As we turn the page on this year’s chapter of The Assembly Las Vegas and hit cruising altitude, ACAMS moneylaundering.com types out some of the news and insights we gathered from the big stage, breakout sessions and sidelines of the three-day conference.
Monday’s opening panel began with Erin West, deputy district attorney of Santa Clara County, California, warning attendees over the explosion and growing sophistication of cryptocurrency-related investment fraud, or “pig butchering,” scams, so called because those who perpetrate them intend to bilk victims out of every asset they own, “from snout to tail.”
Scammers armed with scripts will work their victims for weeks or even months to gain their trust and empty their bank accounts, and use expertly created websites to convince them their investments are not only safe, but also accruing value.
“People cash in 401ks, take out second mortgages, drain kids’ college funds,” West said. “They are losing literally everything they have.”
A pig-butchering scam took down a small Midwestern lender, Lisa Arquette, associate director of risk management supervision at the Federal Deposit Insurance Corp., said Monday in an apparent reference to Heartland Tri-State Bank of Elkhart, Kansas, which closed down in July at an estimated cost of $54 million to the government.
But victims of pig butchering scams still use wires or other “old school” payment methods to transfer their funds to the perpetrators, a behavior that Kyle Armstrong, a former FBI agent who now directs law enforcement relations at TRM Labs, said gives banks and other mainstream financial institutions a reasonable chance of detecting the crime.
With the launch of a U.S. corporate beneficial-ownership registry drawing near, several panelists voiced doubts that banks will derive any benefit.
Exemptions to the beneficial ownership reporting rule and the current absence of a plan for verifying the accuracy of the information legal entities must submit to the Financial Crimes Enforcement Network, or FinCEN, threaten to undermine the database, Daniel Stipano, counsel with Davis Polk in Washington, D.C., said in a panel on Monday afternoon.
“If I’m in the money laundering business, I think [the reporting rule] gives me a pretty good road map if I don’t want to report beneficial ownership,” said Stipano, former deputy chief counsel for the Office of the Comptroller of the Currency. “Frankly, I wonder why any financial institution would want to access it.”
FinCEN Director Andrea Gacki said in a keynote address Tuesday morning that verification, though not possible initially, constitutes a long-term objective for the bureau.
“Having a way to test the validity of the information entered is an important part of the job,” said Gacki. “As an initial step, the bureau may cross-check ownership reports against other available data sources to identify inaccuracies and potential evasion.”
FinCEN separately plans to publish a long-awaited proposal by the end of this year that will permanently subject the real estate sector to anti-money laundering requirements, Gacki said.
Jim Richards, former Bank Secrecy Act compliance chief at Wells Fargo, said during a panel Tuesday that Paycheck Protection Program-related fraud will drive an enormous wave of criminal investigations for which financial institutions should prepare.
“To law enforcement you’re either a victim, a witness or a suspect,” said Richards. “You want to be good witness.”
Michael Greenman, chief counsel at U.S. Bank, advised financial institutions how to go about persuading ransomware victims to come forward, and ultimately recommended a “carrot and stick” approach.
“The last thing they want to do is talk with their relationship manager,” said Greenman. “But we need to know what crypto addresses are involved.”
The Wagner Group, a U.S.-blacklisted, Russian mercenary organization, is not going to disappear despite the death of Yevgeny Prigozhin, other panelists said Tuesday afternoon.
“There are hundreds of shell companies associated with Wagner, some that are designated but many that are not,” said Justyna Gudzowska, senior advisor at The Sentry, told attendees at a Tuesday afternoon panel. “Treasury may not be able to act on it [immediately], but you can: Do your horizon scanning, get information from as many sources as you can.”
In Monday’s keynote address, Elizabeth Rosenberg, assistant secretary of terrorist financing and financial crimes at the U.S. Treasury Department, downplayed the significance of Russia’s development of a digital currency.
“I believe we have an enormous amount of work to do with fiat currency, including the dollar, so this is the first order of challenges we really need to dig into,” said Rosenberg. “Eventually, digital currencies may … graduate from emerging into full-fledged challenges, but right now, our immediate work has to do with fiat currency and highly convertibly hard currencies.”
Roughly a quarter of respondents to a poll on Monday indicated that they or their organizations have “no appetite” for using artificial intelligence to investigate potentially illicit transactions, a result that Carolyn Anderson, a senior manager at BMO Financial Group, attributed to unfamiliarity.
“We don’t know what we don’t know,” said Anderson. “It’s very easy for us to stick with what has worked for us in the past.”
FBI agent Chad Linnerooth warned Monday that artificial intelligence and deepfake technology will fuel “the next phase of scams” and make fraud much harder to detect.
On Wednesday, Dennis Lormel, former head of the FBI’s now-defunct Terrorist Financing Operations Section, discussed the importance of public-private partnerships in stanching the flow of funds between terrorists and their material supporters.
“After 9/11, I was most concerned with the information that we didn’t realize we had,” said Lormel, now president of DML Associates in Virginia. “It could have been about a terrorist attack.”
Also on Wednesday, Melissa Duffy, a partner at Fenwick’s trade and security practice in Washington, D.C., opined that U.S. sanctions priorities have shifted over the past year from simply terminating relationships with Russia towards pinpointing “peripheral activity,” a task she described as “a lot tricker.”
“How do you deal with these circumvention risks? And third countries where sometimes the red flags are behavioral or qualitative?” Duffy asked. “That’s not as simple as just running a name through a screening list.”
And that’s a wrap from 27,000 feet.
Safe travels, and we’ll see you in Toronto!
Contact Chelsea Carrick at firstname.lastname@example.org, Fred Williams at email@example.com and Colby Adams at firstname.lastname@example.org
|Topics :||Anti-money laundering , Know Your Customer , Cryptocurrencies , Fintech , Fraud , Sanctions|
|Source:||U.S.: Department of Justice , U.S.: FinCEN|
|Document Date:||October 4, 2023|