16/05/25

US: US Banks ‘Prime Candidate for Exploitation’ by Money Launderers

As published on: pymnts.com, Friday 16 May, 2025.

Banks in the United States are increasingly finding themselves ensnared in cartel-connected money laundering operations.

Underground banking networks are working with drug cartels to deposit cash from drug sales at bank branches and ATMs, The Wall Street Journal reported Thursday (May 15).

“U.S. banks are a prime candidate for exploitation, and there are vulnerabilities which Chinese money brokers have been able to take advantage of over the course of many years,” said Frank Tarentino, special agent in charge of the Drug Enforcement Administration’s New York office, per the report.

Money launderers open dozens of accounts at multiple banks, masking their identities with phony passports or recruiting local students or business owners, the report said.

In North Carolina, a Chinese network was accused of using shell companies to deposit at least $92 million in cash at Bank of America, Chase and Wells Fargo branches between May 2022 and April 2024, according to the report. None of the banks were accused of wrongdoing.

In a “rare” enforcement action against a bank, TD Bank last year paid $3 billion in penalties for an oversight lapse that allowed a Chinese money-laundering operation based in New York City to move more than $470 million in ill-gotten cash through TD branches in New York, New Jersey and Pennsylvania, the report said.

Meanwhile, the banking industry is calling on the U.S. government to overhaul anti-money laundering (AML) regulations as incidents of fraud increase.

Darrin McLaughlin, executive vice president and chief AML and sanctions officer for Flagstar Bank, told a House subcommittee hearing last month that one-third of American adults had experienced financial fraud in the prior 12 months.

“Bad actors have leveraged cutting-edge technologies, social media and telecommunications to target Americans’ life savings,” he said before the House Financial Services Subcommittee on National Security, Illicit Finance and International Financial Institutions on behalf of the American Bankers Association.

He said a “strategic approach” that includes the banking industry, the government and other stakeholders is needed and that “regulatory reforms let us focus on the real threat.”

As PYMNTS wrote late last year, AML is about “protecting customers, reputations and the ability to innovate.” Banks that “don’t invest in sophisticated AML frameworks can face the risk of falling behind not only in compliance but in their ability to serve customers effectively.”

Highlights

Meta delayed its Behemoth AI model until fall or later, reportedly due to lack of “significant” advances, according to The Wall Street Journal.

The impact to companies is muted since they already have access to other open-source Llama 4 and earlier AI models.

Slower AI breakthroughs industrywide suggest scaling laws may be hitting limits.

Meta reportedly is postponing the release of the largest version of its open-source Llama 4 artificial intelligence (AI) model from summer to fall at the earliest.

Called “Behemoth,” the multimodal model is not improving “significantly” enough to be released by June; it was already delayed from April, when Meta held LlamaCon, its first Llama developers conference.

The delay looks to be the first hiccup from Meta on the release of its Llama flagship family of large language models, which have been praised for the speed of their release, according to The Wall Street Journal.

As a powerful open-source model, Llama has given developers in smaller companies, nonprofit communities and academia a generally free AI model to use. It has been the counterweight to the closed, proprietary models developed by OpenAI, Google, Amazon and others.

The impact on companies is more muted since many big companies go through the cloud giants, which mostly offer proprietary models.

Smaller companies can customize the smaller open-source Llama models, but still need help to implement them since Meta — as a social media giant — is not in the business of offering deployment services. Meta is using Llama to power its own social media tools, so CEO Mark Zuckerberg can control his own AI destiny.

The issue with Behemoth is whether the model shows enough advances to justify launching it publicly, according to the paper.

Need for Speed
In the tech industry, developers and users can quickly disparage new releases if they don’t show enough advances to justify a public launch.

At LlamaCon, Meta released two smaller sister Llama 4 models that are still large in certain aspects.

Maverick has 400 billion total parameters (internal settings) with a 1 million token context window length or 750,000 words (GPT-4o only has 128,000 tokens)
Scout has 109 billion parameters and a 10 million (7.5 million words) context window length.
Initially, Behemoth was set for release at the same time. It would have 2 trillion parameters.

The Journal said Meta is getting impatient with its Llama 4 team as it continues to pour a fortune into AI investments.

This year, the company has budgeted up to $72 billion in capital expenditures, much of which is earmarked for AI development in support of Zuckerberg’s long-term vision.

Mounting Frustrations
Zuckerberg and other senior leaders have yet to disclose a public release date for Behemoth. While the model could still launch earlier than expected, possibly in a limited form, insiders are worried that its current performance may not live up to expectations set by company statements.

Frustrations are reportedly mounting among Meta’s leadership over the progress made by the team responsible for the Llama 4 models, which has struggled to deliver tangible gains on Behemoth. This has led the company to consider major leadership changes in its AI product group.

Meta has publicly promoted Behemoth as a powerful system, claiming it surpasses offerings from OpenAI, Google and Anthropic on certain evaluations. Internally, however, training difficulties have hampered its effectiveness, people familiar with the development said.

PYMNTS contacted Meta for comment but has yet to get a reply.

OpenAI has also experienced delays. Its next major model, GPT-5, was originally anticipated for a mid-2024 release. Last December, the Journal noted that development had fallen behind schedule.

OpenAI CEO Sam Altman later clarified in February that the interim model would be GPT-4.5, while GPT-5, expected to deliver larger advances, remained months away.

Reasons for Delay
Advances in AI model development could slow for several reasons. Among them:

Running out of high-quality data

Large language models require massive amounts of data to train on, such as the entire internet. But they may be running out of publicly available data to access, while copyrighted content carries legal risks.

That is why OpenAI, Google and Microsoft are urging the Trump administration to preserve their right to train on copyrighted material.

“The federal government can both secure Americans’ freedom to learn from AI, and avoid forfeiting our AI lead to the PRC [People’s Republic of China] by preserving American AI models’ ability to learn from copyrighted material,” according to OpenAI.

Algorithmic limitations

It used to be that increasing model size, using more compute, and letting models train on more data would yield notable advances. But there have been diminishing returns from AI models, leading some to say the scaling laws are slowing down, according to Bloomberg.

Tags

US US Banks Money laundering