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November 2022 Event: HIDTA, HIFCA, GTOSs and PEPS (the other AML acronyms)

On November 14th 2022, ACAMS Carolinas Chapter hosted a virtual event regarding several acronyms within the banking industry as well as law enforcement. The audience was comprised of approximately 300 financial institution professionals, law enforcement personnel, and ACAMS Carolina Chapter members. The discussion highlighted Politically Exposed Persons or PEPs, High Intensity Financial Crimes Areas or HIFCAs and FINCEN Real Estate Geographical Targeting Orders or GTOs. The event was moderated by Board member Christopher Healy who currently works at US Bank. The speakers included:

· Evan Campanella, Assistant Special Agent in Charge for Homeland Security Investigations Baltimore Field Office.

· Sarah Weise, AML Officer and PEP subject matter expert, US Bank Minneapolis, Minnesota.

· Timothy Gorman, Program Manager Homeland Security Investigations’ National Targeting Center/ Trade Transparency Unit Washington, DC.

During the course of the discussion, several topics were covered including looking at how financial institutions manage their risk in dealing with PEPs, and coordination between law enforcement and financial institutions in support of HIFCAs and GTO initiatives. In that regard, panel members noted the importance of coordination between law enforcement and financial institutions to enable financial institutions to manage risk at their respective financial institutions better as it relates to intelligence sharing of emerging typologies with law enforcement.

Sarah started the discussion with a definition of PEPs and provided the rationale behind a risk-based approach when dealing with PEPs from onboarding to a monitoring perspective. Sarah provided the background of how and why financial institutions’ PEP populations fall into their risk management strategy. Sarah highlighted the increased scrutiny placed on PEPs prior to and during the Ukraine/Russia conflict that was not only evident within US Bank but across all financial institutions.

Evan also highlighted the importance of a strong relationship between financial institutions and law enforcement. Evan defined HIFCAs and HIDTAs and denoted the slight differences with each on how HIFCAs are more illicit money-centric, whereas HIDTAs focus more on illicit narcotics trafficking. Evan provided real-life examples of the importance of law enforcement working within HIFCA/HIDTA task forces, in coordination with financial institutions, to act as a force multiplier and have a significant impact on the communities they serve.

Discussion of law enforcement and financial institution partnerships continued with Tim highlighting HSI’s efforts in the enforcement of FINCEN’s GTOs in the real estate space. Tim provided clarity on several red flags seen by law enforcement which can play across all GTOs and will assist financial institutions with their risk management and enhancing their customer due diligence programs. Examples of red flags include:

· Large geographical distance between the buyer and the property being purchased. This possibly reflects the involvement of a third party, or that the beneficial owner could be an LLC.

· Use of fraudulent identification to obscure the true owner who may be moving illicit funds via real estate.

· Large amounts of cash brought to closing without a mortgage being involved. This large amount of cash doesn’t reflect the buyer’s characteristics or employment and the purchase would be well out of their means.

· Suspicious behavior that does not make commercial sense based on the real estate agent’s familiarity with the real estate industry and its normal course of business.

Tim conveyed the need for financial institutions to increase training on GTOs so they can identify fraud as early as possible which will impact and enhance financial institutions’ customer due diligence programs. The message was to mitigate your risk so you don’t inadvertently conduct business with bad actors which in the end financial institutions will face negative publicity for these business ventures which sometimes is even more damaging to the institution's bottom line than any potential regulatory enforcement actions.

Follow us on LinkedIn and join the ACAMS Carolinas Chapter so you don’t miss out on these conversations and future events.

Blog is written by: Board Member, Christopher Healy, CAMS

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