Tag: 9/11

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Looking Back on 9/11

Looking back at 9/11: Alex Dill – Patriot Act: The AML Response to Terrorist Threats


Alex Dill is Tom Fox’s guest on this episode of the Looking Back at 9/11 Series. Alex is a scholar and professor specializing in financial regulation, risk management and compliance. He also has corporate experience in ​​the ethics of business practices in finance, bankruptcy, bond covenants, and debt markets. He joins Tom to talk about The Patriot Act’s impact on responding to terrorist threats.
Listen to the Episode Now:

How 9/11 Changed AML
Before 9/11, AML regulations were very lax and backward looking. The focus was on prosecuting crimes that were already committed, and prosecuting money laundering, more so than the financing of terrorism. Banks weren’t engaging in meaningful customer due diligence as they felt the process invasive. After 9/11, this all changed. Law enforcement agencies and financial institutions revamped their policies and procedures to take a more preventive approach to AML and financing of terrorism. This led to The Patriot Act.
The Financial Response
Tom asks Alex if he saw a similar regulatory response with non-financial institutions with respect to Patriot Act AML procedures post-9/11. “There was a huge amount of rulemaking that had to be done,” Alex responds. He adds that public companies adopted customer due diligence, and that it was applied more broadly to different sectors, but with a risk-based approach. Companies now had to file suspicious activity reports, not just banks. Customer identification was also introduced. “The Patriot Act sought to encourage cooperation among law enforcement agencies, and among the financial institutions themselves to share information and obtain information from foreign law enforcement authorities,” Alex tells Tom.
The Challenge With The Patriot Act 
Alex explains to Tom that there are challenges with the Patriot Act. A major challenge is detecting the financing that goes into these attacks. Funds that finance these actions are sourced from both legal and illegal means, and that is a major issue. The transaction amount can be small, and this might pose a risk to some compliance officers. 
Technology in Anti-Terrorism
Alex remarks that technology is very important moving forward in the fight against terrorism, as it has changed the way we function in our world. The downside of technology is that it has also helped create some of the compliance issues we have today. Social media platforms have helped to create polarization in the society, and programs like cryptocurrency have been used by criminals for money laundering, and financing terrorism. However, Alex ends with a positive note stating that the AML act of 2020 has been doing the work to help curb these issues.
Resources
Alex Dill | LinkedIn | Twitter

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Blog

Looking Back on 9/11: Professor Alexander Dill – Patriot Act: The AML Response to Terrorist Threats


This coming Saturday is the 20th anniversary of the attacks upon America on September 11, 2001. Like most Americans, this was the seminal event in the history of our country. I have been thinking a lot about that date and the anniversary; even more so with the fall of Afghanistan and the evacuation from Kabul. I wanted to do something to commemorate this anniversary, so I decided to do a podcast series featuring the personal stories of persons in the compliance field with their thoughts about what the date of 9/11 means to them, how it changed our profession and their thoughts looking back some 20 years later. The lineup for this week is:

  • 6 – Gabe Hidalgo
  • 7 – Juan Zarate
  • 8 – Alex Dill
  • 9 – Eric Feldman
  • 10 – Scott Moritz
  • 11 – John Lee Dumas

My guest today is Professor Alexander Dill. Professor Dill is a scholar specializing in financial regulation, risk management and compliance. He also has corporate experience in ​​the ethics of business practices in finance, bankruptcy, bond covenants, and debt markets. He joined me to talk about The Patriot Act’s impact on responding to terrorist threats. On 9/11, he worked in lower Manhattan.
He recalled Tuesday, September 11, 2001, was a beautiful Tuesday morning. When he got out at his subway stop for work there was a big crowd of people and they were talking about a single engine Cessna, which had accidentally hit the North Tower. That turned out not to be true. He never did make it in his building. He solemnly said, “I think I was lucky because there were people in the corner office watching people as they jumped out of the top floors. I looked down in the ground at a street corner and I saw an engine from one of the American airlines planes which I later saw in the 9/11 Museum.” He saw the South Tower collapse and he related, “I was frozen in my tracks, I just couldn’t move. Then an EMS worker was running up the street and yelled at me, get moving. There was a big cloud of dust chasing her. So, I did finally did start running.”
Dill said that prior to 9/11, anti-money laundering (AML) regulations were very lax and backward looking. The focus was on prosecuting crimes that were already committed, and prosecuting money laundering, more so than the financing of terrorism. Banks were not engaging in meaningful customer due diligence as they felt the process invasive. After 9/11, this all changed. Law enforcement agencies and financial institutions revamped their policies and procedures to take a more preventive approach to AML and financing of terrorism.
Financial institutions also changed their attitudes. Banks had previously considered customer due diligence to be overly invasive in the business model. Whether it was in deposit taking, wire transfers or payouts, they resisted meaningful customer due diligence. All that resistance crumbled in the wake of 9/11. These became the core attributes of the Patriot Act, as federal authorities had long wanted to introduce meaningful customer due diligence and they were finally able to do so in the form of the Patriot Act, which had strong, bi-partisan support. It was this desire for a more preventative, proactive approach led to the Patriot Act.
We also considered the similar regulatory response with non-financial institutions with respect to the Patriot Act AML procedures post-9/11. Dill said, “There was a huge amount of rulemaking that had to be done.” He added that public companies adopted customer due diligence, and that it was applied more broadly applied to different sectors, but with a risk-based approach. Companies now had to file suspicious activity reports, not just banks. Customer identification was also introduced. “The Patriot Act sought to encourage cooperation among law enforcement agencies, and among the financial institutions themselves to share information and obtain information from foreign law enforcement authorities.”
Yet even with the Patriot Act there are still challenges. A key challenge is detecting the financing that goes into these attacks. Funds that finance these actions are sourced from both legal and illegal means, and that is a major issue. This brought other sectors within the ambit of the Patriot Act. Dill said, “they brought in broker dealers, what I call the capital markets from broker dealers, mutual funds and the futures industry, pool operators, commodity brokers, and so on. A customer identification program was introduced. Another problem is trying to prevent future terrorist acts, which complicates design of a system for detection and prevention. Of course, firms also rely on the government’s list of known and suspected terrorists. Finally, is the basis of a risk-based approach, which is usually the transaction amount. Many terrorist-based transactions are relatively small, and this might pose a risk to some compliance officers.”
I concluded by asking Dill to reflect back on what the last 20 years had brought to the world of AML and compliance. His view is that the advent of technology has been the key in AML and the terrorism financing fight, in AML and terrorism financing regulation and in AML and terrorism financing compliance. But technology advances are much broader than simply in combating terrorist financial. Dill pointed to social media which he said has a “creative and productive side, but also kind of a dark side or a negative side.” Cryptocurrency has expanded investment opportunities if you want to get into that value title asset class, “but it is also increasingly used by criminals for money laundering and financing of terrorism.” Finally, there is “AI and machine learning, where this tech can offer very efficient compliance solutions, but the models are often black boxes. They can’t be properly validated, and this increases model risk.” Dill ended with the Anti-Money Laundering Act of 2020, which he said, “really does a good job of enhancing, attempting to enhance innovative technologies to help achieve the law enforcement objective.”
Please check out each of the podcasts this week. They will post at 6 AM CT on the Compliance Podcast Network and JDSupra and midnight on Innovation in Compliance, YouTube, iTunes and Spotify. Tomorrow Eric Feldman will join me to discuss the change in an Inspector General’s (IG’s) role in the wake of 9/11.

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Looking Back on 9/11

Looking Back at 9/11: Juan Zarate – The Treasury Department Responds


Juan Zarate is the Global co-Managing Partner and Chief Strategy Officer at K2 integrity. On 9/11 he was a prosecutor at the Treasury Department working on international enforcement issues, anti money laundering, anti-corruption and anti-terrorist financing. He joins Tom Fox to commemorate the 20th anniversary of 9/11. They discuss how his role changed, the Treasury Department response and what the tragic event means for him.
Listen to the Episode Now:

A Change of Mission
9/11 changed the mission of the Treasury Department. Juan tells Tom, “We went after terrorist financing to try to disrupt and dismantle Al-Qaeda’s terrorist networks and infrastructure, and disrupt how illicit financing was flowing through the international system.” He recalls where he was on the fateful day and how seeing the smoke from the Towers and the Pentagon affected him emotionally. Something very different was happening, he recalls; the country was under attack.
He outlines the strategic, departmental and tactical changes implemented after 9/11 to fight terrorism. The President declared that we were now at war. “The attitude and the strategic direction of the government was [that] we now have to prevent terrorist attacks,” Juan recalls. “We have to disrupt and dismantle terrorist networks. And that led to an entire preventative paradigm for the counter-terrorism approach to the government.” The new mission of the Treasury Department was the following areas, Juan remarks: “How do you use financial information more aggressively? How do we think about the use of tools and authorities that the Treasury has, like sanctions, anti money laundering rules? How do we think about the relationships internationally with central banks, finance ministries? How do we get the world on board to disrupt terrorist financing, to rip these organizations out of the legitimate financial commercial world?” The Patriot Act was one tactical change, among others, that was implemented to achieve the new mission of fighting terrorism.
What 9/11 Means
Tom asks Juan, “What are your reflections now as we come up on the 20th anniversary of the day of 9/11, and really what it meant for America and for you 20 years later?” Juan responds that he has mixed emotions. He thinks about the victims and their families first of all. That day changed history, he says. “It changed the way that the U S government viewed the world. It changed the way that we operated our strategy. And it changed the sense of our vulnerability.” The recent events in Afghanistan make the 20th anniversary even more difficult for Juan. “I have very mixed emotions coming on the 20th anniversary of 9/11,” he concludes, “but I’m very proud of the work that we did. I’m proud of the people I served with and my sympathies go out to the victims and their families.”
Resources
Juan Zarate at K2 Integrity 

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Blog

Looking Back on 9/11: Juan Zarate-the Treasury Department Responds

This coming Saturday is the 20th anniversary of the attacks upon America on September 11, 2001. Like most Americans, this was the seminal event in the history of our country. I have been thinking a lot about that date and the anniversary; even more so with the fall of Afghanistan and the evacuation from Kabul. I wanted to do something to commemorate this anniversary, so I decided to do a podcast series featuring the personal stories of persons in the compliance field with their thoughts about what the date of 9/11 means to them, how it changed our profession and their thoughts looking back some 20 years later. The lineup for this week is:

  • 6 – Gabe Hidalgo
  • 7 – Juan Zarate
  • 8 – Alex Dill
  • 9 – Eric Feldman
  • 10 – Scott Moritz
  • 11 – John Lee Dumas

Juan Zarate is the Global Co-Managing Partner and Chief Strategy Officer at K2 integrity. On 9/11 he was at the Treasury Department working on international enforcement issues, anti-money laundering (AML), anti-corruption and anti-terrorist financing. Zarate discussed how his role changed, the Treasury Department response and what the tragic event means for him.
On 9/11, Zarate was in his office, which faced south giving him a view right to the Pentagon. Zarate had a TV in his office, obviously watching with horror as to what was happening in New York. He had been a terrorism prosecutor for a number of years at the Department of Justice (DOJ) so was aware of Al Qaeda. “When I looked south across the windows from the office you could see smoke billowing from the Pentagon. From the fourth floor of the Treasury Department, looking out across the river, you could see smoke rising from the Pentagon.” This affected him emotionally; something very different was happening, he recalled; the country was under attack.
Zarate said there were three categories of changes in fighting terrorism after 9/11. They were at the strategic level, departmental level and then the tactical level. He said, “What happened at that point was the government decided that the president decided very clearly we’re now at war. We can’t sit back. We can’t follow these cases after the fact, right? We are not here to just prosecute people. We now have to prevent these attacks from happening” through more proactive measures. “The attitude and the strategic direction of the government was [that] we now have to prevent terrorist attacks,” he recalled. “We have to disrupt and dismantle terrorist networks. And that led to an entire preventative paradigm for the counter-terrorism approach to the government.”
At the departmental level, the new mission of the Treasury Department was, “How do you use financial information more aggressively? How do we think about the use of tools and authorities that the Treasury has, like sanctions, anti-money laundering rules? How do we think about the relationships internationally with central banks, finance ministries? How do we get the world on board to disrupt terrorist financing, to rip these organizations out of the legitimate financial commercial world?”
At the tactical level, there was the passage of the Patriot Act, which broadened and deepened the AML system, and then enabling the international community. There was the creation of the Financial Action Task Force (FATF), which “created new standards for combating terrorist financing, things like dealing with cash couriers and other elements of the financial system, where we needed to make sure that the international community and in particular, the banks and the banking centers were doing everything possible to prevent terrorists from getting into the system.” This was a “wholesale shift that happened over time, but it was pretty quickly as there was a clear mandate from the President to prevent another attack and to do everything, to disrupt and dismantle terrorist networks.”
There were other areas in this tactical level. Zarate discussed the Executive Orders that came out, the list of terrorists, terrorist organizations, organizations supporting terrorism that came from the US. There were regulations specifying Bank Secrecy Act (BSA) regulations which came from OFAC and later FinCEN. Zarate said the ATF had a role as well as Federal Air Marshalls. He concluded, “there was an entire range of things, we were doing tactically and legally to try to amplify what we were doing from a US government and a Treasury perspective.”
I asked Juan, “What are your reflections now as we come up on the 20th anniversary of the day of 9/11, and really what it meant for America and for you 20 years later?” He responded that he has mixed emotions. He thinks about the victims and their families first of all. That day changed history. “It changed the way that the US government viewed the world. It changed the way that we operated our strategy. And it changed the sense of our vulnerability.” The recent events in Afghanistan make the 20th anniversary even more difficult for Juan. “I have very mixed emotions coming on the 20th anniversary of 9/11,” he concluded, “but I’m very proud of the work that we did. I’m proud of the people I served with, and my sympathies go out to the victims and their families.”
Join us tomorrow when Professor Alexander Dill reflects on being in Manhattan, in the financial district, on 9/11 and the changes brought by the Patriot Act.
Please check out each of the podcasts this week. They will post at 6 AM CT on the Compliance Podcast Network and JDSupra and midnight on Innovation in Compliance, YouTube, iTunes and Spotify.

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Looking Back on 9/11

Looking Back at 9/11: Gabe Hidalgo – Needing to Make a Difference


On the 20th anniversary of the 9/11 terrorist attack, Tom Fox and guests look back on the tragic event and what it meant for them personally, as well as how it impacted the world of compliance. Tom’s first guest this week is Gabe Hidalgo, anti money laundering compliance expert, who shares how the events of that fateful day changed the course of his career.
Listen to the Episode Now:

Looking Back
Gabe – who worked as outside counsel for insurance companies at the time – remembers turning on YahooTV as soon as he got to his office on 9/11 and seeing the second plane hit the World Trade Towers. He knew immediately that it was a deliberate attack. “I knew that this was kind of a hallmark moment,” he tells Tom, “that this was not an accident.” He details leaving the office in haste to get to his pregnant wife, and the obstacles and roadblocks he faced on the way. When they finally reunited at home, they were overcome with emotion. He remembers feeling gutted thinking about the unborn children who would grow up never knowing their fathers.
Needing to Do Something
Gabe needed to do something more than just shed tears about 9/11, he tells Tom. He started to think about how he could use his skills as an attorney. “I went down the path of looking in private industry, what I can do, and came across anti money laundering compliance, which I thought was fascinating. And I said to myself, I need a way for me to be able to get into that so that I can start making a difference.” He shares his journey into the field, and that it was exactly the right time and the right fit for him. 9/11 was a wake up call for America, he remarks. It made us realize that we need to do whatever we can to prevent anything similar from happening again.
Evolution of AML Since 9/11
Tom asks Gabe how AML compliance has advanced since 9/11. It’s much more difficult for terrorist financiers to move funds now, he responds. “A lot of institutions have strengthened and hardened their compliance programs to the point where they can monitor individual transactions as they’re moving across the transactional workflow in the United States. They examine each and every transaction that’s coming across from a correspondent banking perspective, which is probably one of the most high-risk channels for money movement.” Gabe and his colleagues have done great work over the past 20 years, which has helped law enforcement stop and apprehend would-be terrorists. However, we can’t be complacent, Gabe says.
Tom asks what 9/11 means for America. The 20th anniversary is a somber one, Gabe replies. 9/11 taught us not to be naive, that we’re not as protected as we think we are. He is proud of the advancements made to keep everyone safe, but the work continues. “It’s a moment of reflection,” he points out. “We need to think about not only the people who have lost their lives, but everyone that was impacted – whether they were directly impacted through a family loss, or they were emotionally impacted by what actually occurred.”
Resources
Gabe Hidalgo on LinkedIn 

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Blog

Looking Back on 9/11: Gabe Hidalgo on Needing to Make a Difference

This coming Saturday is the 20th anniversary of the attacks upon America on September 11, 2001. Like most Americans, this was the seminal event in the history of our country. I have been thinking a lot about that date and the anniversary; even more so with the fall of Afghanistan and the evacuation from Kabul. I wanted to do something to commemorate this anniversary, so I decided to do a podcast series featuring the personal stories of persons in the compliance field with their thoughts about what the date of 9/11 means to them, how it changed our profession and their thoughts looking back some 20 years later. The lineup for this week is:

  • 6 – Gabe Hidalgo
  • 7 – Juan Zarate
  • 8 – Alex Dill
  • 9 – Eric Feldman
  • 10 – Scott Moritz
  • 11 – John Lee Dumas

My guest today is Gabe Hidalgo, anti-money laundering (AML) compliance expert, who shared how the events of that fateful day changed the course of his career. Hidalgo was working as counsel for insurance companies at the time. He recalled turning on YahooTV as soon as he got to his office on 9/11 and seeing the second plane hit the World Trade Towers. He knew immediately that it was a deliberate attack. “I knew that this was kind of a hallmark moment,” and “that this was not an accident.”
He talked about his frantic attempt to reach his wife, who worked in midtown Manhattan at the time. He told about attempts to drive into Manhattan to pick her up and bring her back to their home in Queens. On that day he saw military roadblocks for the first time on the highways going into Manhattan. His wife was finally able to get a bus off the island and they met up at her bus station. When they finally reunited at home, they were overcome with emotion. He said they cried most of that day and they could hear others crying in the adjacent apartments as well.
One of the most poignant moments was when they heard about the wives who lost their husbands and the children who lost their fathers in the NYC attacks. He and his wife were pregnant with their first child and Hidalgo recalled feeling gutted thinking about the unborn children who would grow up never knowing their fathers.
Having understood that America had been attacked, Hidalgo was determined to join the fight against terrorism. As he related, he needed to “do something more than just shed tears”. He immediately ruled out local law enforcement or the FBI as his wife was adamant that she did not want him carrying a gun or going into harms way. So, Hidalgo started to think about how he could use his skills as an attorney. “I went down the path of looking in private industry, what I can do, and came across anti-money laundering compliance, which I thought was fascinating. And I said to myself, I need a way for me to be able to get into that so that I can start making a difference.”
Hidalgo found a local money service business in Queens that had a global footprint and was looking for a director of legal compliance. He applied and in the interview process told the hiring manager “I don’t have any AML experience, I just need about 30 days to get up to speed.” However, he could immediately handle legal works so “within those 30 days I read everything I could. I looked at every single document that I could in regard to AML. To be honest with you, AML felt like the perfect fit for me, given what I wanted to do was to help as much as I could to help to prevent anything like this happening again in our country.”
The company was about to be examined by the State of New York which focused his learning skills in AML. Hidalgo had to “look at their policy and procedures that they had in place, rewrite a lot of those policies, procedures, and basically put into practice everything I read about AML.” As he wryly noted, “luckily for me, the examination went great.”
We explored how AML compliance has advanced since 9/11. Hidalgo said, “I think if you were to examine the sea change of sweeping changes that have occurred in the last 20 years between what compliance programs looked like back then versus what they are now. It’s a magnitude of hundreds and hundreds of times more difficult for those funds to be moved the way they were moved for the 9/11 plot. These changes have made it much more difficult for terrorist financiers to move funds now.”
Hidalgo, who subsequently worked as a regulator Federal Reserve Bank of New York, added while no program is perfect “I’ve seen these programs in place, even when there were opportunities to enhance what they were doing. A lot of institutions have strengthened and hardened their compliance programs to the point where they can monitor individual transactions as they’re moving across the transactional workflow in the United States. They examine each and every transaction that’s coming across from a correspondent banking perspective, which is probably one of the most high-risk channels for money movement.” He concluded by stating that he believes his colleagues in AML compliance “have done great work over the past 20 years, which has helped law enforcement stop and apprehend would-be terrorists. However, we can’t be complacent”.
I concluded by asking Hidalgo for his reflections looking back at 9/11; some 20 years later. Hidalgo began by noting that “the 20th anniversary is a dark moment”.  9/11 taught us not to be naive, that we’re not as protected as we think we are. He said, “We need to think about not only the people who have lost their lives, but everyone that was impacted – whether they were directly impacted through a family loss, or they were emotionally impacted by what actually occurred.” He is proud of the advancements in AML compliance made to keep everyone safe but concluded, “the work continues.”
Please check out each of the podcasts this week. They will post at 6 AM CT on the Compliance Podcast Network and JDSupra and midnight on Innovation in Compliance, YouTube, iTunes and Spotify.

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Sunday Book Review

Sunday Book Review: September 5, 2021, the 9/11 edition

 
In today’s edition of Sunday Book Review:

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Daily Compliance News

September 11, 2019- the 9/11 edition

In today’s edition of Daily Compliance News:
  • Who is the most powerful regulator on the planet? (Hint-she’s not aYank) (NYT)
  • Cloudfare confirms possible sanction violation disclosure to government. (WSJ)
  • New California labor bill may help Uber/Lyft drivers. (NYT)
  • FEMA officials in Puerto Rico charged with corruption and fraud. (Washington Post)