of course, being very robust, California, but other states to varying degrees touch a lot of financial services as well, whether it's banking or money service businesses, payments, money transmitters, et cetera.

John Byrne: Since you're with financial institutions, do you want to mention the recent announcement by the OCC regarding three employees from Wells Fargo?

Elliot Berman: Everyone will remember that quite a while ago starting more than a dozen years ago 2013 to 2016, there were a series of significant problems at Wells related to opening unauthorized accounts for customers and a number of other things. Three individuals who were in senior positions during that time window have now been assessed civil money penalties by the OCC. Their former chief risk officer, who also received a prohibition order, which means that person cannot work in another federally regulated financial services company. The chief auditor and the executive audit director. And the the CMPs, the civil money penalties range from 10 million dollars at the top end for the person who is in the job of Community Bank Group Risk Officer, down to $1.5 million for the Executive Audit Director.

CMPs for individuals often take a very long time to work their way through the regulatory process, and this is an indication that, 10 to 12 years later they're finally coming to finality.

John Byrne: I also saw, and I didn't drill down on it, but the OCC is going to increase their civil money penalty amounts. So that's more of an operational issue, but they also announced that this week.

The Treasury Department, again, as we continue to reference U.S. related activity, does a great job of keeping us up to date in the sanctions space with almost daily updates. But today, as we're going to record, they are moving against more Russian efforts to evade U.S. sanctions. And this particular targeting is a scheme between actors in Russia and the People's Republic of China to facilitate cross border payments for sensitive goods. Treasury is reinforcing the grave risks foreign persons facing continued work with Russia's military industrial complex.

They redesignated a particular executive order of almost 100 entities already designated. As a result of that designation if they knowingly facilitate significant transactions, there'll be mandatory secondary sanctions as well. So according to this particular executive order, more than 150 entities and individuals have been sanctioned, but that's that was announced today. As well, so I wanted to wanted to mention that.

Elliot Berman: And in the sanction space as well, the Department of State this week indicated that they were creating sanctions targeted at the Russian energy sector for the purpose of degrading it. These are 180 vessels that are being identified as blocked property. There's 150 individuals and these are concurrent with the Department of Treasury. This is an effort, of course, that all unfolds from the executive orders related to the Russian invasion of Ukraine.

John Byrne: Elliot, I think we'd be remiss if we didn't mention, as we go to record today, the public announcement of the departure of our CEO, Frank Ewing. And Frank's put a very compelling emotional piece on LinkedIn that folks should take a look at. He's started this company 14 years ago. He's going to stay on as a board member but he's moving on in from the CEO role.

And as we both know, the growth since we've been here has been phenomenal. There's over 5,000 employees 12 countries, and only a couple hundred when you and I both started doing these programs. So wanted to make sure we mentioned Frank's leaving.

Steve Meirink is taking his place. He'll be the new CEO. Want to just say that we're excited about that, but also want to mention the amazing work that Frank's done and his strong support for what you and I do, Elliot to get content out there to the broadest parts of the community possible.

So we couldn't have been able to do all close to almost a million downloads since we started doing this, if it wasn't for Frank's support. So that's really been essential to what we hope is added a little bit more information. everybody's day to day needs to stay on top of financial crime prevention.

Elliot Berman: I absolutely second everything you said. We wish Frank well. A well earned pause in what I'm sure is still going to be a long and very successful career.

John Byrne: That's right. Just want to highlight next week on the 23rd, we will be doing our January webinar, and this will be dedicated to the challenges and needed strategies to combat human trafficking and smuggling. We'll have representatives from Polaris, Homeland Security, and IRS CI. It'll be live from 1 to 2 pm ET. If you want to send in some questions ahead of time, feel free to send those to me. So I wanted to mention that, Elliot, and also that I have two podcasts that we are scheduling for next week.

One is with Les Joseph, former head of the FIU at Wells and a longtime career servant of the Justice Department. He's going to talk about some of the issues In the fraud space that he's raised. And as I mentioned, Ari Redbord will go into detail on the crypto crime report. And as always, if you have other folks you want us to talk to, other themes you want us to cover, please feel free to reach out.

Elliot Berman: And you can still register for next week's webinar at our website. We've got a lot of registrations, but we've got plenty of room so we encourage you to join us and get caught up on the latest on this topic. And John, I know you're traveling here to Milwaukee later this week so you can attend another Marquette basketball game, our Big East leading Marquette Golden Eagles.

John Byrne: 5-0 so far, so we this has been a phenomenal run under Shaka Smart, so this is a lot of fun and definitely looking forward to it. Safe travels everybody out there, appreciate everybody listening, and we will talk to you next time. Take care, Elliot.

Elliot Berman: You too, bye bye.