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ACAMS moneylaundering.com is now leaving Las Vegas, as the song goes, but not without unpacking our notes to share some of what we learned at this year’s conference.

The Assembly Vegas opened Monday with senior regulators from the Office of the Comptroller of the Currency, or OCC, Federal Deposit Insurance Corp., also known as the FDIC, Federal Reserve Board and Financial Crimes Enforcement Network, also known as FinCEN, discussing their proposals to modernize anti-money laundering programs pursuant to the AML Act.

“The changes … will not on their own create the more effective and risk-based regime we’re working towards,” James Martinelli, a deputy associate director at FinCEN, told attendees. “We spend a lot of time in the preamble [of the bureau’s proposal] talking about the required training for examiners, enhanced feedback loops—how all these pieces will come together.”

FinCEN’s proposal varies from the OCC, FDIC and Federal Reserve Board’s plan by newly requiring that cryptocurrency exchanges and other non-bank financial institutions formally assess their risk, an obligation banks have long had to meet.

Regulators also reiterated their directive to banks to fully catalogue their exposure to third party-related risks, recognize that they vary from platform to platform depending on their services, customers, locations and AML programs.

Lisa Arquette, deputy director of operational risk at the FDIC, pointed out that banks have long outsourced “foundational” functions such as core processing, cybersecurity and transaction screening to third parties, but those types of arrangements expanded after the global pandemic to cover “much, much more,” including the provision of financial services.

“We have seen a lot of relationships … that involve not only a third party, [but] sometimes fourth and fifth parties … to help banks grow—not organically the way they used to, but to reach other consumers,” Arquette said. “When that happens, it’s important for the banks we supervise to recognize that the regulatory obligations reside with the bank.”

FinCEN’s plan to modernize the federal AML regime also spells change for the casino industry.

“What a risk-based analysis will address is problem points or problem areas in your operations,” Thomas Peterman, who chaired the compliance committee at Wynn Resorts from 2018 to 2023, said Tuesday.

“Where could somebody who has illicit funds move them through us? How does a criminal use us as a casino to help further their criminal enterprise?” Criminals still launder funds by placing minimal bets at casinos and other gaming platforms before cashing out, and by buying and selling chips to other patrons.

But the financial crime-related risks posed by the growing interplay between cryptocurrency and casinos have yet to appear on most radars, Peggy Jacobs, vice president of gaming compliance at MGM Resorts, said.

“I don’t know of any gaming companies [directly] processing crypto, but they may be partnering with a particular crypto company or hosting Bitcoin ATMs,” Jacobs said.

Instant payment platforms still struggle with sanctions despite guidance from the Office of Foreign Assets Control, also known as OFAC, particularly as the U.S. list of specially designated nationals continues to expand and other, more-complex financial restrictions proliferate.

“Do you screen domestic transactions? Only your high-risk customers? Do you only screen across borders?” William Monk, chief product officer at Napier AI, asked Tuesday. “Where do you draw the line in your risk appetite? This is where OFAC is less clear.”

Global volatility has raised the bar for Zelle, Venmo and other instant payment platforms, which have had to incorporate thousands of sanctions-related modifications in the past year alone.

“What signaled a very tough U.S. enforcement landscape was [that] there was no knowledge requirement … in [executive order 14024], unlike virtually every other U.S. secondary-sanctions program,” John Smith, an attorney with Morrison & Forester, said Tuesday. “Both OFAC and [the Office of Financial Sanctions Implementation] said not that long ago to expect a busy fall.”

Sanctions and AML compliance meanwhile continue to converge.

“The way … sanctions evaders go about their activities is largely what we see in the money laundering space—[such as using] shell entities to obfuscate ownership and control,” said Jessica Bartlett, global head of financial crime at Barclays. “But … sometimes sanctions people don’t appreciate how important it is to look at money laundering, and [vice versa].”

Financial institutions still show unease towards equipping their compliance programs with large language models, or LLMs, and other artificial intelligence-driven technology, with 40 percent of respondents to a poll on Tuesday answering that “we’re lucky to have excel” and only 4 percent indicating that their employers have embraced AI.

Their hesitation towards AI is primarily informed by regulatory and legal issues, followed by potential for bias and discrimination. For Carrie Gilson, director of financial intelligence and analytics at U.S. Bank, data privacy ranks as a larger concern.

“There is nothing from stopping an investigator from entering information into the free version of ChatGPT and asking for suggestions on how to summarize the facts they have gathered,” Gibson said. “Then you have customer data … stored within the public model.”

Other panelists, including Meera Das, vice president of AML, compliance, technology and modeling at Capital One, noted AI’s potential for improving suspicious activity reporting, including by giving financial institutions the option of reviewing an entire batch of transactional alerts instead of only a small sample.

“You’ll still need a human being to type up the SAR narrative, [but] AI can … say, ‘These 15 elements need to go into [it],” Das said during Tuesday’s opening panel.

An earlier panel Tuesday shed new light on the collapse of FTX and the federal government’s case against the now-defunct cryptocurrency exchange’s founder, Sam Bankman Fried, now serving 25 years in prison after federal jurors found him guilty of stealing and conspiring to launder billions of dollars from customers.

“The financial accounting for the company was basically done in a very informal way …. folks used Google Sheets,” Scott Hartman, a federal prosecutor for the Southern District of New York, told attendees.” So one of the biggest challenges we had in terms of trying to sort out what happened with customer assets was there wasn’t a general ledger.”

Sean Van Schaften, a special agent with the FBI’s counterterrorism unit, warned Tuesday afternoon that terrorist organizations have infiltrated ” every single space” of the global financial system and use “all avenues to move money” in jurisdictions that have not blacklisted them.

“They can operate freely in certain countries and through banks without any issue,” Van Schaften said. “In countries where they are designated, this may change how they operate and what types of shell companies they use.”

Federal investigators have a taller hurdle to clear when pursuing cases against violent, homegrown extremists, largely because no legal, regulatory or administrative authority exists for designating them as such.

“This problem is a little newer for us and it requires more creative thinking,” said Leyla Salehzadeh, a policy advisor at the Office of Terrorist Financing and Financial Crimes. “A lot of [what] we do is liaise with other agencies and the private sector, [where] we talk to banks, to virtual asset service providers.”

The conference ended Wednesday where it began, with senior compliance officers, former U.S. officials and Young Lee, director of financial transparency and regulatory policy at the Treasury Department, engaging in a lively discussion on FinCEN’s AML modernization proposal.

“I’ll be honest, I was a little disappointed,” said Bill Fox, former managing director and senior risk adviser at Bank of America. “Our objective here is to get at financial crime, [of which] compliance is a foundational element, [but] what has caused challenges in this space in when the government tells us how to comply.”

And that’s a wrap.

Safe travels, and we’ll see you in Toronto!

Contact Chelsea Carrick at ccarrick@acams.org and Colby Adams at cadams@acams.org