Fraud and Financial Crime: Federal implications of banking marijuana money

Fraud and Financial Crime: Federal implications of banking marijuana money

by Lester Joseph, Head, Global Financial Crimes Intelligence Group, Wells Fargo & Company

Interview ahead of Fraud and Financial Crime USA Congress, taking place March 27-28 in New York City 
Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

Since 2010, I have been managing a Global Financial Crimes Intelligence Group at Wells Fargo. In this position, I lead a team of talented intelligence analysts from diverse backgrounds to track and report on financial crimes risks across the institution – both domestic and international. Prior to joining Wells Fargo, I spent 25 years as a prosecutor at the US Department of Justice. Since 1991, my focus at DOJ was on money laundering.

My current focus is on money laundering activity around the world as it affects our correspondent banking relationships. Most recently, we have been looking closely at the money laundering activity in the Baltic region that has been the subject of recent news reports. Other areas of focus are cybersecurity and cyber-enabled financial crimes.

What, for you, are the benefits of attending a conference like the Fraud and Financial Crime USA Congress and what can attendees expect to learn from your session?

The benefits of attending a conference are having the opportunity to listen to and speak with other people who are working in this area and learning from their experience. Those of us working in the financial industry are all facing the same problems, and it is helpful to see how others are addressing these problems. Also, it is important that we work together to address issues like fraud and cybersecurity. In my sessions, I hope that I will be able to provide some insight into how to address these issues.

You will be joined by BMO Harris Bank N.A., Nationwide and the Federal Bureau of Investigation for a panel discussion, in your opinion, what are the benefits of possibly sharing more information with other financial firms?

Working together with our peer institutions and with law enforcement is critical to our mission. It is very helpful to learn what our law enforcement partners are working on and how we can best help them to fight financial crime. The suspicious activity reports that we file are for their benefit, so their insights and feedback are very important to us.  And, since criminals are very adept at moving their funds through different banks, it is important that banks share information and collaborate in order to mitigate financial crimes threats.

In regards to intelligence, how could the public sector support financial institutions and vice-versa?

Financial institutions and the public sector have a symbiotic relationship.  Financial institutions have a lot of information about financial activity, but they don’t always have the context to know what is useful or significant. The government has a better understanding of the context of financial crime through their investigations and intelligence.  So, when the public sector and private sector work together, the public sector can provide background and context about what is important to them.  And the private sector, in turn, will benefit by having a better understanding the government priorities and will be able to provide more useful information to law enforcement.

What are the major clashes between federal and state laws and how do they affect the industry?

The major clash between federal and state laws that is impacting the financial industry at this time involves marijuana.  Marijuana is still a prohibited controlled substance under federal law, but has been legalized by in numerous states. Banks are caught in the middle of this situation.  Most banks do not directly bank marijuana businesses, but may have customers who are indirectly involved in the marijuana industry.  Banks are spending significant resources trying to determine how to determine which businesses and customers are acceptable and which are not.

How do you see the impact of Fraud and Financial Crime evolving over the next 6-12 months?

I believe that the evolving areas of concern for financial crime are in the areas of cyber-related financial crime and cybersecurity.  New payment mechanisms, such as peer-to-peer systems, are also areas of concern.  Criminals are quick to exploit new technological developments to commit fraud, so financial institutions have to constantly develop to protect their customers and their institutions.

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