“Descriptive & Memorable” – The Fed’s soon-to-be-published Pandemic Response Accountability Committee Website

The CARES Act, section 15010(g) (1) (A) requires that: “Not later than 30 days after the date of enactment of this Act, the [Pandemic Response Accountability] Committee shall establish and maintain a user-friendly, public-facing website to foster greater accountability and transparency in the use of covered funds and the Coronavirus response, which shall have a uniform resource locator that is descriptive and memorable.”

Subsection (3) provides that the Committee shall ensure that the website provides “materials and information explaining the Coronavirus response and how covered funds are being used. The materials shall be easy to understand and regularly updated”.

There follows thirteen explicit requirements, including … any progress reports, audits, inspections, or other reports … user-friendly visual presentations to enhance public awareness of the use of covered funds and the Coronavirus response … detailed data on any Federal Government awards over $150,000 … by month to each State and congressional district, where applicable … a means for the public to give feedback on the performance of any covered funds and of the Coronavirus response, including confidential feedback … a link to estimates of the jobs sustained or created by this Act to the extent practicable … a plan from each Federal agency for using covered funds.

Stay tuned – April 26th is the due date for this new descriptive, memorable, and critically important website. Congress and, more importantly, the public, need to keep a watchful eye over how the hundreds of billions of dollars are being allocated and spent. Bookmark your calendar … and stay safe.

The Roger Stone Case – The Shenanigans Continue

Federal Court concludes that Roger Stone’s lawyers’ motion to disqualify Judge Amy Berman-Jackson is “nothing more than an attempt to use the Court’s docket to disseminate a statement for public consumption that has the words ‘judge’ and ‘biased’ in it”

www.merriam-webster.com › shenanigan 1 : a devious trick used especially for an underhand purpose. 2a : tricky or questionable practices or conduct —usually used in plural. b : high-spirited or mischievous activity —usually used in plural.

This is the second article I’ve written on the Roger Stone case. The first from February 12th, “The Roger Stone Case: Whether Outraged or Relieved, At Least Be Informed”, can be found here.

Roger Stone’s five lawyers are continuing their high-spirited activity. They filed a motion seeking to disqualify Federal District Court Judge Amy Berman-Jackson. The factual underpinning of their argument was that they had filed a motion for a new trial, alleging that one of the twelve jurors lied on their juror questionnaire and during their questioning by the Court, and that those lies related to their bias against Roger Stone and Donald Trump. That motion was pending during the sentencing hearing on February 20, 2020. Stone’s lawyers argue that during that hearing, Judge Berman-Jackson made statements that give rise to a reason to question her impartiality in connection with that pending motion for new trial based on alleged juror misconduct. They relied on section 455(a) of title 28 of the United States Code (title 28 governs the federal judiciary and judicial procedure). Section 455(a) states: “any justice, judge, or magistrate judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.” The purpose of section 455(a) is to promote public confidence in the judiciary by avoiding even the appearance of impropriety whenever possible, and in the District of Columbia, where this court sits, recusal is required when “a reasonable and informed observer would question the judge’s impartiality.”

What did Roger Stone’s lawyers argue? They point to this section of Judge Berman-Jackson’s sentencing:

“Sure, the defense is free to say: So what? Who cares? But, I’ll say this: Congress cared. The United States Department of Justice and the United States Attorney’s Office for the District of Columbia that prosecuted the case and is still prosecuting the case cared. The jurors who served with integrity under difficult circumstances cared. The American people cared. And I care.”

Stone’s lawyers argued that the Judge’s use of the words “jurors” and “with integrity” (which Judge Berman-Jackson noted were “three words on the 88th page of the 96-page transcript of a two-and-a-half-hour hearing”) are disqualifying because there is a pending motion for new trial with respect to a single juror, and the hearing has not yet taken place. They wrote:

“The Court’s ardent conclusion of ‘integrity’ indicates an inability to reserve judgment on an issue which has not yet been heard. Moreover, the categorical finding of integrity made before hearing the facts is likely to lead a reasonably informed observer to question the District Judge’s impartiality … The premature statement blessing ‘the integrity of the jury’ undermines the appearance of impartiality and presents a strong bias for recusal.”

How did Judge Berman-Jackson rule? Writing in the third person (“the Court, “it”, and “its”), the Judge wrote the following:

“Its characterization of the jurors’ service was voiced on the record, and it was entirely and fairly based on the Court’s observations of the jurors in the courthouse; through the nine days of voir dire and trial, when they were uniformly punctual and attentive, and through their thoughtful communications with the Court during deliberation … and the delivery of the verdict … Moreover, the record dating back to January of 2019 reflects that the Court took each issue raised by this defendant seriously; that on each occasion, it ruled with care and impartiality, laying out its reasoning in detail; and that it was scrupulous about ensuring his right to a fair trial. It granted important evidentiary motions in his favor; it proposed utilizing a written questionnaire to ensure that the parties could receive more information than is usually available for jury selection; it struck 58 potential jurors for cause based on the defendant’s motions or on its own motion; and it repeatedly resolved bond issues in his favor, even after he took to social media to intimidate the Court, after he violated conditions imposed by the Court, after he was convicted at trial, and after he was sentenced to a term of incarceration. Moreover, at the sentencing hearing that forms the sole basis for the defendant’s motion, the Court concluded, based in part on many considerations put forth by the defendant, that it was appropriate to vary from the applicable Advisory Sentencing Guideline Range.”

And finally the conclusion:

“At bottom, given the absence of any factual or legal support for the motion for disqualification, the pleading appears to be nothing more than an attempt to use the Court’s docket to disseminate a statement for public consumption that has the words “judge” and “biased” in it. For these reasons, defendant’s motion is hereby DENIED. SO ORDERED. AMY BERMAN JACKSON United States District Judge DATE: February 23, 2020”

The five lawyers that filed the motion to disqualify Judge Berman-Jackson are, no doubt, fine attorneys. This has been, and continues to be a grueling legal case (indeed, with 343 documents having been docketed, that is more than 1 each business day since the indictment was filed on January 24, 2019). I trust they’re sleeping well at night … high-spirited activity can be tiring.

The Roger Stone Case – Whether Outraged or Relieved, At Least Be Informed

“A good deal of hysteria, some of it reflexive, much of it recreational”

The media, social media, politicians, and pundits are reacting loudly and passionately about the President’s decision to weigh in on the sentencing of Roger Stone, the resignations of four Assistant United States Attorneys involved in the case, and the decision of the Department of Justice to submit a revised sentencing recommendation. And the hysteria should continue for the foreseeable future, with the sentencing of Mr. Stone now set for February 20th.

Whether you are outraged or relieved about what is happening in this case, your outrage or relief should at least be informed.

In an essay published on May 10, 2004 in the Wall Street Journal’s Opinion section titled “The Spirit of Liberty: Before Attacking the Patriot Act, Try Reading It”, then chief judge of the U. S. District Court, Southern District of New York Michael Mukasey reminded us that if we were to express opinions on something, those opinions should at least be informed. Judge Mukasey was writing about the USA PATRIOT Act, passed in October 2001 in the wake of the 9/11 terrorist attacks, a statute which had “become the focus of a good deal of hysteria, some of it reflexive, much of it recreational.” Judge Mukasey wrote that “[l]ike any other act of Congress, the Patriot Act should be scrutinized, criticized and, if necessary, amended. But in order to scrutinize and criticize it, it helps to read what is actually in it.”

The Roger Stone case isn’t an act of Congress, but the facts of the case – set out in the 288 documents on the docket – should be read and understood before one expresses an opinion. But 288 documents is a lot of reading. Three of those documents should, in my opinion, be enough to provide enough of a balanced background to allow someone to have and express an informed opinion: the Government’s original Sentencing Memorandum, Roger Stone’s Sentencing Memorandum, and the Government’s Revised Sentencing Memorandum.  These are all publicly available documents. I’ll summarize them here. But first, a stop to explain the Sentencing Guidelines that are used in all federal criminal cases and which have been the subject of much of the rational, irrational, reflexive, or recreational hysteria around the Roger Stone case.

Federal Sentencing Guidelines – a Primer

The following is an excerpt from my April 2019 article on the College Admissions Scandal – College Admissions Scandal – RegTech Consulting Article April 16, 2019.

The Federal Sentencing Guidelines are intended to provide “guideline ranges that specify an appropriate sentence for each class of convicted persons determined by coordinating the offense behavior categories with the offender characteristic categories.” US Sentencing Commission Link

So there are two things to be considered: the defendant’s own criminal histories, if any, and the “offense level” of their crime, adjusted for various aggravating factors, and adjusted down for “acceptance of responsibility”. This gives an offense level of between 1 and 43, organized into four “zones”. The defendant’s criminal history is then considered, resulting in being placed into one of six criminal history categories. The result is a Sentencing Table with the seriousness of the crime on the Y axis and the seriousness of the criminal on the X axis. The court refers to, and can depart from, the ranges set out in the Table. A (partial) sentencing table (showing only the first 30 of the 43 offence levels) is seen below.

United States v. Roger J. Stone, U.S. District Court, District of Columbia Case 19CR00018 – Sentencing Scheduled for February 20, 2020

Government’s Original Sentencing Memorandum – Seeking imprisonment consistent with Sentencing Guidelines of 87-108 months

The Government’s original Sentencing Memorandum went through the history of the case. In January 2019 a federal grand jury indicted Roger Stone on seven criminal counts: one count of obstruction of a Congressional investigation (relating to his sworn testimony before the House Intelligence Committee), five counts of making false statements to Congress (“in his testimony before the House Intelligence Committee, Stone told the Committee five categories of lies”), and one count of witness tampering. In November 2019, after a lengthy trial, a jury convicted Roger Stone of all seven counts. The Memorandum also included a number of issues relating to the pre-trial conduct of Mr. Stone, and the court’s response to that conduct. An episode relating to an image Mr. Stone posted to Instagram of the judge with cross-hairs next to her head was included in the Memorandum.

The Government asked that “a sentence consistent with the applicable advisory Guidelines would accurately reflect the seriousness of his crimes and promote respect for the law.” At page 16 of its Memorandum, the Government set out the Guidelines Range based on an offense level of 29 and a Criminal History category of I (no criminal record), resulting in a range of imprisonment of 87 months to 108 months. That offense level of 29 was determined as follows:

14 for the base offense(s) level

+8 for threatening a witness

+3 for interference with the administration of justice

+2 for an offense that was extensive in scope, planning, or preparation

+2 for obstruction of justice

Roger Stone’s Sentencing Memorandum – Seeking probation below the Sentencing Guidelines of 15-21 months

Roger Stone’s attorneys’ Memorandum included a number of character references (letters) and focused on his exemplary personal life, a life they pointed out was very different than his public persona. They laid out a position that the sentencing guidelines should be based only on the base offense level of 14, without any enhancements, leaving a guideline range of 15 to 21 months, and that the Court should go below that range and sentence the defendant to a period of probation. They concluded ” the Court should impose a non-Guidelines sentence of probation with any conditions that the Court deems reasonable under the

Government’s Amended Sentencing Memorandum (February 11) – Seeking imprisonment “far less than” Sentencing Guidelines of 87-108 months, but leaving it up to the Judge to decide how much less than

After the four Assistant US Attorneys withdrew from the case, new counsel from the Department of Justice filed an amended Sentencing Memorandum, setting out the Government’s position that:

“The prior filing submitted by the United States on February 10, 2020 (Gov. Sent. Memo. ECF No. 279) does not accurately reflect the Department of Justice’s position on what would be a reasonable sentence in this matter. While it remains the position of the United States that a sentence of incarceration is warranted here, the government respectfully submits that the range of 87 to 108 months presented as the applicable advisory Guidelines range would not be appropriate or serve the interests of justice in this case.”

And the Government concluded:

“The defendant committed serious offenses and deserves a sentence of incarceration that is “sufficient, but not greater than necessary” to satisfy the factors set forth in Section 3553(a). Based on the facts known to the government, a sentence of between 87 to 108 months’ imprisonment, however, could be considered excessive and unwarranted under the circumstances. Ultimately, the government defers to the Court as to what specific sentence is appropriate under the facts and circumstances of this case.”


You’ve read, or will read, the three sentencing memoranda. You have or will have a rudimentary understanding of the Federal Sentencing Guidelines and how they were applied in this case. From there, you can join the debate and express a reasonably learned opinion, backed by some knowledge of the facts. It is my opinion that everyone has a right to their opinion and to express that opinion, but it is their duty to express that opinion only after informing themselves of the facts and, to paraphrase Judge Mukasey, without resorting to reflexive, recreational hysteria.

Google’s PageRank Algorithm: September 4, 2001 – June 4, 2019

Google’s PageRank Algorithm – from the time it was patented in 2001 to when it expired in June 2019, we’ve gone from doing 30 million searches a day against 55 gigabytes of data, to doing 5.6 billion searches a day against 2 trillion gigabytes of data!

It appears that Google’s PageRank algorithm has expired: https://patents.google.com/patent/US6285999B1/en

Lawrence Page, one of the co-founders (with Sergei Brin) of Google, developed the PageRank algorithm in 1997. On January 9, 1998 Brin filed a patent application, and on September 4, 2001 the patent was granted. Notably, the patent expired on June 4, 2019.

The patent is available at https://patentimages.storage.googleapis.com/37/a9/18/d7c46ea42c4b05/US6285999.pdf

The Abstract provided as follows:

A method assigns importance ranks to nodes in a linked database, such as any database of documents containing citations, the World wide web or any other hypermedia database. The rank assigned to a document is calculated from the ranks of documents citing it. In addition, the rank of a document is calculated from a constant representing the probability that a browser through the database will randomly jump to the document. The method is particularly useful in enhancing the performance of Search engine results for hypermedia databases, such as the World wide web, whose documents have a large variation in quality.

The patent also included the following interesting paragraph:

Currently, a popular search engine might execute over 30 million searches per day of the indexable part of the web, which has a size in excess of 500 Gigabytes. Information retrieval systems are traditionally judged by their precision and recall. What is often neglected, however, is the quality of the results produced by these search engines. Large databases of documents such as the web contain many low quality documents. As a result, searches typically return hundreds of irrelevant or unwanted documents which camouflage the few relevant ones. In order to improve the selectivity of the results, common techniques allow the user to constrain the scope of the search to a specified subset of the database, or to provide additional search terms.

This was from September 2001. As of June 2019, according to … Google (!) there are about 63,000 searches per second or 5.6 billion searches per day. And how big is the indexable part of the web? In 2001 it was 500 gigabytes. According to Cisco, as of June 2019 the indexable part of the Web is about 2 zettabytes, which is 2,000 exabytes, which is 2 million petabytes, which is 2 billion terabytes, which is 2 trillion gigabytes.

So … from the time Google’s PageRank algorithm was patented in 2001 to when it expired in June 2019, we’ve gone from doing 30 million searches a day against 55 gigabytes of data, to doing 5.6 billion searches a day against 2 trillion gigabytes of data. If only our mobile devices were as resilient as Google’s algorithms!

The Plaintiffs Trump v Democrat-controlled House Committees’ Subpoenas

One key question – do the Committees’ investigations have a valid legislative purpose? – brings Anti-Money Laundering investigations and legislation into the spotlight

Posted May 11, 2019 with an update from one court’s decision on May 20, 2019

I am not offering an opinion, one way or another, on the relative merits of the parties’ allegations: I am pointing out that these cases could have an impact on AML programs and professionals.

In two different federal courts in a span of seven days, President Trump and various companies he owned or controlled, directly or indirectly (or owns or controls, directly or indirectly, through a trust or otherwise, or otherwise has or had an interest in), and in the New York case, three of his children (all collectively referred to “the Plaintiffs Trump”), sought to quash a number of subpoenas issued by three Democrat-controlled U.S. House of Representative committees. In both cases, the plaintiffs Trump argued that the Democrats or Democrat-controlled committees:

“ignored the constitutional limits on Congress’ power to investigate. Article I of the Constitution does not contain an ‘Investigations Clause’ or an ‘Oversight Clause.’ It gives Congress the power to enact certain legislation. Accordingly, investigations are legitimate only insofar as they further some legitimate legislative purpose. No investigation can be an end in itself. And Congress cannot use investigations to exercise powers that the Constitution assigns to the executive or judicial branch.”

In the Washington DC case, the Plaintiffs Trump allege:

“[the] subpoena … lacks a legitimate legislative purpose. There is no possible legislation at the end of this tunnel; indeed, the Chairman does not claim otherwise. With this subpoena, the Oversight Committee is instead assuming the powers of the Department of Justice, investigating (dubious and partisan) allegations of illegal conduct by private individuals outside of government. Its goal is to expose Plaintiffs’ private financial information for the sake of exposure, with the hope that it will turn up something that Democrats can use as a political tool against the President now and in the 2020 election.”

In the New York case, the Plaintiffs Trump allege:

“The subpoenas … lack any legitimate legislative purpose. There is no possible legislation at the end of this tunnel; indeed, the Committee Chairs have not claimed otherwise. With these subpoenas, the Committees are instead assuming the powers of the Department of Justice, investigating (dubious and partisan) rumors of illegal conduct by private individuals, many of whom are outside of government. Their goal is to rummage around Plaintiffs’ private financial information in the hope that they will stumble upon something they can expose publicly and use as a political tool against the President.”

The cases are very similar and involve the same four basic principles of law: the scope of the investigatory powers of Congress, whether and to what extent the various committees have the power to investigate, whether a committee has a “valid legislative purpose” in issuing a subpoena, and the role of the courts in quashing Congressional subpoenas. In the DC case, the “valid legislative purpose” or purposes involve conflicts of interest and financial disclosure issues: in the New York case, those purposes involve compliance with banking regulations, money laundering, industry-wide compliance with anti-money laundering policies, the use of anonymous corporations as vehicles to launder illicit funds, and transparency regarding ownership of anonymous shell corporations generally.

For AML professionals, the New York case should be watched closely to see if there is any impact on AML legislation, regulation, and expectations.

The Washington DC Case – Federal District Court, District of Columbia, Civil Case Number 19CV01136 –filed April 22, 2019

In this case, President Trump and various Trump-owned and/or controlled (previously or currently, directly or indirectly through trusts or otherwise) companies, sued Elijah Cummings in his official capacity as Chairman of the House Committee on Oversight & Reform, and Mazars USA LLP. The opening two paragraphs of the complaint paint the picture:

“The Democrat Party, with its newfound control of the U.S. House of Representatives, has declared all-out political war against President Donald J. Trump. Subpoenas are their weapon of choice.”

“This case involves one of those subpoenas. Last week, Defendant Elijah E. Cummings invoked his authority as Chairman of the House Oversight Committee to subpoena Mazars USA LLP—the longtime accountant for President Trump and several Trump entities (all Plaintiffs here). Chairman Cummings asked Mazars for financial statements, supporting documents, and communications about Plaintiffs over an eight-year period—mostly predating the President’s time in office.”

(One week after the complaint was filed, the parties agreed to, essentially, dismiss the case against the accounting firm and the Chairman of the House Committee, and substitute as the sole defendant the actual Committee, to be represented by the Office of General Counsel of the House of Representatives).

On May 9th, Judge Amit Mehta issued an order that has the effect of turning the May 14th hearing on the preliminary injunction into a trial on the merits: the Judge will hear arguments on the 14th and then decide whether the subpoena shall stand or not.

The New York Case – Federal District Court, Southern District of New York, Civil Case Number 19CV03826 – filed April 29, 2019

This complaint is very similar to the complaint filed in Washington DC the prior week. Here, President Trump, a number of his companies, and three of his children (Donald Jr., Eric, and Ivanka: again, “the Plaintiffs Trump”) brought a civil complaint against two of the Plaintiffs Trump’s banks, Deutsche Bank and Capital One, to prevent the banks from responding to subpoenas issued by the House Permanent Select Committee on Intelligence and the House Financial Services Committee. Among other allegations, the Plaintiffs Trump pleaded that the subpoenas “have no legitimate or lawful purpose”, are “to harass” the President, “to rummage through every aspect of his personal finances” and are intended to “ferret about” for incriminating information. And as in the DC case, the Plaintiffs Trump also argue that the Committees are exceeding their constitutional powers:

“The Committees have ignored the constitutional limits on Congress’ power to investigate. Article I of the Constitution does not contain an ‘Investigations Clause’ or an ‘Oversight Clause.’ It gives Congress the power to enact certain legislation. Accordingly, investigations are legitimate only insofar as they further some legitimate legislative purpose. No investigation can be an end in itself. And Congress cannot use investigations to exercise powers that the Constitution assigns to the executive or judicial branch.”

“The subpoenas to Deutsche Bank and Capital One lack any legitimate legislative purpose. There is no possible legislation at the end of this tunnel; indeed, the Committee Chairs have not claimed otherwise. With these subpoenas, the Committees are instead assuming the powers of the Department of Justice, investigating (dubious and partisan) rumors of illegal conduct by private individuals, many of whom are outside of government. Their goal is to rummage around Plaintiffs’ private financial information in the hope that they will stumble upon something they can expose publicly and use as a political tool against the President.”

On May 3rd the plaintiffs filed a Motion for Preliminary Injunction to prevent the defendant banks from responding to the subpoenas. The two Committees intervened, and were added as Intervenor-Defendants (“real parties in interest”) and are represented by the Office of General Counsel of the U.S. House of Representatives. The parties agreed on a schedule for submitting replies to the Motion and for a hearing date – May 15th.

On May 10th the House filed its Opposition to the Trump motion. Among other things, the Opposition addresses the Plaintiffs Trump arguments about the powers of the Congressional committees and their motives in issuing the subpoenas:

  • “Mr. Trump’s request for a preliminary injunction betrays a fundamental misunderstanding of the powers of the Legislative Branch under our constitutional scheme and is flatly inconsistent with nearly a century of Supreme Court precedent.”
  • “Contrary to Mr. Trump’s allegation that the Committees are merely attempting to expose his finances, the Committees are investigating serious and urgent questions concerning the safety of banking practices, money laundering in the financial sector, foreign influence in the U.S. political process, and the threat of foreign financial leverage, including over the President, his family, and his business.”
  • “The Committees are conducting wide-ranging investigations of issues bearing upon the integrity of the U.S. financial system and national security, including bank fraud, money laundering, foreign influence in the U.S. political process, and the counterintelligence risks posed by foreign powers’ use of financial leverage.”

The House Opposition provides some details on what the two committees are investigating. The details relating to the Committee on Financial Services are particularly interesting for AML professionals. That Committee is:

“… investigating serious issues regarding compliance with banking regulations, loan practices, and money laundering … the movement of illicit funds throughout the global financial system … the questionable financing provided to President Trump and the Trump Organization by banks like Deutsche Bank to finance his real estate properties …. industry-wide compliance with banking statutes and regulations, particularly anti-money laundering policies … the use of anonymous corporations as vehicles to launder illicit funds through legitimate investments and enterprises …”

And “[t]he Committee is considering legislation that would increase transparency regarding ownership of anonymous shell corporations generally.”

As of this writing, the Plaintiffs Trump have not yet replied to the House Opposition to their motion.

Update May 20, 2019 – In the District of Columbia case, the District Court judge upheld the Committee’s subpoena and ordered the accounting firm to comply with the subpoena. The Plaintiffs Trump have indicated they will appeal that decision.

In his written opinion, the Judge began with the following (citations omitted):

“I do, therefore, . . . solemnly protest against these proceedings of the House of Representatives, because they are in violation of the rights of the coordinate executive branch of the Government, and
subversive of its constitutional independence; because they are
calculated to foster a band of interested parasites and informers,
ever ready, for their own advantage, to swear before ex parte
committees to pretended private conversations between the
President and themselves, incapable, from their nature, of being
disproved; thus furnishing material for harassing him, degrading
him in the eyes of the country . . .” – President James Buchanan

These words, written by President James Buchanan in March 1860, protested a resolution adopted by the U.S. House of Representatives to form a committee—known as the Covode Committee—to investigate whether the President or any other officer of the Executive Branch had sought to influence the actions of Congress by improper means. 

Buchanan “cheerfully admitted” that the House of Representatives had the authority to make inquiries “incident to their legislative duties,” as “necessary to enable them to discover and to provide the appropriate legislative remedies for any abuses which may be ascertained.” But he objected to the Covode Committee’s investigation of his conduct. He maintained that the House of Representatives possessed no general powers to investigate him, except when sitting as an impeaching body. Buchanan feared that, if the House were to exercise such authority, it “would establish a precedent dangerous and embarrassing to all my successors, to whatever political party they might be attached.” 

Some 160 years later, President Donald J. Trump has taken up the fight of his predecessor.


Echoing the protests of President Buchanan, President Trump and his associated entities are before this court, claiming that the Oversight Committee’s subpoena to Mazars exceeds the Committee’s constitutional power to conduct investigations. The President argues that there is no legislative purpose for the subpoena. The Oversight Committee’s true motive, the President insists, is to collect personal information about him solely for political advantage. He asks the court to declare the Mazars subpoena invalid and unenforceable.

Courts have grappled for more than a century with the question of the scope of Congress’s investigative power. The binding principle that emerges from these judicial decisions is that courts must presume Congress is acting in furtherance of its constitutional responsibility to legislate and must defer to congressional judgments about what Congress needs to carry out that purpose. To be sure, there are limits on Congress’s investigative authority. But those limits do not substantially constrain Congress. So long as Congress investigates on a subject matter on which “legislation could be had,” Congress acts as contemplated by Article I of the Constitution.

Applying those principles here compels the conclusion that President Trump cannot block the subpoena to Mazars.


… it is not for the court to question whether the Committee’s actions are truly motivated by political considerations. Accordingly, the court will enter judgment in favor of the Oversight Committee. 

More to come …

AG Sessions: “No more guidance!” AG Barr: “Here’s new guidance!”

Does “good faith” mean “effective”?

On November 17, 2017 the DOJ issued a press release titled “Attorney General Jeff Sessions Ends the Department’s Practice of Regulation by Guidance”. It provided, in part:

“Today, in an action to further uphold the rule of law in the executive branch, Attorney General Jeff Sessions issued a memo prohibiting the Department of Justice from issuing guidance documents that have the effect of adopting new regulatory requirements or amending the law. The memo prevents the Department of Justice from evading required rulemaking processes by using guidance memos to create de facto regulations. ‘Guidance documents can be used to explain existing law,’ Associate Attorney General Brand said.  ‘But they should not be used to change the law or to impose new standards to determine compliance with the law … This Department of Justice will not use guidance documents to circumvent the rulemaking process, and we will proactively work to rescind existing guidance documents that go too far.’”

See https://www.justice.gov/opa/pr/attorney-general-jeff-sessions-ends-department-s-practice-regulation-guidance

On April 30, 2019 the DOJ issued a press release titled “Criminal Division Announces Publication of Guidance on Evaluating Corporate Compliance Programs.” It provided, in part:

“The Criminal Division announced today the release of a guidance document for white-collar prosecutors on the evaluation of corporate compliance programs.  The document, entitled ‘The Evaluation of Corporate Compliance Programs,’ updates a prior version issued by the Division’s Fraud Section in February 2017.  It seeks to better harmonize the guidance with other Department guidance and standards while providing additional context to the multifactor analysis of a company’s compliance program.”

See https://www.justice.gov/opa/pr/criminal-division-announces-publication-guidance-evaluating-corporate-compliance-programs

This new Guidance Document brings far-reaching consequences for corporations and those that work for corporations. It provides as follows:

“As the Justice Manual notes, there are three ‘fundamental questions’ a prosecutor should ask:

  1. ‘Is the corporation’s compliance program well designed?’
  2. ‘Is the program being applied earnestly and in good faith?’ In other words, is the program being implemented effectively?
  3. ‘Does the corporation’s compliance program work’ in practice?

And then it cites JM [Justice Manual] § 9-28.800.

So as I usually do, I went to the source – the Justice Manual – to make sure that it does, in fact, have those same three fundamental changes. What does that section actually provide? Accessing  https://www.justice.gov/jm/jm-9-28000-principles-federal-prosecution-business-organizations#9-28.800 on May 3, 2019, it provides as follows:

“The fundamental questions any prosecutor should ask are: Is the corporation’s compliance program well designed? Is the program being applied earnestly and in good faith? Does the corporation’s compliance program work?”

So it appears that the Guidance has interpreted “applied earnestly and in good faith” to mean “implemented effectively.”

This appears to be a shift from one that appears more focused on intent – earnestness and good faith both describe the intent of the actor – to one that is more focused on outcome – effectiveness.

That appears to be a real change.  Does it mean that acting earnestly and in good faith doesn’t bear much weight if, at the end of the day, the program was found to have been implemented ineffectively?

Notwithstanding former AG Sessions “no more guidance!” command, perhaps AG Barr can provide some guidance on the guidance of whether they’ve shifted from an intent standard to a result standard.

Finally, I didn’t see anything in the new Guidance, nor in the DOJ press release, that referenced the September 5, 2015 memo (guidance) put out by then-DAG Sally Yates titled “Individual Accountability for Corporate Wrongdoing”. Among other things, that guidance provided that “to be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.”

Perhaps that guidance was rescinded by then-AG Sessions at or around the same time he rescinded the Cole and Ogden Memos around federal priorities for cannabis prosecutions?

Lessons Learned as a BSA Officer – 1998 to 2018: Presentation to SoCal ACAMS Chapter, March 8, 2019

Lessons Learned as a BSA Officer – 1998 to 2018

“I didn’t say it was your fault, I said I was blaming you” – Winston Churchill

Topics Covered

  1. All the Cooks in the AML Kitchen aka Stakeholders
  2. All the Resources Available to You
  3. The 5 Dimensions of Risk – Up, Down, Across, Out, and Within
  4. FinTech versus Humans
  5. The 7 Cs – What Makes a Good Analyst/Investigator
  6. Tall, Dark and Handsome – Words and Punctuation Matter!
  7. SMEs v SMEs – Subject Matter Experts vs Subject Matter Enthusiasts
  8. Is Transaction Monitoring a Thing of the Past?
  9. The Importance of Courage
  10. Takeaways

All the Cooks in the AML Kitchen – There are more stakeholders than you realize …

To most risk professional, stakeholders are shareholders, directors and senior management, and perhaps regulators. But there are many more than that, and they all have different perspectives, even competing interests, when it comes to how you do your job as a risk professional:

  • Shareholders and Directors
  • Team Members – or employees … as opposed to … Team Mates – those who report to you, who you report to. Where you sit in an organization has a big influence on how you see the organization and your job.
  • Senior Management – however that is defined in your organization, this is the “Top” from where the “Tone” comes from in “Tone from the Top”
  • Middle Management – again, however this is defined in your organization, this is where a lot of tone deaf people reside. A G30 report from a few years ago on financial institutions and risk management referred to middle management as “the Blocking Middle”. We’ve all seen that.
  • Regulators – those you interact with, and who interact with you. I call those “your regulators”, which is different from the Regulators – the people in DC setting policy
  • The Media and Social Media (two very different stakeholders)
  • Physical communities where you operate, and online and virtual communities
  • Your trade associations (such as ACAMS)
  • Customers and Clients
  • Politicians – local, state, federal
  • Law enforcement and Prosecutors – local, state, federal
  • Family, friends … and Yourself

These stakeholders all have their own interests and perspectives. You can balance different perspectives, but you need to juggle competing interests, and even choose one or more stakeholders over others. Good risk management brings these views together as different perspectives, and balances the interests of stakeholders: bad risk management treats them as competing interests, and ignores the interests of stakeholders.

Ask yourself in each situation … which stakeholders’ interests are you preferring over others? How are you communicating with those stakeholders? But realizing you’ve got 20 or more “Cooks in the Kitchen” is helpful as you think about decisions you need to make.

Resources – The classic question: “do you have enough resources to do your job?”

In answering that question, most people start with the number of people they have. In fact, that might be the LAST thing to consider when it comes to all the things that you actually have available to you. The resources you actually have available to you, in order of importance, are:

  1. Relationships – both internal (evidenced by your stature, authority, and independence in the organization, access to senior management and the board, access to junior management in the businesses) and external (with your regulators and law enforcement). A key aspect of relationships is trust – do your regulators trust you? Does senior management trust your judgment when you stop a new business initiative, or do they fight you every step of the way?  Relationships are the critical resource you have, or don’t have. Which takes you to the second most important resource …
  2. Data – does your institution have the necessary customer and transactional and other data necessary for you to run your program? If so …
  3. Technology – does your institution have the ability to keep that data current, and to get it to you? If so …
  4. Tools – do you and your teams have the right tools to use that data? By the way, this is where machine learning and AI come in … without good relationships, great data, and better technology, investing in ML and AI is like buying a high speed train without having the tracks to run it on.
  5. Policies and Procedures – Policies tell what needs to be done, and by whom; procedures tell how it gets done, and by whom. Avoid policedures. And remember the “Dress Appropriately” concept …
  6. Time – time is, arguably, your greatest resource. If you’ve ever had to remediate a program under tight audit or regulatory time constraints, you know what I mean. And this leads us to the last resource you have available to you …
  7. People – the number of people is the LAST consideration you should have when it comes to people. Your first concerns are: (1) are they well led? (2) are they well placed in the organization? (3) are they well “fed” (compensation, benefits, opportunities)? And 4th and finally … Do you have enough of them?

Although People are the last resource to consider, they are your most precious resource!

Managing the Five Dimensions – Our professional lives are all about trying to balance five dimensions

  1. Managing UP – to your boss, senior management, the board
  2. Managing ACROSS – to your peers within your organization, as well as peers across the company
  3. Managing OUT – to your industry peers, trade associations, regulators, prosecutors, media, law enforcement
  4. Managing DOWN – managing your team … but this is more about LEADING your team … and not just your direct reports, but your entire team
  5. Managing WITHIN – managing yourself, your family and personal obligations

So consider all five dimensions, and ask yourself the following questions:

  • Which direction am I best at managing? Why?
  • Which direction am I worst at managing? Why?
  • Which direction do I like the best? Why?
  • Which direction(s) do I dread the most? Why?
  • Which direction(s) do I avoid dealing with? Why?

You’ll probably never be in balance … so find and embrace your equilibrium.

FinTech vs Humans – “A computer lets you make more mistakes faster than any inventions in human history – with the possible exceptions of handguns and tequila.” Mitch Radcliffe (1998)

  • Machine Learning has its place in financial crimes, and has had a place in financial crimes since at least 2010: it’s just that the hype and marketing around it is hitting the mainstream.
  • Artificial Intelligence? I’m not convinced we are there yet. I’ve written on this: see www.regtechconsulting.net/news. In one article I quote Mat Velloso, who tweeted: “If it’s written in Python, it’s probably machine learning: if it’s written in PowerPoint, it’s probably artificial intelligence.”
  • And unless and until FinTech can bring intuition, empathy, judgment, common sense, and courage into the financial crimes environment, us humans will always have the most important role and machines will remain tools, not solutions.

There are no technology solutions. Only tools. Humans behaving well, and with good technology and better data, provide solutions.

What about those humans?

The Seven Cs – What makes a great analyst/investigator

  1. Capable – in anything. It doesn’t have to be financial services. Military veterans are great examples of people that can make great analysts without any financial services background because they are invariably capable people.
  2. Computer Savvy – Yep, it goes without saying. And I’m not talking about “I know how to use Excel” savvy: I’m talking about two computers, three screens, and typing faster than you talk. We all know those people …
  3. Curious – this is one of the big qualities. As I’ve said, I’ve directly or indirectly hired thousands of AML analysts over the years … and was one myself. If there is any attribute that separates a good analyst from a great analyst it is an insatiable curiosity to learn more, turn one more corner, to think differently about a problem.
  4. Creative – this is the trait that allows an analyst to think about what is not in the data that should be, to realize that it is not what is in the case that makes it suspicious, but what is not in the case that should be there that makes it suspicious …
  5. Cynical – you have to be a little cynical to be a great AML analyst. As I mentioned above, where bankers see every new customer as a GREAT customer, only possibly a nuisance, and certainly not a problem, every good AML analyst sees every customer as CERTAINLY a problem, clearly a nuisance … and only possibly a great customer. But that cynicism needs to be balanced by …
  6. Compassionate – You need to be compassionate and caring to take the time to understand different cultures and religions (when banks are open in a country will impact fund flow patterns), how and why different migrant communities live and work (and remit money home to family), what the word “hawala” means, naming conventions from different cultures, etc. And I want analysts who care for their teammates, and have compassion for those that aren’t as fortunate. And last and foremost:
  7. Courageous

An analyst/investigator needs to have all 7 attributes in order to look for, find, and explain (1) what is there that should be there, (2) what is there that shouldn’t be there, (2) what is not there that should not be there, and (4) what is not there that should be there.

Tall, Dark, and Handsome – Words (especially adjectives and adverbs) and punctuation matter!

  1. Write simply and clearly

“We know all too well that drugs are killing record numbers of Americans – and almost all of them come from overseas.”          Former AG Jeff Sessions, August 2018 speech

This is a good example of a poorly written sentence that is begging for clarity. The phrase “almost all” means very little: at least 51% and less than 100%. Second, do “almost all” drugs come from overseas, or do almost all Americans come from overseas? And finally, Mexico is the source country for 90% – 94% of heroin entering the US, and the final transit country for 90% of the cocaine entering the US. Mexico isn’t actually overseas from the US.

  1. Use Adjectives and Adverbs Sparingly, if at all

Most modifiers are unnecessary. Whether necessary or not, as a risk professional you should be very aware of both your use of adjectives and adverbs, and when reading others’ use of adjectives and adverbs. When confronted with any modifier, ask yourself (i) why is that modifier being used? (ii) is it being used correctly? (iii) does it change the meaning of the sentence in a way that is unintended? (iv) is it being used consistently with other modifiers? And (v) could it limit or prevent us in the future?

  1. Watch out for Red Flag Words and Phrases

Intended, Primarily, Pilot, Agile Development, shall versus may, Artificial Intelligence, Machine Learning

SMEs vs SMEs – Subject Matter Experts versus Subject Matter Enthusiasts

The Subject Matter Expert is just that. She has:

  1. talent and training,
  2. subject matter knowledge,
  3. environmental knowledge, and
  4. years of experience (and not just one year of experience many times over, but many years of experience).

The true Expert doesn’t see herself as an expert, will rarely call herself an expert, probably doesn’t see herself as an expert, but she possesses those traits, or enough of them, to truly be, and be seen as, a Subject Matter Expert.

The Subject Matter Enthusiast, on the other hand, often:

  1. calls himself an Expert when he isn’t, or
  2. thinks of himself as possessing enough of as many of the traits needed to pass himself off as an Expert.

The Enthusiast overcomes his lack of true expertise with just enough confidence, hubris, and (frankly) enthusiasm to move a project ahead or design a monitoring system just long enough to allow auditors, regulators, and prosecutors to catch up … and then for the true experts to bail him (and the project or monitoring system) out.

What’s the trick? Understanding where your expertise ends and your enthusiasm begins … understanding who are the experts and who are the enthusiasts, having the right blend of experts and enthusiasts … and taking the best of both, bringing them together, and building a highly effective team.

Is Transaction Monitoring a Thing of the Past? – Customer and Counter-Party Interaction Surveillance is the way of the future

Last year I posted on my website the “AML Scenario Builder” I first put together almost 20 years ago. It still applies today. It includes the eight essential data elements needed to do customer risk assessments and to build a relationship-based interaction monitoring and surveillance system:

  1. Customers/Clients/Others … with or without
  2. Products and Services … doing
  3. Interactions and Transactions … through
  4. Delivery Channels … at
  5. Locations/Geographies … sometimes involving
  6. Amounts … while considering
  7. External Factors … and
  8. Internal History

Twenty years ago we had moved away from Transaction Monitoring. Now, in full disclosure we kept a TM system running, and it spit out alerts that we had to deal with. But it was our least efficient, least effective, and one of the smallest sources of alerts we had at all banks I worked at. If TM hasn’t been dead for 20 years, it’s been on life support.

The Importance of Courage – “Courage is the single attribute upon which all other attributes depend” – Winston Churchill

After the September 2001 terrorist attacks, the 9/11 Commission was set up to look at what happened, and why. In its final report issued in 2004, they concluded that the US government’s failures could be grouped into four major categories: failure of policy, failure of capabilities, failure of management, and failure of imagination. And they concluded that the “most important failure” was a lack of imagination.

I believe that all four of those failures – of policy, of capabilities, of management, and of imagination – have one thing in common. A failure of courage.

What do I mean by courage?

  • Courage to speak freely – but respectfully and fairly
  • Courage to walk away when your principles are compromised
  • Courage to change
  • Courage to listen
  • Courage to compromise


  1. Be aware of all of your stakeholders … particularly your friends and family
  2. Recognize all the resources you have available to you … particularly your people
  3. Appreciate all the directions you’re being pulled in … and try to find an equilibrium that works for you
  4. Technology is important … but people are crucial
  5. Look past CVs and focus on whether someone is compassionate, curious, creative, and courageous
  6. Write carefully … and listen more carefully
  7. Identify and embrace the best of your experts and enthusiasts
  8. Be courageous

Grave Danger, Critical Habitats, and Oxford Commas – Words and Punctuation Matter!

Words and punctuation matter! Be precise in, and be careful with, the words you speak and write, and the words you’re hearing and reading.  There is much attention being placed on machine learning and artificial intelligence, both of which require computer coding that is precise. We must have the same attention paid to precise language and precise punctuation. Let me give you a few examples.

In the First Circuit Court of Appeals case of O’Connor et al v Oakhurst Dairy et al, 1st Cir. CA 16CV1901 (March 13, 2017), the Court wrote a 29-page decision on whether “packing for shipment or distribution” meant “packing for shipment” and the separate activity of “distribution”.  The drivers of a Portland, Maine dairy company, Oakhurst Dairy, were suing to recover $10 million in overtime pay. They argued that driving, or distribution, was not covered by a Maine law that sought to exempt certain activity in the perishable foods industries from overtime pay. That law required overtime pay except for “the canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of” certain products, including dairy products. The drivers argued that “packaging for shipment or distribution” didn’t include “distribution”. The Court of Appeals agreed and remanded the case back for a determination of the amount of overtime owed. In February 2019 the parties settled on $5 million.

The Oakhurst Dairy case is also known as the “Oxford Comma” case because it deals with a punctuation style for serial lists of like items that is espoused by the Oxford University Press (apparently with strong opposition from the Associated Press). The decision, which is 29 pages long and begins with “[F]or want of a comma, we have this case”, includes an interesting footnote on page 16. There, the Court notes that Maine’s Legislative Drafting Manual provides “when drafting Maine law or rules, don’t use a comma between the penultimate and the last item of a series.” So the law as written followed Maine’s drafting style. But the Court noted that Maine is one of only seven states to conform to that style, and both the House and Senate follow the “Oxford comma” style (both the House and Senate have an Office of Legislative Counsel and Manual on Drafting Style and Legislative Drafting Manual, respectively.

Both words and punctuation were found lacking in a section of a speech given by former US Attorney General, Jefferson Beauregard Sessions in August 2018:

“We know all too well that drugs are killing record numbers of Americans – and almost all of them come from overseas.”

This is a good example of a poorly written sentence that is begging for clarity. The phrase “almost all” means very little: at least 51% and less than 100%. Second, do “almost all” drugs come from overseas, or do almost all Americans come from overseas? And finally, Mexico is the source country for 90% – 94% of heroin entering the US, and the final transit country for 90% of the cocaine entering the US. I checked on a map, and Mexico isn’t actually overseas from the US. (any more than Canada was the first overseas country visited by First Lady Melania Trump).

In addition to punctuation and grammar, pay attention to modifiers – adjectives and adverbs.  In Weyerhaeuser v. US Fish & Wildlife Service, (USSC 17-71, slip opinion November 27, 2018), the US Supreme Court had the occasion to discuss adjectives at some length as they decided whether the phrase “critical habitat” required any habitability. In a unanimous opinion written by Chief Justice Roberts, the Court wrote (at page 8): “Our analysis starts with the phrase “critical habitat.” According to the ordinary understanding of how adjectives work, ‘critical habitat’ must also be ‘habitat.’ Adjectives modify nouns—they pick out a subset of a category that possesses a certain quality. It follows that ‘critical habitat’ is the subset of ‘habitat’ that is ‘critical’ to the conservation of an endangered species.” See https://www.supremecourt.gov/opinions/18pdf/17-71_omjp.pdf accessed December 6, 2018.

This case reminded me of advice I received as a young barrister in Canada in the late 1980s. My mentor – a Queen’s Counsel who later became a judge – taught me to always pay attention to modifiers: adjectives and adverbs. Remember the movie “A Few Good Men” starring Tom Cruise and Jack Nicholson? Colonel Jessup (Jack Nicholson) was on the witness stand being cross-examined by Lieutenant McCaffrey (Tom Cruise). Lieutenant McCaffrey asked “were the men in danger? Grave danger?” And Colonel Jessup replied in “is there any other kind?”  A great line! Most modifiers are unnecessary, and many are redundant (e.g., end result, first began, twelve noon, and revert back). Whether necessary or not, when writing in a business setting you should be very aware of both your use of adjectives and adverbs, and when reading others’ use of adjectives and adverbs. When confronted with any modifier, ask yourself (i) why is that modifier being used? (ii) is it being used correctly? (iii) does it change the meaning of the sentence in a way that is unintended? (iv) is it being used consistently with other modifiers? And (v) could it limit or prevent us in the future?

Another example of the importance of clear language recently came from an interagency joint statement on “Innovative Efforts to Combat Money Laundering and Terrorist Financing” (December 3, 2018) (see https://www.occ.gov/news-issuances/news-releases/2018/nr-occ-2018-130a.pdf). In that statement, the four banking regulatory agencies and FinCEN wrote, in part:

“… pilot programs that expose gaps in a BSA/AML compliance program will not necessarily result in supervisory action with respect to that program. For example, when banks test or implement artificial intelligence-based transaction monitoring systems and identify suspicious activity that would not otherwise have been identified under existing processes, the Agencies will not automatically assume that the banks’ existing processes are deficient. In these instances, the Agencies will assess the adequacy of banks’ existing suspicious activity monitoring processes independent of the results of the pilot program. Further, the implementation of innovative approaches in banks’ BSA/AML compliance programs will not result in additional regulatory expectations.”

The modifiers “necessarily” and “automatically” are important: the agencies did not write that “pilot programs that expose gaps in a BSA/AML compliance program will not result in supervisory action with respect to that program” or “the Agencies will not assume that the banks’ existing processes are deficient”. They left the door (wide) open for taking regulatory action against institutions where innovative pilot programs reveal gaps in their existing anti-money laundering programs.

In addition to punctuation and modifiers, also be careful when using or reading some common words and phrases that are “red flags” for compliance and risk management professionals. Two examples are:

  • Intended, as in “this product is intended to be sold only to medium-sized businesses”. When read critically, this phrase also means “although this product is intended to be sold only to medium-sized businesses, there are no controls stopping us from selling it to whatever customer class we want …”. Intent is only that: intent.
  • Primarily, as in “this product is primarily sold to mid-size businesses”. With “primarily” comes “secondarily”: “this product is primarily sold to mid-size businesses, but we’re also selling it to whoever will buy it.”

And make sure you understand words and phrases that are now commonly used but may not be commonly understood. Examples include “machine learning” and “artificial intelligence” – honestly now, do you really know what those things mean? And then there’s vague words such as “implement” (which I see all the time in Action Plans), “solution” (most solutions are simply tools), “agile development” (caution – that can mean lack of testing), and my favorite: “paradigm shift”.

It is important to be aware of how you and others use punctuation, adjectives, and adverbs. If not, your career could be in danger. Grave danger.

Public-Private Partnerships: Financial Crime Specialist Jim Richards Discusses Effective and Efficient Information Sharing under the USA PATRIOT Act

Thanks to my friend and financial crimes colleague Gina (Scialabba) Jurva of the Thomson Reuters Legal Executive Institute for the article. We did the interview and article back in November 2018 and it was recently published on LEI’s website. It’a available at:


The text of the article is reproduced below:

With an average of 55,000 new financial institution filings each day — known as Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs) — the Financial Crimes Enforcement Network, (FinCEN) is busy. FinCEN, a bureau within the U.S. Department of the Treasury’s Office of Terrorism and Financial Intelligence (TFI), is the arm of our government charged with safeguarding the financial system from illicit use, combating money laundering, and promoting national security.

Those CTRs and SARs are filed by individual institutions acting alone and, for the most part, are the result of each institution monitoring its own customers’ cash and other transactions and reporting large cash transactions and suspicious transactions. But since the passage of the USA PATRIOT Act, a law enacted in response to the 9/11 terrorist attacks, there have been provisions to allow for the sharing of information between the government and financial institutions, and amongst financial institutions. These provisions – contained in section 314(a) and 314(b) of Patriot Act, authorize FinCEN to share law enforcement and regulatory information with financial institutions (FIs) on individuals, entities, and organizations reasonably suspected of engaging in terrorist financing or money laundering activities, and vice versa.

“The notion of information sharing was there before the PATRIOT Act, but no one had an appetite for it without any statutory protections,” said Jim Richards, Founder of RegTech Consulting, and former Bank Secrecy Act (BSA) Officer and Global Head of Financial Crimes at Well Fargo & Co.

Richards says this is an incredibly powerful tool that has been on the books for more than 15 years; and, when used properly, has provided valuable data to disrupt money laundering and terrorist financing. But, as with anything, Richards believes there are some improvements to be made. “There are ways we can utilize these tools to be more efficient and more effective for banks and law enforcement,” he said, adding that this includes combining parts of the law together in a smarter way.

Section 314 (a) and 314 (b): What’s the Difference?

But first, a crash course on sections 314(a) and 314(b).

  • Section 314(a): Mandatory Information Sharing between Law Enforcement and Financial Institutions — This subsection deals specifically with information sharing between law enforcement via FinCEN and FIs. Law enforcement agencies investigating a crime related to terrorism or money laundering, via a FinCEN request, can ask FIs to search their records to determine whether they maintain or had maintained accounts for, or engaged in transactions with, any “individuals, entities, and organizations reasonably suspected of engaging in terrorist acts or money laundering activities.” Essentially, FinCEN is the gatekeeper for all information requests.
  • Section 314(b): Voluntary Information Sharing Between FIs — Here, two or more FIs and any association of financial institutions (emphasis added, don’t worry, we will get back to that), may share information with one another “regarding individuals, entities, organizations, and countries suspected of possible terrorist or money laundering activities.” Simply put, this is an information-sharing mechanism to help disrupt financial fraud crimes by and among those FIs that elect to participate.

Keep in mind, Section 314(b) is a voluntary information-sharing tool; FIs are not required to register with FinCEN, nor share information.

Section 314(a) activities, however, are mandatory, and FIs must comply with FinCEN information requests. These information requests are limited in scope to terrorism activities (see 18 U.S.C. 2331) and money-laundering activity (see 18 U.S.C. 1956).

Powerful stuff, right? “Before the PATRIOT Act, we couldn’t do that,” Richards notes. Powerful, but not without its share of controversy.

Breaking Down a Section 314(b) Request

Let’s say Bank A and Bank B are registered with FinCEN under Section 314(b). Bank A is investigating an account owned by Jim for the purposes of filing a SAR. If Bank A sees that Jim has been sending money to Gina at Bank B, Bank A can request that Bank B provide transaction information.

Then Bank B can respond with “we aren’t telling you anything” or can say, “Gina has banked with us for 20 years, she owned a flower shop. We saw these transactions and have no concerns.”

The problem, Richards notes, is that because Section 314(b) information-sharing is not mandatory, it also creates more roadblocks. “If you have a certain time in which to file a SAR, and Bank B isn’t getting back to you, what do you do?” he said. “It creates a level of complexity that not many FIs want to deal with. Also, regulators are reluctant to criticize an FI for not participating in a voluntary program but can criticize a participating FI for any failures in doing so, so many FIs simply decide to save themselves from regulatory issues by not participating in an otherwise valuable program.”

Combining Sections 314(a) and 314(b): A New Approach to the PATRIOT Act

In Congressional testimony earlier this year, a witness testified that “of the roughly one million SARs filed annually by depository institutions (banks and credit unions), approximately half are filed by only four banks.” What if FinCEN and these four largest financial institutions worked together to share information? And what if they did that with tools already in the anti-money laundering (AML) toolbox?

Here’s how. Remember the language we emphasized above in Section 314(b)? Financial institutions and any association of financial institutions? An “association” can be a tremendously powerful tool when coupled with Section 314(a). Richards describes a scenario where these largest FIs get together to form an information sharing association under 314(b), which not only allows them to share certain information but provides legal protections when doing so, and then the association can work proactively with FinCEN and law enforcement to receive and send names of known targets under 314(a).

“I see this as the wave of the future,” Richards explained. “Otherwise, each individual FI is limited in what it can see and more importantly, what it can understand.” More importantly, he said, it allows FinCEN and FIs to take existing tools and use them “in a more efficient way to solve big problems like human trafficking, contraband smuggling, the opioid crisis, the fentanyl crisis, and other societal problems.”

“Information sharing associations shouldn’t be limited to the biggest FIs, although Greg Baer’s testimony about the largest four FIs, out of about 12,000 in the US, filing 60% of SARs illustrates how powerful such an association could be,” Richards noted. “This association approach, even with smaller institutions, allows law enforcement to target the worst offenders and allow those FIs to better identify those targets and share information between themselves and with the government. “I think it is really positive,” he added, “but it will only work if the regulatory agencies are fully on board and encourage FIs to participate. If there is no regulatory upside for financial institutions, even the best-intentioned of them will think twice before participating in what is otherwise the right thing to do for our communities and country.”

The Southwest Border(s) – Some Background to Inform the Debate

To understand the current broo-haha about “The Wall”, you need to understand two things. First, a bit about the Mexico – United States border, or the Southwest Border that runs from San Diego/Tijuana on the Pacific Ocean to Brownsville, Texas on the Gulf of Mexico. And second, the need for, design of, and installation of a Southwest Border fence was determined just a few short years ago with the Secure Fences Act of 2006.

First, the Southwest Border is really two different borders, both geographically and politically.

The Geographic Southwest Border

The first third or about 700 miles runs from the Pacific Coast in a series of straight lines: from San Diego to the Colorado River at Yuma, Arizona; 20+ miles down the Colorado River; southeast to Nogales; east-southeast into New Mexico where it jogs north, then east to El Paso/Ciudad Juarez. The second part of the Southwest Border then follows the middle (technically, the deepest channel) of the Rio Grande River about 1,260 miles.

Currently (early 2019), there are various types of fencing – primary pedestrian and vehicle fencing being the two most common – along 650 of the 1,954 miles of the Southwest Border. This is shown in the image below.

The Political Southwest Border

In 1907 President Ted Roosevelt signed what became known as the “Roosevelt Reservation”, which created a 60 foot buffer on the US side of the US/Mexico border in most of California, Arizona, and New Mexico. He was able to do so because the land along the border was federal land (there were a few places that had been in private hands before these states joined the Union that were essentially grandfathered or exempted from the Roosevelt Reservation). But the 60-foot buffer did not apply to any land in Texas, because Texas had retained title to all land before it became a state. The result is critical: although the US Government needs to get permission to traverse private land to get to the border, it owns that border land and can build fencing or a wall without seizing (and compensating) private land owners.  That is not the case in Texas, where eminent domain challenges have become common – and expensive and time consuming – when it comes to building a border wall.

The Secure Fences Act of 2006

In 2005 President Bush launched the Secure Border Initiative to enhance the security at ports of entry and along the ~2,000 mile US Mexico and ~5,500 mile US Canada borders. The enhancements ran the gamut: from more personnel to new technologies, infrastructure, and fencing.

In September 2006, Congressman Peter King (R. NY) introduced the Secure Fence Act of 2006, an “Act to establish operational control over the international land and maritime borders of the United States.” It was a simple, three-section, two-page bill. It passed the Republican-controlled House one day later, on September 14, 2006, by a vote of 283-138. Sixty-four Democrats voted in favor of the Bill: Nancy Pelosi voted against it. On September 29th the Senate approved the Bill 80-19, with 26 Democrats voting in favor, including Joe Biden, Chuck Schumer, Hilary Clinton, and (then Senator) Barack Obama.  President Bush signed the Bill into law on October 26, 2006. The Bill was simple and short: it called for “achieving operational control on the border” through “systematic surveillance” and “physical infrastructure improvements” (section 2), and “construction of fencing and security improvements in the border area from the Pacific Ocean to the Gulf of Mexico.”

At the time of the Secure Fence Act of 2006, there was about 110 miles of existing walls or fencing. The Department of Homeland Security determined that a total of about 670 miles of fencing was “most practical and effective”, and that they could build another 260 miles of vehicle walls or barriers and 290 miles of “primary pedestrian” fencing, at a total cost of $2.3 billion. Essentially, what DHS determined was that they could fill in the rural and urban gaps in the ~700 miles of overland border from California across Arizona and New Mexico (leaving some gaps in the “remote” sections), and fence the urban and border crossing areas of the ~1,260 miles along the Rio Grande River from El Paso to the Gulf of Mexico. They determined that installing fencing along most of the Rio Grande River border was either impractical or ineffective.

By 2007 the DHS had established a Fence Lab at Texas A&M University to test and determine how to build the various types of walls or fencing, and where and how to install it. The DHS was given until December 31, 2008 to design, test, and install the ~550 miles of new fencing.

The budgets for the Secure Border Initiative – which included the new fencing – were set at $1.5 billion for Fiscal Year 2007, $1.225 billion for FY 2008, and $775 million for FY 2009.

The Southwest Border Fencing Results

A DHS Office of Inspector General Report from April 2009 (OIG-09-56) titled “Progress in Addressing Secure Border Initiative Operational Requirements and Constructing the Southwest Border Fence” found that DHS was only 55% finished constructing the pedestrian fencing (making up 370 of the total of 670 miles of fencing) and 51% finished constructing the vehicle fencing (300 miles). It noted four other interesting things: first, none of the nine approved fence prototypes were made of concrete. Second, the delays were caused, in part, from the eminent domain cases in federal court in Texas, of which there were an estimated 300. Third, the original cost estimates were much too low. And fourth, the cost of civilian contractors building and installing the fencing was as much as four times as the costs if the military built and installed the fencing. Note that all 548 miles of new fencing (and a total of 670 miles of fencing) was completed by 2010. The OIG report is at https://www.oig.dhs.gov/assets/Mgmt/OIG_09-56_Apr09.pdf.

Economic Impact of the Southwest Border Fencing

An excellent history of the Safe Fences Act and the economic impacts of a border wall can be found in a November 2018 paper available at https://www.nber.org/papers/w25267 titled “Border Walls”. The abstract for that paper provides:

Border Walls

Treb AllenCauê de Castro DobbinMelanie Morten

NBER Working Paper No. 25267
Issued in November 2018
NBER Program(s):Development EconomicsInternational Trade and Investment

What are the economic impacts of a border wall between the United States and Mexico? We use confidential data on bilateral flows of primarily unauthorized Mexican workers to the United States to estimate how a substantial expansion of the border wall between the United States and Mexico from 2007 to 2010 affected migration. We then combine these estimates with a general equilibrium spatial model featuring multiple labor types and a flexible underlying geography to quantify the economic impact of the wall expansion. At a construction cost of approximately $7 per person in the United States, we estimate that the border wall expansion harmed Mexican workers and high-skill U.S. workers, but benefited U.S. low-skill workers, who achieved gains equivalent to an increase in per capita income of $0.36. In contrast, a counterfactual policy which instead reduced trade costs between the United States and Mexico by 25% would have resulted in both greater declines in Mexico to United States migration and substantial welfare gains for all workers.

Some highlights from that report include:

  • The researchers divided the 1,954 mile Southwest Border into 1,000 identically-sized segments: 22% had a wall in 2006 and 51% had a wall by 2010
  • Of the 781 segments in 2006 without a wall or fencing, the likelihood of getting new fencing was reduced by 83% because they were along the Rio Grande River and reduced by 23% if the terrain was mountainous. They also looked at the likelihood of fencing in remote, rural, and urban areas
  • According to the Pew Research Center, 50% of the 11.6 million Mexican-born population living in the United States in 2016 was in the United States illegally
  • There are 17 border cities and towns that have traditionally been used as crossing points: 60% were fenced before the Secure Fences Act and 90% were fenced after
  • The US Border Patrol divides the Southwest Border into nine sectors: the 2007-2010 wall/fence expansion occurred in six of the nine, but not the three sectors in Texas (Big Bend, Del Rio, and Laredo)
  • “the wall changed relative migration patterns between Mexico and the United States, although our estimates imply that the direct impact on migration was small” (page 16)
  • “a wall expansion that builds along half the remaining uncovered border would result in 144,256 fewer Mexican workers residing in the United States, causing the US real GDP to decline by $4.3 billion … as a result, we do not find any evidence that a larger border wall expansion would have substantially different impacts from the Secure Fence Act.” (page 35)

Summary & Conclusion

In summary, there is currently ~650 miles of fencing along the ~1,950 mile Southwest Border. Most of that – about 550 miles – was built between 2007 and 2010 as a result of the Secure Fences Act of 2006 and a recommendation from the Department of Homeland Security that 670 miles of fence was “most practical and effective.” In February 2018 the Department of Homeland Security, in response to the President’s proposed budget, stated that they needed $1.6 billion to support the construction of 65 miles of new border wall system. See, https://www.dhs.gov/news/2018/02/12/department-homeland-security-statement-president-s-fiscal-year-2019-budget.

In conclusion, I offer no conclusion. Rather, I trust that this information provides you with some information to form your own conclusions as the debate continues in Washington DC and on Twitter and cable news about the need to build (and pay for) more fencing or walls along the Southwest Border.