department of the treasury Archives

Immature AI Bots, Or Immature Banks?

Are we dealing with immature AI bots who don’t know what they’re doing, or immature banks who are panicking?

When we introduce any new technology there are always growing pains. Many of us don’t understand how the technology works and we need to adjust our behaviors. As I’ve said before, business problems are tougher than technology problems. We can technically do many things…but do we want to?

Royal Bank of Canada blocks personal AI agents

Take bots and banking. We can remove the drudgery of banking operations by assigning an AI agent to perform our banking for us.

Well…unless you bank with the Royal Bank of Canada, which is banning the bots:

“Royal Bank of Canada (RBC) has decided to block third-party personal AI agents from direct access to online banking and other RBC digital properties due to concerns about fraud and consumer harm.”

Why?

“…as these systems become more autonomous, the stakes go up when something goes wrong—from fraud and consumer harm to risks that could ripple more broadly through the financial system. That’s why, after careful consideration and based on what we know today, RBC has decided to block third-party personal AI agents from direct access to authenticated RBC digital properties including online banking.”

Traditional banks tend to act conservatively, so it’s not surprising that this bank is leery of personal AI agents. Some consider this a tacit admission that RBC is not ready to integrate the new technology yet.

Then again, is anybody? Is your local bleeding edge financial rockstar entity truly prepared for what AI agents can do?

Proof suggests a solution

The identity company Proof is monitoring these bot blocks and thinks there is a better way. Proof acknowledges the problem that threw Royal Bank of Canada (and Amazon) into a frenzy:

“There is no reliable way to know who an AI agent is acting on behalf of, or whether that person authorized what it is doing.”

Taking FinCEN’s verifiable credentials clarifications into account, Proof launched a new product.

“Proof became the first company to put verified legal identity and transaction authorization for AI agents into production with the launch of x401, an open protocol that lets any website ask an AI agent to prove who it’s acting for and what that person approved. Proof works with Meta’s Muse, ChatGPT dots, Grok, Claude and other assistants that support the Model Context Protocol (MCP).”

Is this enough to calm RBC and Amazon? We’ll see.

Money Laundering Risk at Bank of America

Financial institutions are supposed to reduce money laundering risk. But sometimes they don’t.

The Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency (OCC), and the Office of Foreign Assets Control (OFAC) fined Bank of America for numerous violations of anti-money laundering laws. The agencies found that the bank was guilty of the following:

A “failure to mitigate and report priority national security risks, including Chinese Money Laundering Networks and illicit finance along the southwest border.”
A “deficient and ineffective BSA/AML (anti-money laundering) compliance program.”
“[A]pparent violations of numerous sanctions programs, including on Iran, Russia, narcotics, and global terrorism.”

It all boils down to “Know Your Customer.” If you don’t know who is doing business at your financial institution, you’re in trouble. You could promote illegal efforts from China, Iran, Russia, terrorists, and drug dealers.

How do YOU minimize money laundering? Let Bredemarket help you communicate your solution. https://bredemarket.com/watch-book/

Revised 10/28/2026.

Banking Use of mDLs: Can the Bank Recognize an mDL?

If your bank can’t recognize an mDL (mobile driver’s license), your money may be in danger. Someone with a fake mDL can steal your money.

If you recall my September 18 post on banking use of mobile driver’s licenses (mDLs), you know that the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) participated in a joint statement that clarified acceptable identification for banks and credit unions.

“[The agencies] are issuing two new frequently asked questions (FAQs) that address the use of state-issued mobile driver’s licenses (mDLs) and other government-issued verifiable digital credentials, which may be used to verify identities of natural person customers under the Customer Identification Program (CIP) Rule.”

Slam dunk, right?

Not according to Anderson Insights, as PYMNTS reports.

“According to Anderson, the central issue is not whether digital identification is legally acceptable, but whether banks’ technology, records and exception-handling procedures can support a defensible identity-verification decision.”

To put it plainly, how does a bank teller know that I’m presenting a real mobile driver’s license? Does the teller have the knowledge and the equipment to detect fraudulent mDLs?

Whether evaluating a physical driver’s license or a mobile one, both knowledge and equipment are important. The person reviewing the license has to understand what a real license is like, and what a fake license is like. Ideally, the reviewer’s employer has provided the reviewer with equipment to help distinguish real licenses from fake ones.

If not, someone can present a fake mDL and steal your money.

Heck, we haven’t mastered this for physical driver’s licenses, which have been around for decades. What leads one to believe that we can detect mobile driver’s licenses?

Because sometimes a fake ID is obvious…and sometimes it isn’t.

Recognize an mDL? Recognize a fake one? Google Gemini.

Do you provide an identity solution and need to educate your audiences, both external and internal, about how it works?

Bredemarket can help. Learn more at https://bredemarket.com/watch-book/

Bredemarket services, processes, and pricing in 15 seconds. Revised 10/28/2026.

Self-Excluded from Commodities Trading? Not Likely.

No one thought of being self-excluded from commodities trading…until now. But let me explain what self-exclusion is.

Self-exclusion from gambling

It’s a term that applies to problem gamblers who ask the state to voluntarily self-exclude them from casinos. There are technologies, such as facial recognition, that can flag any attempt by a self-excluded person to enter a casino. And of course there are other ways to identify people and keep them out of casinos. Or out of the online versions of casinos.

Because gambling is regulated by states and/or Indian tribes, these self-exclusion lists are usually maintained at that level.

And they work for gambling. Take the story of “Thomas” (last name not given) who developed a problem with DraftKings and FanDuel.

“I could have ten drinks one night and then be fine with not drinking again for a year,” said Thomas, 35, who asked to be identified by his middle name fearing his problem gambling history could affect his career. “But sports gambling was different. It really got me.”

Eventually Thomas was tens of thousands of dollars in debt and declared bankruptcy. That prompted him to place himself on a self-exclusion list.

And all was fine…for a while.

Attempted self-exclusion from commodities futures trading

“Then one day, about two years later, I’m scrolling on Instagram and I came across an ad for Kalshi,” said Thomas. “I was bored and thought this could be fun…”

Well, Thomas fell into the same old habits again…with one big difference. Because Thomas was not gambling, but instead trading in commodity futures, the sites “do not follow state-mandated protections for people with gambling addictions who are most vulnerable to relapsing.”

Because while it is theoretically possible for someone to become addicted to trading hog futures, it’s fairly unlikely.

And the CFTC isn’t going to force the companies it regulates to perform self-exclusion. When Thomas tried to self-exclude from Kalshi, the company sent him a weakly worded message.

An automated response from Kalshi noted that “self-exclusion is a responsible trading safeguard designed to be irreversible.” It offered other solutions: “Three different responsible risk-management actions can be taken: trading break, voluntary opt-out, and a personalized funding cap.”

Thomas insisted he wanted to be banned from the app. Two days later, he also made three separate requests to Kalshi over email for his account to be permanently closed, correspondence he shared with NPR show.

Eventually Kalshi relented, but it was a hard fight. A fight in which casinos regulated by Nevada and other gaming authorities would not engage.

And so far the CFTC has exhibited no interest in mandating self-exclusion, and no respect for the need to do so. And why would they?

Self-excluded from commodities trading? Google Gemini.

My Favorite Phrase of the Morning

Prediction weenies.

Prediction Weenies, Or Real Gamblers? Music Google Lyria. Public Domain.

CFTC Swaps, and the Differentiation Gambling Apps Are Missing

So the feds and states war over CFTC swaps. States say that Kalshi et al promote gambling, while the CFTC argues they are just “swaps.”

So, what is a “swap”?

“commission-regulated financial instruments where two parties agree to an exchange”

This is opposed to gambling, where a casino governs the entire transaction, sets the payouts, and the like.

Gambling depends upon the emotions of adventure. Google Gemini.

However, a recent federal court ruling agreed with the states of Ohio and Tennessee that the practices of Kalshi, Polymarket, et al do NOT meet the legal definition of a swap.

So what is the CFTC doing? Amending its rules. The draft rules have been forwarded to the Office of Management and Budget, which performs a final review before the government adopts new rules.

Gambling firms’ missed opportunity

But the gambling firms could nip this in the bud, rule or no rule, if they just adopted proactive marketing messaging.

Prediction markets, CFTC regulated. Google Gemini.

The prediction market apps are dancing on a high wire. On the one hand, they have to argue that their products offer predictions, which fall under the purview of the CFTC, and are not gambling. At the same time they have to attract customers who “predict” who will win at sports such as NFL football.

Oh, how I’d love to write the counter-messaging for pure gambling operations right now.

CFTC “swaps”: are they REAL gambling? Google Gemini.

Gambling depends upon the emotions of adventure. The dings and sounds of the casino. The thrill of the big money win. The accomplishment in beating “the house.”

True gamblers aren’t tech weenies who trade in prediction markets when they’re not buying hog futures.

Music Google Lyria. Public Domain.

OK, so maybe Bredemarket won’t sign on a casino as a client any time soon. Then again, casinos certainly have a need for biometric products, and I am the biometric product marketing expert.

If I can help you, gambling firm or not, visit https://bredemarket.com/watch-book/.

Revised 10/28/2026.

Biometric News FOMO: What Did You Miss Last Week?

“Biometric news FOMO” (fear of missing out) occurs when a major biometric news story hits the wires and you know nothing about it.

Here at Bredemarket, I try to help.

I try to fill the biometric news FOMO gaps for you at Bredemarket. Not just with breaking stories, but items that will be stories in the future.

A huge biometric bid. A not-so-huge biometric book. Changes in bank identification. Changes (maybe) in New Jersey courts. Tyranny trees. Identity Day.

Did you miss any of these stories? Read on.

Conquer biometric news FOMO. — Conquer biomertric news FOMO. Google Gemini.

Biometric bid due date FOMO

Take the Department of Homeland Security biometric capture device procurement (70RDA126R00000001): $440 million for finger, face, iris, palm, and multi-modal devices. So potentially up to five proposals, two volumes per proposal, two tabs per volume. That’s a lot of tabs.

Originally released Thursday September 10, the published due date was Friday, September 18 at 7:00 am Pacific. All the bidders waited for an extension announcement, which finally arrived less than half an hour before proposals were initially due. As I write this, bidders don’t have the real due date yet, other than it wasn’t due last Friday after all.

Biometric book FOMO

That last story was covered by Biometric Update. This next one understandably wasn’t.

Because Biometric Update concentrates on the biometric factor of identity verification and authentication. It occasionally touches on other factors, but not all six.

The cover of "Proving Humanity: The Six Factors of Identity Verification and Authentication" by John E. Bredehoft, Bredemarket., — My book.

I do, which is why I plugged my book again. “Proving Humanity: The Six Factors of Identity Verification and Authentication” is for sale.

Banking digital identity FOMO

For a variety of reasons, ranging from detecting fraud to detecting terrorism, your bank or financial institution often asks you for your government identification. For example, your driver’s license.

But the Department of the Treasury clarified that instead of taking your wallet out of your pocket, you can use the wallet on your smartphone.

Yes, banks can now accept mobile driver’s licenses, making things easier for banking customers. After all, we may leave our wallets at home, but we tend to keep our smartphones with us.

New Jersey court fingerprint acceptance FOMO

Unlike the stories above, there were NOT any updates on Judge Carmen Messano’s forthcoming evidentiary hearing. This hearing, when held, regards the acceptability of fingerprints as evidence in New Jersey courts. It was mandated as part of State v. French G. Lee.

Nothing yet; Messano just officially started this month. But something will happen, so I’m tracking it.

Tyranny trees FOMO

If you haven’t noticed, Flock Safety cameras are unpopular. So unpopular that people are bringing them down. Take Jevon Martinez, who brought some “tyranny trees” (his term for automated license plate recognition cameras) down and helpfully returned them to the sheriff.

And was arrested. Two words: dumb crime.

Lacking identity FOMO

Then on (as the Africans say) 16/9 ID4Africa and many others observed Identity Day 2026. 16/9 isn’t just a date; it’s a reference to United Nations Sustainable Development Goal Target 16.9 to “[p]rovide legal identity for all, including birth registration, by 2030.”

Avoiding biometric news FOMO

And there’s more, but rather than going back an entire week, I stopped at Wednesday.

But how can you conquer your fear of missing out on biometric news?

Subscribe to the Bredemarket blog.

https://bredemarket.com/subscribe-to-bredemarket/

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Banking Use of mDLs

Is banking use of mDLs permitted when you have to prove your identity? Before we dive into this, let’s define some things.

This post looks at five acronyms:

CIP, for the Customer Identification Program (Rule)

VDC, for Verifiable Digital Credential

mDL, for mobile Driver’s License

FAQ, for Frequently Asked Question

FinCEN, for Financial Crimes Enforcement Network

Finally, we look at FinCEN’s FAQs regarding CIP acceptance of mDLs as VDCs.

Five acronyms

A Customer Identification Program (CIP), mandated by Section 326 of the USA Patriot Act and other legislation, specifies how financial institutions implement Know Your Customer (KYC) and anti-money laundering (AML) programs to stop terrorists and others from sending illicit money through the institutions. Each individual financial institution writes its own CIP, and at a minimum it dictates that the institution collect the customer’s name, address, government-issued identification number, and (for individuals) their date of birth.

A Verifiable Digital Credential (VDC) is one way to gather the information mandated by a financial institution’s CIP. NIST breaks down the three words in the name:

Verifiable: cryptographically, to verify the authenticity and integrity of the data.
Digital: on a smartphone, a cloud wallet, or somewhere similar.
Credential: issued by a government, educational institution, or some similar holder of personal information.

We’ve talked about mobile Driver’s Licenses (mDLs) before. They’re VDCs that display the same information (or a subset) that is contained on your physical driver’s license. And they’re not restricted to t h e United States.

A collection of Frequently Asked Questions (FAQs) supposedly answers the most pressing questions about a particular service. Even Bredemarket has a collection of F AQs, but they’re hopelessly outdated. Add to to-do list.

Finally, the Financial Crimes Enforcement Network (FinCEN) is part of the U.S. Department of the Treasury. We’ve talked about FinCEN before also: what it does, and what it doesn’t do.

Is banking use of MDLs allowed?

A mobile driver’s license does you no good if no one accepts it.

There are precious few places where I can use my California mDL. The Transportation Security Administration people at Ontario International Airport accept them, but that’s about it.

Which is why FinCEN’s new FAQs are so important.

“The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), jointly with the staffs of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency (the “Agencies”), are issuing two new frequently asked questions (FAQs) that address the use of state-issued mobile driver’s licenses (mDLs) and other government-issued verifiable digital credentials, which may be used to verify identities of natural person customers under the Customer Identification Program (CIP) Rule.”

I will save you from having to read the FAQs.

Yes, the industry supports banking use of mDLs.

Banking use of mDLs is permitted. — Google Gemini.

American Firms No Longer Have to Report Beneficial Ownership

I promised Diana Wales that I was going to write about this, so I’d better get cracking.

Beneficial ownership

I’ve talked about beneficial ownership before and why it’s important. As I said while discussing the ownership of Hungarian firm FaceKom:

“De facto control without de jure control could very well be wielded by a powerful politician, or his son-in-law.”

And to make things juicier, FaceKom was acquired by another Hungarian firm (4iG Informatikai) with government links. Viktor Orbán has since left office, and I don’t know the current status of either firm.

Because of this, businesses throughout the world track beneficial ownership, and the U.S. Government is here to help.

U.S. firms no longer have to report

Well, it used to be.

“The U.S. Treasury Department announced on Tuesday (Aug. 11) that its Financial Crimes Enforcement Network (FinCEN) is permanently removing U.S. companies and U.S. persons from beneficial ownership reporting under the Corporate Transparency Act and will delete previously reported information. Foreign reporting companies remain subject to narrower requirements involving foreign beneficial owners.”

In essence, the idea is that U.S. companies don’t have to engage in beneficial ownership reporting because all U.S. owned companies are good and would never break the law. It’s only those foreign companies that do evil beneficial ownership disguises.

But financial entities are still responsible

Of course, this doesn’t only benefit the U.S. companies who are relieved of the reporting requirement. It also benefits financial firms who don’t have to worry about the beneficial ownership of U.S. owned companies because…oh wait…financial firms still have to worry.

“But eliminating a government reporting requirement does not eliminate the financial system’s need to understand corporate ownership. Banks, broker-dealers and other covered financial institutions remain subject to customer due diligence obligations designed precisely to prevent criminals from hiding behind legal entities. They must identify and verify beneficial owners in specified circumstances, understand customer relationships, build risk profiles and monitor for suspicious activity.”

So since there’s no central source of beneficial ownership information, the financial institutions must rely on alternate sources. Multiple alternate sources.

And the U.S. firms, breathing a sigh of relief from eliminating a government reporting requirement, will now have to submit reports to a myriad of private entities, and maybe some state authorities also. And if Texas demands that you file a beneficial ownership report, don’t mess with Texas.

Welcome to the world of efficiency.

And one more thing: how do we know that these U.S. owned companies AREN’T under foreign control?

A word from our (U.S. owned) sponsor

If your firm must explain its know your business processes to your own clients, perhaps you can take advantage of Bredemarket’s marketing and writing services.

Bredemarket: Services, Process, and Pricing.

The Quadruple-Penalty Mistake: Inside UBS’ AML Failure

When a company runs afoul of regulations, there’s always the chance that they’ll be caught and fined. But what if they’re caught multiple times for different facets of the same offense…because they had never heard of YOUR company’s anti-money laundering (AML) solution?

deepidv on “coordinated enforcement”

Take the story of UBS Financial Services and FOUR different government and private entities.

“UBS Financial Services Inc faced simultaneous enforcement action from four separate US regulators. FinCEN [Financial Crimes Enforcement Network, part of Treasury] fined the firm $125 million for AML and suspicious transaction reporting failures. The SEC [Securities and Exchange Commission, independent agency] fined UBS $20 million for related AML failures. The CFTC [Commodity Futures Trading Commission, independent agency] fined the firm $8 million for AML monitoring deficiencies. FINRA [Financial Industry Regulatory Authority, private corporation overseen by the SEC] issued its own fine for overlapping AML shortcomings.”

Ouch.

If you don’t check money laundering, you’ll be out of money yourself.

And those are only the fines in the United States. Other countries may pile up and add more fines.

Could your company have solved UBS’ problem?

Now, there’s the chance that a vendor could have helped UBS Financial Services stay in AML compliance.

And perhaps YOU are that vendor.

If your software costs less than $125 million, it’s a win.

So how do prospects learn about your AML solution?

You tell them…with Bredemarket’s help.