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James Freis

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James Freis
6th Director of the United States Treasury Department's Financial Crimes Enforcement Network
In office
March 2007 – September 2012
PresidentGeorge W. Bush
Barack Obama
Preceded byRobert W. Werner
Succeeded byJennifer Shasky Calvery
Deputy Assistant General Counsel of the United States Department of the Treasury
In office
September 2005 – March 2007
PresidentGeorge W. Bush
Preceded byOffice established
Succeeded byMike Maher
Personal details
Born
James H. Freis Jr.

(1970-10-27) October 27, 1970 (age 54)
Aberdeen, Maryland, U.S.
EducationGeorgetown University (AB)
Harvard University (JD)
OccupationAttorney
AwardsCressey Award (2009)[1]
Treasury Medal (2012)[2]
HometownMetuchen, New Jersey

James H. Freis Jr. (born October 27, 1970) is an American lawyer and financial industry executive who from 2007 to 2012 served as the United States Department of the Treasury's 6th Director of the Financial Crimes Enforcement Network (FinCEN), where he expanded the scope of the anti-money laundering regulations and became known for spearheading efforts to combat fraud and implementing modern data analysis. He was an attorney and central banker at the Federal Reserve Bank of New York and the Bank for International Settlements.

From 2014 to 2020, he was the Group Chief Compliance Officer of the Deutsche Börse Group, Europe's largest provider of systemically significant financial market infrastructures. In June 2020, he joined Wirecard AG, where he is credited for promptly substantiating and initiating actions to stop the largest financial fraud in Germany's modern history, known publicly as the Wirecard scandal.[3] Since 2021, he has been active with fintech and startup companies.[4]

Early life and education

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Freis was born in Aberdeen, Maryland, to James Henry Freis and Maria Freis, and raised in Metuchen, New Jersey, where he attended St. Joseph High School.[5] His mother is a retired nurse and social worker. His father, who passed away in August 2020, was a first-generation[clarification needed] student at St. Peter's College, graduating cum laude in 1966. He graduated in 1969 from Villanova Law School, before departing to Germany with the U.S. Army from 1970 to 1972. Freis Sr. spent his career practicing corporate law with a single law firm, which later became Drinker Biddle & Reath through mergers.[6][7]

Freis attended Georgetown University, graduating magna cum laude in 1992 with an A.B. in economics with honors and government/international relations, a certificate in German area studies and Phi Beta Kappa. While at Georgetown, he competed on the varsity heavyweight rowing crew. He then earned his Juris Doctor cum laude from Harvard Law School in 1995. While at Harvard, Freis was a Senior Editor of the Harvard Environmental Law Review. He became a Chartered Financial Analyst charterholder in 2002.[8]

After graduating from Harvard, Freis served as a fellow of the Robert Bosch Foundation in Germany. From 1995 to 1996 he worked in the German Federal Banking Supervisory Office in Berlin and Bayerische Vereinsbank, a German universal bank in Munich.

Early career

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Federal Reserve Bank of New York

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Freis joined the Federal Reserve Bank of New York's legal department as an Attorney in 1996,[9] where he advised on financial market regulations, payment and settlement system issues at wholesale and retail levels, and foreign government and central bank accounts. He worked on the successful defense before the Iran–United States Claims Tribunal of claims brought against the Bank by the Central Bank of Iran arising out of the hostage crisis.[10][11]

Bank for International Settlements

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In 1999, Freis moved to Basel, Switzerland and became Senior Counsel in the Legal Service at the Bank for International Settlements, an international organization known as the "bank for central banks."[12] There he supported the provision of financial services to central banks; advised on international law such as privileges and immunities; and supported the Basel-based experts’ committees of global financial standard setters, through 2005.[13]

United States Department of the Treasury

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Freis joined the United States Department of the Treasury in September 2005 as the first-ever Deputy Assistant General Counsel for Enforcement & Intelligence.[2] Freis provided legal support and helped staff the Treasury's Office of Terrorism and Financial Intelligence which was created in 2004, including supervising the legal counsel to the Financial Crimes Enforcement Network, the Office of Foreign Assets Control, and the Treasury Executive Office for Asset Forfeiture.[9]

Freis served as lead negotiator on behalf of the United States Government on sensitive counter-terrorism programs and contributed to the Terrorist Finance Tracking Program, and was also responsible for developing international financial measures against rogue states, such as part of Treasury's efforts against Iran[14][15] and North Korea.[16][17][18]

Financial Crimes Enforcement Network (FinCEN)

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Freis was appointed Director (CEO) of the Financial Crimes Enforcement Network (FinCEN) on March 5, 2007, by United States Secretary of the Treasury Hank Paulson.[9] At the time, FinCEN's mission was "to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity."[19] FinCEN had faced criticism from the financial industry over difficulties of complying with anti-money laundering regulations,[20] which had been expanded in 2001 under USA PATRIOT Act, Title III. On June 22, 2006, Secretary Paulson visited FinCEN and together with Director Freis launched initiatives to improve FinCEN's Regulatory efficiency and effectiveness.[21]

Freis also oversaw FinCEN's broad IT Modernization Program to collect, analyze, and share data collected under FinCEN's regulatory authority, estimated to cost $120  million. While earlier FinCEN IT projects had failed, under Freis the modernization project was managed on time and budget.

On the regulatory front, Freis expanded cooperation with State financial services regulators,[22] and he expanded FinCEN's regulations to non-bank mortgage lenders,[23] Fannie Mae and Freddie Mac,[24] and initiated the rules for investment advisors.[25] He amended the regulations for money services businesses and in July 2011, issued regulations for "prepaid access.[26][27]" The latter changes formed the basis for FinCEN regulation of virtual currency.[28][29][30] In testifying before the Congress, Freis explained, "Recognizing that payment systems evolve rapidly,... The rule was developed to be technologically neutral and hopefully cover new developments for years to come."[31]

Freis initiated rulemaking requiring financial institutions to collect information on beneficial owners of accounts.[32] The final rule was issued in 2016,[33] at which time President Obama in referencing the regulation “call[ed] on Congress to pass new legislation that requires all companies formed inside the United States to report information about their real owners to the Treasury Department's Financial Crimes Enforcement Network.[34][35]" On December 11, 2020, Congress mandated the remaining component of the decade old policy proposal, by including in the National Defense Authorization Act of 2021 a chapter expanding FinCEN's powers, most prominently requiring companies to disclose information about their beneficial owners which would be available to law enforcement through a national database to be developed and maintained by FinCEN.[36] Freis also initiated rulemaking to implement a Congressional mandate to collect data on cross-border electronic transfers of funds, which was supported by law enforcement but faced criticism from the financial industry for potentially collecting too much data, and which has not yet been implemented.[37][38][39]

On an international basis, Freis also oversaw FinCEN's role as the financial intelligence unit of the United States, and a member of the Egmont Group of Financial Intelligence Units. He promoted greater sharing of information among financial institutions, including on a cross-border basis.[40] Under Freis, FinCEN worked closely with counterpart regulators and the financial intelligence unit in Mexico, and in law enforcement efforts along the Southwest Border.[41][42]

Freis left FinCEN after an apparent disagreement over how independent FinCEN should be as a Bureau of the Treasury Department.[43][44][45][46][47] In September 2012, he was awarded the Treasury Medal as the longest serving FinCEN Director.[2]

Post-Treasury career

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In January 2013, Freis joined the international law firm Cleary Gottlieb Steen & Hamilton as counsel based in its Washington, D.C., office. He joined the firm's international banking and financial institutions practice and also advised on enforcement and regulatory matters.[48]

Deutsche Börse Group

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He was appointed effective April 1, 2014, as the new Chief Compliance Officer for the Deutsche Börse Group, to oversee compliance as well as responsibilities towards supervisory authorities, among all Group entities.[49] Based in Frankfurt, Germany, the international financial market infrastructure provider includes the Frankfurt Stock Exchange; the Eurex Exchange offering futures and options derivatives; Eurex Clearing central counterparty (CCP); Clearstream, the International Central Securities Depository (ICSD); commodities and FX trading platforms; and various IT, financial index providers, and analytics businesses. Freis served concurrently as the Chief Compliance Officer for the Clearstream Group holding company with about EUR 15 trillion in assets under custody.[50][51]

Wirecard

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Main article: Wirecard scandal

On May 8, 2020, Wirecard AG, the payments processor and financial services provider based in Germany announced that effective July 1, 2020, James Freis would be joining as executive board member[52] ("Vorstand"). Wirecard had faced criticism and allegations of accounting irregularities over the prior two decades as it grew globally, but that notwithstanding, by 2018 it had become a member of the DAX stock index[53] of German blue chip companies. Wirecard was viewed as needing a "new start."

Freis's appointment was described as part of a "comprehensive change" in the management board, and he would be responsible for a newly created department "Integrity, Legal and Compliance." Together with the announcement of Freis's appointment, then CEO Markus Braun apologized for past turbulence at Wirecard, and both he and chairman of the supervisory board, Thomas Eichelmann, described Wirecard's business model as "sustainable and highly profitable."[54]

On June 18, 2020, Wirecard announced Freis had joined the management board with immediate effect, earlier than his planned start date of July 1.[55] Later that evening, Freis was introduced by Markus Braun in a video[56] in which Braun announced that Wirecard might have been the victim of fraud in connection with its funds held in overseas bank trustee accounts.[57][58] Working through the night to investigate, Freis quickly concluded that there was obvious fraud in the purported Wirecard accounts and in the morning informed the supervisory board.[59]

On June 19, 2020, Wirecard announced the resignation of Markus Braun as CEO and the appointment of James Freis, one day after being appointed to the management board, as interim CEO[60] with sole power of representation.[61] After working through the weekend in reviewing the company's business activities and finances, Freis wrote an announcement published by Wirecard in the early morning of Monday, June 22, 2020, that the bank trustee account balances in the amount of 1.9 billion euro likely did not exist, and that previous Wirecard descriptions of its so-called third party acquiring business were not correct. Freis was in constructive discussions with Wirecard's lending banks and was considering restructuring options,[62] yet from Thursday to Monday, Wirecard's stock price had lost 90% of its value.[63]

On June 25, 2020, less than a full week after having joined Wirecard, Freis decided to initiate insolvency proceedings.[64] Bank creditors of Wirecard had been willing to roll over credit lines[65] for a period of months, and some initially criticized Freis for the decision to place Wirecard into insolvency, because they became forced to book losses immediately.[66] A year later, the insolvency administrator had generated only about €600 million selling most of Wirecard's assets, against more than €3 billion in banks and bondholder claims, and over €14 billion of total claims filed in the insolvency proceedings.[67]

Freis continued to oversee day-to-day operations of Wirecard, and announced to staff on September 11, 2020, that he was stepping down from management at Wirecard. The Wirecard scandal is likened to a "German Enron" in light of the company's inflated financial accounts and failure of its auditors to detect them[68] and as the greatest financial fraud in modern German history.[69]

In September 2020, the German Parliament launched an investigation of Wirecard generating voluminous records through the June 2021 final reports. Opposition lawmakers characterized the Wirecard scandal as a “collective failure of supervision”, criticizing numerous government authorities, the board of directors, and auditors.[70]

2021–present

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More recently, Freis has founded a consulting firm advising on financial regulation and good governance.[71]

He is active with fintech and startup companies, including these affiliations:

  • Advisory Board of Starling, a RegTech applied behavioral sciences technology company.[72]
  • Co-founder and Chairman of CRINDATA, offering financial institutions solutions for operational risk management to oversee outsourcing and third party service providers.[71][4]
  • Advisor to Moonpay, which serves as an on-ramp for customers to buy crypto, and is active in NFTs.[4][73]
  • Regulatory Technology Officer to FQX AG, a Blockchain startup in Switzerland, leading a project to compose programmable corporate debt offerings stored as NFTs on blockchain.[74][75]

Memberships

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As an attorney, Freis is a member of the bar associations of New York, New Jersey and the District of Columbia. Current affiliations include:

References

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  1. ^ Awards & Recognition at Association of Certified Fraud Examiners; published 2012; retrieved December 12, 2020
  2. ^ a b c FinCEN Director Freis Receives Treasury Medal at Financial Crimes Enforcement Network; published September 21, 2012; retrieved December 12, 2020
  3. ^ Wirecard: The Downfall of a German Fintech Star at Harvard Business School; by Jonas Heese, Charles C.Y. Wang, Tonia Labruyere; published March 2021; retrieved May 8, 2022
  4. ^ a b c MoonPay Hires Wirecard Whistle-Blower CEO James Freis as Adviser at Bloomberg; by Hannah Miller; published March 21, 2022; retrieved May 8, 2022
  5. ^ "140 seniors win Byrd scholarships", Courier News, June 19, 1988. Accessed December 24, 2020, via Newspapers.com. "Middlesex County: James Freis of Metuchen, St. Joseph's High School"
  6. ^ James Henry Freis, Esq. Obituary; published 2020; retrieved November 30, 2020
  7. ^ Drinker Biddle, with two NJ offices, to merge with Faegre Baker Daniels at NJ Biz; by Gabrielle Saulsbery;published December 18, 2019; retrieved December 12, 2020
  8. ^ Financial Innovation and Market Structure at CFA Institute; by Ron Rimkus; published May 1, 2015; retrieved December 12, 2020
  9. ^ a b c Secretary Paulson Names James H. Freis, Jr. as the New Director of FinCEN at U.S. Department of the Treasury; published March 5, 2007; retrieved December 12, 2020
  10. ^ BANK MARKAZI IRAN V. THE FEDERAL RESERVE BANK OF NEW YORK at Jus Mundi; published November 16, 1999; retrieved December 12, 2012
  11. ^ Report From The President at NewYorkFed.org; by William J. McDonough; published 1999; retrieved December 12, 2020
  12. ^ "James Freis - CrossTech". May 24, 2023.
  13. ^ "James H. Freis, Jr. - Member of the Supervisory Board at Wirecard".
  14. ^ Testimony of Stuart Levey at Federal Register; published November 18, 2011; retrieved December 12, 2020
  15. ^ Stuart Levey's War at New York Times; by Robin Wright; published October 31, 2008; retrieved December 12, 2020
  16. ^ Success in Macau Bank Case Demonstrates Reach of U.S. Sanctions at New York Times; by Steven Weisman; published June 26, 2007; retrieved December 12, 2020
  17. ^ The Ripples of Punishing One Bank at New York Times; by Steven Weisman; published July 3, 2020; retrieved December 12, 2020
  18. ^ Bank Blocks Plan to Release Frozen Funds to North Korea at New York Times; by Donald Greenless; published March 27, 2007; retrieved December 12, 2020
  19. ^ Annual Report 2007 at FinCEN.gov; published 2007; retrieved December 12, 2020
  20. ^ In Focus: Full Plate to Greet Fincen's New Director at American Banker; published April 9, 2007; retrieved December 12, 2020
  21. ^ Secretary Paulson Visits FinCEN at U.S. Department of the Treasury; published June 22, 2007; retrieved December 12, 2020
  22. ^ CSBS Newly Elected Chairman Underscores State-Federal Coordination at Financial Crimes Enforcement Network; published May 24, 2012; retrieved December 12, 2020
  23. ^ Fincen Requires Non-Bank Mortgage Lenders To Develop AML Programs at The Wall Street Journal; by Samuel Rubenfeld; published February 7, 2012; retrieved December 12, 2020
  24. ^ Fincen Proposes AML, Reporting Rules For Fannie, Freddie at The Wall Street Journal; by Samuel Rubenfeld; published November 3, 2011; retrieved December 12, 2020
  25. ^ Fincen Developing AML Rules For Advisers at The Wall Street Journal; by Samuel Rubenfeld; published November 16, 2011; retrieved December 12, 2020
  26. ^ FinCEN Issues Prepaid Access Regulations at The Wall Street Journal; by Samuel Rubenfeld; published July 26, 2011; retrieved December 12, 2020
  27. ^ Additional Records at Federal Register; published July 22, 2011; retrieved December 12, 2020
  28. ^ On the Silk Road: the Dark Side of Cryptocurrencies at New America; published February 12, 2014; retrieved December 14, 2020
  29. ^ Lawmakers And Regulators Take A Closer Look At Bitcoin at Diane Rehm Show; published November 19, 2013; retrieved December 14, 2020
  30. ^ VC3: former FinCEN director James Freis is talking at the Bitcoin regulation conference on August 14th at 99 Bitcoins; by Maria Santos; published January 2, 2018; December 14, 2020
  31. ^ THE FUTURE OF MONEY: WHERE DO MOBILE PAYMENTS FIT IN THE CURRENT REGULATORY STRUCTURE? at House Committee on Financial Services; published June 29, 2012; retrieved December 14, 2020
  32. ^ FinCen Releases Plan Targeting Beneficial Ownership at American Banker; by Kate Davidson; published February 29, 2012; December 14, 2020
  33. ^ https://www.govinfo.gov/content/pkg/FR-2016-05-11/pdf/2016-10567.pdf [bare URL PDF]
  34. ^ U.S. Gives Banks More Time To Identify Corporate Owners at The Wall Street Journal; by Samuel Rubenfeld; published May 6, 2016; retrieved December 14, 2020
  35. ^ Remarks by the President on the Economy at The Obama White House; published May 6, 2016; retrieved December 14, 2020
  36. ^ Congress Approves Anti-Money-Laundering Measure at The Wall Street Journal; by Jack Hagel and Ian Talley; published December 11, 2020; retrieved December 20, 2020
  37. ^ FinCEN Wants Banks To Report Every Cross-Border Transaction at The Wall Street Journal; by Samuel Rubenfeld; published September 27, 2010; retrieved December 14, 2020
  38. ^ Money transfers could face anti-terrorism scrutiny at The Washington Post; by Ellen Nakashima; published September 27, 2010; retrieved December 14, 2020
  39. ^ Proposal Would Expand Reporting of Money Transfers at New York Times; by Sewell Chan; published September 29, 2010; retrieved December 14, 2020
  40. ^ FinCEN Statement Noting the Release of the Egmont Group's White Paper: at Financial Crimes Enforcement Network; published February 4, 2011; retrieved December 14, 2020
  41. ^ NATIONAL SOUTHWEST BORDER COUNTER NARCOTICS STRATEGY at Office of National Drug Control Policy; published 2011; retrieved December 14, 2020
  42. ^ Annual Report 2011 at Financial Crimes Enforcemnet Network; published 2011; retrieved December 14, 2020
  43. ^ Freis's Stay at FinCEN Creates Awkward Moment at American Banker; by Rob Blackwell; published June 29, 2012; retrieved December 14, 2020
  44. ^ Behind the Big Changes at Fincen at American Banker; published May 31, 2012; retrieved December 14, 2020
  45. ^ DID TREASURY FIRE JIM FREIS FOR SHOWING THAT BANKSTERS ARE A BIGGER PROBLEM THAN TERRORISTS? at Emptywheel; published May 31, 2012; retrieved December 14, 2020
  46. ^ 31 U.S. Code § 310.Financial Crimes Enforcement Network at Legal Information Institute; retrieved December 12, 2020
  47. ^ FinCEN's Mandate From Congress at Financial Crimes Enforcement Network; retrieved December 12, 2020
  48. ^ Former U.S. Treasury FinCEN Director James H. Freis, Jr. Joins Cleary Gottlieb as Counsel at Cleary Gottlieb; published November 12, 2012; retrieved December 14, 2020
  49. ^ People Moves: Deutsche Borse Group, PwC, DOJ at The Wall Street Journal; by Rachel Louise Ensign; published March 26, 2014; retrieved December 14, 2020
  50. ^ Clearstream's monthly figures at Clearstream; published February 13, 2020; retrieved December 14, 2020
  51. ^ ISSA Compliance Rules Make Custodians Nervous at Global Finance; by Tom Leander; published October 16, 2015; retrieved December 14, 2020
  52. ^ Wirecard AG: Comprehensive change in the Management Board of Wirecard AG at Wirecard; by Iris Stöckl; published May 8, 2020; retrieved December 14, 2020
  53. ^ Wirecard kicks Commerzbank out of DAX at DW.com; published September 5, 2018; retrieved December 14, 2020
  54. ^ Wirecard revamps management board amid probes at Yahoo! Finance; published May 8, 2020; retrieved December 14, 2020
  55. ^ Wirecard AG: Personnel changes: Management Board member Jan Marsalek suspended on a revocable basis – James Freis, Jr. appointed with immediate effect as member of the management board responsible for compliance at Wirecard; by Iris Stoeckl; published June 18, 2020
  56. ^ Wirecard AG Stellungnahme des Vorstandes 19.06.2020 at YouTube; published June 18, 2020; retrieved December 14, 2020
  57. ^ Wirecard: Braun gibt ein Statement ab at 4 investors; by Johannes Stoffels; published June 16, 2020; retrieved December 14, 20202
  58. ^ Wirecard can't rule out 'considerable fraud' as billions go missing at Yahoo! Finance; by Jill Petzinger; published June 19, 2020; retrieved December 14, 2020
  59. ^ The man who led Wirecard into insolvency at Reuters; by Arno Schuetze; published July 9, 2020; retrieved December 14, 2020
  60. ^ Wirecard, a Payments Firm, Is Rocked by a Report of a Missing $2 Billion at New York Times; by Kevin Granville; published June 19, 2020; retrieved December 14, 2020
  61. ^ Wirecard AG: Markus Braun resigns with immediate effect as member of the management board; James Freis appointed as interim CEO at Wirecard; published June 19, 2020; retrieved December 14, 2020
  62. ^ New Wirecard CEO Has Few Days to Calm Nervous Investors at Bloomberg; by Sarah Syed; published June 22, 2020; retrieved December 14, 2020
  63. ^ "[Fehlerhafter Aufruf] - News vom 22.06.2020 - Börsen-Zeitung Mobil".[permanent dead link‍]
  64. ^ Wirecard AG: Application for opening of insolvency proceedings Archived June 28, 2020, at the Wayback Machine at Wirecard; published June 25, 2020; retrieved December 14, 2020
  65. ^ Wirecard Wins Short Reprieve as Banks Scan Long-Term Damage at Bloomberg; by Steven Arons; published June 24, 2020; retrieved December 14, 2020
  66. ^ Mußler, Hanno; Peitsmeier, Henning. "Wirecards Gläubigerbanken: "Von uns hat keiner den Stecker gezogen"". Faz.net.
  67. ^ Top German asset manager takes Wirecard administrator to court over losses at Financial Times; by Olaf Storbeck; published August 15, 2021; retrieved May 8, 2022
  68. ^ Wirecard: the scandal spreads to German politics at Financial Times; published September 29, 2020; retrieved December 14, 2020
  69. ^ "Deutscher Bundestag - 3. Untersuchungsausschuss". Archived from the original on December 12, 2020. Retrieved December 14, 2020.
  70. ^ German Parliament to Investigate Wirecard Scandal at The Wall Street Journal; by Ruth Bender; published September 1, 2020; retrieved December 14, 2020
  71. ^ a b Was macht eigentlich der letzte Wirecard-Chef? at Manager Magazin; by Katharina Slodczyk; published October 21, 2021; retrieved May 8, 2022
  72. ^ https://starlingtrust.com/former-director-of-fincen-james-h-freis-jr-joins-starlings-risk-governance-advisory-board/ [dead link‍]
  73. ^ MoonPay welcomes former US Treasury Director James Freis as special advisor at MoonPay; by Geoffery Lyons; published March 25, 2022; retrieved May 8, 2022
  74. ^ Blockchain Startup FQX announces the appointment of James Freis, Former Director of FinCEN, as Regulatory Technology Officer to Compose Programmable Debt Offerings at NewsFile; published May 5, 2022; retrieved May 9, 2022
  75. ^ Blockchain Startup FQX announces the appointment of James Freis, Former Director of FinCEN, as Regulatory Technology Officer to at Bloomberg; published May 5, 2022; retrieved May 9, 2022
  76. ^ Biographical note: James H. Freis at MOCOMILA; published 2013; retrieved December 14, 2020
  77. ^ Membership Roster at CFR.org; retrieved May 8, 2022
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