This week, John and Elliot discuss the latest pronouncements from the US Treasury about the Corporate Transparency Act, the new head of the Treasury’s Office of Terrorism and Financial Intelligence, the case of theft from a non-profit to support cancer patients, the 2024 Corruption Perceptions Index from Transparency International, and other items impacting the financial crime prevention community.
The Latest on the CTA, a New Head of TFI, Stealing from Cancer Patients, and the Corruption Perceptions Index - Transcript
Elliot Berman: Hi, John. How are you today?
John Byrne: Elliot just weathering the continued storm that we're all involved in. But I want to start off with a positive announcement. Elaine Rudolph Carter dedicated public servant from the Federal Reserve has announced her retirement. Elaine worked in the Richmond Fed for many years, was one of the original founders of the BSA Coalition that is down there, which is a conference and roundtables and bankers and regulators and law enforcement.
Pretty early on she was able to recognize the importance of partnership to try to figure out AML challenges. So Elaine is retiring, but I wanted to mention that because again, just another example of great public servants that are in the AML space. Elaine, congrats to you.
Elliot Berman: John, that's a great lead in to a reminder to our listeners that the AML Partnership Forum this year's two day conference will be spread over March 19th through the 21st at the Mayflower Hotel, and you can still register to join the event at amlpf.com. And again, an effort to build public private partnership in the space, even in these fraught times.
John Byrne: That's great.
After a 10 year period of legislation moving through the Congress, being enacted, and regulations being promulgated. In large response to a FATF mutual evaluation of the United States back in 2006, that we had deficiencies in the beneficial ownership area because of the abuse of shell or the creation of shell companies and other entities, the Treasury Department, over the weekend announced that they will not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, and it will further not enforce any penalties or fines against U. S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect.
That means that the Department will issue a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. According to the Treasury Secretary Besant, a victory for common sense and it's a unleashing the bold agenda by reining in burdensome regulations, in particular for small business that are the backbone of the American economy. And as Elliot and I have mentioned several times, we have both have small businesses, LLCs, took us both about 15 minutes each to file. So I'll just leave that there.
But I do want to mention two more things related to this. Yesterday a statement was released by the new chairman of House Financial Services, French Hill, reading from the statement, the Treasury Department's decision not to enforce penalties against U. S. citizens or domestic reporting companies is a massive step forward for small business across the nation and we look forward to reviewing next steps.
Have other people spoken about this? You may ask, why yes. There's an organization that we've actually talked to and interviewed before, and that's the Fact Coalition. The Fact Coalition, as you might imagine, had a different take on this announcement. Their press release says Treasury reopens the floodgates to dirty money in the United States. They said the gutting of the landmark AML law will enable fentanyl traffickers and other criminals. Remember the fentanyl issue is apparently one of the reasons why we issued tariffs against both Canada and Mexico.
Reading again from the press release from the Fact Coalition, you can get all this information, it's all online, obviously. Ian Gary, who's the executive director of the Fact Coalition said with one tweet, the administration has contradicted 15 years. I'm sorry, it wasn't 10, of bipartisan work by Congress to end the scourge of anonymous shell companies. Hollowing out the Corporate Transparency Act is an unconstitutional subversion of Congress's intent that will not survive judicial scrutiny. And that's obviously something that we'll be watching very closely.
The executive director of the Small Business Network, something called the Main Street Alliance, said this, small businesses suffer when they're forced to compete with fraudulent and criminal enterprises that exploit anonymous shell corporations to evade accountability. And this is a reckless effort to undermine the CTA. So the MSA actually stands firmly in defense of that.
So Elliot, I know we talked about this offline. This was created by statute, the directions, and obviously the regulations came through that process. We're both lawyers. It is going to be interesting to see if this gets challenged, which I imagine it would, and then what's going to be the outcome.
Elliot Berman: Agreed. The other thing you mentioned that part of what the impetus for the CTA was a FATF mutual evaluation of the U. S. that indicated that we did not have an effective way to identify beneficial owners. I don't know if it's ongoing right now, but I think the U. S. has a mutual evaluation in 2025 and
John Byrne: It's 2026, but it started already. So the report will be issued next year. But it's already begun. We've heard from others that have already begun the process of interviewing various stakeholders in the U.S. so that, yeah, it's a lengthy process, but it has started.
Elliot Berman: And it'll be interesting, but probably not very surprising to see how this reads in the FATF report next year. It's not that you and I stay up at night waiting for FATF reports, but this one will be interesting.
John Byrne: It will be. I have other things, but go ahead. What's on your what's on your plate?
Elliot Berman: Staying with the U. S. government for a moment, OFAC and FinCEN in terms of the structure at Treasury, report up to the Office of Terrorism and Financial Intelligence, TFI, and the head of that office is a appointed position, and so a fellow named John Hurley it's been announced that he'll replace the current head, a fellow named Brad Smith. Hurley has a background in asset management and he has served on the current president's intelligence advisory board, I think, in the first administration. But it'll be interesting to see with him at the head, whether we'll see significant directional change in either that bureau or agency in terms of sanctions activity and regulatory activity.
Just a reminder to everybody, the AML program rule is sitting out there in a state of flux, so it'll be interesting if it moves forward in a different form, just dies. But John Hurley will have something to do with that.
John Byrne: Now on sanctions, just to stay with that for a second. Yesterday OFAC announced a sanction against the Iran based I'm sure I'm going to not pronounce this correctly, but Harisad, the sole administrator of Nemesis. Which is an online darknet marketplace, which was the subject of a international law enforcement. operation was taken out in 2024, and this is tied to fentanyl sales.
And they said that Nemesis has over 30,000 active users, 1,000 vendors, and facilitated the sale of nearly $30 million worth of drugs between 2021 and 2024. They also say in the announcement that today's sanctions designation is OFAC's first action as a member of the FBI led interagency joint criminal opioid and dark net enforcement team.
So that's something that I guess we'll continue to see more announcements through that. I would just make a second comment regarding sanctions. We've also seen some stories I believe Reuters is the first to investigate this, that given all the activity in the past five or six days and before, frankly, there's a really solid chance that this administration will eliminate or severely tailor back Russian sanctions, which is not going to be followed by our European allies, but obviously also will shake up the sanctions infrastructure. So I wanted to mention that, it hasn't been confirmed, but I think anybody watching what's going on knows that this is one of the next steps.
Elliot Berman: It's clearly one of the strong motivations for the Russians to try to reach some kind of peace agreement or settlement, whatever you're going to call it, related to Ukraine would be to get the sanctions dropped.
John Byrne: That's right. That's right. We'll be watching that. Everybody will be watching that closely. And so one other thing on our end, another announcement this came out of IRS CI's Charlotte field office. They announced that Stephanie Roberts of Gastonia, North Carolina, was sentenced to 18 months in prison for stealing thousands of dollars from a non-profit corporation for cancer patients. There's somebody you want to invite to dinner. In addition to the prison term imposed, she was ordered to serve two years under court supervision and pay $157,000 in restitution. The acting attorney general there, Cameron, was joined by somebody who's a friend of the AML Partnership Forum, Trey Eakins, a special agent in charge of IRS Charlotte office.
So more information is available on the website. I would just say this is a very difficult time for our colleagues at IRS. There's also stories as we go to record today that close to 50% of staff, maybe let go by the end of the year. We'll leave to others to comment on what a disaster that would be not just for filers and refunds, but to going after evaders of taxes and shell companies and all those other things. But did want to mention that the IRS was part of this group that was able to get this sentence in this really sad case in North Carolina.
Elliot Berman: John, we've talked recently about several gambling industry related issues, both in Australia and in the UK. There is a company that operates in the UK, Aspire Global. And the UK Gambling Commission found serious failures in its anti money laundering and social responsibility measures. It operates 58 gambling websites, and so it was fined 1. 4 million pounds and was directed to clean up its act.
As we often talk about, there's the focus on banking, but money laundering and fraud run through any financial service type of enterprise that's out there and in many places the regulations reach out to those folks. You're doing business with any of these people you need to be aware of what their status is.
John Byrne: Yeah, that's obviously correct. Elliot and I being lawyers have been in the past involved in events and projects with the American Bar Association. In my view, they've been relatively quiet about all that's been going on and frankly for a while. But in the past couple of weeks, they've actually been very vocal about a few things.
And on March the 3rd, they put out a statement and I'm just going to read parts of it, but the ABA rejecting efforts to undermine the courts and the legal profession. They said a few things, government actions, evidence, a clear and disconcerting pattern of a court issues, a decision this administration does not agree with the judge is targeted.
If a lawyer represents parties in a dispute with the administration, or if a lawyer represents parties the administration does not like lawyers are targeted. We issue statements standing up for these four key principles. And a government official targeted us, meaning the Bar Association, by instructing some of its lawyers not to attend ABA meetings or participate as speakers.
These actions highlight escalating governmental efforts to interfere with fair and impartial courts, the right to counsel, due process, freedom of speech and association in our country. So a strong statement about the efforts to intimidate and the facts behind it, including some specific executive orders, one that targeted legal and medical organizations because of DEI advocacy, what's happened with the Justice Department.
So the American Bar Association, you may not always agree with everything that they recommend, but certainly a reputable, long standing organization who's speaking out very loudly about this and they end with this. The American Bar Association has chosen to stand and speak. Now's the time for all of us to speak with one voice. We invite you to stand with us.
Elliot Berman: Yeah, strong statement. We've talked about the decision by the Justice Department not to enforce the Foreign Corrupt Practices Act. We've talked about other corruption things. And in prior years, we've talked about Transparency International's Corruption Perceptions Index.
The one for 2024 is now available on the Transparency International website. And wanted to let folks know, if you don't track that, it's worth a look through. Lots of different ways to look at it. The countries at the top and the countries at the bottom haven't moved around a lot. You've got, the top countries in terms of the least corruption, Denmark, Finland, Singapore, followed by New Zealand, Luxembourg, Norway, Switzerland, Sweden. The bottom are the same countries that struggle with pretty much everything. South Sudan, Somalia, Venezuela, Syria, Yemen, Libya, Eritrea, Equatorial Guinea, Nicaragua, Sudan.
Go out and take a look at it. It's very interesting. It's a very comprehensive report. They look at a number of different things, and the y aggregate information from many authoritative sources to come up with their process for giving scores.
The U. S. slid just a little bit. This was prepared well before the order to step away from the FCPA. How that will affect things for the 2025 report we'll know in a year. If you're following corruption, if you're trying to figure out risk like geographic risk, this certainly would be a source that you could look to as part of your overall geographic risk assessment.
John Byrne: Sounds good. You mentioned the Forum that's coming up in a couple of weeks. And I have a few podcasts that we're going to be posting in the next couple of weeks. We've talked to some experts that deal in technology issues with compliance, governance structures, those sorts of things. Trying to effort some additional folks. Some folks that have retired from the government just recently, either by design or other reasons, have agreed to sit down for conversations about both some of their concerns, but also some of the things they did during their careers that are relevant to our community. So we'll be working on those as well.
Elliot Berman: And our next webinar will be the 27th of March. It's on risks related to virtual assets. We've got several experts to help folks with that. So it's valuable and we're beginning to develop a new group of podcasts about virtual assets and cryptocurrencies. And those will be posted on our website probably take us about six weeks to get those going, but another thing to watch for in the future. So John I'm not going to see you next week, but I will see you the week after.
John Byrne: Sounds good. Trying to get away from the chaos. I'm actually going down to spring training and watch the Washington Nationals play some spring training baseball in the next couple days. Talk to you.
Elliot Berman: Talk to you next week. You travel safely and enjoy the game and take your sunscreen.
John Byrne: Yeah, no question.
Elliot Berman: All right. Bye bye.