UK Strategic Assessment, Lots of Corruption, AI-Enabled Fraud, and More

This week, John and Elliot discuss the National Strategic Assessment for 2024 for the UK, George Santos's plea, the latest edition of the Cornerstone from Homeland Security, the policy brief on environmental crime from the FACT Coalition, and several other items. They explore their impact on the financial crime prevention community.

UK Strategic Assessment, Lots of Corruption, AI-Enabled Fraud, and More - Transcript

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

John Byrne: I'm good, Elliot. Nice vacation, you and Karen, how'd it go?

Elliot Berman: We had a great time. Wonderful weather. We were in New England, in Boston, and Cape Cod, and Plymouth, New Hampshire, and had a wonderful time. And I know that Karen and I celebrated an anniversary at the end of last week, and you and Sue celebrated one over the weekend. How did that go?

John Byrne: It was great. It was our 45th, and we had everybody here. The whole family was here, and we celebrated that, plus some August birthdays, including our soon to be one year old grandson Owen, who will turn one this week. It was great. It was great. Everybody was here, and it was great.

We were able to have a quick conversation last week with Joe McNamara that went well. So we're happy to have you back. A bunch of different things going on. One that we didn't talk about in our prep call earlier today, the FBI has formally indicated that there have been hacking attempts from Iran, both against the Trump campaign and the Harris campaigns.

They the US intelligence groups, including the FBI, announced that earlier this week and apparently they've been using phishing as the way to try to get that information. That was also something that was mentioned. And since we talk about cyber issues constantly, we thought we would add that to the mix.

What are some of the things on your plate?

Elliot Berman: I know you were going to mention this, but former Representative Santos reached a plea agreement with the U. S. Attorney and the Justice Department. He will very likely serve some jail time. It was for identity theft, which was very interesting that was the charge that they ended up with.

John Byrne: Let me just add real quick, besides that the sentencing obviously hasn't occurred yet. He also has to pay restitution of $373,000 and a forfeiture of $205,000. And so in that particular case brought by the Eastern District of New York, and as you just mentioned Justice Department was involved as well. And IRS, I gotta give our partners there some credit for that as well in terms of their ability to do the investigation there.

Elliot Berman: I saw a piece reported about something happening in London, which related to Simpson, Thatcher and Bartlett, which is a large international law firm headquartered in the US. The Solicitors Regulation Authority in London, which supervises lawyers was enforcing their gatekeeper rules, which require law firms to have proper anti money laundering policies.

And the London office of Simpson Thatcher has been referred to the reviewing tribunal for being out of compliance for a number of years. The reason this is interesting is you and I have talked many times about the importance of gatekeeper regulation. Many countries have been putting it in place, FATF certainly views it as the state of the art, and the US has been slow starting to make some forward progress, but there's nothing so far about lawyers, and a lot of transactions, I used to be a transactional corporate lawyer, and a lot of transactions flow through law firms, and, having, whether it's suspicious activity reporting requirements or other things so that lawyers do not become facilitators would be a good thing. This is an indication of a country that has them and is working to enforce them even against major law firms.

John Byrne: It's interesting sticking with the corruption angle that we mentioned with Santos, And proving, obviously, our ability to be bipartisan when we see elected officials commit corrupt acts. Also, what was announced yesterday from the U. S. Attorney's Office here in D. C., Treyon White Sr., a D. C. council member, was arrested yesterday with a criminal complaint charging him with bribery and the bribery was acceptance of $156,000 in cash payments in exchange for using his position to pressure government employees.

That was done to accept the money in exchange for using his position to pressure renewal of contracts to particular companies with 3% of the total contract value. The arrest was announced by the U. S. Attorney's Office in D. C. in conjunction with the FBI and also our good friend and supporter of the Forum, Kareem Carter, who is the Executive Special Agent in Charge of IRS CI here in Washington, DC. So I wanted to give some call out to our friend Kareem who's involved in that case as well, and it's an arrest, obviously, it's an allegation, and there will be obviously court proceedings. But wanted to mention that as that was just announced by that the court or by the attorney's office, but also was in the Washington Post.

Elliot Berman: And since this be seems to be corruption week and fraud week the Southern District of New York, US Attorney's Office announced the charging of a, Franciscan friar with wire and mail fraud related to fake medical charity in Beirut. The allegations, and again, as you pointed out, this is charging, this is not decisioning, but the individual involved was allegedly seeking to raise funds for clinics in Beirut that didn't exist. Part of the allegations are that he passed himself off as a doctor, a surgeon with many PhDs and doing good work in Beirut where all the money was flowing to him.

On the irony scale, this one's pretty high since his order requires a vow of poverty. We'll see where this one goes. Again, just announced this week. And it'll wind its way through the criminal justice process and we'll see what comes out the other end.

John Byrne: Going internationally, the National Crime Agency in the UK issued their National Strategic Assessment of 2024 of what they call serious and organized crime that comes from the NCA's Director General. And a series of threat areas they talk about cyber, drugs, fraud, illicit finance, modern slavery, and human trafficking. The threats, they say, cannot be considered in isolation. and increasingly important to target cross cutting enablers that enhance offenders ability to conduct their criminal activities. And so they look at the criminal's use of technology, the UK border, insider threats, bribery and corruption, as well as crimes happening in the prison system.

So this was just issued earlier this week. Again, this is the National Strategic Assessment 2024 from the National Crime Agency in the UK.

Elliot Berman: Yes, and just like in the US, where we have risk assessments and threat assessments, this is a detailed document, as you mentioned, covering many areas and therefore being Pretty comprehensive. Unlike a lot of the reports that you see in the US, which are issued in a PDF this is all done on their website. It's very interesting and not surprisingly, many of the things that we see in the US threat assessments are definitely covered here.

But good reading and helpful for our listeners who are either in the UK or who are doing business in the UK to be aware of what is NCA looking at. NCA is a law enforcement agency similar to the FBI in the US, and valuable to take a look at.

John Byrne: The FACT Coalition, which we've talked about in the past, is the Financial Accountability and Corporate Transparency organization that includes Transparency International and other representatives, issued a report this week, Environmental Crimes Posing Unique Illicit Finance Challenges and Require Specific Solutions.

A short seven page report. Interesting analysis from the researchers there. Basically, they take a look at current laws and regs in the US that do indicate and threat assessments that do talk about Environmental Crimes. Specifically the US Strategy on Countering Corruption, the Council on Transnational Organized Crime, the National Money Laundering Risk Assessment, and other things, but based on this short policy brief, they say that there still needs, even though there are regulations coming or evolving on beneficial ownership, on residential real estate.

They do point out that generic, their view, AML CFT approaches without tailoring them to specific realities of environmental crime are unlikely to be fully effective. So they go through a series of challenges and opportunities, particularly some interesting areas that they focus on. They're calling part of what happens in environmental crime double laundering, which is a term I had not seen before.

I'll let folks take a look at that and put that again in their in their tool shed, if you will. But they talk about that, they talk about more often than any other crime, many of the immediate perpetrators of these crimes are also victims, which is an interesting analysis. And then they indicate, and they don't blame, but they indicate that financial institutions don't have the same tools to identify environmental criminals, which is obviously absolutely true.

So they point out the need for continued use of sanctions, but also in the US to add additional environmental crimes to the predicate lists of money laundering crimes under US federal law. So an interesting analysis there. It is a global issue, but they do mention some things from the US perspective.

And again, there was a number of co authors with this from both in the FACT Coalition, the International Wildlife Trust, and something called the Wildlife Justice Commission. But an interesting short report. In fact, Elliot, I will reach out to these authors and see if they'd be willing to sit down for a podcast at some point.

So this is really an interesting area. Clearly, the financial sector can't be experts in everything, including environmental crime, but just another interesting angle of how illicit finance comes at us in so many different ways.

Elliot Berman: I found the report very interesting and I'm not going to go into detail about it, but the whole idea of the double laundering and the fact that one of the many challenges with environmental crime is figuring out whether you're actually seeing a transaction that is legal or not.

John Byrne: That's right.

Elliot Berman: That's one of the differences here from what we're used to in traditional money laundering where it's clearly the result of illegal activity. Here there's not an easy way to tell whether that load of lumber was illegally harvested in a protected area, or that's commercially appropriate activity. I agree with you I commend the report to folks in the community just to get a better context for this whole area as you try to think about what parts of your organization may be affected and how you might be able to identify things.

John Byrne: We also have talked in the past, our partners in Homeland Security have a regular issued newsletter called Cornerstone. The August issue is out. This is issue 55, and it focuses on the rise in AI driven cyber enabled fraud and attacks. So they talk about how generating AI is being used for cyber attacks, some recommendations in there, the type of attacks, password cracking, phishing, voice phishing, business email compromises, some things we're obviously very familiar with, and some examples of the SEC going after investment fraud through the misuse of AI.

They give you some preventive measures, which include have an encrypted offline data backup strategy to prevent loss of data and revenue. So this Cornerstone issue, as I mentioned, Issue 55, the rise in AI driven cyber enabled fraud and attacks.

Elliot Berman: I think you and I have both found the various topics they cover and how they cover them to be valuable. It's good and succinct, but it also picks key current trend kinds of issues like AI, how AI is stepping in as another piece of some of the same problems we've been seeing, but now an accelerator.

John Byrne: The last thing on my list is sadly, this is the 10th anniversary of the murder of James Foley, a photojournalist, a Marquette alum who was brutally murdered by ISIS 10 years ago. As a result of that Jim's mother Diane created the Foley Foundation and has worked tirelessly to deal with changing the policies of the US and other countries to get hostages returned. There's been a series of interviews with Diane and a lot of activity around the Foley Foundation, but the Senate in a rare bipartisan vote issued a resolution just the other day recognizing the Foley Foundation's work to advocate for the release of Americans taken captive abroad.

Janine Shaheen from New Hampshire, along with Lindsey Graham of South Carolina put together this resolution, which was supported by the entire Senate. You can take a look at the actual language there, but the bottom line is the comment from Diane Foley, where she said that they thank these senators for this resolution and calling for the moral courage to prioritize the return of Americans held captive abroad and deter international hostage taking and arbitrary detention.

So I wanted to mention that. We've had several conversations with some members of the Foley Foundation, some of the reports they've done, and also talked to Diane a few months ago about the book that she released earlier this year about her journey since Jim's murder.

Elliot Berman: I'm glad to see that the Senate was able to be unanimous about something, and this is a good thing about which to be unanimous. A terrible problem, the risks that journalists take to report on what's going on around the world, particularly from the most difficult places on the planet.

John when people hear this our August webinar will have been completed and that's on best practices in dealing with high risk customers. They'll be able to find the fully recorded version in about a week on our website. And in September we're doing a webinar on the use of adverse media monitoring in KYC and EDD, and that'll be live streamed September 26th at 1 p.m. Eastern time. Other things you have in the pipeline?

John Byrne: Just efforting a couple of other interviews, so we're working on that. I will just remind folks that last month we, we did the webinar on relationship or romance scams. That recording is available on our website. So you can go to the AML RightSource website, go down to resources and look at previous webinars, and that information is there, and you can watch the whole recording. We urge you to take a look at that. A very topical and difficult issue and very challenging issue. We were really pleased with the folks that we talked to there and I hope you got some good value out of that conversation. That's available. Feel free to distribute that at your institutions, your firms, or your agencies.

Elliot Berman: All right, John. You have a good rest of the week and we will talk again next week.

John Byrne: Take care. See you.

Elliot Berman: Bye bye.