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As we bid farewell to Florida again and make our way home, ACAMS moneylaundering.com reflects on this year’s edition of The Assembly Hollywood and shares some of what we learned.

Katrina Berger, executive director of Homeland Security Investigations, or HSI, opened the conference by discussing the launch of the Cross Border Financial Crime Center, or CBFCC, a public-private partnership to strengthen the agency’s detection and disruption of multi-jurisdictional illicit finance.

“The partnership will greatly enhance U.S. law enforcement’s ability to identify and trace criminally linked proceeds back to kleptocrats, corrupt government officials, transnational criminal organizations and other criminal actors,” said Berger.

Brian Davis, the CBFCC’s first director, said Monday that China-based money-laundering syndicates “are laundering money faster … than we’ve ever seen before, and are operating differently than any other money laundering organization we’ve seen,” including by quickly selling U.S. dollars to those seeking to evade the country’s controls against capital flight.

“There are the Mexican cartels with billions of dollars they need laundered, and then you have the underground Chinese bankers,” Davis said. “It’s a marriage of convenience.”

During Monday’s roundtable panel, Lisa Arquette, deputy director of operational risk at the Federal Deposit Insurance Corp., voiced concerns over the growing shift in resources from ensuring compliance with anti-money laundering rules towards finding new, lucrative, but ultimately high-risk streams of revenue in anticipation of an economic downturn.

“There are opportunities that have developed for financial institutions to grow, maybe not organically, but through third-party relationships,” said Arquette.

Banks, however, must not only vet the fintechs, banking-as-a-service providers and other third-party financial partners for which they process transactions, but also identify the customers with whom they indirectly interact by tethering themselves to such platforms, Arquette warned.

Melissa Duffy, an attorney in the trade and national security practice at Fenwick & West in Washington, D.C., said while moderating a panel on Tuesday afternoon that “know your customer” has taken on new meaning thanks to Russia’s full-scale invasion of Ukraine, during which U.S. officials have newly “deputized” banks to assist them in enforcing export controls.

“You’re seeing a single transaction might hit multiple different touchpoints across export controls and sanctions,” said Duffy. “You’re seeing increased collaboration with OFAC [the Treasury Department’s Office of Foreign Assets Control, DOJ [the Justice Department] and other agencies in how they’re approaching and prioritizing sanctions enforcement.”

Brian O’Toole, global head of sanctions compliance at Wells Fargo, described the financial services industry’s new mission as an enforcer of the U.S. trade embargo of Russia in old, familiar terms.

“It’s not so much an export controls and sanctions problem, it’s a [due] diligence and identification problem,” O’Toole, who formerly served as senior adviser to the director of OFAC, said Tuesday. “Understanding where your customers are sending their goods and making sure you’ve got the appropriate identification of the typologies that folks have identified.”

Russian contractors perpetually seek to evade sanctions and export controls by using intermediaries in third countries to acquire U.S.-restricted goods with potential military applications on their behalf, OFAC Deputy Director Lisa Palluconi said Monday.

“We’re looking at shell companies … third-country storefronts popping up,” Palluconi said. “We’re seeing troubling increases in imports [by Russia].”

OFAC responded to the trend in December 2023, warning foreign financial institutions in an advisory that they risk exclusion from the U.S. financial system by handling payments tied to illegal shipments to Russia.

Palluconi and her counterpart across the Atlantic, Giles Thomson, director of Britain’s Office for Financial Sanctions and Implementation, said the U.K. and U.S. now coordinate their licensing policies, as banks have long faced disparate, sometimes conflicting requirements when seeking permission to handle payments otherwise viewed as off limits.

Artificial intelligence, national priorities

Fraudsters are increasingly using artificial intelligence to steal funds from victims, James Barnacle, head of the FBI’s Financial Crimes Section, and Jennifer Shasky Calvery, a senior compliance officer at HSBC, said. Criminals use the technology to carry out romance fraud, child sextortion, election fraud and to override banks authentication controls.

“We use things like voice identification, or facial recognition, and more and more of those things can be overcome by deep fakes and artificial intelligence,” Shasky Calvery, one of three former FinCEN directors who spoke at the conference, told attendees.

Sandra Garcia, a senior official with the Treasury Department’s Office of Terrorist Financing and Financial Crime, said Monday afternoon that a long-anticipated rule that will require financial institutions to implement a list of eight crimes whose finances constitute a national priority into their compliance programs will be completed this year.

Treasury’s Financial Crimes Enforcement Network published the list three years ago pursuant to the Anti-Money Laundering Act, but a rulemaking languished after the bureau prioritized the development of a regulatory framework for the AML Act-mandated national database of corporate beneficial owners.

FinCEN’s current list of national priorities includes cybercrime, fraud, drug trafficking, human trafficking, human smuggling, foreign and domestic terrorist financing, transnational organized crime and proliferation of weapons of mass destruction.

“You can anticipate that the categories may not change, but the [details] will be updated,” Garcia said. Within the broad category of fraud, for example, check fraud has seen a resurgence since 2021, a trend that may prompt the bureau to specify that particular crime by name.

Daniel Stipano, an attorney at the Davis Polk & Wardwell law firm in Washington, D.C., said he hopes that finalizing the national priorities will give banks a green light to reallocate resources from technical compliance towards intelligence gathering, which benefits law enforcement.

Doing so will first require a fundamental change in mindset from the Federal Financial Institution Examination Council, not to mention an update of the organization’s manual for its examiners in the field.

“I see financial institutions devoting tons of time and resources to technical compliance, keeping the examiner happy,” Stipano said. “I think this [national-priorities] mandate was supposed to be a reset, not an additive requirement.”

Crypto-bill?

Panelists on Monday afternoon said all indications point to Congress passing legislation to establish a regulatory structure specifically for stablecoins, which function like other cryptocurrencies but with values based on those of mainstream currencies, before laying the foundation for a broader regulatory framework for all virtual assets.

Legislation approved by the committee in July 2023, the Clarity for Payment Stablecoins Act, would require issuers to back their stablecoins with reserves of mainstream currency.

The bill, which did not receive consideration on the House floor, would also establish the basis for federal regulators to verify the existence of those reserves and monitor them for safety-and-soundness purposes.

House Financial Services Committee Chairman Patrick McHenry (R-NC) and Ranking Member Maxine Waters (D-CA) are crafting new legislation that could lead to the introduction of a companion bill in the Senate, Caroline Hill, senior director of global policy and regulatory strategy at Circle, said during the panel.

Terrorists and insiders

The Oct. 7 attack on Israel perpetrated by Hamas re-energized terrorism and terrorism-related fundraising across the globe, U.S. officials told attendees Monday afternoon.

“Hamas has taken advantage of the situation to raise funds,” said Leyla Salehzadeh, a policy adviser at Treasury’s Office of Terrorist Financing and Financial Crimes, which has observed a proliferation of reports suggesting that financiers of Hamas have redirected humanitarian donations made through crowdfunding platforms towards the blacklisted group’s military wing.

The conflict has driven up the volume of reports of antisemitic and Islamophobic threats within the U.S., said Eliza Odom, section chief of the FBI’s Counterterrorism Division. “There is a high threat level for domestic, international and state-sponsored terrorism.”

In addition to screening and training employees on how to identify and address criminal infiltration, banks must monitor employment decisions at the branch level, Molly Moeser, acting chief of the Justice Department’s Money Laundering and Asset Recover Section, told attendees at the conference’s keynote address on Tuesday morning.

The section’s Bank Integrity Unit has prosecuted five bank and credit union employees in the U.S. over the past year for secretly selling their financial institutions out to money launderers.

“You really have to be attuned to what is happening at the retail level,” Moeser said. “This is where money launderers will exploit your system.”

And that’s a wrap.

Contact Chelsea Carrick at ccarrick@acams.org, Fred Williams at fwilliams@acams.org, Larissa Bernardes at lbernardes@acams.org and Colby Adams at cadams@acams.org