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ACFCS Conference 2017: More focus on bank ties to TBML, narcos pushing into virtual worlds, and more

Friday, October 20, 2017   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
bmonroe@acfcs.org
October 20, 2017

The U.S. government will be putting more scrutiny on how banks tackle trade-based money laundering, institutions will face more pressure to extend broad-based compliance training to branch managers, and more narco traffickers are moving their illicit funds through virtual currencies.

Those are just some of the critical updates, regulatory focal points and future challenges covered at the ACFCS 2017 Annual Conference that took place Monday and Tuesday in Boston, a packed event attended by hundreds of financial crime professionals.

“Our conference again demonstrated our goal of providing the best thought leadership and most relevant and timely topics,” ACFCS Executive Director Garry Clement said.  “The feedback from both sponsors and registrants could not have been more laudatory which confirmed ACFCS is focusing correctly and continues to demonstrate we are a partner in the fight against financial crime.”

The conference included more than two dozen panels and nearly 50 speakers, including current and former compliance officers, regulators, investigators, journalists, artificial intelligence and machine learning tech wizards and others covering the entire spectrum of financial crime.

From its inception, the event was created to arm these groups for the “new reality of financial crime,” whether they work in a financial institution, as a federal examiner, member of law enforcement or as a consultant helping bridge the divide between these various stakeholders in countering organized criminal, fraud and terror groups.

Guidance on how to prepare for this new reality emerged in speaker presentations and keynotes over the course of the conference, centering around a few key themes. Experts from both banks and law enforcement emphasized the need for more nimble, converged and cross-trained compliance teams, along with knowledge and awareness of financial crime risk that extends from tellers to top management.

Elsewhere, presenters highlighted advances in artificial intelligence and machine learning to craft more detailed, rich and valuable intelligence to law enforcement. On the regulatory side, representatives from some top US agencies spoke of promising efforts to boost public-private cooperation, and ensure that the flow of SARs and other financial intelligence was not a one-way street.

In all, the goal of the event was to be part of the association's wider global initiative to create a phalanx of financial crime training, knowledge and instinct throughout every level of an organization.

Attendee feedback, told spontaneously to ACFCS staff and board members included comments such as, “wow, this is so much better than any conference I have attended this year,” and general sentiments that the speakers offered relevant, important and actionable information that could be immediately implemented for AML, fraud and cybersecurity teams.

‘Amazing, outstanding conference’

The conference was “amazing,” said another attendee, adding that he found it a fresh, positive departure from other outside association events. “I can honestly say that I attended each and every session and regret that I was not able to attend all breakout sessions.”

“I very much enjoyed attending the conference and listening the viewpoints of the various speakers,” said a panelist. “You are to be congratulated for putting on an outstanding conference.” 

“ACFCS has a more impressive roster of panelists, and is a welcome change from the usual programs,” said a second panelist. “Another good feature is that it isn’t just AML/CFT focused,” so it provided an opportunity to also talk about fraud trends and counters.  

ACFCS Executive Director Garry Clement addresses attendees

Risk management

One of the best pieces of advice to counter criminals and fraudsters, and strengthen your overall financial crime compliance program at the financial institutional level is to train and educate your branch managers broadly on financial crime, according to a law enforcement official.

With millions, and cumulatively, billions of dollars tied to the international professional sports industry, one panel concluded that even future basketball, football and sports stars still in college should be labeled high-risk – particularly if they are purchasing cars worth nearly $50,000 with an annual income of only $15,000.

The heightened risk should also potentially be extended to sports recruiters, apparel companies and even colleges trying to woo choice prospects, as that decision has, in some cases, been influenced by corrupt funds and expensive, graft-gilt items.  

With so many known “high-risk” areas to worry about, the U.S. government is reportedly working on something to give more guidance on the other side of the scale.

The U.S. Treasury is attempting to create a national, and potentially international, “good guy’s list,” of entities that would widely be considered at a lower risk of financial crime in a bid to help financial institutions better manage resources and focus on higher-risk entities, and garner the all-important regulatory buy-in.

The list is expected to be more precise than simply detailing low-risk sectors, but actual business names.

Conversely, the world’s largest money remitters are working to create a different list, a shared, terminated “bad agent” database to prevent former agents who had been fired for potential illicit actions, or failing to properly follow compliance program requirements, from getting fired from one money services business, just to go across the street to a different one.

The move addresses a major issue and vulnerability regulators have identified in several money services business (MSB) enforcement actions in recent years. In some cases, agents who were fired from one location came back a few months later to engage in supporting fraudulent activity in the same company or a similarly large competitor.

Fraud, virtual currency trends

There is a direct correlation to the areas of the country where the opioid epidemic is growing and explosion of retail fraud, both from addicts stealing to get illegal heroin and legal prescription drugs. In some cases, some addicts, individually, were stealing $2,000 to $3,000 a day and $10,000 to $20,000 a week.

Feeding that habit are narco cartels, and more Mexican and Colombian drug cartels are turning to Bitcoin, according to law enforcement presenters. As well, more individuals, and criminal groups, in China are putting their money into virtual currencies to evade Chinese currency controls, currently set at $50,000, according to a former law enforcement official.

In the same vein, some speakers said that the future of financial crime is criminals using dark net sites and virtual currency to buy and sell illicit products.

Even so, organized criminal groups are also getting smarter to ensure, even in virtual worlds, they hedge their bets against getting their assets forfeited. Criminals are making sure not to leave too much currency in virtual wallets or with the administrators of dark net sites, some of which have been raided by global authorities in recent months. 

Corporate transparency  

Criminals of all stripes also flock to countries that are a bastion for corporate opacity. As well, some believe that because certain states within the United States don’t collect and display beneficial ownership information, the country plays a significant role in facilitating global corruption and is considered a destination for secrecy.

With the U.S. not collecting beneficial ownership data, some panelists concluded that weakness made the country a destination for secrecy, facilitating global corruption.

The U.S. is trying to change that with a new law requiring banks to get beneficial ownership details, becoming effective next year, down to the 25 percent level.

But some bank officials expressed concern that examiners will require details down to a 10 percent ownership level, or will require customers who have self-certified beneficial ownership details to still be investigated to determine veracity – even though there is no federal corporate registry database to compare results.

One panel stated that terrorists are here in the United States and they are using Delaware to hide behind anonymous shell companies.

In one instance, investigators were only clued in to the potentially illicit activities because a suspect mentioned on social media that he voted in an election in a risky Middle Eastern country. The lesson for compliance professionals: Use all available information, including social media, to find connections to risky customers that could be missed using traditional routes.

Regulation remediation

That lead to a larger discussion of what more the U.S. could do to improve U.S. AML compliance?

Here are three solutions that were proffered:

·         Information sharing banks: Government agencies are pushing to more explicit expand 314(b) sharing provisions for all crimes, including cyber events, not just money laundering and terrorist financing. They are also trying to make sharing safe harbors more ironclad to ward off civil suits.

·         Information sharing law enforcement: These agencies are also attempting to make 314(a) more of a two-way street than a one-way street, getting more immediate, regional data on criminal trends to banks, rather than just asking about potentially illicit individuals.

·         Updated, trimmed laws: Government agencies are also looking more broadly at laws that are weak, antiquated or could be trimmed that are hurting the gathering, analysis or dissemination of AML data.

Enforcement actions

The conference also analyzed a critical question on the minds of all financial crime professionals: What are some of the common AML compliance themes in mega enforcement cases?

They include: misplaced trust in affiliates, a lack of transparency down to customers and correspondents, a lack of data to properly risk rank customers and tune the related transaction monitoring system and incomplete payment systems information.

Banks should also be prepared to see more AML enforcement cases tied to trade finance, with a focus on if banks asked for the underlying details of entities they are directly providing services and, for sub-entities, what are the compliance controls of correspondent institutions and on overall risk of their customers and operating regions. 

Social media continues to play a more prominent role in bank risk ranking


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