Illustration of person looking through binoculars. Behind the person are different icons demonstrating key lessons from the ACAMS Assembly 2023 conference in Las Vegas, including human trafficking, beneficial ownership, and cryptocurrency.

The 2023 ACAMS Assembly in Las Vegas brought together financial crime and fraud professionals for three days of insightful discussions. The event offered several key takeaways on fraud and scam prevention efforts that significantly affect the financial services industry.

Here are some of the most compelling insights from the conference:

Human Trafficking and Scams: A Disturbing Connection Emerges

One of the most eye-opening revelations at the ACAMS 2023 Assembly in Las Vegas was the layering of online scams and how they enable human trafficking.

Often, when we think of human trafficking, we picture young children forced into labor camps or more egregious crimes such as prostitution or drug smuggling. However, the conference highlighted how human trafficking is closely tied to various scams. The Department of Homeland Security has been actively working to identify employment recruitment schemes targeting English-speaking individuals from countries like Nigeria and Indonesia. These victims are promised jobs and given money, only to find themselves trapped in foreign lands, unable to leave. They are forced into making numerous calls and texts per day, turning a scam into a full-blown human trafficking operation.

Take the alarming example of a Southeast Asian pig butchering ring crackdown. Individuals were manipulated into traveling to Cambodia, Laos, and Myanmar through fake job offers. Upon arrival, the victims were trapped in a sweatshop and forced to engage in online scams. They weren’t allowed to leave the compound. Many faced threats of financial withholdings, food deprivation, and even violence if they resisted.

Several victims reported engaging in romance scams to lure new victims into investment scams. They directed victims to make cryptocurrency investments over a series of transactions. The investment grew larger and larger over time, similar to how a pig is fattened up before slaughter. 

The critical lesson of the pig butchering ring demonstrates that scams are not merely related to financial loss. Understanding these layered typologies is essential for banks and law enforcement agencies to effectively combat financial crimes and protect customers from more than monetary losses.

Beneficial Ownership Registry: Challenges and Skepticism

Transparency in the field of anti-money laundering was also a topic of discussion at the Assembly. Andrea Gacki, director of the Financial Crimes Enforcement Network (FinCEN), delivered a virtual address to the conference.

Gacki’s speech focused on reporting requirements for the Corporate Transparency Act (CTA). The CTA will require businesses to file a beneficial ownership report within 30 days of forming or registering a business in the United States. Updated beneficial ownership reports must be filed within 30 days of any ownership status or information changes.

FinCEN views collecting beneficial ownership information as a critical step in stopping many financial crimes. This includes money laundering, corruption, illicit drug sales, sanctions evasion, and more. FinCEN believes these registries will help bring these crimes to light, making it more challenging for criminals to hide their financial assets among legitimate banking institutions.

However, at the ground level, there was some skepticism among financial institutions about the effectiveness of such registries. While the CTA promises a beneficial ownership directory that banks could access, there are concerns about how well it will work in practice. For example, questions were raised about who would monitor business registrations and establish a feedback loop. 

It’s also important to note that FinCEN is still mapping out its enforcement strategy. Without consequences in place for non-compliance with CTA, the effectiveness of these registries remains uncertain.

Cryptocurrency: Risks and Mitigations

In the world of cryptocurrency, a notable development discussed at the Las Vegas ACAMS Assembly 2023 was the shifting landscape of partnerships between crypto wallet providers and financial institutions. 

Just as Western Union has been a trusted conduit for sending money across borders, crypto wallets are now fulfilling a similar function, albeit in the digital realm. However, while larger banks are reluctant to take on the risks posed by cryptocurrency, smaller institutions appear ready to step in and fill the void.

Many banks are still grappling with understanding their exposure to cryptocurrency and determining the measures needed to mitigate risks effectively. As a result, some crypto wallet providers are turning to credit unions and community banks for support. These financial institutions often have experience in managing compliance requirements and risk mitigation strategies. By partnering with them, crypto wallet providers can tap into their expertise and infrastructure to navigate the regulatory landscape effectively.

This shift is reminiscent of the role traditional money services businesses (MSBs), like Western Union, have historically played in the financial industry. In fact, it’s becoming increasingly clear that crypto wallets are the new MSBs of this generation.

Utilizing AI and Machine Learning for Crypto and SAR Feedback Loops

Finally, the conference discussed the importance of artificial intelligence (AI) and machine learning deployment to fight financial crime. 

This focus is especially relevant in the evolving landscape of cryptocurrency transactions, which present unique challenges due to their digital and decentralized nature. AI and machine learning can potentially revolutionize anti-money laundering (AML) and fraud detection efforts. 

Unlike traditional rule-based methods reliant on predefined criteria, these technologies can analyze vast data sets and uncover intricate patterns that might otherwise go unnoticed. In the realm of cryptocurrencies, AI and machine learning can track and analyze transaction flows, detect suspicious patterns, and flag potentially illicit activities. They offer a proactive approach to identifying financial crimes, aiding financial institutions in thwarting increasingly sophisticated criminals.

Another significant conference takeaway was the call for improved feedback loops in reporting suspicious activities. Financial institutions routinely file Suspicious Activity Reports (SARs) to report concerning transactions or behaviors. However, banks and compliance professionals often receive limited information on subsequent actions post-SAR filing. This leaves many compliance professionals wondering how their work impacts the broader fight against financial crimes.

An intriguing proposal emerged during the conference: to provide more insightful feedback to banks. This feedback could encompass details on investigation outcomes, arrests made, and actions taken. Such an approach offers banks a more informative feedback loop to refine reporting processes, enhance SAR quality, and empower compliance teams by demonstrating the real-world impact of their work.

The ACAMS Assembly provided invaluable insights into the intricate realm of financial crimes and compliance. These takeaways underscore the evolving nature of financial threats and the paramount importance of collaboration, transparency, and advanced technologies in proactively combating financial crime.