UNODC Report, FALCON Policy Brief, NCA Anti-fraud Efforts, and OCC Reorganization

This week, John and Elliot discuss the UNODC’s technical policy brief on the expanding activity of Asian crime syndicates, a policy brief on high-level corruption from Project FALCON, a blog post from the FACT Coalition how high gold prices are fueling guerilla warfare in Columbia, the NCA’s effort in 2024 to interdict fraud and its focus on online fraud involving AI, and other items impacting the financial crime prevention community.

UNODC Report, FALCON Policy Brief, NCA Anti-fraud Efforts, and OCC Reorganization - Transcript

Elliot Berman: Hey John, how are you today?

John Byrne: Hi, Elliot. Good. It was good seeing you last week we were both at an event on Marquette University's campus for the Commercial Banking Center, in which the panelists discussed impacts of tariffs and policies and regulatory issues with the current administration.

So we had some interesting dialogue there. So I thought that was a good opportunity for the audience to hear some potential challenges and some actual challenges. So I thought that was well worth the time to to have those conversations.

Elliot Berman: Yes. And we're recording on Wednesday and in today's print edition of the Milwaukee Journal Sentinel, your picture is on the front page of the business section.

John Byrne: Yeah. At least it's not a wanted poster.

Elliot Berman: It is not you're there with a recognized economist, so you're okay.

John Byrne: So a lot of things going on. I thought we would start with just an announcement from two days ago. A Manhattan jury found former Senator Bob Menendez's wife, Nadine Menendez guilty on 15 public corruption charges.

Based on the story that I'm reading from Politico, she was accused by prosecutors of being her husband's partner in crime basically, and acting as a go between when the couple sold his power in exchange for cash gold and things like a Mercedes convertible. So interesting that this very public corruption case, resulted in conviction because as we've talked about in previous This Week in AML conversations, the current administration has paused corruption related cases. So it's gonna be interesting to see, is this going to be the last one for a while?

And the Politico story does talk about it. They say that the latest major public corruption case brought by the Manhattan US Attorney's Office was charges against the New York City Mayor e Eric Adams. And again, according to the story that case quote went down in flames after an order from Trump's Department of Justice to drop the charges, unquote.

This is gonna be fascinating to see what happens after this. But in any event, another indication that when corruption occurs, doesn't matter political party. Facts of their juries can and will convict.

Elliot Berman: Yeah. So we may have to wait till 2029 to see the next public corruption trial, at least federal public corruption trial in the United States.

John Byrne: Yeah, no kidding. Going into international issues, and we'll jump back and forth on this, a report issued by the United Nations Office on Drugs and Crime earlier this week. Cyber Fraud in the Mekong Reaches an Inflection Point. According to the report transnational organized crime groups in East and Southeast Asia are hedging beyond the region as crackdown pressures increase.

Amidst heightened awareness and enforcement actions, Asian crime syndicates are expanding operations deeper into many of the most remote, vulnerable, and unprepared parts of the region. What other parts of that report did jumped out at you?

Elliot Berman: As with any of these UNODC reports, and this is actually one in a series looking at financial crime risks and scam risks in Southeast Asia. They end up providing a lot of information and some recommendations and I recommend that people take a look at the report and read the recommendations.

I'm just gonna touch the high points, so the four sections that in which they make recommendations, raising political awareness and will. Strengthening regulatory frameworks. Enhancing the technical and operational capacity of enforcement agencies. And promoting whole of government responses and inter-agency coordination. And as you and I talked briefly before we started recording these all make sense and it feels like the the US is going in the opposite direction essentially in all of these.

And I think these, these recommendations are the type that are meaningful as a general proposition about how to work to deal with systemic financial crime.

John Byrne: I totally agree with that. Staying with cyber issues. Late last week, Governor Barr from the Federal Reserve gave a speech at the Federal Reserve Bank of New York entitled Deep Fakes in the AI Arms Race in Bank Cybersecurity. And he talked about cyber crime as we know being on the rise and that cyber criminals are increasingly turning to Gen AI to facilitate their crimes. They said estimates of direct and indirect costs of cyber incidents range from one to 10% of global GDP.

Specifically he talks about how cybercrime with deep fakes, how that works. And there needs to be a response from the financial sector and from the government in terms of how to deal with this, he said, in addition to preventing the attacks, we need to figure out ways of making attacks more costly and sort of similar to what you just talked about that may include coordination.

Coordination with domestic and global law enforcement. Internationally, consistent laws against cyber crime, and this is important, continued improvement on sharing threat intelligence and insights in real time. Again, this is Governor Michael Barr's speech on the 17th to the Federal Reserve Bank of New York.

Elliot Berman: And on that same theme the UK's National Crime Agency issued its annual plan. And in it, it talked a lot about its anti-fraud activities the last year. It indicated that it prevented 260,000 fraud actions and that it's increased its focus on disrupting financial crime. One of the things that ties directly into Governor Barr's comments is that the NCA has started a number of initiatives to crack down on online fraud, and this includes a commitment to examine ways to defend against AI enabled cyber crimes.

So this isn't just a US issue or a Federal Reserve issue. This is clearly global issue, which we've talked about before. But folks at the top of agencies around the globe are definitely focused on fraud. And specifically on recognizing the increasing impacts that AI is having on financial crime.

John Byrne: Sticking with international the FALCON Group which stands for fighting corruption and organized crime issued a policy brief to deal with the continued fight against high level corruption despite what's happening in the US. This particular project, it's a examination of corruption schemes. Their societal impacts as well as policy recommendations. So, just quickly, and this can be found on the Falcon, dash Horizon EU website. But key findings from the brief include corruption risk indicators. There's new indicators are proposed to assess corruption risk.

According to this brief would utilize high quality administrative data and corporate information, and that can guide policymaking. Impact of corruption, the document addresses the consequences of corruption, including distorted public resource allocation, reduced foreign investment and diminished trust in public institutions. That should feel close to home.

And then policy recommendations include data collection. Interoperability, standardization to enhance monitoring and prevention. So again, the FALCON Group, this is a policy brief on the fight against high level corruption.

Elliot Berman: A really good report. Interesting. I know we talked about some other things that FALCON has done a couple of months ago. Another excellent source of thought leadership and insightful exploration in this particular space.

John Byrne: Also wanna highlight in the area of cryptocurrency, the Washington Post Editorial Board just several days ago, their main editorial was Crypto Needs Sensible Regulation. Reading from the editorial the Trump administration is pushing ahead to undo most of the efforts the US government has made to regulate cryptocurrency markets.

And they talk about things like disbanding the National Cryptocurrency Enforcement Team, you don't necessarily hear this characterized in some of the postings I've seen on LinkedIn, by the way. The editorial goes on to say that this is a part of a comprehensive strategy to undo efforts by the previous administration to ensure transparency and investor protection in the world of crypto.

Again, this is from the editorial, these efforts toward deregulation should be worrying, including for the banking industry. So just highlight this. This is from the Washington Post, the April 20th edition. An opinion piece by the editorial board.

Elliot Berman: Several weeks ago we spoke about the geographic targeting order issued by FinCEN related to MSBs along the southern border, particularly in California and Texas. And this week we saw that a business owner in San Diego has sued the administration over that requirement arguing that they don't have the infrastructure, that it requires them to collect private personal data, and other things.

And it does touch on the fact that small businesses are gonna struggle to build the infrastructure 'cause they're unlikely to have it at the $200 level as opposed to the $10,000 level. So I would expect that a final disposition will take some time.

John Byrne: According to the story, the federal judge overseeing a Texas case, this was the Texas case filed by the Texas Association for MSBs, issued a temporary restraining order on Friday, barring FinCEN from enforcing the new rule. So that happened late last week. We haven't seen any updates on either of these. The defendant's named in the lawsuit that Elliot mentioned, or FinCEN, it's director as well as Treasury, the Treasury secretary, and the Attorney General. We'll certainly stay close to that issue going forward and see where that ends up.

A couple other things I wanna mention the FACT Coalition that's the financial accountability and corporate transparency advocacy group. They've issued a blog post entitled The Deadly Gold Rush, How Soaring Prices Fuel Columbia's Gorilla Warfare. And they talk about the rise in gold to up to 30% in 2025 alone, according to the blog post is transformed, what they call dormant caches into liquid power.

Then they said because of Columbia's fractured guerilla networks, is a game changer. According to the blog post military intelligence reports reveal that dissident commander in chief of FARC now controls a significant stockpile of gold value at 50 billion COPs, which is about $12 million in US.

And they also make the point that gold's not just a tool for purchasing weapons, it also underwrites a sophisticated network of cross border investments. So an interesting post is again on the FACT Coalition website find at thefactcoalition.org.

Elliot Berman: A number of things have been happening in the regulatory community here in the US and one that hasn't necessarily got as much press as some of the bigger ones, like what's going on at CFPB and for those following it, the fact that the Capital One Discover merger was approved by the various federal regulators. But the OCC announced a reorganization. And one part of that is the supervision function for large banks and the one for mid-size and community banks, which had been in separate groups, are going to combine them into a single bank supervision and examination office.

This is scheduled to take effect in June and I'm quoting here, it will allow for the seamless sharing of expertise and resources to address bank specific issues or novel needs, and provides opportunities for career development and progression for the agency's entire examination workforce.

I can tell you from having had clients who were supervised by both of these existing groups, that there is some difference in approach because large banks, bigger, more complex more of everything and have lots of things that, for example, even larger community banks, services, they don't offer, global reach, those kinds of things.

And there is a certain amount of specialization that you develop as an examiner. Or a supervisor in working with different size organizations and while combining them for administrative purposes would be fine. I hope that this doesn't end up meaning that someone who was on the Citibank engagement for the last x number of years ends up moving over and examining billion dollar community banks, because while they're both banks, they're very different. And I think they need to be supervised based on their complexity. And I hope this isn't gonna make that go away.

John Byrne: Makes sense. Couple things before we close this down. One is I wanted to highlight that a great partner for the private sector. Justin Cole has just announced that he's retiring after 27 years of service. He was the director in the Office of Communication at IRS-CI. Done quite a bit with the private sector, both helpful with our Forum and scheduling conversations with key folks at IRS-CI. We wish Justin the best.

Separately, this is not a positive. Senator Ron Johnson, one of Elliot's senators in Wisconsin, said the other day that he wants to hold hearings trying to figure out whether or not I'm paraphrasing, but not by much folks, whether 9/11 was quote an inside job.

This is a, in my humble opinion, and we worked so closely with our partners in the public sector, this is a disgusting turn of events. Given all that we went through. We meaning the country. The private sector, the financial sector, the law enforcement sector, to suggest that the 9/11 Commission report and everything else somehow was inaccurate, is just, it's more than disappointing. So this was announced a couple of days ago, and I'm hopeful there'll be both outrage and direct conversation about this if this actually comes to fruition.

Elliot Berman: Agreed. Yes, , I don't have anything complimentary to say about Senator Johnson, so I won't say anything at all.

John Byrne: There you go. So going forward by the time you hear this, we'll have had our April webinar on cybersecurity.

And I have a couple of interviews set up in the next couple of weeks. One, which will be with a group that we've not talked to about bef talked with before, the Jewelers Vigilance Committee talking about that industry and how they handle AML/CFT sanctions issues. I'm looking forward to hearing from those folks. And then we are efforting a couple of other conversations that will hopefully be able to nail down in the next few weeks.

Elliot Berman: And if you didn't get a chance to attend the live stream a full recorded version will be posted to our website by the end of next week. And by the time you hear this, you'll be able to sign up for our may webinar, which is on sanctions compliance in the new world. And that'll be on May 22nd. So come to our website and you will find the pathway to register for that webinar. So John you have a great rest of the week and I will talk to you next week.

John Byrne: Take care, Elliot. Stay safe.

Elliot Berman: You too. Bye-bye.