Goldman's CISO Andy Ozment Balks at Tangle of Cyber Regulations

CNBC reports on CISO Andy Ozment's take on the current chaotic and cumbersome patchwork of cybersecurity laws.

Such interesting insight from @GoldmanSachs CISO Andy Ozment today. Thank you for joining me on this panel at #WSJCyber! Photo: @AdamJanofsky pic.twitter.com/CKW7e67Ggz

— Sara Castellanos (@SCastellWSJ) December 11, 2018

Danske Bank Faces the Music for Money-Laundering Corruption

Denmark’s largest bank, Danske Bank, has been caught in a money-laundering scandal that has sent its CEO packing and halved its share price. The country’s regulatory agency, the Financial Supervisory Authority (FSA), stands accused of knowing but not acting with alacrity on money laundering shenanigans, even with a 2012 FSA report that describes some of the bank’s customers as being “insufficiently legitimized.”

The Estonian branch of Danske Bank specifically is under the spotlight for its handling of $227bn of suspicious transactions originating from various ex-Soviet countries. Eight other banks have also been implicated, including three banks that link the Estonian branch to America’s financial system.

Danish prosecutors filed criminal charges against Danske Bank on November 28; other investigations have also been triggered, including by America’s DoJ and Estonian authorities. So far, the bank is accused of failing to report suspicious transactions, lacking a senior compliance manager, and failing to train staff on anti-money-laundering protocols.

Although no evidence has reportedly been found yet, American investigators are looking into whether money was handled for people or companies subject to U.S. sanctions.

Danske Bank has a $2.7bn reserve fund set aside for potential fines, and they continue to add to it. In the years preceding, several people had alerted authorities about the shady transactions but were sidelined with NDA’s or by regulators who were not eager to police the bank.

Resource articles:
Bloomberg "Danske May Face Smaller Fine After ‘Draconian’ Management Purge"
The Economist "The first charges for money-laundering are laid against Danske Bank"
MarketWatch "Danske Bank charged in money-laundering scandal"

Danske Bank reveals it’s built up $2.7 billion in reserves to absorb potential fines for its role in one of Europe’s worst ever money laundering scandals https://t.co/OlRf99eDQM

— Bloomberg (@business) December 6, 2018

Hearing Key Points: "Combating Money Laundering and Other Forms of Illicit Finance: Regulator and Law Enforcement Perspectives on Reform"

(Working Draft)

"Combating Money Laundering and Other Forms of Illicit Finance: Regulator and Law Enforcement Perspectives on Reform"

Hearing held on November 29, 2018 before the:
U.S. Senate Committee on Banking, Housing, and Urban Affairs
Full Committee Hearing

Witnesses:

Mr. Kenneth A. Blanco, Director, Financial Crimes Enforcement Network (FinCEN), U.S. Department of Treasury

Written Testimony (9 pages) Key Points:

• Intro
• The Importance of Bank Secrecy Act Information
• Regulatory Reform - Strengthening the AML/CFT Framework
• Understanding BSA Value
• Promoting Responsible Innovation
• Public-Private Information Sharing
• Conclusion

Mr. Steven D'Antuono, Section Chief, Financial Crimes Section, Federal Bureau of Investigation (FBI)

Written Testimony (12 pages) Key Points:

• I. Background
• II. Money Laundering Threats
• Illicit Cash
• Trade-Based Money Laundering (“TBML”)
• Misuse of Banks
• Obscured Beneficial Ownership
• Misuse of MSBs
• Prepaid Access Cards
• Virtual Currencies
• Purchase of Real Estate and Other Assets
• III. FBI Efforts to Counter Money Laundering Threats
• Working Groups and Task Forces
• Use of BSA Filings
• Outreach to Financial Institutions
• IV. Current Challenges to Law Enforcement Activities
• Opaque Corporate Structures
• Evidence Collection Involving Foreign Entities
• Small Dollar Transactions
• V. Conclusion

Ms. Grovetta Gardineer, Senior Deputy Comptroller For Compliance And Community Affairs, Office of the Comptroller of the Currency

Written Testimony (13 pages) Key Points:

The China Challenge: Economic Sticks and What To Do About Them

The Senate Foreign Relations Committee is holding a three-part hearing series under the 'Subcommittee on East Asia, The Pacific, and International Cybersecurity Policy' on a topic it calls "The China Challenge." The first hearing "The China Challenge, Part 1: Economic Coercion as Statecraft," was held on July 24, 2018, the second "The China Challenge, Part 2: Security and Military Developments" was held on September 5, 2018 and the third is pending.

The first hearing was attended by two witnesses, Dan Blumenthal of American Enterprise Insititute (AEI) and Ely Ratner of Center for a New American Security (CNAS). During his testimony, Mr. Ratner presented a report prepared by CNAS titled "China's Use of Coercive Economic Measures." For a better understanding of what is meant by coercive economic measures, here is part of the introduction from Chapter 1 of the report:

China has long used economic statecraft as a pillar of its foreign policy. Historically, Chinese leaders used economic inducements ranging from gifts to the promise of loans and investments to solidify relationships with foreign governments and advance Chinese influence. [...]

In 2013, China launched the Belt and Road Initiative (BRI), a potentially $1 trillion, almost 70-country global infrastructure development initiative that is likely to significantly expand Chinese influence from Asia to Europe. [...]

Over the past decade, however, China has also used the “sharp end” of its economic statecraft, turning to coercive economic measures as a tool. The authors define coercive economic measures as China’s restrictions on trade or investment intended to impose financial or economic costs on a target in pursuit of a foreign policy objective or to influence a foreign government to offer policy concessions to China. As used here, coercion indicates the use, or threatened use, of economic “sticks,” but not the use of positive inducements or other tools, as commonly included in academic definitions.

Testimony on Sanctions Programs, Particularly for Iran, Russia, and North Korea

The Treasury's Assistant Secretary for Terrorist Financing Marshall Billingslea
testifies for a hearing on sanctions programs on September 26, 2018.

Marshall Billingslea testified for a Congressional hearing titled “Administration Goals for Major Sanctions Programs” on September 26, 2018.

His introduction by Congressman Barr details his long history of public service (at 37:35):

Today we welcome the testimony of Marshall Billingslea who was confirmed in June of 2017 as Assistant Secretary of the Treasury for Terrorist Financing. In this role he helps oversee the Trump administration's efforts in administering economic sanctions programs globally.

Prior to joining Treasury Mr. Billingsley served as managing director for business intelligence services at Deloitte Advisory. He had previously held positions at the Department of Defense where he served as Deputy Under Secretary of the Navy and Principal Deputy Assistant Secretary of Defense for Special Operations and Low Intensity Conflict.

Mr. Billingsley has also worked as NATO Assistant Secretary-General for Defense Investment and as a staff member on the Senate Foreign Relations Committee. He is a recipient of the Defense Medal for Distinguished Public Service. Assistant Secretary without objection your written statement will be made part of the record. The Honorable Marshall Billingslea you are now recognized for five minutes.

CFIUS Updated with Foreign Investment Risk Review Modernization Act (FIRRMA)

The President signed the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) into law on August 13, 2018 as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2019 (H.R.5515). The law seeks to balance the gains of foreign investment against potential national security risks.

A Harvard Law School Forum reports, "FIRRMA represents the most sweeping changes to the law governing the Committee on Foreign Investment in the United States (CFIUS) since the passage of the Foreign Investment and National Security Act of 2007 (FINSA)." And from Stephanie Zable on Lawfare:

FIRRMA identifies several factors that Congress wants CFIUS to take into account when considering the national security risks posed by foreign investments.

• Whether a transaction involves a country of special concern that has a strategic goal of acquiring technologies that would affect U.S. technological leadership in that area;
• The national security effects of cumulative market share control by foreign persons;
• Whether a foreign person involved in a transaction has a history of complying with U.S. law;
• [Continues ...]

On August 23, 2018, President Trump held a roundtable with lawmakers on FIRRMA. They discussed the importance of protecting U.S. intellectual property and technology from other countries, specifically China. The fairly brief video on C-SPAN is here. CSIS also has a longer audio broadcast "Putting FIRRMA into Practice: What CFIUS Reform Means for Foreign Investment in the United States."

On a related note, Michael Brown, former CEO of Symantec and co-author of a Pentagon study on China’s Technology Transfer Strategy, had recommended CFIUS reforms in his testimony before Congress on July, 19, 2018.

Congratulations to leaders in Congress for reaching a deal on CFIUS reform. The bill will enhance the ability of the US Government to protect critical US technology while keeping America open to foreign investment.

— Steven Mnuchin (@stevenmnuchin1) July 24, 2018

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Facebook, Inc. (FB) 5 Year Stock Value

From Yahoo Finance:

Facebook, Inc. (FB) NasdaqGS 5 Year Stock Value - Sept 30, 2018

Source: finance.yahoo.com/quote/FB

Yahoo Finance, Technology Sector Heatmap - Sept 30, 2018
Source: finance.yahoo.com/screener/predefined/technology/heatmap

Plus "Tech Stocks This Week: Facebook's Security Breach and More."

Hearing: The Monetization and Illicit Use of Stolen Data

In March 2018 the U.S. House Financial Services Committee held a hearing via their Terrorism and Illicit Finance Subcommittee. The hearing was titled “After the Breach: The Monetization and Illicit Use of Stolen Data”.

Dr. James Lewis of the Center for Strategic and International Studies (CSIS) is one of the four testifying witnesses. The other witness hail from RAND, McAfee, and Carnegie Mellon University. Dr. Lewis answers a question from Chairman Pearce regarding the countries best at handling cybercrime (minute 45):

Thank you Mr. Chairman. There's a good correlation between countries that have strong law enforcement systems and punishment for cybercrime. So if you're a cybercriminal and you live in the US or the UK or France or Germany your life expectancy is probably only about three years before you're caught and go to jail. In places that have weak cybersecurity laws like Brazil or countries other developing countries um you see a growth in criminal activity. So the effort here is to have strong cyber security laws -- the U.S. leads in that with the Budapest Convention -- and to develop new ways to cooperate on the exchange of evidence and on efforts to take down networks. So currently there is no central place that does this. The UN has a committee on crime that is trying to develop a more common approach but the differences among nation make it hard to get... cooperation. Thank you.

S&T Encourages Financial Sector Participation in CART

S&T is Partnering with Financial Service Organizations to Secure the Finance Sector from Cyber Threats

DHS is responsible for protecting the majority of the 16 critical infrastructure sectors, and even when we are not the named Sector-Specific Agency (SSA), we are partnering with agencies to offer solutions to keep our nation safe.

One example is the Financial Services Sector. The Department of Treasury is the SSA, however DHS Science and Technology Directorate (S&T) has developed the Next Generation Cyber Infrastructure (NGCI) Apex program (Cyber Apex) to provide cybersecurity solutions to this sector. Through the Cyber Apex program, S&T has partnered with the Department of Treasury to engage financial services organizations and encourage participation in the Cyber Apex Review Team, also known as the CART. […] 

Currently, the CART is a mix of large banks and financial institutions, however S&T is expanding the group to mid-sized and regional banks to increase knowledge and information sharing. As members of the CART, financial organizations will have the opportunity to identify cybersecurity gaps, review research findings and receive recommended solutions to help keep networks and systems safe from cyber threats.

To date, the Cyber Apex program is researching four efforts—detecting lateral movement within a network, gaining knowledge of artifacts on the network, improving analytical sharing methods and protecting sensitive data—but, as new capability gaps arise the program will add new research efforts. 

US-China Tariffs

The US is in the process of imposing several waves of tariffs on China. As of April 2018, the US implemented tariffs on steel and aluminum imports from China. A new wave of tariffs imposed on July 6 targets advanced technology to further limit Chinese imports. A future round is currently undergoing a public comment and review process. China responds:

BEIJING — China will make economic changes at its own pace regardless of U.S. pressure, and their worsening dispute over technology policy can only be solved through negotiations as equals, a Commerce Ministry spokesman said Thursday.

The comments reinforced Beijing's rejection of U.S. demands to scale back technology plans Washington says violate China's free-trade commitments and might erode American industrial leadership.

The spokesman, Gao Feng, gave no indication of plans for more negotiations over the conflict, which threatens to chill global trade and economic growth.

"No matter what measures the United States takes to exert pressure, China will proceed with reform and opening up at its own pace," Gao said.