Crypto Compliance for 2022 and Beyond

The crypto industry has exploded over the past few years, further integrating into the global financial system and creating direct and indirect links to banks and other financial institutions.  The intersection of the fiat and crypto financial worlds offers vast opportunities, as well as new compliance challenges.

From 2015 to 2021 we have seen an upheaval in crypto regulation. In that time, regulators and supranational organizations, such as the FATF, have begun to set standards and expectations to address financial crime in crypto. Most recently, in late October the FATF issued its long-awaited updated guidance on crypto, which among other changes sharpens the focus on DeFi and stablecoins.

As more jurisdictions issue guidance to apply their existing frameworks to the cryptoasset world, one trend has emerged: the manner in which a jurisdiction regulates cryptoasset products will likely mirror its approach to traditional financial products.

For insights on the updated FATF recommendations and more, we talk with Chris DePow, Senior Advisor – Financial Institution Regulation & Compliance at Elliptic. We’ll explore financial crime risks and pending regulatory initiatives in the crypto space, and hone in on the challenges faced by traditional financial institutions as they seek to integrate crypto offerings and DeFi services.

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How Data, Tech and Collaboration ‘Mega-Trends’ are Reshaping Fincrime

Change is a constant in the fincrime compliance space, but the last 18 months have seen a breakneck pace of changes – both negative and positive. In a recent survey by Refinitiv of compliance professionals around the globe, 71% of respondents said cybercrime became more difficult to contain during the Covid-19 pandemic, and 66% said that the pandemic has forced businesses to take shortcuts with KYC/due diligence checks.

But there are positive trends as well, including an increased awareness of environmental crimes and a growing recognition of the central importance of public-private sector collaboration. On this episode of the CrimeCast, Phil Cotter, Group Head of Customer & Third Party Risk Solutions, Data & Analytics for Refinitiv, helps you make sense of the “mega-trends” in the fincrime space, including public-private partnership and the linkage between fincrime and ESG.

He also gives insights on how emerging tech and access to the right data are the key trends linking these trends together.

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For Elliptic’s Stelios Tachtatzis, a picture is worth more than a thousand words – particularly when it can reveal criminals using virtual value to monetize illicit hauls

The Skinny:

  • Stelios Tachtatzis is one of the rare figures in the financial crime and compliance space who has taken a truly expansive and convergent mindset to strengthen compliance and fight financial crime.
  • Even after more than a decade in the financial services and technology sectors, Tachtatzis is currently the head of financial crime risk and compliance at blockchain analytics titan Elliptic, as an avid photographer, he realizes that to truly understand what is going on in a scene you have to see the big picture.
  • In many ways, Tachtatzis is the prototype of the financial crime professional of the future, easily and fluidly shifting from the experienced-based decision-making of the seasoned investigator to the evidence-driven choices of the data scientist. 

By Brian Monroe
bmonroe@acfcs.org
November 23, 2021 

Stelios Tachtatzis has always had an artist’s eye when it comes the world around him – he actually quit his major in economics for a year to study photography. To this day, he takes his camera with him wherever he goes.

But even after more than a decade in the financial services and technology sectors, he is currently the head of financial crime risk and compliance at blockchain analytics titan Elliptic, he realizes that to truly understand what is going on in a scene, you have to see the big picture.

The Londoner is one of the rare figures in the financial crime and compliance space who has taken a truly expansive and convergent mindset to strengthen compliance and fight financial crime.

Tachtatzis has widened the aperture to see when organized criminal groups, fraudsters and ransomware gangs jump from the fiat to the virtual worlds of value in an attempt to skip anonymously through the blockchain. 

How?

By going beyond just understanding classic financial crime compliance, counter-fraud and transactions screening, in recent years expanding his knowledge of artificial intelligence, advanced data analytics, cyber-fraud and information security and now, blockchain analytics. 

Block and tackling on the Blockchain

Over the last decade, the “pseudo-anonymous” nature of certain crypto coins, like Bitcoin, has been a draw for criminals and bane to law enforcement agencies around the globe.

The culprit: bad guys have increasingly moved portions of the trillions of dollars in tainted funds – whether they be from ransomware attacks, hacks or other cyber-enabled frauds – into seemingly untraceable crypto coins.

But that bane over the last few years has turned into a boon, with international investigative agencies partnering up with blockchain analytics firms to meld advanced technologies and highly-specialized skillsets to follow the money in the real and virtual worlds.

The result: They have successfully peered through a nigh incomprehensible sea of numbers, letters and addresses to connect to the flesh-and-blood puppet masters pulling the strings.  

That is why Tachtatzis’ viewpoint is informed by holding court at the intersection of a bevy of in some ways disparate and other ways, interlaced and interwoven disciplines.

What does the world look like through the crystalline lens of his eyes?

An illumined amalgam of data analysis, cryptocurrencies, blockchain analytics, digital assets, decentralized finance, cyber-enabled fraud, cybersecurity and the historic mores of anti-money laundering (AML) and transaction monitoring. 

More crypto adoption, requires investigative adaptation

But his quest for knowledge is not a nicety, it is a necessity – with criminals constantly adjusting and adapting to evade law enforcement traps and finding new gaps and vulnerabilities in the dark corners of finance – fiat, digital and everything in between.

The industry, however, is responding.

“It’s almost difficult to remember how we used to do things a decade ago in the financial crime space,” he said.

“The industry has dramatically changed with technologies such as machine learning, artificial intelligence, blockchain, and behavioral analytics being only a few of the primary catalysts.”

In many ways, Tachtatzis is the prototype of the financial crime professional of the future, easily and fluidly shifting from the experienced-based decision-making of the seasoned investigator to the evidence-driven choices of the data scientist.

So it is appropriate that after stints with UBS, Accenture, and McKinsey & Company as a risk management expert — delivering strategic compliance programs for tier one banks, and regulators across the world – he has found his way to Elliptic.

Transparency of blockchain can be used offensively, defensively to rein in risk

Elliptic, one of the world’s top blockchain analytics firms, according to industry rankings, holds recognition as a World Economic Forum Technology Pioneer.

“The platform has successfully evaluated risk on transactions measuring in worth up to some several trillion dollars,” according to 101 Blockchains. “Most importantly, it has helped in uncovering many instances of fraud, terrorist fundraising, financial crimes, and money laundering.” 

Elliptic, like it’s peers Chainalysis and CipherTrace, has engaged in high-profile investigations and followed the money related to a historic rise in ransomware attacks during a pandemic-pummeled 2020 and equally viral and vitriolic 2021.

As well, the company has aided in crafting compliance defenses so brick-and-mortar banks can connect with crypto exchange customers and virtual exchanges can better police themselves and change the perception of being law enforcement foils to powerful investigative allies.   

The company has even dipped its toe in the water in the burgeoning, but little understood area of non-fungible tokens (NFTs).

NFTs are a relatively new type of cryptoasset which represent an intangible digital item whose owners are recorded on the blockchain. 

In recent months, these digital assets, in some cases, have commanded millions of dollars in hard cash – and that is for just one NFT. Some NFTs are digital pieces of art created by up-and-coming artists or even snapshots of virtual worlds by relative unknowns.

In a recent sale, one NFT of a single gray pixel sold for hundreds of thousands of dollars.

As for Elliptic’s brush with NFTs, SmartApp Inc., a Japanese-based non-fungible token (NFT) marketplace, chose its technology to provide a blockchain analytics system to screen crypto wallets to better counter financial crime risks.

The move was the first time that an NFT platform had been implemented an analytics solution in Japan, according to both firms.

That area in particular is one that captures the interest of Tachtatzis, the “rise and rapid adoption of digital assets such as crypto, stablecoins, NFTs etc.,” he said. 

Demystifying myths, improving perception of misconceptions

But not all crypto risks are equal.

“There is a general misconception among compliance professionals that those assets are mostly used for illicit activity, but this is not true,” Tachtatzis said.  

“At Elliptic, we have been monitoring illicit activity linked to digital assets since 2013 and our data shows that, although in the early days of adoption, about 35% of crypto transactions were linked to such activity; this number has dropped to less than 0.5% today.”

But creating technology from scratch to better divine a digital world in flux – one that often connects to darknet sites working hard to remain in the shadows – can’t happen by keeping the status quo.

That is why he uses one of the worst pieces of advice he has ever received as fuel to do the complete opposite.

What was it?

“Great work. Just keep doing what you are doing,” Tachtatzis said.

Taking that idea a step further, he knows he is part of a larger universe of law enforcement agencies, regulators and compliance officers working to identify and stop the worst of the worst when it comes to organized criminals, human traffickers and even others who would harm children.

That is why Tachtatzis has a singular vision and passion, realizing that, if done right, his work will live on and help others for future generations.

Who inspires him?

“Anyone who is driven by the legacy they will leave behind as professionals, instead of purely advancing their own interests,” he said.

Tachtatzis was kind enough to share some of his diverse and dynamic knowledge and insight in our latest ACFCS Member Spotlight: 

Who inspires you?

Anyone who is driven by the legacy they will leave behind as professionals, instead of purely advancing their own interests.

What is something about you that not many people know?

I dropped out of the school of economics within six months, and went on to study photography. A year later I decided to go back and finish my degree, but even to this day I don’t leave my house without carrying a camera with me.

What do you do in your current role

My main objective is helping our customers to understand the financial crime risks arising from the use of digital assets, and to establish new mitigation controls by leveraging Elliptic’s solutions, data, and services within their existing compliance value chain.

What does your career trajectory in financial crime look like?

The world is changing rapidly, and with systemic events such as Covid-19, we have seen a paradigm shift in the compliance industry in terms of how criminals behave throughout the various stages of money laundering.

It’s an ever-evolving landscape that I wish to continue exploring now, and in the foreseeable future.

What is the best advice you have ever received?

Leaders smile a lot; always say yes to opportunities; and appreciate how lucky you have been in the process of achieving anything.

What is the worst advice you have ever received?

“Great work. Just keep doing what you are doing.”

What would you say are the most important attributes for someone in your position to succeed?

By default, you need to develop a plethora of skills and to build your knowledge across various areas, including the ever-expanding world of crypto, regulation and financial crime (to name a few).

However, that eventually happens with time as you grow in your career. The key attribute I would highlight is finding your just cause and being curious.

First and foremost, understand why being a financial crime professional matters, be proud of being one and for the legacy you will leave behind you. Again, just make sure to always be curious.

The financial crime space is rapidly changing, and your curiosity will keep you ahead of the game.

How has (compliance, investigations, etc.) changed and evolved during your career?

It’s almost difficult to remember how we used to do things a decade ago in the financial crime space.

The industry has dramatically changed with technologies such as machine learning, artificial intelligence, blockchain, and behavioral analytics being only a few of the primary catalysts.

These technologies have entirely changed the way we detect and prevent unusual behaviors and transaction patterns.

However, we are just half-way through the transition, and we are still experimenting with most of those innovative solutions.

There are several challenges the industry will have to solve before we get to a point where financial crime solutions can seamlessly adapt and respond to the ever-changing external landscape.

What do you see as the key challenges related to financial crime in your role or in the sector overall?

There are many challenges the industry is working on such as data quality, model agility and validation, and the volatility of the external socio-economic landscape. 

However, the one that I am most interested in, is the rise and rapid adoption of digital assets such as crypto, stablecoins, NFTs etc. There is a general misconception among compliance professionals that those assets are mostly used for illicit activity, but this is not true.

At Elliptic, we have been monitoring illicit activity linked to digital assets since 2013 and our data shows that, although in the early days of adoption, about 35% of crypto transactions were linked to such activity; this number has dropped to less than 0.5% today.

The fact is that organizations like Elliptic, in collaboration with regulators and law enforcement, have transformed the crypto ecosystem into an extremely safe space, and there is a great opportunity for financial institutions like banks to enter.

The main challenge is how they can efficiently and effectively identify and mitigate the inherent risks arising from the use of those digital assets.

This is where my team comes in to support compliance leaders to redesign their financial crime operating models and enable their organization to offer crypto services.

What motivated you to become a financial crime professional?

I was fortunate early enough in my career to work in consulting and gain experience across various risk functions.

During that time, financial crime stood out as an area with a great opportunity to make an impact, not only on the organization I was working for, but also its customers and the wider society which I found extremely fulfilling.

Is there anything that surprised you about your current role?

As a financial crime professional moving from the traditional fiat to the crypto space, I was surprised by the tremendous level of transparency that you can derive from publicly available data on the blockchain.

It is truly mind-blowing the level of efficiency you can achieve when investigating suspicious activity, identifying source of funds, etc.

Why did you join ACFCS or gain the CFCS designation?

ACFCS offers tremendous opportunities to new as well as highly experienced compliance professionals to further advance their career, stay up to speed with any topics related to financial crime, and build a global and robust network of industry experts that is key to your success.

What is the most rewarding part of your job?

Working closely with our customers to help them shape their use cases, and to adopt a risk-based approach to crypto is by far the most rewarding part of my role.

How did you get your first job in the field and what advice would you give other job seekers to help land their first position.

I was looking for a new project while working for a global consultancy firm, and I randomly came across a financial crime related initiative.

I was fortunate to be selected by the project lead, and the rest is history!

My advice to job seekers is: if you are interested in financial crime don’t worry too much about the exact position but just enter the space and continuously explore for new opportunities to further advance your career.

I think it’s worth quoting Shery Sandberg, who once said “If you are offered a seat on a rocket ship, don’t ask what seat. Just get on.” 

For professionals with 5-10 years of experience, what advice would you give them to help advance to senior management roles?

If you have gained your experience in the fiat world, I would strongly recommend a transition into the crypto world.

It’s going to be an extremely rewarding experience that will help you understand the intersection of crypto and fiat and subsequently become a well-rounded compliance professional.

ACFCS Fincrime Canada Summit Snapshot: Counterfeiting is not a ‘victimless’ crime, with ties to deadly terror attacks, drug overdoses

The Skinny:

  • While many may think of counterfeiting as a harmless, “victimless” crime – think fake fancy footwear, designer purses and electrical equipment, like phone chargers – it is a multi-billion-dollar problem that is serious, deadly serious.  
  • That is just one of the critical takeaways from speakers Wednesday at ACFCS’ Second Annual Fincrime Canada Virtual Summit during the “Project Gemini – Fighting Counterfeiting, Disrupting Organized Crime” panel.
  • Nearly 2,000 professionals gathered for the three-day event, full of deep, relevant training, networking, games, giveaways and much more, with the overarching ethos of championing effective compliance programs, better allaying regulatory fears and allying your efforts with law enforcement needs.

By Brian Monroe
bmonroe@acfcs.org
November 18, 2021

While many may think of counterfeiting as a relatively innocuous crime – fake fancy footwear, designer purses, clothing, leather goods and electrical equipment, like phone chargers – it is a multi-billion-dollar problem that is serious, deadly serious.  

That is just one of the critical takeaways from speakers Wednesday at ACFCS’ Second Annual Fincrime Canada Virtual Summit during the “Project Gemini – Fighting Counterfeiting, Disrupting Organized Crime” panel.

Nearly 2,000 professionals gathered for the three-day event, full of deep, relevant training, networking, games, giveaways and much more, with the overarching ethos of championing effective compliance programs, better allaying regulatory fears and allying your efforts with law enforcement needs.  

As for Project Gemini, it is a new initiative started this year by the Canadian Anti-Counterfeiting Network (CACN) and Western Union to join forces to better detect and deter domestic and cross-border counterfeiting syndicates that are, in some cases, orchestrated by transnational organized crime rings.

With some groups like the International Chamber of Commerce releasing estimates in recent years that the trade in counterfeit consumer goods has breached the trillion-dollar mark annually, the issue is one that affects Canadians fiscally and physically. 

Losing money, taking lives

Even as businesses bemoan losing revenue counterfeiting – particularly large-scale operations involving organized criminal groups and legal and illegal drugs – these activities have resulted in people losing their lives.

Counterfeiting “affects the health of businesses and the public,” said Robert Whalen, Chair of the CACN, who also more than 30 years of policing experience with a particular emphasis on Criminal Organized Crime related to Property Offences.

China, Hong Kong, Singapore and Turkey have been the top four source countries for counterfeit goods since 2014.

Germany replaced Thailand in the top five in 2016, according to the Organization for Economic Co-operation and Development (OECD). 

Criminals can make more money selling counterfeit goods, than drugs

As well, the problem is only getting worse because more criminals are concluding it is easier, and comes with less penalties, to sell counterfeit good than drugs.

In one example, a career drug peddler turned from selling cocaine to counterfeit goods, with overall, criminal groups able to make seven times more money, say, using a small compartment to ship pirated DVDs of software than illicit drugs.

Counterfeit goods also can kill, Whalen said.

He noted that some overdose deaths have been linked to fake pharmaceuticals and, in one report he highlighted, a fake electronics device started a fire in a home that killed the occupant.

Canada also has an ignoble distinction in that arena as “one of the largest producers of counterfeit opioids in the world,” he said.  

How best to fight against counterfeiting? Get the word out about illicit connections

The partnership for Project Gemini has several core objectives, said Nick Ruggiero, the Manager in the Office of Law Enforcement Outreach and Investigations for Western Union in Canada, including:

  • Highlighting the fact that the counterfeiting of goods (CG) goes beyond the infringement of IP, but deprives companies of revenue and affects brand reputation
  • Stressing the environmental impact and the risk to health and safety
  • Demonstrating that there is a direct link to organized crime and other criminal activity
  • Broadening industry networks and scope bringing together members from outside the financial services industry and law enforcement to collaborate
  • Sharing intelligence and best practices to detect, deter, and report CG-related activity
  • Having reporting entities include #Project Gemini or #Gemini in the narrative portions of their STRs
  • Publishing an Operational Alert, like those published in relation to romance fraud and laundering of proceeds from online child sexual exploitation

“Together we want to push this initiative across, industry,” law enforcement, regulators and the broader financial crime and compliance community to raise awareness and understanding to the nexus to criminal activity, Ruggiero said.

What kinds of activity? How about the rising risks of organized criminal groups trading in bogus pharmaceuticals, personal protective equipment, medication and even parts of automobiles and airplanes – that, if used, could contribute to major malfunctions, even crashes. 

Selling fake goods also supports terror plots

Terror groups have also sold fake goods to fund attacks.

In 2015, open-source reporting indicated that the weapons used in the attack on the Charlie Hebdo offices in Paris were partially financed through the sale of fake items.

In October 2003 in Beirut, Lebanese authorities discovered containers filled with counterfeit brake pads & shock absorbers worth 1 million euros, profits that would have supported Hezbollah.

Interpol has reported that Al-Qaïda and other extremist groups have received hundreds of millions of dollars from their “supporters” over the past decade, including funds originating from the trade of counterfeit goods.

Sales of fake CD’s were also used to fund the 2004 Madrid train bombings.

The selling of counterfeit goods is not a “victimless crime” and in fact has a “direct link to terrorist financing,” Whalen said. 

ACFCS Fincrime Canada Summit Snapshot Day One: More public-private partnerships, AI trust, adoption needed to counter crypto-fueled fraudsters, terror masterminds

The Skinny:

  • ACFCS’ Second Inaugural Fincrime Canada Virtual Summit saw more than 1,700 professionals gather for the three-day event, full of deep, relevant training, networking, games, giveaways and much more. Some key takeaways include:
  • Speakers highlighted that even as Canada in recent years has become a world leader in forging public-private partnerships between banks and regulators to better stamp out human trafficking, child exploitation, romance scams and illicit activity – more must be done.
  • Those initiatives must also innovate, engaging artificial intelligence across anti-money laundering (AML), sanctions, fraud and sanctions programs. Interweaving and underpinning such efforts, institutions must strengthen commitments to sharpen human decision-making – the most subjective and oft-criticized area of the compliance function.  

By Brian Monroe
bmonroe@acfcs.org
November 16, 2021

Even as Canada in recent years has become a world leader in forging public-private partnerships between banks and regulators to better stamp out human trafficking, child exploitation, romance scams and illicit activity – more must be done.

Those initiatives, taking place in and out of the Great White North, must also be paired with greater trust, truth and transparency to engage artificial intelligence across anti-money laundering (AML), sanctions, fraud and sanctions programs.

Interweaving and underpinning such efforts, institutions must also at the same time engender a deeper commitment to broaden training and sharpen human decision-making – the most subjective, nebulous and oft-criticized area of the compliance function.  

Those are just some of the takeaways from day one of ACFCS’ Second Inaugural Fincrime Canada Virtual Summit, where more than 1,700 professionals registered for the three-day event, full of deep, relevant training, networking, games, giveaways and much more.

The conference cov­ered topics across the spectrum of financial crime and compliance, including regulatory focal points, enforcement trends, crypto, data analytics, child exploitation networks, human trafficking and more.

Here are some conference highlights: 

  • Federated learning: While in many cases, privacy coins or secretive beneficial owners hidden by shifting shells can stymie investigations, Privacy-Enhancing Technologies (PETs) can be a boon to teams working to analyze and share vast amounts of data. Using these technologies, systems can analyze information from multiple banks – without the fear of individuals getting access to details they shouldn’t.
  • Community responsibility: So why did banks in Canada, and the country’s financial intelligence unit, Fintrac, band together to better understand and fight back against individuals who harm children or trade in child sexual exploitation material (CSAM)? The reason: “It protects our clients. It protects our community. It is incumbent upon us to protect our children from these predators,” said one speaker.
  • Crypto, terror nexus: Terror groups are turning to virtual value to capture more funding. Some of the indicators of suspected money laundering or terrorist financing, include the use of privacy coins, mixers/tumblers and transactions tied to unregistered/high-risk exchanges. Lone wolf, home grown terrorists are some of the most difficult to uncover, with banks in some cases needing to combine aberrant transactions with negative news dives to uncover sinister inclinations.

On the crypto and compliance side, blockchain analytics firms have a bevy of trends cropping up this year that could be bank and virtual exchange challenges in 2022, including:

  • More criminal groups, sanctions busters and terror groups using mixers.
  • Tracking these groups could be more challenging with the emerging of the Lightning Network
  • Cross-chain hopping and laundering groups riding economic trends, such as hacking the market and cashing out before it drops – in privacy coins. 

Can privacy ever help fincrime compliance programs?

With criminal groups looking for ever more creative ways to launder funds and obfuscate money trails in the real and virtual worlds, that puts increased pressure on banks the world over to somehow make connections among the disparate pieces – and fight back.

So how can you better fight financial crime through public-private partnerships across multiple jurisdictions? While also not skirting privacy restrictions or courting data breaches?

That answer to that question might, ironically enough, be in the area of privacy-enhancing technologies or PET, according to speakers during the Privacy-Enhancing Technologies – The Key to Unlocking FinCrime Collaboration panel on Tuesday.

While in many cases, privacy coins or secretive beneficial hidden by shifting shells can stymie investigations, PET can be a boon to teams working to analyze and share vast amounts of data. Using these technologies, systems can analyze information from multiple banks – without the fear of individuals getting access to details they shouldn’t.

In the case of Canada, this has the potential to supercharge public-private partnerships to make more connections to potential illicit activity across multiple banking groups across different jurisdictions.

Already, Canada’s financial intelligence unit, Fintrac, has been a world leader in the area of PPPs.

The PPP strategies spearheaded by Fintrac, starting with BMO in 2016 tied to human trafficking and last year, with Scotiabank related to child sexual abuse material (CSAM), have resulted in countries and world leaders asking, “How do you do it,” said Stuart Davis, Executive Vice President and Global Head of Financial Crimes Risk Management at Scotiabank.

“It has become a model for the globe,” with dozens of countries emulating the initiatives, he said, adding that combining PPPs and PETs will “help us make a difference in the future.”

A look at what fuels our shared fight: public, private partnerships to protect the innocent

So why did banks in Canada, and the country’s financial intelligence unit, Fintrac, band together to better understand and fight back against individuals who harm children or trade in child sexual exploitation material (CSAM)?

The reason: “It protects our clients. It protects our community,” said Nunzio Tramontozzi, Director of the Special Investigations Unit at Scotiabank, during the panel: Inside Project Shadow – Public-Private Partnerships to Combat Online Child Exploitation.

“It is incumbent upon us to protect our children from these predators,” he said. “I am a big proponent of education and knowledge. We need to teach our kids what to do when presented with these types of individuals online. [Children] need to be able to talk to [their parents] and tell [them] what is going on.”   

So what is the difference between how banks, law enforcement and regulators work together related to investigations into child sexual exploitation material (CSAM) and other fraud and money laundering cases?

“The aim of the investigation isn’t to get the money,” said Michael Boole, Manager in the Intelligence Sector of Fintrac’s AML Unit.

“While we are going after money laundering, in the case of CSAM, the aim is to get the victim out,” he said. “The money is less important.” 

OFAC, Fed, NYDFS penalize Mashreq bank $100 million for sanctions failures, just three years after $40 million fine for similar issues

The Skinny:

  • The U.S. Treasury’s Office of Foreign Assets Control (OFAC), Federal Reserve and the New York State Department of Financial Services (NYDFS) Tuesday issued coordinated enforcement actions totaling $100 million against Dubai-based Mashreqbank for purposely omitting details on payment transactions with ties to Sudan.
  • The case is eerily similar to other international bank “stripping” cases that have cropped up since 2009 – there have been nearly a dozen over a little more than a decade with forfeitures and penalties of more than $12 billion, including one case alone of more than $9 billion.
  • Part of the message the NYDFS wants to relay to the broader international banking sector is that operations with branches in the United States had better police their correspondent networks – particularly those in riskier regions with a propinquity to destabilized, extremist and terror hotspots. 

By Brian Monroe
bmonroe@acfcs.org
November 9, 2021

The largest and oldest bank in the United Arab Emirates will pay a host of federal and state regulatory and sanctions agencies $100 million for dealings with a blacklisted regime designated as a state sponsor of terror – just three years after paying $40 million for similar acrimonious actions and compliance inactions.

The U.S. Treasury’s Office of Foreign Assets Control (OFAC), Federal Reserve and the New York State Department of Financial Services (NYDFS) Tuesday issued coordinated and interlinked enforcement actions, orders and penalties against Dubai-based Mashreqbank for purposely omitting details on payment transactions with ties to Sudan.

The investigation by NYDFS uncovered that Mashreqbank “instructed its employees to avoid populating certain fields in the payment messages sent between banks so as to conceal the prohibited Sudanese element of these transactions.”

Such a move would effectively bypass the sanctions filters at other banks, evading the triggering of an alert or potential for intermediary institutions to freeze any of the transactions. 

The country has been on U.S. blacklists since the 1990s for terror ties and human rights abuses.

The U.S., after reviewing the country’s progress in recent years and after Sudan satisfied several prerequisites to better stamp out extremist groups, removed the designation in December.

The case is eerily similar to other international bank “stripping” cases that have cropped up since 2009 – there have been nearly a dozen over a little more than a decade with forfeitures and penalties of more than $12 billion, including one case alone of more than $9 billion.

In those enforcement actions, senior executives, and in one instance even the compliance team itself, institutionalized the practice of scrubbing interbank payment messages in wires for links to countries on U.S. watchlists, including Iran, North Korea, Sudan, Cuba and others. 

In the latest action, and a prior $40 million penalty against the bank by the Fed and NYDFS in 2018, regulators also highlighting a lack of culture, the importance of senior executive support and even a willingness to make examples out of staffers in and out of compliance – the dreaded specter of individual liability and a potential career killer. 

The emphasis on compliance culture and individual liability, as well as the importance of empowered and informed AML and sanctions teams feeling they have the support and courage to speak up, should be a message banks large and small take to heart.  

“While the details surfacing in this case may seem outlandish and alarming to compliance and investigative teams in most organization, with some likely even commenting ‘that could never happen in our organization,’ the reality is, it can and does,” said Jon Elvin, a former banking executive and Chief BSA/AML Officer, now the Executive Director of Strategy and Corporate Impact at ACFCS.

“The truth is, organizations, events, personalities and financial incentives can unduly shape behavior, broadly and in certain smaller sub-culture divisions,” he said, a nod to high-profile federal enforcement actions in recent years where pockets of non-compliant teams evaded program rules and brought the wrath of regulators.  

This is why “corporate culture” is critical.

“Employees, especially those in risk management, compliance and investigative channels MUST know they have a responsibility and the support to do the right thing always,” Elvin said.

After main Swiss correspondent conduit gets pinched, house of cards falls

In the case of Mashreqbank, this resulted in other banks processing prohibited payments totaling more than $4 billion between 2005 and 2009.

The practice only ended in 2009 after a Swiss bank used by Mashreqbank to process these transactions rejected a Sudan-related U.S. dollar-denominated transaction.

Ironically, the next day, news broke that the Swiss bank was “being investigated by the New York County District Attorney’s Office for violating economic sanctions rules,” according to the NYDFS.

That prodded Mashreqbank leaders to realize the jig was up, concluding that U.S. authorities would likely follow the tainted transaction trail back to them.

Not knowing when regulators or investigators would come knocking, the bank quickly closed all U.S. dollar accounts held by Sudanese banks, but still tarried on disclosing the plethora of prohibited transactions to the NYDFS for another six years, until 2015 – in that time squeezing in a few more transactions with the off-limits locale.  

Between 2010 and 2014, Mashreqbank’s New York Branch processed additional Sudan-related, prohibited payments, totaling approximately $2.5 million, according to the NYDFS consent order.

These transactions, though in violation of sanctions rules, were “less obviously tied to Sudan,” according to the consent order. “For example, a number of these customers were not residents or domiciled in Sudan, and their payment instructions did not reference Sudan.”

So how did Mashreq game the system and prevent intermediary banks from seeing that a Sudanese financial institution was the actual originator?

They “covered” their tracks.

From January 2005 through the early part of 2009, Mashreq used a series of “cover payments” to “conceal the Sudanese connections to transactions,” primarily on behalf of the privately-owned Sudanese bank Blue Nile, that would otherwise have been prohibited by OFAC, according to penalty documents.  

This process involved the use of a specific SWIFT payment message used for inter-bank transfers, called the MT202.

The messaging format allowed certain fields that typically had to be filled out in other payment message types to remain blank, and still move the funds.

Because of the “bank-to-bank nature of these payment instructions, MT-202s merely instructed intermediary banks to move funds across correspondent banking networks without identifying the original ordering bank or ultimate bank,” according to the NYDFS.  

The result: the funds would flow through intermediary banks, some in the United States and other partner jurisdictions, without those financial institutions knowing their source was a blacklisted region and entity.

But what about the final bank in the chain?

Wouldn’t they block or reject the transaction and alert OFAC?

Not exactly, especially if the bank was located in a country outside the U.S.

“The originator and beneficiary information would be contained only in a separate bank-to-bank payment message which was sent by Mashreq directly to the ultimate beneficiary bank,” according to the NYDFS.

The last piece of the puzzle: the “final payment pursuant to this series of messages was a foreign bank, so that it could complete the OFAC-prohibited payment without necessarily violating U.S. law.”

SWIFT finally caught on in 2009, eventually changing its payment message format in an “effort to make the cover payment methodology more transparent,” according to the consent order. 

How did Mashreq garner attention of authorities? Risky correspondent portals

Overall, the bank has nearly 40 branches globally and assets totaling more than $44 billion, roughly $1.5 billion of that figure in the New York branch, which has been operating in Gotham, along with a predecessor, since 1989.

In all, Mashreq has 14 domestic branches in the United Arab Emirates and 26 branches and representative offices abroad, including in Bahrain, Egypt, Hong Kong, India, Kuwait, Qatar, the United Kingdom, and the United States.

Part of the message the NYDFS wants to relay to the broader international banking sector is that operations with branches in the United States had better police their correspondent networks – particularly those in riskier regions with a propinquity to destabilized, extremist and terror hotspots.

The penalty could have been higher, but the NYDFS stated the bank gave “substantial cooperation with the investigation and its ongoing remedial efforts,” including retooling is compliance program by adding hundreds of compliance staff and upgrading systems and technology.   

Even so, the bank, as part of the negotiated settlement, must report at regular intervals on the “status and sustainability” of its sanctions compliance program.

The current $100 million sanctions penalty was borne out of the October 2018 enforcement action and $40 million fine, which though mainly focused on AML compliance failings, ordered Mashreq to engage a third-party for a transactional lookback to uncover any missed sanctions violations.

To read ACFCS coverage of the prior Mashreqbank penalty, click here.

In the previous action, the NYDFS and Fed chastised the bank for a bevy of financial crime compliance deficiencies, including lax oversight of dollar clearing portals for high-risk countries, monitoring and reporting on suspicious activity and policies for dealing with rogue regimes.

The regulators also required the bank to hire an outside consultant and engage in a transactional lookback to find any missed instances of aberrant activity during a six-month period in mid-2016.

“Mashreqbank failed to fully comply with critical New York and federal banking laws aimed at combating international money laundering, terrorist financing and other related threats by failing to provide adequate oversight of transactions by customers in high-risk regions,” said former Superintendent Maria Vullo in a statement at the time.

To read the full action, click here.

ACFCS noted at that time the penalty continued a trend of federal and New York regulators focusing on foreign banks with operations in the United States that also have sprawling correspondent banking networks.

A rising fear, particularly when those connections touched banks in regions to be at a higher risk for money laundering, corruption or terror finance.

For instance, Mashreq’s New York branch offers correspondent banking and trade finance services and provides U.S. dollar clearing services to clients located in Southeast Asia, the Middle East and Northern Africa – regions that “present a high risk in connection with financial transactions,” according to the NYDFS.

The weak AML oversight of these portals was magnified due to the financial throughput through these arenas.

The branch engaged in a substantial amount of U.S. dollar clearing activity for foreign customers in high risk jurisdictions – with some components of the program still processing alerts manually.

For example, in 2016, the branch cleared more than 1.2 million U.S. Dollar transactions with an aggregate value of over $367 billion. 

In 2017, the branch cleared more than one million U.S. Dollar transactions with an aggregate value exceeding $350 billion.

In the settlement documents, NYDFS examiners noticed a sharp decline in AML and OFAC program performance between 2014 and 2016, going from “satisfactory” to overall abysmal scores in just two years.

But some lines in the order had compliance analysts chafing, including this one: “A bank’s programs should improve sufficiently over time as the institution receives the benefit of the guidance provided by the examiners and works to implement-solutions to issues uncovered during examinations.”

Compliance program ‘lacked detail, nuance or complexity’

At the time of the 2016 Examination, the branch’s BSA/AML and OFAC policies “lacked detail, nuance or complexity,” according to the 2018 order.

“Shortcomings included failing to make appropriate use of relevant information in Know Your Customer (KYC) files, including documentation detailing the customer’s line of business and anticipated activity,” which are typically key metrics woven into AML risk assessments, with final figures then sensitizing the transaction monitoring system.

Examiners also noted that even with more staffing, AML analysts were absolutely overwhelmed by alert volumes, leading to increasingly longer lag times to even review or disposition alerts.

“At the time of the 2016 Examination, the New York Branch had accumulated a three-month backlog in its generation of any transaction monitoring alerts,” according to DFS.

Deluge of alerts overwhelmed AML staff

With some 1,500 to 1,600 alerts typically generated per month during that period, the gap between analyst and analyzed only widened.

The rising tide of alerts surged to roughly 2,000 a month as 2017 waned – with only one reviewer doing both the first and second-line reviewers of the same alert, defeating the purpose of a second pair of eyes as a backstop as it was the same reviewer.

Examiners continued to find faults across both AML and sanctions related to the number of analysts reviewing transaction alerts and sanctions hits.

“The branch maintained inadequate documentation concerning its dispositions of OFAC alerts and cases, with branch compliance staff failing to properly substantiate its rationales for waiving specific alerts and cases,” according to the action,

Examiners noted as well that the issues at Mashreq in New York were further compounded by a disconnect between the branch and the head office, leading to a third-party auditor in 2017 also failing to highlight areas needed for improvement.

Organizations that have sound internal controls effectively challenge and see accountability demonstrated by leaders, a dynamic as well harped on by regulators in expensive and expansive penalties under the seemingly innocuous term “the tone at the top.”

But when it comes to top executives – in and out of compliance – creating the “right expected behavior is essential. If they do not believe this, problems will surface,” Elvin said.  

That can be difficult when, at many institutions, the fincrime compliance function and the business line have been natural enemies since time immemorial.

“Often there can be natural tension between risk and front-line business generation areas,” Elvin said.

“Stronger cultures shape open and transparent discussion and I recall stories from colleagues across the industry where those sometimes get strained in certain one-off situations, but in the end, the right actions and outcomes are usually reached in healthy corporate cultures.”

In reviewing some of the details in this specific situation, just as in other similar bad outcome events, “I would suspect, that several ‘in the trenches’ staff observed and knew certain things were not right.”

But that begs the question: why didn’t they speak up? What led to some feeling they could or should not escalate?

That answer gets to the very heart of what are the practical, tangible aspects of a “culture of compliance,” or, in this case, a lack thereof.

“If you must think twice, you already have the answer,” Elvin said. “This is a good reminder to those leaders, board of directors, supervisors, and practitioners, to reinforce the expected behaviors and channels of escalation for warranted situations.”

But the penalty figure and potential remediation costs – typically estimated to be more than 10 times the actual fine – could have been far worse without the bank’s quick and complete commitment to clean up shop.

The regulator acknowledged that Mashreqbank exhibited “laudable conduct” in not quibbling about the penalty and engaged in “strong cooperation in this matter, including demonstrating a commitment to remediating the shortcomings identified, and to building an effective and sustainable BSA/AML and OFAC compliance infrastructure.”

ACFCS Special Contributor Report: AML Regulations Are Really About Protecting People – see the big picture to bridge gap between rules, results

The Skinny:

  • In this piece, the team at AI-technology innovator Symphony AyasdiAI looks at recent updates of U.S. anti-money laundering rules and questions if the country is still keeping pace with growing criminal laundering threats, and the activities generating them, like drug and human trafficking.
  • Financial institutions must change their perspective to fully play their role in spotting and preventing money laundering, realizing that illicit groups are exploiting the gap between the bank requirements to deliver on regulatory objectives, and those efforts largely missing the mark.
  • Financial institutions, regulators and law enforcement must come together, rather than, in some cases, being at odds with each other and pulling banks in both directions in-between. Why? AML is more than compliance. These crimes devastate whole communities, making AML not just about checking off compliance boxes on a list of requirements, it’s about helping to protect human beings. 

By Brian Monroe
bmonroe@acfcs.org
November 4, 2021

Anti-money laundering legislation got a much needed, but tardy upgrade with The Anti-Money Laundering Act of 2020, the biggest change in the field in the last two decades since the seminal U.S.A. Patriot Act in 2001.

It made massive changes to the Bank Secrecy Act of 1970, signaling a serious effort by federal officials to take anti-money laundering (AML) seriously by shifting from solely satisfying regulatory objectives to creating “effective” compliance teams generating “highly useful” and “relevant” intelligence for investigators.

These would be further informed by focused, shifting defined “priority areas,” released by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), both broad generators of illicit income, like corruption and cyber-enabled fraud, but also attuned to the actions and reactions of international threat actor groups.

This also included adding stronger whistleblower program provisions, which is critical, given that human intelligence remains key to the discovery of hidden criminal and financial malignancies in the banking system.

Yet, though there are several powerful elements within the Act, there’s also a lot more room for growth.

Ultimately, for all the positives of these new changes, they still fail to tackle one of the biggest challenges: AML regulation’s mission needs to change from being mostly a compliance – or worse, an analytical – issue.

Instead, it needs to focus on a moral imperative to prevent our financial system from being used to facilitate some of the worst human rights and criminal violations.  

Progress at a glacial pace

This year’s annual defense-spending bill included a whistleblower program to reward tipsters who report possible AML violations.

It’s a great start, but as a recent Wall Street Journal article pointed out, so far, it’s been slow to gain momentum. Part of the slowness is related to how the rewards system is set up.

Still, it’s good to see the feds taking some stronger steps here.

What many consider the centerpiece of the AMLA is the Corporate Transparency Act (CTA). It’s intended to combat the use of “shell companies” as havens for money laundering and other illicit activity.

It establishes a registry and requires millions of domestic and foreign companies registered to do business in the U.S. to disclose information about their beneficial owners.

Though the CTA is laudable, and necessary, as corporate opacity is a magnet for criminal groups of all stripes, some say it is also late to the party.

A beneficial ownership registry has existed in the United Kingdom since 2016, as part of strengthened AML regulations.

And under the CTA, the secretary of the treasury won’t have to implement these reporting requirements until a year after the rules were passed: Jan. 1, 2022.

And there is a school of thought that says beneficial ownership does not necessarily help in the detection of crime, given the near impenetrable opacity that has been created over the last three decades.

It’s an interesting hypothesis, and one we at AyasdiAI are seeking to test over the next year or so.

FinCEN has suggested that the final regulations will give affected entities additional time in which to come into compliance.

In all, these would be welcome leadership changes at the Treasury Department and the Federal Deposit Insurance Corp. (FDIC), one of the federal banking regulators, might help focus on new, more innovative, and more aggressive discovery and interdiction.

Simultaneously, since the pandemic began, there’s been a surge in the number of shell companies.

Lockdowns didn’t stop the bad guys from selling drugs or perpetrating other crimes – it just meant that they wound up with piles of cash that they haven’t been able to launder through the channels they normally would use due to business closures.

So instead, they started buying small, distressed businesses for cash. Ownership remained, but control was lost creating a complex discovery and detection problem.

Additionally, the adversaries of the market continue to evolve extraordinarily quickly with rising identity theft volumes, the yet-to-be understood bribery holes created by the rush to digitization during COVID-19, and the proliferation of new financial instruments like de-centralized finance, cryptocurrency and NFTs.

We can’t wait another two decades for a major piece of legislation. Fixing the cadence and focus of regulatory oversight is desperately important. 

What, why, where and how: From rules to results

Federal regulators recently updated U.S. banking laws with the Anti-Money Laundering Act of 2020.

It includes important provisions, including a whistleblower program. However, such progress is too slow to match the pace of criminals who are laundering money as the result of and to further finance their harmful activities.

These activities include human and drug trafficking, sexual exploitation, terrorist financing, rogue sovereign state activities, pedophilia and frankly some of the worst evils facing our society.

These crimes devastate whole communities, making anti-money laundering (AML) not just about checking off compliance boxes on a list of requirements, it’s about helping to protect human beings.

Financial institutions must change their perspective to fully play their role in spotting and preventing money laundering.

Are they complicated? No, definitely not.

But they are being arbitraged by a cabal of illicit groups exploiting the gap between the bank requirements to deliver on regulatory objectives, and those efforts largely missing the mark, outfoxed by the dynamic and sophisticated actions of creative and crafty criminal adversaries. 

The spirit of the law

There really seems to be energy to combat money laundering at the federal level.

But how do we get this down to the examiners’ level quickly to add energy across the entire market?

Regulatory updates, amendments and full Acts like the AMLA tend to take a lot longer than they should to get to the individual banks.

And in some cases, once the legislation gets down to the individual examiner, the requirements are already outdated.

Unfortunately, criminals have little to no lag time, which means regulations will always be behind.

De-centralized finance, Bitcoin, and NFTs are accelerating; electronic payments and open banking all offer massive exposures to the system.

The central issue with many regulatory approaches is that ultimately, they still treat money laundering as a compliance issue and not what it truly is: a moral and human rights mission.

What happens much of the time is that financial institutions focus on just the regulations, taking a check-the-boxes compliance approach without understanding the full ramifications of money laundering.

The rule of the law shouldn’t be the objective, the spirit of the law should be.

AML officers, compliance leaders and financial intelligence unit (FIU) leaders have an incredibly impactful role on the adversaries that exploit the system.

They can be astonishingly impactful, especially when system-wide collaboration is used to challenge the “portfolio” approach that organized criminals so readily rely on.

A change in perspective

Perspective is essential when thinking about AML.

Banks must consider themselves as stewards of the integrity of the financial system and the standards a society holds itself to.

These aren’t small firms, some are almost countries in themselves.

Culture and tone from the top have a material impact on the societies they operate in – and a culture of compliance, or lack thereof, has been a reoccurring theme in high-profile AML and sanctions enforcement actions, some that has soared into the billions of dollars.

Banks must be the leaders of innovation and crime discovery, not simply the executors of abstract regulations that are often outmaneuvered before they are implemented.

Meanwhile, regulators should be stimulating innovation, discovery, and learning from the market – not stifling change because it shifts power and control away from examiners.  

They should be the Product Management of the fight against financial crime – synthesizing ideas, breakthroughs, information and propagating that to the constituents of the market, a duty because of the unique perspective regulators have to see the best and worst across banking groups large and small.

Regulations are not a competitive issue.

They are frameworks to allow the system to have integrity and balance. So, it needs to be a collective endeavor, involving technology, banks, and regulators working together against a common group of highly sophisticated and agile foes.

Banks need to stop fearing they’ll be penalized for discovering new attacks or risks. 

At the same time, regulators should act as the catalyst for innovation and as a clearinghouse for collective ideas that increase the effectiveness of the system and its constituents.

That may feel to many to be the reverse of the traditional compliance model, but only through such partnership can the system arm itself effectively against those that exploit the financial system’s fragmentation, opacity and lack of coordination.

The spirit of the law must be the prime motivator, rather than the letter of the law.

We now have the technologies to first discover, then disrupt and maybe someday stop criminal exploitations of the banking system. Sure, that may seem naïve, but we now have the tools and ability to create real change.

So it comes to money laundering, human and sex trafficking, the narco-economy and rogue state actions, it should be much less about keeping the regulators happy against some abstract requirements and more about the constituents of the system.

It’s more about ensuring our banking system isn’t exploited as a facilitator of some of the worst actions against humanity.

The top-down method of regulators making decisions about how financial institutions should catch the bad guys, instead of the banks catching the bad guys and then telling the regulators how it was done, isn’t working.

Such a backwards dynamic hamstrings the entire system and gives adversaries the ability to institutionalize many of the risks we’re trying to stop. 

From Compliance to Caring

Streamlined reporting, a cash-for tips whistleblower program and other provisions are a great step forward for AML efforts.

But it took so long to get here, and there are still several shortcomings, mainly the cadence and singular focus on individual banks rather than stimulating systemic focus, innovation and synchronization.

The goal: a true harmony and partnership between the public sector and private sector, banks, regulators and law enforcement working together in truth, trust and transparency against a common enemy – all organized criminal groups and their tainted financial lifeblood.  

Money laundering facilitates serious crimes against real human beings, such as slavery, the illicit drug trade, sexual exploitation and terrorism.

Merely ticking the boxes to meet minimum compliance is insufficient to meet these threats. We need a rapid upgrade not just of regulation but of mindset to help uphold human rights and human dignity.

In DOJ corporate compliance update, expect less leeway for leniency in high-profile failures, more pressure to name, shame individuals

The Skinny:

  • Financial institutions and corporates facing federal prosecutions for financial crime compliance failures will find themselves facing more stringent resolutions, more pressure to name and shame individuals and less leeway or leniency – particularly if they have had prior high-profile enforcement actions.
  • That is, according to just-released statements and updated guidance by the U.S. Department of Justice (DOJ). The federal agency is restoring prior guidance tied to the finer points of cooperation credit to name all involved, not just the top illicit influencers, to mine lower-ranking lackeys to reel in the bigger fish.
  • As well, federal authorities are crafting new guidance ensuring prosecutors weigh a company’s full compliance history – not just in a specific area, like corruption, if it has a hefty helping of prior tax infractions. In tandem, the DOJ is rescinding prior guidance on any real or perceived roadblocks to assigning monitors.

By Brian Monroe
bmonroe@acfcs.org
November 1, 2021

For financial institutions and corporates that find themselves facing federal prosecutions for financial crime compliance failures, they could find themselves facing more stringent resolutions, more pressure to name and shame individuals and less leeway or leniency – particularly if they have had prior high-profile enforcement actions.

Those are some of the key takeaways from several just-announced new initiatives to strengthen corporate compliance oversight, investigations and enforcement for individuals and serial offenders by the U.S. Department of Justice (DOJ), according to Deputy Attorney General Lisa Monaco, speaking at a recent industry conference.

To read her full statements, click here.

In short, Monaco detailed a host of changes corporates should consider to make compliance a top-of-mind issue now, to ward off future investigations – or strengthen a firm’s leverage at the negotiating table.

The comments hold more weight than simply a speech at an industry event.

Monaco forcefully stated that she is formally restoring prior guidance tied to the finer points of cooperation credit to name all involved, not just the top illicit influencers, and crafting new guidance ensuring prosecutors weigh a company’s full compliance failing track record – not just in a specific area, like corruption, if it has a hefty helping of prior tax infractions.

She also stated the DOJ is rigorously rescinding prior guidance on any real or perceived negative proclivities to assigning monitors in major enforcement actions.

The tacit meaning: They can come up at any time in any case in any stage of negotiations if the government feels they can’t trust the company in question to comply with restoring a stout compliance function without compunction.   

Some overarching themes to consider now as immediate outcome action items include:

  • Pay now or pay more later: Companies need to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it’s going to cost them down the line.
  • Going on record about the full record: For clients facing investigations, as of today, the department will review their whole criminal, civil and regulatory record — not just a sliver of that record.
  • Rating your cooperating: For clients cooperating with the government, they need to identify all individuals involved in the misconduct — not just those substantially involved — and produce all non-privileged information about those individuals’ involvement.
  • Watching the watchers, monitoring the monitors: For clients negotiating resolutions, there is no default presumption against corporate monitors. That decision about a monitor will be made by the facts and circumstances of each case.
  • More changes in store, the floor not the ceiling: Looking to the future, this is a start — and not the end — of this administration’s actions to better combat corporate crime.

Why the stronger focus on compliance? Scams, breaches, breaching national security

The comments have direct relevance for bank anti-money laundering (AML) officers and non-bank governance, legal, risk and compliance executives.

Why?

They give updated thinking around the crafting, components and decision-making in high-profile compliance enforcement actions, including monitorship selection, recidivism and non-prosecution agreement/deferred prosecution agreement (NPA/DPA) non-compliance and individual liability – in this case hewing toward more public and punitive penalties.

The move marks a significant uptick in compliance enforcement focus, chiefly for corporates that are not financial institutions – companies that, while not required to have AML programs, still must ensure they are not engaging in grand corruption, the many flavors of fraud, sanctions violations and the like.

So what are the trends driving the DOJ’s new stance on corporate compliance and what has changed in recent years?

Several, including frauds and cyber breaches increasingly coming with tethers to national security issues, such as the “new role of sanctions and export control cases to cyber vulnerabilities that open companies up to foreign attacks.”

Second, data analytics is playing a larger and larger role in corporate criminal investigations, whether that be in “healthcare fraud or insider trading or market manipulation,” Monaco said.

In tandem, criminals are “taking advantage of emerging technological and financial industries to develop new schemes that exploit the investing public.”

The more direct meaning: that is DOJ’s nod to the growing prevalence of cyber-enabled and crypto-fueled frauds, where a supposed shiny digital coin coming soon is a Ponzi scheme with a virtual value sheen and the link you clicked on about investing in Bitcoin has infected your computer with a ransomware attack – that you must pay in Bitcoin. 

New corporate crime ‘advisory group’ can surge resources, draw from FBI embed

But how will the DOJ executive on such a grand vision, without necessarily a major staff up of investigative talent or prosecutory prowess?

Team building by improving the group dynamic.

Monaco also highlighted the creation of the Corporate Crime Advisory Group, which will be made up of representatives from every part of the department involved in corporate criminal enforcement.

“This group will have a broad mandate and will consult broadly,” she said, adding that it will consider issues like selecting the corporate monitor – a private-sector sentinel who reports directly to the DOJ, repeat offenders and what actions should be taken against companies that repeatedly breach negotiated settlements.

Conversely, the advisory group will also work to better parse out “what benchmarks we should use to measure a successful company’s cooperation,” Monaco said.

The advisory group could also use its influence and unified voice speaking from so many different areas of DOJ to shift and capture more resources for significant investigations of potential major enforcement failures.

As one example, a new squad of FBI agents will be embedded in the Department’s Criminal Fraud Section, she said.

That stratagem, successes and failures, will also inform longer term recommendations on revisions to strengthen, review and refine overall corporate criminal enforcement tactics.  

It will also “ensure that individual accountability is prioritized,” she said.

“Accountability starts with the individuals responsible for criminal conduct,” Monaco said, adding that it is DOJ’s “unambiguous first priority” to prosecute the “individuals who commit and profit from corporate malfeasance.”

DOJ will also weigh in on a term that has been mentioned in massive AML and sanctions penalties: corporate culture.

“Corporate culture matters,” she said. “A corporate culture that fails to hold individuals accountable, or fails to invest in compliance — or worse, that thumbs its nose at compliance — leads to bad results. While the priority remains individual accountability, where appropriate, we will not hesitate to hold companies accountable.”

Putting the full record on the record: reserving the worst for recidivists

The scope of analyzing compliance culture in future criminal cases will also drip further into all of the individuals involved, not just the kingpins, but the lesser involved lackeys on the lowest rungs of the corporate ladder.

“To be clear, a company must identify all individuals involved in the misconduct, regardless of their position, status or seniority,” to get extensive credit for cooperating with DOJ, Monaco said.

“It will no longer be sufficient for companies to limit disclosures to those they assess to be ‘substantially involved’ in the misconduct,” she said, adding that such distinctions are “confusing in practice and afford companies too much discretion in deciding who should and should not be disclosed to the government.”

Such a limitation also “ignores the fact that individuals with a peripheral involvement in misconduct may nonetheless have important information to provide to agents and prosecutors,” yielding details that could help further incriminate senior level officers, often shielded by layers of legal defenses.

For future compliance failures, the hits will just keep on coming, as DOJ investigators are not just going broader and deeper – they are going further back and even considering adjacent prior settlements, even if they are in a different area entirely.

DOJ is making clear that “all prior misconduct needs to be evaluated when it comes to decisions about the proper resolution with a company, whether or not that misconduct is similar to the conduct at issue in a particular investigation,” Monaco said.

That record of misconduct “speaks directly to a company’s overall commitment to compliance programs and the appropriate culture to disincentivize criminal activity,” she said, adding the more strident enforcement trident will be formalized in an amendment to the Department’s “Principles of Federal Prosecution of Business Organizations.” 

“Going forward, prosecutors will be directed to consider the full criminal, civil and regulatory record of any company when deciding what resolution is appropriate for a company that is the subject or target of a criminal investigation,” Monaco said. 

ACFCS Member Spotlight: The secrets to success for Jumio’s Craig Fetterman? Treat those under you like they were your boss, continually broaden knowledge, network

The Skinny:

  • When Craig Fetterman finally got a chance to manage others in the compliance field, he made sure not to let it go to his head. Rather than trying to institute an authoritarian regime, he took a decidedly different tack, guided by a simple but powerful philosophy: “Treat people who work for you as if they were your boss.”
  • Now at AI-powered financial crime technology firm Jumio, Fetterman realizes that even as his career has become more data analytics driven, there can be no program success without knowledgeable, skilled and passionate professionals.
  • Helping companies craft and develop technology, and as well guiding and teaching bank compliance teams to implement them, has been a foundational theme since Fetterman entered the fincrime fray nearly 25 years ago. 

By Brian Monroe
bmonroe@acfcs.org
October 27, 2021 

When Craig Fetterman finally achieved the lofty title of managing others in the financial crime compliance field, he made sure not to let it go to his head.

Rather than trying to institute a totalitarian and authoritarian regime, meant to instill fear and obedience, he took a decidedly different tack, guided by a simple but powerful philosophy: “Treat people who work for you as if they were your boss.”

“The theory is that your team is there to help you achieve your goals, so your primary focus should be to make them successful at that.”

Now at AI-powered financial crime technology firm Jumio, which specializes in customer identification verification and screening, Fetterman realizes that even as his career has become more data analytics driven, there can be no program success without knowledgeable, skilled and passionate professionals.

He is currently the Director of Global Customer Success for Jumio’s anti-money laundering (AML) business.

In that role, Fetterman is responsible for helping organizations understand how Jumio’s solutions can help meet their regulatory requirements, He is also responsible for all RFP responses across the entire organization.

He also has a B.S. in Information Systems and Finance from the University at Albany in New York.

Helping companies craft and develop technology, and as well guiding and teaching bank compliance teams to implement them, has been a foundational theme since Fetterman entered the fincrime fray nearly 25 years ago.

The last 15-plus years he has focused on financial crimes and compliance working at Citibank and industry juggernaut NICE Actimize, before joining Beam Solutions, which was acquired by Jumio in 2020.

One the key secrets to success for a field as deep and dynamic as AML is to grow all available networks of knowledge, in and out of your organization, so you can turn yours strengths into weakness and gain true, practical knowledge from the thought leaders wrestling with budgets, regulators and historical and emerging vulnerabilities.

In that same vein, attending in-person or virtual industry events and conferences, take time to network and engage attendees, including regionally to better understand local criminal tactics, but also top leaders you want to connect with and collaborate.

More people have also been connecting to share knowledge on fincrime compliance and money laundering – but not in the way you think.

As AML departments have risen in importance for banks globally, commanding eye-popping salaries for high-profile leaders and capturing penalties in the billions of dollars, the focus on and awareness of money laundering has soared in the arena of pop culture, Fetterman said.

That is a big change from recent decades, he said.

“I feel that 15-20 years ago, if you asked a random person (not in financial services) about money laundering, they wouldn’t know much about it,” he said. “Now with banks asking more questions, increased press coverage, and shows like Ozark and Breaking Bad, the general public is more aware of the AML world.”

Fetterman was kind enough to share some of his insight in our latest ACFCS Member Spotlight:

Who inspires you?

I’m often inspired by the frontline financial crimes specialists that have dedicated themselves to detecting and investigating illicit activity.

Because I’ve always been in roles that provide the tools and support that they need to do their jobs effectively, I’m inspired by the men and women who go the extra mile to protect our society and our financial systems from various types of bad actors.

What is one thing - industry-related or not - that you learned in the past month?

I had a couple of experiences recently with some work being done at my house that showed me that there’s no substitute for a professional that’s good at their job.

The first was when I was having a new couch delivered for my living room. I wanted to move my old couch down to my basement, which has a tight stairway with low ceilings and a few tight corners.

I spent a couple of hours measuring how it could fit based on every possible orientation to negotiate it down the stairs, only to determine that it would not be able to fit.

When the new couch was delivered, I asked the men who delivered it what they thought, and they looked at the couch and the stairway for about 5 seconds and said “I think so.”

They had to remove the door and the couch legs, but 10 minutes later the whole thing was in the basement. 

If I had tried to do it myself (or with a helper), it would have taken me hours, and I probably would have failed, but instead I got to watch a team of professional couch movers do what they do best.

It doesn’t matter whether it’s moving couches, performing brain surgery or investigating financial crime, I’ve realized that there’s no substitute for genuine expertise.

What is something about you that not many people know?

I’m a Wikipedia junkie. Instead of reading a full book on a particular topic like most people, I prefer to read 100 Wiki articles on 100 different topics.

The articles can be about anything. Articles that I’ve enjoyed recently span from a biography of Andrew Carnegie to theories of human evolutionary migration and from the International Space Station to the JFK assassination.

Usually, during the course of reading an article, I’ll find links to several other related articles to read until I’m a fake expert on the topic. The website’s Random Article feature can be interesting as well. And I’ve recently started editing articles.

What do you do in your current role

As the Director of Global Customer Success for Jumio’s AML business, I’m responsible for a team that covers three main functions: solutions consulting, implementations, and customer support. 

The solutions consulting component involves working with organizations that are evaluating AML solutions to understand their challenges and requirements, and illustrate how Jumio’s suite of anti-financial crime products can help them to be successful.

The implementation team is responsible for managing the entire system deployment process from kick-off through go-live.

This is probably the most challenging component because we work with so many different types of organizations across multiple sectors including traditional banks, fintechs, cryptocurrencies, lending, marketplaces and more.

Finally, the third component is customer support, which helps our live clients with any issues that they may encounter to ensure that the solution delivers the expected value.

In addition to my primary Customer Success responsibilities, I am also responsible for Jumio’s global RFP team across all of our solutions beyond AML, including ID and identity verification.

Lastly, I function as an AML subject matter expert within Jumio, assisting our internal teams such as product, marketing and sales.

What does your career trajectory in financial crime look like?

I try not to look too far ahead because I think that trying to predict the future is sometimes an exercise in futility.

Two years ago, who would have predicted that a global pandemic would change so many aspects of our day-to-day lives?

While it’s good to have an idea of what you want in the future, I try to avoid pre-writing my career story. I try to always look forward to the next unexpected surprise.

What is the best advice you have ever received?

The first time I was given an opportunity to manage other people, I was told to treat people who work for you as if they were your boss.

The theory is that your team is there to help you achieve your goals, so your primary focus should be to make them successful at that.

So essentially… help them to help you.  While this is obviously not an absolute for every situation, I find it valuable to consider this perspective to ensure that you’re both successful.

What is the worst advice you have ever received?

Years ago, a few of my colleagues convinced me to move into a sales role.

While I enjoyed the experience, the role shifted my attention away from the topics that I enjoyed most.

I found myself focusing on prospecting leads and scheduling meetings when I would have preferred to focus on industry trends and technology solutions.

Even though I decided to leave sales a couple of years later, I don’t at all regret giving it a try, because I love trying new things and got to see our industry from a different perspective.

What would you say are the most important attributes for someone in your position to succeed?

When you’re in a customer success role such as mine, you need to be able to see things from other people’s perspectives.

What may seem like a small inconvenience from a technology perspective can be a major issue for somebody that has a regulator arriving for an audit the following week.

Or a software interface that requires a few more clicks to accomplish a task may seem insignificant, but to a team of analysts who are overwhelmed by alerts to investigate, those extra few seconds add-up.

It’s important to empathize with the position that they’re in so that you can make more informed decisions.

How has (compliance, investigations, etc.) changed and evolved during your career?

One big change is that the general public is aware of money laundering and AML.

I feel that 15-20 years ago, if you asked a random person (not in financial services) about money laundering, they wouldn’t know much about it.

Now with banks asking more questions, increased press coverage, and shows like Ozark and Breaking Bad, the general public is more aware of the AML world.

Why did you join ACFCS or gain the CFCS designation?

I engage with ACFCS because I value the insight of people in different roles at different organizations. Every article or webinar is an opportunity to hear the challenges that other people in the industry face and the creative ways that their organizations are finding to solve those challenges.

What is the most rewarding part of your job?

I like that I get to work with many different types of companies (banks, securities, fintechs, lending, cryptos, marketplaces, etc.).  It makes the job more interesting, and I get to learn something new every day.

How did you get your first job in the field and what advice would you give other job seekers to help land their first position.

I took an interesting path to get to my current role. I started out as a software developer for treasury and capital markets systems.

I then joined Citibank in the technology team responsible for a broker-dealer. When I was being promoted to manager, the compliance technology team was in need of a new manager. 

This was my introduction to the regulatory compliance and financial crimes space.

My initial focus was on securities and financial markets compliance, such as suitability, market manipulation, and insider trading. It was during my 12 years at Actimize that my focus shifted towards Anti-Money Laundering and fraud. 

For professionals with 5-10 years of experience, what advice would you give them to help advance to senior management roles?

If you’re like me and you love to learn new things, don’t be afraid to ask your colleagues about their jobs. 

For example, if you’re an analyst, schedule some time to meet with somebody in an audit or technology role to ask how they spend their time and what problems they are trying to solve.

This will give you a much broader understanding of the big picture within organizations and our industry.

The same can apply to people outside your organization at industry events.

What I’ve found is that people enjoy sharing their knowledge and experience and will also want to hear the same from you. It’s also a great way to build your professional network while gaining valuable knowledge.

The Future of Banking: Onboarding Customers You’ll Never Meet

Before the pandemic, banks were slowly embracing innovation and integrating new technologies. But that gradual, comfortable pace was upended by the pandemic. Banks were forced to shutter branches, while never-digital customers shifted to digital-first behaviors.

This trend is here to stay. Many customers expect to access all banking services on their smartphone and don’t anticipate visiting a bank branch at all.

As customers shift to digital only channels, how can banks deliver a high level of customer service, provide guidance on the right products and services, and at the same time manage the financial crime risks of opening accounts with people they will likely never have a face-to-face interaction with?

Are fraud risks really higher with digital banking? Get answers to these questions and many others in this conversation with Brian Ferro, Director of AML with Feedzai.

Fincrime Career Tips and Tricks: To capture success in fincrime compliance career, don’t search for specific job, research topics that ignite interest, spark curiosity to court opportunity

The Skinny:

  • In this new initiative, ACFCS engages the fincrime compliance community for wisdom and practical insights on how to enter and rise in a fulfilling but demanding and everchanging field.
  • For this tip, we travel to the United States, to see through the eyes of an experienced legal professional and compliance thought leader with a penchant for polished prose.
  • For Ola Tucker one of the secrets to success in a field as complex, deep and detailed as financial crime compliance is to not get tunnel vision related to a particular position or company, but research to find your own “areas of interest.” Why? By working with passion and purpose, companies will come to you.

By Brian Monroe
bmonroe@acfcs.org
October 21, 2021

In this new initiative, ACFCS engages the fincrime compliance community for wisdom and practical insights on how to enter and rise in a fulfilling but demanding and everchanging field.

We are asking minds across the spectrum and around the world of compliance officers, regulators and investigators to share some of their secrets to success.

Some of the questions: How can you take the first steps launching a career in the midst of a pandemic? And for those already working, how can you continue to develop professionally and take it to the next level?

For this tip, we travel to the United States, to see through the eyes of an experienced legal professional and compliance thought leader with a penchant for polished prose

For Ola Tucker one of the secrets to success in a field as complex, deep and detailed as financial crime compliance is to not get tunnel vision related to a particular position or company, but research to find your own “areas of interest.”

Why? Because caring about the subject can make all the difference in the world.

Don’t focus solely “just on specific jobs or career paths, but research topics you’re interested in and want to learn more about,” she said. “This will naturally lead you to opportunities in the types of industries and organizations you’re drawn to.”

She has been in the legal, compliance and regulatory fields for more than 15 years and is currently the Founder and Writer at Compliance Notes, which provides compliance-focused written content and freelance writing services, as well as compliance training, to individuals and businesses.

She also teaches classes on anti-money laundering (AML), anti-corruption, illicit financial flows, and corporate compliance in the Graduate, Compliance, and Legal Studies Program at Widener University Delaware Law School, with further areas of expertise in internationals sanctions and ethics.

Formerly, Tucker served as the AML Compliance Officer at a privately-held trust company, based in Wilmington, Delaware.Prior to that, she was a compliance consultant and analyst at two Fortune 50 companies.

She was kind enough to share some of her career insight in our latest “tips and tricks” episode. Enjoy!

Name: Ola Tucker

Organization: Compliance Notes

Title: Founder/Consultant/Writer

Country: United States

What initially attracted you to the world of financial crime prevention? What keeps you here now?

For me personally, a career in financial crime was a great alternative to a traditional legal career, and I’m able to use a lot of the skills (e.g., research, writing) and knowledge (e.g., how the criminal system works) that I learned in law school.

Financial crime continues to evolve as a result of globalization and technology.

Therefore, there is always something new and interesting to learn. It’s an exciting field to work in.

How did you overcome the experience gap for those new to their industry, field or country?

Keep on top of the many financial crime-related cases and enforcement actions in the news.

From the Panama Papers and the FinCEN Files, to cases involving cybercrime and the dark web, and many others, there’s always something going on in this area.

There are also a ton of free webinars from which someone just starting out can learn a lot.

What’s your advice to someone just starting out in the industry and wondering how to chart their career path?

Do a lot of research on your areas of interest.

Not just on specific jobs or career paths, but research topics you’re interested in and want to learn more about.

This will naturally lead you to opportunities in the types of industries and organizations you’re drawn to.

Any advice or suggestions for job-seeking during the pandemic?

Get active on LinkedIn and make connections with others in the industry. Virtual connections can be just as useful as those made in-person. 

Read and share current and noteworthy information. 

Write articles or blog posts to get your name out there.

Any other thoughts or guidance on getting started in fincrime careers to share?

There’s a lot of need for people with different types of skills, backgrounds, and experiences, whether it be language proficiency, technical expertise, or analytical ability. 

Highlight what you’ll bring to the table.

Get involved in sharing your career tips: How It Works

Each quarter, ACFCS is asking its members for advice on various aspects of fincrime careers, from getting your foot in the door to finding a mentor.

This quarter, we’re focused on guidance for launching a career – everything from what motivated you to seek out a role in fincrime prevention, to where you’re seeing hiring opportunities and more.

We’ll gather responses and share them back with our member community. Three participants will receive one year of complimentary ACFCS members (added to your existing membership for current members).

To learn more and submit your tips, click here

For Jim Dinkins, president of Thomson Reuters Special Services, persistence, disproving doubters a hallmark of 30 years in federal law enforcement, compliance

The Skinny:

  • James “Jim” Dinkins has made a career out of fighting financial crime in all of its forms over more than 30 years – at the forefront of the intersection of national security, border security, organized crime, narco trafficking, global trade and terrorist financing.
  • But Dinkins, now President of Thomson Reuters Special Services (TRSS), an independent subsidiary of news, information and technology heavyweight, Thomson Reuters, employs his analytical mindset and investigative skillset to better calculate, calibrate and mitigate fincrime risks – a vital asset with compliance programs commanding millions of dollars in resources and high-profile enforcement penalties soaring into the billions of dollars.
  • His career is also an exercise in patience, persistence and disproving anyone who didn’t believe in him or give him a chance – in some cases, when one door shut, literally flying to another state in-person at a federal investigative agency to open another by sheer force of will. 

By Brian Monroe
bmonroe@acfcs.org
October 18, 2021 

James “Jim” Dinkins has made a career out of fighting financial crime in all of its forms over more than 30 years – at the forefront of the intersection of national security, border security, organized crime, narco trafficking, global trade and terrorist financing.

His career is also an exercise in patience, persistence and disproving anyone who didn’t believe in him or give him a chance – in some cases, when one door shut, literally flying to another state in-person at a federal investigative agency to open another by sheer force of will.

From drug cartels in the 1980s, to terror groups after 9/11, he has learned, taught and led agents to follow the money at the U.S. Customs Service and later, spearheading the formation of Homeland Security Investigations (HSI), the nation’s second largest federal investigative department.

But Dinkins, now President of Thomson Reuters Special Services (TRSS), an independent subsidiary of news, information and technology heavyweight, Thomson Reuters, employs his analytical mindset and investigative skillset to better calculate, calibrate and mitigate fincrime compliance risks.

How?

Through the lens of his experience, combined with deep and detailed analyses of internal and external transactional and risk data, intelligence collection and analysis and overlaying that with insider threats and exterior emerging and perennial vulnerabilities, like global trade and international banking blindspots. 

Over his career, Dinkins has seen the evolution of a nascent financial crime compliance field, from the Money Laundering Control Act of 1986, that made laundering a federal crime, to the foundation of the modern compliance sector, the 2001 U.S.A. Patriot Act – forged in the aftermath of the 9/11 terror attacks – to what many are calling the most significant update in the last 20 years: The U.S. Anti-Money Laundering Act (AMLA).

But that eventual long and storied story got off to a very inauspicious start.

“When I was in high school, the guidance counselor pulled my mom aside and told her I wouldn’t succeed in college so I should go into auto mechanics or find a trade school,” he said.

“Since I couldn’t find a job in the Motor City auto industry after graduating high school, I went to college. It was a blessing. I discovered I was interested in criminal justice and went from a failing high school student to graduating with a 3.7 GPA.”

Dinkins’ career in government service began in 1986 with the U.S. Customs Service, and in 1988 he became a U.S. Customs Special Agent investigating cross border criminal activity.

Following 9/11, he was named Chief of the Cornerstone and Financial investigation Programs at the newly founded Department of Homeland Security, where he led the development of international and domestic initiatives to combat vulnerabilities in the United States’ financial and trade sectors.

After that dark day, Dinkins realized that banks and law enforcement would have to work more closely together than they ever had before – an understanding that eventually helped him transition to a top fincrime compliance position at U.S. bank.

“On 9/11, I wanted to do what I could to hold those responsible accountable and prevent it from happening again,” he said. “And I knew that the government could not do this alone. It would require a partnership with corporate America. So I naturally gravitated to positions and opportunities where I could be part of the solution.”

In 2010, Jim led the formation of Homeland Security Investigations (HSI), overseeing the agency’s global national security and public safety efforts and directing a budget of $2 billion USD, more than 9,000 employees, 200 field offices throughout the United States and 75 international locations in 48 countries.

Achieving those coveted posts, Dinkins said, came not from loudly championing his successes, but humbly mastering the responsibilities in his current position.

“I was promoted many times throughout my law enforcement career not because I was seeking those opportunities, but because people saw something in me I didn’t see in myself,” he said. 

In fact, when he became a Special Agent in Charge (SAC), he didn’t apply for the role.

“After I decided not to apply for the role, I got a call saying: ‘Congrats! You’re the new SAC!’ I was never the kind of person always seeking to move up the chain, I just wanted to master the job at hand and was grateful to have the opportunity I had been given.”

That tenet is one of his secrets to success. One of the best pieces of advice anyone has ever given him: “The best advice, and what’s benefitted me throughout my career, is just this: master the job and tasks that you’re given.”

“Don’t focus so much on the future that you fail to do a fantastic job with the opportunity you have already been given,” he said. “Be so great at your job that people around you will advocate for you. By doing so, other opportunities will present themselves. So master the role you’re given, and people will naturally want you to do more.”

Something also to consider: “And by the way, if you don’t manage the task at hand, you’re more likely to fail as you move up the ladder and move on to more complex responsibilities.”

That is a valuable lesson in a field as broad, deep and dynamic as financial crime compliance.

“Today, compliance keeps changing and evolving, and there are more complex solutions than ever to help mitigate risk,” Dinkins said. “The techniques I used 20 years ago are different than today. Just like leaders, everyone needs to learn and evolve and if you don’t, you’ll be left behind.”

While not in law enforcement anymore, he advocates that all counter-crime compliance teams remember they are partners, erstwhile allies in this fight, and their decisions, skills and knowledge matter.

“I often think many people serving in financial crimes compliance lose sight of the fact that they are playing a pivotal role in keeping our communities and nation safe,” he said.  “It’s not a regulatory administrative task, it’s part of the ecosystem of preventing crime.”

Dinkins was kind enough to share some of his extensive and expansive knowledge and thought leadership in our latest ACFCS Member Spotlight:

Who inspires you?

One of my first government bosses, Gloria Marshall, was an inspiring boss and leader.

She spent more than 55 years in the federal government, and the way she treated her employees inspired me. She earned the respect of her staff, and colleagues, which led to a high-functioning team.  

Many of her team, including me, went the extra mile for Gloria because we didn’t want to let her down – not because of fear punishment. I’ve always aspired to be that kind of leader.

What is one thing - industry-related or not - that you learned in the past month?

I found TikTok! I’d never had any social media accounts besides LinkedIn. I have two daughters who are in their early twenties, and they of course have TikTok.

I was on vacation and I downloaded it…and now I may have to delete it because it can consume hours at a time. You can really go down a TikTok rabbit hole!  

What is something about you that not many people know?

When I was in high school, the guidance counselor pulled my mom aside and told her I wouldn’t succeed in college so I should go into auto mechanics or find a trade school.

Since I couldn’t find a job in the Motor City auto industry after graduating high school, I went to college. It was a blessing. I discovered I was interested in criminal justice and went from a failing high school student to graduating with a 3.7 GPA.

After graduating with my BA in Criminal Justice and becoming a special agent, all I aspired to be was a senior special agent.

I was promoted many times throughout my law enforcement career not because I was seeking those opportunities, but because people saw something in me I didn’t see in myself. 

In fact, when I became a Special Agent in Charge (SAC), I didn’t apply for the role. After I decided not to apply for the role, I got a call saying: “Congrats! You’re the new SAC!”

I was never the kind of person always seeking to move up the chain, I just wanted to master the job at hand and was grateful to have the opportunity I had been given.

What do you do in your current role

I lead one of the most creative and innovative teams I’ve ever worked with. It’s amazing, I’ve never seen such a collection of smart people under one roof in my life.

And I am extremely proud to lead our mission-driven organization, that’s committed to making our world safer and more secure.

As president, I oversee the company’s teams lead by our CFO, CTO, general counsel, strategy, Analysis, HR, business development, innovation, and human rights crimes.  

What does your career trajectory in financial crime look like?

When I started as a special agent under Treasury in the 80s and early 90s, one of the biggest issues the national [law enforcement agencies] faced was Colombian cartels, and investigating cartel money laundering. 

When I ran an undercover money laundering operation, I learned about everything from trade-based money laundering to the black-market peso exchange.

My teachers in this case were the money brokers themselves, as they unwittingly explained the services they needed that we ultimately provided to them in an undercover capacity. 

During this time, I was very interested and found it very effective to follow the money and understand the transnational and financial aspects of the criminal organization.

They were very complex cases that led to the arrest and conviction of high-level cartel money launderers and leaders. 

Following 9/11, I applied these same investigative techniques to identify potential terrorist financing.

We started an operation designed to identify criminal organizations who were seeking to exploit vulnerabilities in our formal and informal banking systems to support terrorism and other criminal organizations.

The reality is almost all crimes are committed for financial gain, and that fact is important for disrupting and dismantling criminal organizations.

What is the best advice you have ever received?

The best advice, and what’s benefitted me throughout my career, is just this: master the job and tasks that you’re given.

Don’t focus so much on the future that you fail to do a fantastic job with the opportunity you have already been given. 

Be so great at your job that people around you will advocate for you.  By doing so, other opportunities will present themselves. So master the role you’re given, and people will naturally want you to do more.

And by the way, if you don’t manage the task at hand, you’re more likely to fail as you move up the ladder and move on to more complex responsibilities.  

What would you say are the most important attributes for someone in your position to succeed?

Being a leader is really important. And sometimes it’s easy to become a manager and not a leader.

So, I would say it’s very important to be able to identify talent and surround yourself with great talent, and then empowers them to succeed.

A great leader is not afraid to fail and make mistakes but will own those mistakes and move on. And you also have to be willing to put in as much work as you want from your team, so lead from the front.

How has (compliance, investigations, etc.) changed and evolved during your career?

It’s all changed drastically. When I was an agent, if you were doing an investigation and you wanted to know who owned a piece of property, you had to go the clerk’s office and get the physical records, sometimes even pulling microfiche film.

Sometimes, we had to dig through suspects trash and dumpster dive to find old records and stray pieces of information.

Today, you can find out nearly all of that with a CLEAR search. Technology has changed, both on the investigative side and among criminal organizations as well.

So as technology drives opportunities for law enforcement, it also provides opportunities for criminals. The internet is a great example – it’s a great investigative tool, but it also offers a whole new dimension to buying and selling contraband.

9/11 also changed everything about law enforcement and compliance.

The Patriot Act required companies to be more vigilant about monitoring for financial crimes and conducting due diligence on things like knowing your customer when they open bank accounts.

9/11 showed the vulnerabilities of many systems and institutions.

Today, compliance keeps changing and evolving, and there are more complex solutions than ever to help mitigate risk. The techniques I used 20 years ago are different than today.

Just like leaders, everyone needs to learn and evolve and if you don’t, you’ll be left behind. 

What do you see as the key financial crime challenges in your role or in the sector overall?

When I was at US Bank, having spent an entire career investigating money laundering and then transitioning into an AML compliance position, one of the great challenges I found was the volume of activities financial services must monitor.

There are billions of transactions happening around the globe, and it’s so difficult to identify what’s really related to criminal activity. It’s a much more complex virtual world we live and bank in, and it’s so hard for an AML professional.

Finance, trade, travel and commerce are all global in nature now.

Monitoring these transactions in real time is an enormous challenge. I really have the utmost respect for the financial crimes professionals I worked with who were hard working, dedicated, and geniuses in their areas of expertise.

What motivated you to become a financial crime compliance professional?

Having spent years investigating the money laundering activities of criminal organizations, and seeing firsthand how criminals would seek to exploit the slightest vulnerability in our financial system to earn, move and store their illicit funds, I knew the power of financial crime expertise.

On 9/11, I wanted to do what I could to hold those responsible accountable and prevent it from happening again. And I knew that the government could not do this alone.

It would require a partnership with corporate America. So I naturally gravitated to positions and opportunities where I could be part of the solution.

I often think many people serving in financial crimes compliance lose sight of the fact that they are playing a pivotal role in keeping our communities and nation safe. It’s not a regulatory administrative task, it’s part of the ecosystem of preventing crime.

What is the most rewarding part of your job?

The most rewarding part of my job is having a positive impact on our communities, national security, and public safety.

I also love having the opportunity to empower people and helping create an environment where people can follow their dreams and succeed in their own way.

Is there anything that surprised you about your current role?

TRSS has grown very rapidly, from a couple dozen employees to almost 250 located throughout the US and UK in 2021.

Our ability to grow while maintaining our sense of culture is amazing, because we’ve hired high-quality people who are serious about doing good. Losing the culture is our greatest risk as a fast-growing organization, and we’ve been able to overcome it.

We have been lucky to find and hire people who challenge us as a team and challenge us to serve our clients better. 

How did you get your first job in the field and what advice would you give other job seekers to help land their first position.

I was earning a criminal justice degree at the University of Detroit, where they actively sought internships and cooperative education opportunities for their students.

So they filled out and sent my application to be a co-op student to multiple federal agencies including the US Customs Service in Detroit.

I was lucky enough to get an interview and was initially turned down, but a few weeks later the US Customs, Office of Enforcement, in Washington DC contacted me again later when their selected candidate couldn’t take the role.

Later, I had to apply to become a U.S. Customs Special Agent. You had to apply at the local level and find an office that was interested and also had a vacancy. 

When I couldn’t get a commitment, I flew to San Francisco and Los Angeles, went into the office and convinced them that they needed to hire me. I was offered a position in both locations, but accepted the first office in San Francisco. Always go the extra mile!