Greg is joined by Rodney MacInnes, a compliance expert with over 17 years of experience in the money services and real estate industries, as they discuss the challenges of risk management and anti-money laundering (AML) compliance in the real estate sector. Rodney shares a compelling story about identifying potential mortgage fraud through discrepancies in bank statements, and provides insights into building effective AML policies and procedures.

Key Takeaways:

• The real estate industry struggles with risk management due to a lack of guidance and information from regulators like FINTRAC. Operational briefs from FINTRAC will be crucial in helping the industry understand the risks and indicators to look for.
• Detecting money laundering in real estate transactions is particularly challenging, as the real estate sector is often the final stage of he money laundering process, making it harder to trace the criminal origins of the funds.
• Proactive compliance measures, such as investigating discrepancies in client documentation, can uncover hidden risks like mortgage fraud. Rodney's story demonstrates the importance of thinking creatively about potential risks.
• AML policies and procedures should focus not only on external risks, but also on internal risks within the organization, such as inconsistent reporting of suspicious transactions by staff members.
• Ongoing staff training and monitoring are essential to ensure compliance, as industry incentives to complete transactions can lead to complacency and overlooking red flags.

Connect with Greg and ReallyTrusted at:

https://reallytrusted.com/

https://www.facebook.com/ReallyTrusted/

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Greg Dent: 00:00:01

All right, welcome to another episode of the KYC

Greg Dent: 00:00:04

podcast. Thank you very much for tuning in. I am super excited to

Greg Dent: 00:00:08

have Rodney MacInnes joining us today. Rodney from outlier

Greg Dent: 00:00:11

solutions. Rodney is a compliance ninja. Has been a

Greg Dent: 00:00:16

compliance ninja for over 15 years now. Is that about right?

Greg Dent: 00:00:20

Rodney,

Rodney MacInnes: 00:00:20

oh yeah, I think I'm pushing like 17 or 18

Rodney MacInnes: 00:00:23

at this point.

Greg Dent: 00:00:23

There you go. All right. Do you want to tell a

Greg Dent: 00:00:26

little bit about your background in the credit, money services,

Greg Dent: 00:00:31

business spaces and stuff, and before we kind of get into our

Greg Dent: 00:00:33

topic here, absolutely.

Rodney MacInnes: 00:00:36

So I started out my compliance life in money

Rodney MacInnes: 00:00:40

services, businesses, I worked my way from kind of a sales

Rodney MacInnes: 00:00:44

position into a compliance position because I was sick at

Rodney MacInnes: 00:00:48

doing cold calling on the phone, which really helped me bridge

Rodney MacInnes: 00:00:53

the gap between kind of the struggles between sales and

Rodney MacInnes: 00:00:56

compliance. And so I understood what was needed from a sales

Rodney MacInnes: 00:01:00

perspective, but also from a compliance perspective. And so I

Rodney MacInnes: 00:01:04

was able to kind of help people understand and streamline the

Rodney MacInnes: 00:01:07

process. And really I, for the most part, was the liaison

Rodney MacInnes: 00:01:11

between sales and compliance, because I could speak both

Rodney MacInnes: 00:01:13

languages. I moved from there into a different role that was

Rodney MacInnes: 00:01:19

at the time I started an MSB and then morphed into a B lender,

Rodney MacInnes: 00:01:24

and so we did a lot of mortgages for for new immigrants and

Rodney MacInnes: 00:01:29

business for self and things like that. So I got to see kind

Rodney MacInnes: 00:01:32

of many different sides of the real estate space. From there, I

Rodney MacInnes: 00:01:38

moved to outlier, and that was 10 years ago, and just for

Rodney MacInnes: 00:01:45

background, the term Ninja is what happens, is when you let

Rodney MacInnes: 00:01:49

nerds pick their titles. So 11 years ago, when the company

Rodney MacInnes: 00:01:52

started, our co founder Amber, decided that she had been

Rodney MacInnes: 00:01:58

referred to as a compliance ninja in her previous role, and

Rodney MacInnes: 00:02:01

that was what she dubbed herself, was the chief AML

Rodney MacInnes: 00:02:03

ninja. And the idea is, is that we can go in and execute on a

Rodney MacInnes: 00:02:07

mission, so do our deliverable, complete the mission, and then

Rodney MacInnes: 00:02:11

disappear into the night and no one would ever know that we were

Rodney MacInnes: 00:02:14

there.

Greg Dent: 00:02:15

I actually quite love the terminja, and I, as much as

Greg Dent: 00:02:19

I say it with a smile, I think it's actually a really cool way

Greg Dent: 00:02:21

of looking at what you do. So So that's cool. Wanted to chat with

Greg Dent: 00:02:27

you, because about a month ago, you and I were talking about

Greg Dent: 00:02:31

risks and and the importance for businesses of identifying risks

Greg Dent: 00:02:37

and how those sometimes get hidden, and you had what I

Greg Dent: 00:02:40

thought was a really neat story. So maybe let's, let's start from

Greg Dent: 00:02:44

there and see where the conversation leads. If you could

Greg Dent: 00:02:46

kind of tell the story in as much as you are able to anyway.

Rodney MacInnes: 00:02:50

So the the fun part of of risk is it is such a

Rodney MacInnes: 00:02:55

broad spectrum, and the most difficult part of it is not

Rodney MacInnes: 00:03:00

knowing what you don't know. And that's this, one of the

Rodney MacInnes: 00:03:03

struggles within the sector and real estate's been like it's

Rodney MacInnes: 00:03:08

been regulated since day one, since FINTRAC started

Rodney MacInnes: 00:03:11

regulating, reporting entities, real estate was included,

Rodney MacInnes: 00:03:16

mortgage brokers. Are more recent. So this is the change in

Rodney MacInnes: 00:03:19

part of the struggle that we're seeing within that space is,

Rodney MacInnes: 00:03:22

come September, October, October, mid October, they're

Rodney MacInnes: 00:03:27

going to be considered reporting entities. But I'm very hopeful

Rodney MacInnes: 00:03:33

that at that time, we get some quality information from FINTRAC

Rodney MacInnes: 00:03:36

about what we should be looking for when it comes to the risk

Rodney MacInnes: 00:03:39

side of things, FINTRAC will produce what are called

Rodney MacInnes: 00:03:43

operational briefs, and they're kind of a list of what they've

Rodney MacInnes: 00:03:45

seen from STRS and things like that, that will provide the

Rodney MacInnes: 00:03:49

industry with information about how FINTRAC looks at

Rodney MacInnes: 00:03:54

transactions, when they conduct examinations and things like

Rodney MacInnes: 00:03:57

that. And without that information, this is where you

Rodney MacInnes: 00:04:01

get into that unknown, unknown area. And so I'm hopeful that

Rodney MacInnes: 00:04:04

we'll see something that'll be useful for mortgage brokers. And

Rodney MacInnes: 00:04:06

if not, it's kind of, you know, look at your look at your data,

Rodney MacInnes: 00:04:11

and try and do the analysis, or refer to someone that has, like,

Rodney MacInnes: 00:04:15

understandable background in that space.

Greg Dent: 00:04:18

Yeah, it's funny. I think part of our conversation

Greg Dent: 00:04:22

then, and I think what's still true is the mortgage sector

Greg Dent: 00:04:27

already has a bit of an idea on how to manage risks, because, on

Greg Dent: 00:04:33

some level, they have to. They don't want to have a massive

Greg Dent: 00:04:36

credit exposure, they don't want to have fraud. They don't want

Greg Dent: 00:04:39

fraud to happen in their sector any more than anybody else does,

Greg Dent: 00:04:42

and so from that point of view, they have already some of the

Greg Dent: 00:04:46

thinking built into into their practices, I suspect, but the

Greg Dent: 00:04:50

operational briefs that you're talking about, I think, are

Greg Dent: 00:04:53

going to be really important, because it's a different it's

Greg Dent: 00:04:58

different characteristics, or different. Indicators that I

Greg Dent: 00:05:00

think we're looking for all of a sudden, that people may just not

Greg Dent: 00:05:03

have the language around yet. Absolutely, is that, but a fair

Greg Dent: 00:05:05

way of reframing the concept?

Rodney MacInnes: 00:05:07

Yeah, for sure, it's one of those struggles of

Rodney MacInnes: 00:05:10

this is one thing I've spoken about since I worked in the real

Rodney MacInnes: 00:05:12

estate industry. And when we sit in examinations with clients and

Rodney MacInnes: 00:05:16

things like that, is, or perform effectiveness reviews is that

Rodney MacInnes: 00:05:18

real estate is inherently like, for the most part, operationally

Rodney MacInnes: 00:05:22

compliant, because you can't do a purchase or a sale without

Rodney MacInnes: 00:05:26

filling out a litany of legal documents and collecting

Rodney MacInnes: 00:05:30

identification. And like, there's just things that are

Rodney MacInnes: 00:05:32

inherent within the operation of how a sale goes about. And so

Rodney MacInnes: 00:05:37

the this struggle is understanding exactly to your

Rodney MacInnes: 00:05:40

point. The other side of the equation, that isn't always

Rodney MacInnes: 00:05:45

first, like first or top of mind, I should say the other

Rodney MacInnes: 00:05:49

part of this struggle is with regards to money laundering.

Rodney MacInnes: 00:05:53

There's, there's three stages of money laundering. So placement,

Rodney MacInnes: 00:05:56

layering, integration, placement being the money going into the

Rodney MacInnes: 00:06:01

financial sector integration or layering, where it's moved

Rodney MacInnes: 00:06:05

around to obfuscate the source, the criminal source, of the

Rodney MacInnes: 00:06:08

funds. And then the final stage is where you get into the real

Rodney MacInnes: 00:06:12

estate space. So at that point, most of the time, it's already

Rodney MacInnes: 00:06:16

been integrated and moved around, and it's distance from

Rodney MacInnes: 00:06:19

that criminal origin. So tracking and finding that you

Rodney MacInnes: 00:06:24

know suspicious transaction is not as easy as it may be when

Rodney MacInnes: 00:06:28

you're on kind of the the first stage of money laundering, and

Rodney MacInnes: 00:06:31

this has been one of the struggles within the sector. But

Rodney MacInnes: 00:06:34

it it's not an excuse. It's not something that you get to be

Rodney MacInnes: 00:06:37

like, well, it's really hard for us. We don't have to do anything

Rodney MacInnes: 00:06:40

fin track. And I want to say 2016 I think, issued one of

Rodney MacInnes: 00:06:45

their operational briefs that was directed at the real estate

Rodney MacInnes: 00:06:48

sector that was like, Hey, folks, we've only seen 127 STRS

Rodney MacInnes: 00:06:54

from you, and there's trillions of dollars flowing through the

Rodney MacInnes: 00:06:59

Canadian real estate sector. And then, I don't know what, three

Rodney MacInnes: 00:07:03

years later, we had the Vancouver model happen. And so

Rodney MacInnes: 00:07:07

these are, these are some of the problems that the industry has

Rodney MacInnes: 00:07:12

struggled with from day one. And I think we're moving forward in

Rodney MacInnes: 00:07:17

the right direction, but it still, it still is a long way to

Rodney MacInnes: 00:07:21

go. And this is, you know, to that risk part of the

Rodney MacInnes: 00:07:24

conversation. This is where we're constantly trying to get

Rodney MacInnes: 00:07:27

better data, more information, and things like that, from fin

Rodney MacInnes: 00:07:30

track, which, which they understand, and they are trying

Rodney MacInnes: 00:07:33

to produce what they can, but they also regulate a lot of

Rodney MacInnes: 00:07:36

other industries. And so it's, it's a bit of a struggle, but I

Rodney MacInnes: 00:07:41

think we're, like, I said, I think we're moving in the right

Rodney MacInnes: 00:07:43

direction on that. Yeah,

Greg Dent: 00:07:44

no. I mean, I think two things I want to kind of go

Greg Dent: 00:07:48

back on the your the first point you made there around how far

Greg Dent: 00:07:52

into the money laundering process real estate ends is

Greg Dent: 00:07:55

exactly the reason why I think the sector has really struggled

Greg Dent: 00:07:59

in in their knowledge, that the amount of times people still

Greg Dent: 00:08:03

will say to me, well, it's okay. There's no money laundering

Greg Dent: 00:08:07

here. Nobody shows up at my brokerage with a bag of cash.

Greg Dent: 00:08:10

And that's like the regular refrain, and it's it just misses

Greg Dent: 00:08:14

kind of the what might be the most important point of the

Greg Dent: 00:08:18

whole thing when they say that the I think the what's equally

Greg Dent: 00:08:21

interesting to me is, yeah, the Vancouver model comes around and

Greg Dent: 00:08:25

has been pretty widely publicized and talked about, and

Greg Dent: 00:08:29

books, literally, books written on this topic, literally and and

Greg Dent: 00:08:33

yet, the number of STRS hasn't really dramatically increased

Greg Dent: 00:08:37

yet. I'm personally noticing a bit of a shift in the

Greg Dent: 00:08:40

conversations I'm having with Canadian real estate brokerages,

Greg Dent: 00:08:44

and seeing more and more of them wanting to file, which is

Greg Dent: 00:08:48

wonderful. I say wanting to file because, you know, there's that

Greg Dent: 00:08:52

whole little web reporting not working thing right now, but

Greg Dent: 00:08:55

that's, that's not a topic for another day. That's

Greg Dent: 00:08:59

a topic for another day, exactly, yeah, but there are a

Greg Dent: 00:09:02

number of brokerages who are now seeing how they should be filing

Greg Dent: 00:09:05

STRS, and that's that's really cool.

Rodney MacInnes: 00:09:09

Back to your your original question about

Rodney MacInnes: 00:09:11

kind of situations and things like that. I'm going to tell a

Rodney MacInnes: 00:09:15

story from when I was a compliance officer at a at a

Rodney MacInnes: 00:09:19

company, mortgage broker company, and I kept seeing

Rodney MacInnes: 00:09:24

something that just seemed odd to me, and I couldn't make sense

Rodney MacInnes: 00:09:29

of it, and it just it rubbed me the wrong way. And as a

Rodney MacInnes: 00:09:33

compliance nerd, people understand this. Who understand

Rodney MacInnes: 00:09:36

compliance from a sales side of things, this is something I'm

Rodney MacInnes: 00:09:41

I'm not as familiar with folks paying attention to or or caring

Rodney MacInnes: 00:09:45

about as much. For me, it was because I'm signing my name onto

Rodney MacInnes: 00:09:50

that transaction to say, like, yes, this can proceed. I want to

Rodney MacInnes: 00:09:54

be certain that it's not going to come back to bite me later.

Rodney MacInnes: 00:09:57

And so I kept seeing these bank statements that were. Uh, like,

Rodney MacInnes: 00:10:01

they just, they just looked different. And they didn't look

Rodney MacInnes: 00:10:04

different enough that it was clear that there was something

Rodney MacInnes: 00:10:07

obviously wrong with it. They just, they were older. So as you

Rodney MacInnes: 00:10:12

start to, you know, see bank statements all the time, as

Rodney MacInnes: 00:10:15

you're funding mortgages and stuff like that, for whatever

Rodney MacInnes: 00:10:18

purpose, you start to understand that, like, okay, TD actually

Rodney MacInnes: 00:10:21

just recently changed their font size, and so now the name of the

Rodney MacInnes: 00:10:25

person is a slightly larger than the address listed on the bank

Rodney MacInnes: 00:10:28

statement, and you start to understand that what it should

Rodney MacInnes: 00:10:30

look like. And then when someone produces a bank statement that

Rodney MacInnes: 00:10:33

doesn't look like that, then it begs the question, why is this

Rodney MacInnes: 00:10:37

different? Sometimes they pulled it on their phone. That makes

Rodney MacInnes: 00:10:39

sense. Sometimes it's actually a physical bank statement that was

Rodney MacInnes: 00:10:42

mailed to their house that makes sense, but you start to

Rodney MacInnes: 00:10:45

understand and be able to dig a little deeper into what exactly

Rodney MacInnes: 00:10:48

is going on. And in those instances, was a very simple

Rodney MacInnes: 00:10:51

explanation. I downloaded it on my phone, or it was mailed to my

Rodney MacInnes: 00:10:56

house. That's why it looks different. So those, those

Rodney MacInnes: 00:10:57

simple questions immediately alleviated my concern that said

Rodney MacInnes: 00:11:02

some of them didn't. There was no, there was no clear response.

Rodney MacInnes: 00:11:07

The person was just like, I just, that's my bank statement.

Rodney MacInnes: 00:11:09

That's what was mailed to me. It's like, okay, no problem. So

Rodney MacInnes: 00:11:15

I took it upon myself to do some some research. And I like,

Rodney MacInnes: 00:11:22

frankly, I went home, I went on to the dark web, and I did a

Rodney MacInnes: 00:11:26

search for Canadian bank statements. And it was baffling.

Rodney MacInnes: 00:11:32

Like, for 50 bucks, I think I could buy any major Canadian fi

Rodney MacInnes: 00:11:40

bank statement, and it gave me a template, it gave me the fonts I

Rodney MacInnes: 00:11:44

had to use. There was a how to and it gave me dummy

Rodney MacInnes: 00:11:47

transactions that I could feed into my bank statement to make

Rodney MacInnes: 00:11:50

it look legitimate. And I could put whatever information on it

Rodney MacInnes: 00:11:52

with whatever numbers I wanted to. And then all I do is save a

Rodney MacInnes: 00:11:56

PDF 50 bucks, and that's a good deal, right until you get your

Rodney MacInnes: 00:12:02

mortgage for more than you can afford,

Greg Dent: 00:12:04

right? Yes, there's a bunch of problems with this.

Greg Dent: 00:12:07

Let's a big problem.

Rodney MacInnes: 00:12:08

So it was, it was one of those things where

Rodney MacInnes: 00:12:10

all of a sudden I had this, oh no, we've, we've got, we've got

Rodney MacInnes: 00:12:15

issues here, and I don't know how to fix it, because they're

Rodney MacInnes: 00:12:19

like, the quality of these things. It's a it looks exactly

Rodney MacInnes: 00:12:22

the same. But I found, I found the thing that indicated what

Rodney MacInnes: 00:12:27

was different between a legit and an illegitimate bank

Rodney MacInnes: 00:12:31

statement, and it was the print form. So when you get a printed

Rodney MacInnes: 00:12:35

bank statement from a bank, it's going to have the little kind of

Rodney MacInnes: 00:12:38

dots and printer logic on the bottom of it that traces it back

Rodney MacInnes: 00:12:42

to its origin, where it's a PDF from a website. That's a little

Rodney MacInnes: 00:12:46

trickier, but what we're seeing a lot is folks like saying that

Rodney MacInnes: 00:12:50

it was a PDF of the online bank statement, right? But it would

Rodney MacInnes: 00:12:57

have to be like perfectly level, and if it's slightly askew, you

Rodney MacInnes: 00:13:03

know, that can't be the case, because, I mean, it's a

Rodney MacInnes: 00:13:06

computer, it's going to be as perfect as it kind of can be

Rodney MacInnes: 00:13:08

without being true level for all of my Rick and Morty fans out

Rodney MacInnes: 00:13:13

there. So it's one of those items that once found, then we

Rodney MacInnes: 00:13:19

had to do a look back, and it resulted in, I think, somewhere

Rodney MacInnes: 00:13:23

between 20 and 30 STRS at the time on accounts that we had

Rodney MacInnes: 00:13:26

opened, and we're still like, I mean, these mortgages were

Rodney MacInnes: 00:13:29

funded. There's not really much you can do at that point. And

Rodney MacInnes: 00:13:33

frankly, the obligation is to, like, submit that suspicious

Rodney MacInnes: 00:13:38

transaction report from a credit perspective, that was not my

Rodney MacInnes: 00:13:41

department, so I can't comment on what happened there, because,

Rodney MacInnes: 00:13:45

frankly, I don't really know. Once it, once it's kind of

Rodney MacInnes: 00:13:47

approved, I'm subject to the ongoing monitoring, and that's

Rodney MacInnes: 00:13:50

where my kind of liability lies. So I want to make sure that the

Rodney MacInnes: 00:13:56

funds came in consistently from where they said they were going

Rodney MacInnes: 00:13:59

to, and we're not getting third party deposits and things like

Rodney MacInnes: 00:14:01

that. But as far as how the credit was handled and the other

Rodney MacInnes: 00:14:04

factors involved, I don't know, and frankly, it was B lending.

Rodney MacInnes: 00:14:09

So it was the mortgages were not long, long periods of time. They

Rodney MacInnes: 00:14:14

were usually a year, maybe two, and they probably went somewhere

Rodney MacInnes: 00:14:18

else after that.

Greg Dent: 00:14:18

And by definition, they were a little bit higher

Greg Dent: 00:14:20

risk to start with. So, you know, yeah, that's an

Greg Dent: 00:14:24

interesting story. What I what I like I think about that story,

Greg Dent: 00:14:26

and why I think it was, why I really wanted to kind of have

Greg Dent: 00:14:29

you back on and talk about that a little bit. Is it highlights

Greg Dent: 00:14:32

for me that there's no, like, one way that you're going to

Greg Dent: 00:14:38

identify problems within your business. And I want to say,

Greg Dent: 00:14:41

like, what you've just told us is a really interesting story

Greg Dent: 00:14:44

about potential money laundering, but also about just

Greg Dent: 00:14:47

downright, like, straight fraud that that business probably

Greg Dent: 00:14:50

would not have wanted to be involved if had they had the

Greg Dent: 00:14:53

information at the outset. And so the neat thing in my mind

Greg Dent: 00:14:57

about anti money. Laundering policy and procedures is that

Greg Dent: 00:15:01

you're actually like, protecting your business as well from from

Greg Dent: 00:15:05

risk, which is where this all started, I guess, this

Greg Dent: 00:15:08

conversation and but the the message I really want to pull

Greg Dent: 00:15:14

out of it for our listeners is the importance of kind of

Greg Dent: 00:15:18

thinking about things differently, or thinking about

Greg Dent: 00:15:22

why they're doing what they're doing, rather than just wrote

Greg Dent: 00:15:25

filling in forms, which is all too often how, certainly in the

Greg Dent: 00:15:30

real estate sector, people's view fin track where it's well,

Greg Dent: 00:15:34

we'll fill out the form, we'll be fine. And if that's the view

Greg Dent: 00:15:38

of a compliance officer in the sector, then it's no wonder

Greg Dent: 00:15:41

we're not seeing good data, because there is no good data at

Greg Dent: 00:15:44

that point. So

Rodney MacInnes: 00:15:45

I think you hit the nail on the head with, you

Rodney MacInnes: 00:15:47

know, trust me, as a compliance person, I wish there was a flow

Rodney MacInnes: 00:15:53

chart or a checklist or something that was like, if this

Rodney MacInnes: 00:15:57

then this equals suspicious. That would make life way easier.

Rodney MacInnes: 00:16:01

And fin track would have been screaming that from the

Rodney MacInnes: 00:16:04

rooftops, because that's one of the thing. The other thing we

Rodney MacInnes: 00:16:06

hear is like, this is fin tracks job. It's like, no fin tracks

Rodney MacInnes: 00:16:09

job is actually to regulate the entity, like regulate the

Rodney MacInnes: 00:16:12

industries and take what is produced by the Department of

Rodney MacInnes: 00:16:17

Finance, because they write the legislation. It's fin tracks job

Rodney MacInnes: 00:16:20

to interpret it. So for them to go out and do the adjudication

Rodney MacInnes: 00:16:25

of what's suspicious or not is a like a massive overreach. And as

Rodney MacInnes: 00:16:31

someone who consults with numerous different businesses

Rodney MacInnes: 00:16:34

across numerous different industries, I don't on a rare on

Rodney MacInnes: 00:16:42

a rare occasion, I will sit down with someone, go through a

Rodney MacInnes: 00:16:45

suspicious transaction or something they think is

Rodney MacInnes: 00:16:47

potentially suspicious, and talk through it to help them, because

Rodney MacInnes: 00:16:51

there's a lot of like items and idiosyncrasies between their

Rodney MacInnes: 00:16:55

business, their customer, their average customer, the

Rodney MacInnes: 00:16:58

information that they have on file, the the amount of time it

Rodney MacInnes: 00:17:01

takes them to explain to me enough information for me to

Rodney MacInnes: 00:17:05

make a rational determination, or at least help them make a

Rodney MacInnes: 00:17:09

rational determination, like when I do that, it's never me

Rodney MacInnes: 00:17:13

that gets to make the final decision. I'm talking that

Rodney MacInnes: 00:17:16

person into their decision. I'm helping them get to the final

Rodney MacInnes: 00:17:20

endpoint. And so this is one of one of the items is that, yeah,

Rodney MacInnes: 00:17:23

there is no clear determination. And for the most part, one

Rodney MacInnes: 00:17:27

single indicator is enough to make your gut go. That feels

Rodney MacInnes: 00:17:31

off. When you get a second indicator, you're not like,

Rodney MacInnes: 00:17:34

okay, we're getting close to like, with this needs to be

Rodney MacInnes: 00:17:36

escalated to compliance for an investigation. And in those

Rodney MacInnes: 00:17:40

instances like I was referring to before, where the bank

Rodney MacInnes: 00:17:43

statement was just it just didn't look what I expected. I

Rodney MacInnes: 00:17:47

asked, got an answer, and I moved on. It was, it was really

Rodney MacInnes: 00:17:50

that simple, instead of what happened later when I realized

Rodney MacInnes: 00:17:55

that we actually did take a bunch of bank statements that

Rodney MacInnes: 00:17:57

may not have been legitimate, and honestly, I have no idea.

Rodney MacInnes: 00:18:04

There's nothing concrete that says that it was or it wasn't.

Rodney MacInnes: 00:18:07

It just looked suspicious, and that's all that need. That's all

Rodney MacInnes: 00:18:11

you need to file a suspicious transaction report. Is

Rodney MacInnes: 00:18:14

reasonable grounds to suspect. You don't have to know, you

Rodney MacInnes: 00:18:17

don't have to believe. You just have to like suspect it looks

Rodney MacInnes: 00:18:22

odd. I'm gonna tell FINTRAC about it. And

Greg Dent: 00:18:24

if there's another string to pull on all of that,

Greg Dent: 00:18:26

it's that it didn't negatively, directly impact your business.

Greg Dent: 00:18:31

You didn't have to stop doing business with these people.

Greg Dent: 00:18:33

Quite the contrary. In fact, you couldn't. In those cases, they'd

Greg Dent: 00:18:36

open the mortgage. You're doing business with them, whether you

Greg Dent: 00:18:39

like it or not. And I think that's the other fear that I've

Greg Dent: 00:18:43

certainly heard from from people, typically in a sales

Greg Dent: 00:18:46

capacity, where you know their their livelihood is based on

Greg Dent: 00:18:52

making the sale, or on processing the deal, on whatever

Greg Dent: 00:18:55

industry that is, and there's no requirement to stop working

Greg Dent: 00:18:59

while there is okay if you want to get technical, the

Greg Dent: 00:19:02

terrorists, not sure, okay. But for the most part, there's no

Greg Dent: 00:19:05

requirement to stop working with. I'm

Rodney MacInnes: 00:19:07

also going to throw another caveat on that, if

Rodney MacInnes: 00:19:09

your customer is like, I'm just about to launder this half a

Rodney MacInnes: 00:19:13

million on this condo. So I just need you to get this go through.

Rodney MacInnes: 00:19:16

I'm not going to give you any other information, and then my

Rodney MacInnes: 00:19:19

money is laundered. I'm going to sell the condo, and I'm good,

Rodney MacInnes: 00:19:21

don't do that transaction. When you that's when you know there's

Rodney MacInnes: 00:19:25

a money laundering offense involved, without a doubt. Don't

Rodney MacInnes: 00:19:28

do that transaction. But where something is suspicious, or

Rodney MacInnes: 00:19:32

you've got a customer that's presenting as high risk, nothing

Rodney MacInnes: 00:19:35

says you can't do that. It becomes a risk based decision

Rodney MacInnes: 00:19:38

within the entity to say that, yeah, this one's a little higher

Rodney MacInnes: 00:19:43

risk based on the information that we have, but I don't have

Rodney MacInnes: 00:19:46

anything here, which blatantly tells me this is related to a

Rodney MacInnes: 00:19:50

criminal offense, actual money laundering, terrorist property,

Rodney MacInnes: 00:19:55

terrorist financing, something along those lines. And so that's

Rodney MacInnes: 00:19:58

where in those circumstances. You want to do that what is

Rodney MacInnes: 00:20:01

referred to as enhanced due diligence, which is basically

Rodney MacInnes: 00:20:04

something that you do that you don't do for every other

Rodney MacInnes: 00:20:06

customer. So it's something you do above and beyond. So besides

Rodney MacInnes: 00:20:10

the identification, besides all the KYC information that you're

Rodney MacInnes: 00:20:13

collecting, maybe I'm going to do a Google search. Let's go

Rodney MacInnes: 00:20:17

Greg dent scam, or Greg dent crime. And if I don't see

Rodney MacInnes: 00:20:22

anything, then I feel better about that. And so those are,

Rodney MacInnes: 00:20:26

those are the things that FINTRAC is expecting you to do,

Rodney MacInnes: 00:20:28

is, is something else. So it's not enough to just say, Well,

Rodney MacInnes: 00:20:32

yeah, they're high risk, but we're okay, we're we're not risk

Rodney MacInnes: 00:20:35

averse. Let's, let's just plow ahead. You got to do something

Rodney MacInnes: 00:20:37

else. So you need that, that little bit of extra. And so

Rodney MacInnes: 00:20:40

where, you know, back to the bank statement thing, where you

Rodney MacInnes: 00:20:43

just ask the question that meets enhanced due diligence

Rodney MacInnes: 00:20:46

requirements. So it's really prescriptive on, or it's not

Rodney MacInnes: 00:20:48

prescriptive, sorry, on what you have to do. It's really based on

Rodney MacInnes: 00:20:52

the situation. So if somebody gives you an ID, and you look at

Rodney MacInnes: 00:20:54

it and be like, that doesn't look anything like you can you

Rodney MacInnes: 00:20:57

give me another piece of ID and they say, Sure, no problem. You

Rodney MacInnes: 00:21:00

know, I put on 100 pounds during covid. Like, okay, that makes

Rodney MacInnes: 00:21:03

sense. Your passport looks nothing like your driver's

Rodney MacInnes: 00:21:05

license, but you look like at least one of them. Boom, that's

Rodney MacInnes: 00:21:08

enhanced due diligence right there. Like, it doesn't have to

Rodney MacInnes: 00:21:11

be complicated. It's really meant to either help you

Rodney MacInnes: 00:21:15

mitigate the risk or or understand the risk or not. And

Rodney MacInnes: 00:21:20

then the situations where it's not, then you get to have the

Rodney MacInnes: 00:21:23

conversation with compliance, or frankly, compliance gets to make

Rodney MacInnes: 00:21:26

the decision on whether it's actually suspicious and triggers

Rodney MacInnes: 00:21:28

a reporting requirement. Yeah,

Greg Dent: 00:21:30

no, that. That all makes sense and super helpful.

Greg Dent: 00:21:32

And for listeners who want to learn more about adverse media,

Greg Dent: 00:21:35

which is one of those enhanced due diligence things, we do have

Greg Dent: 00:21:37

an episode of this podcast specifically about that, so feel

Greg Dent: 00:21:40

free to look that up. Yeah. So, yeah. Thank you. I think this

Greg Dent: 00:21:46

has been really a useful dive into risk and kind of the meat

Greg Dent: 00:21:51

and potatoes of what an AML policy and procedure really

Greg Dent: 00:21:54

ought to be about. Is there anything else that you think

Greg Dent: 00:21:57

that we really should have talked about through the course

Greg Dent: 00:21:59

of this that we've we've missed out any big, big takeaways that

Greg Dent: 00:22:03

we haven't touched on

Rodney MacInnes: 00:22:05

one item that you just mentioned recently. So

Rodney MacInnes: 00:22:08

the the industry is really focused on, you know, the

Rodney MacInnes: 00:22:12

transaction, because sales is driving, you know, is driving

Rodney MacInnes: 00:22:17

the transaction with a commission at the end of the

Rodney MacInnes: 00:22:19

line. And so there's an inherent incentive to complete the

Rodney MacInnes: 00:22:22

transaction. Otherwise, frankly, you're not getting paid and and

Rodney MacInnes: 00:22:26

this is one of the struggles that we see, is that folks are

Rodney MacInnes: 00:22:30

kind of like, I'm just going to pretend I didn't see that,

Rodney MacInnes: 00:22:33

because I want to get my commission check. And it's

Rodney MacInnes: 00:22:36

trying to drive home the understanding that just because

Rodney MacInnes: 00:22:40

you see something that isn't a clear path to you know, a

Rodney MacInnes: 00:22:45

closing of a transaction doesn't mean that it's not going to

Rodney MacInnes: 00:22:49

happen. It's just it's an extra step. And like as a brokerage,

Rodney MacInnes: 00:22:53

you're looking to help your staff understand the

Rodney MacInnes: 00:22:57

implications of not doing what needs to be done in those

Rodney MacInnes: 00:23:01

situations. And if you looked at any fin track penalty that has

Rodney MacInnes: 00:23:06

occurred within the last two years, a huge focus on that is

Rodney MacInnes: 00:23:11

around unreported, suspicious transactions, those are deemed

Rodney MacInnes: 00:23:14

very serious under the proceeds of crime, money laundering,

Rodney MacInnes: 00:23:18

terrorist financing regulations specific to administrative

Rodney MacInnes: 00:23:21

monetary penalties, which are the penalties that FINTRAC gives

Rodney MacInnes: 00:23:24

out. They are non punitive. They're meant to encourage

Rodney MacInnes: 00:23:27

compliance. But at the same time, if you've seen some of the

Rodney MacInnes: 00:23:31

numbers that have come out, they're not small, basically

Rodney MacInnes: 00:23:33

punitive

Greg Dent: 00:23:33

to those businesses, I can assure you,

Rodney MacInnes: 00:23:36

yeah. But like, look at the US or Australia or

Rodney MacInnes: 00:23:39

things like that. Like that, like you want to see punitive

Rodney MacInnes: 00:23:41

those are punitive measures when you're looking at, like,

Rodney MacInnes: 00:23:43

hundreds of millions of dollars. Anyways, it's one of those

Rodney MacInnes: 00:23:47

things that you really have to underscore with with staff and

Rodney MacInnes: 00:23:51

train on what to do in those situations and what to look for.

Rodney MacInnes: 00:23:55

So back to the beginning of the conversation about the

Rodney MacInnes: 00:23:58

information that is provided from FINTRAC. That is what

Rodney MacInnes: 00:24:01

FINTRAC is going to look for when they come in. So staff need

Rodney MacInnes: 00:24:04

to understand that these are the things you need to be monitoring

Rodney MacInnes: 00:24:06

for, and where something just seems off like it's hard to

Rodney MacInnes: 00:24:12

convey how much better things will be if you just say

Rodney MacInnes: 00:24:15

something, yeah, I don't know this happened, and it seemed

Rodney MacInnes: 00:24:19

kind of weird, and I'm not sure what to do. Well, why don't you

Rodney MacInnes: 00:24:23

ask them where they got their bank statement? Oh, it was not

Rodney MacInnes: 00:24:26

from printed online. It was mailed to them. That makes

Rodney MacInnes: 00:24:29

sense. I'm good. Suspicion alleviated. And like on top of

Rodney MacInnes: 00:24:34

that, it is understanding within your business, the team members

Rodney MacInnes: 00:24:39

that are there and you know, folks that maybe require a

Rodney MacInnes: 00:24:44

little more oversight, and things like that, or additional

Rodney MacInnes: 00:24:48

training and things that, to that nature is, is one of the

Rodney MacInnes: 00:24:51

items when we do an effectiveness review, is we do

Rodney MacInnes: 00:24:54

staff interviews, which can happen in a fin track exam. Fin

Rodney MacInnes: 00:24:58

track may pull certain. Staff and just ask them general AML

Rodney MacInnes: 00:25:02

questions. So in order to test the effectiveness, when we do a

Rodney MacInnes: 00:25:04

review, we do that as well. One of the conversations I have with

Rodney MacInnes: 00:25:09

the compliance officer before I do that is, do you have any

Rodney MacInnes: 00:25:12

problem children? Is there anyone that you may want me to

Rodney MacInnes: 00:25:15

ask? And most of the time, the answer is no, but every now and

Rodney MacInnes: 00:25:18

then someone's like, actually, so and so is always lagging on

Rodney MacInnes: 00:25:22

doing their training. I have to push them and they wait right

Rodney MacInnes: 00:25:25

until the very last day to get it done. If you could just

Rodney MacInnes: 00:25:28

include them in that questionnaire that would, that

Rodney MacInnes: 00:25:30

would be perfect. And so it's, it's understanding, you know,

Rodney MacInnes: 00:25:34

we're talking risk. It's understanding the risk inside

Rodney MacInnes: 00:25:38

your business as well. So not only the external risk that your

Rodney MacInnes: 00:25:41

customers or clients are presenting, but the internal

Rodney MacInnes: 00:25:43

risks that you're maybe not aware of, and this is one of

Rodney MacInnes: 00:25:48

those big, big you don't know what. You don't know items and

Rodney MacInnes: 00:25:53

you know, interacting with your staff, looking at transactions,

Rodney MacInnes: 00:25:56

reviewing the data that's being produced, and things like that,

Rodney MacInnes: 00:26:00

will really help drill down into what may require a little more

Rodney MacInnes: 00:26:03

attention. That's a, that's

Greg Dent: 00:26:06

a, I mean, I that's a great way of phrasing. And I

Greg Dent: 00:26:10

think, you know, when I look at most of the people I talk with

Greg Dent: 00:26:14

within the real estate sector, the the two places where I can

Greg Dent: 00:26:18

almost always get people to say, Oh, well, maybe we aren't in a

Greg Dent: 00:26:22

great place. Is when I asked them, what would your How would

Greg Dent: 00:26:26

your agents know to make a other than low risk determination?

Greg Dent: 00:26:31

What criteria would they use? What what evaluative measures

Greg Dent: 00:26:34

would they have for that? And normally, the compliance officer

Greg Dent: 00:26:38

says to me, I don't know. I mean, if they're from a country

Greg Dent: 00:26:41

of of higher risk would be the only reason, and that's like,

Greg Dent: 00:26:44

the better ish answer. So I guess my my point on all of this

Greg Dent: 00:26:48

is, I think that that training piece that you're talking about

Greg Dent: 00:26:51

and and making sure that training piece is across the

Greg Dent: 00:26:55

sex, across the whole organization, so that you don't

Greg Dent: 00:26:58

have that problem child, because that's where, that's where your

Greg Dent: 00:27:01

business has a has a risk that you may not be aware of. It may

Greg Dent: 00:27:04

and you really don't want in your business. It doesn't

Rodney MacInnes: 00:27:08

even have to be a problem child like the other

Rodney MacInnes: 00:27:10

issue you look at is consistency. So where Rodney,

Rodney MacInnes: 00:27:14

the compliance nerd, says this is suspicious, but also do sales

Rodney MacInnes: 00:27:17

sometimes. So where I'm looking at a transaction, I say this is

Rodney MacInnes: 00:27:20

suspicious, and we file an STR on it, and Greg looks at a very,

Rodney MacInnes: 00:27:24

very similar situation and is like, this is fine, and moves

Rodney MacInnes: 00:27:28

forward and doesn't file an str. When FINTRAC comes in, they're

Rodney MacInnes: 00:27:31

going to say, Okay, why do you file on this customer, but not

Rodney MacInnes: 00:27:35

on this customer? Explain this to me, and that is a really,

Rodney MacInnes: 00:27:39

really difficult conversation to have. And so this is where you

Rodney MacInnes: 00:27:42

know, back to that training piece is extremely important for

Rodney MacInnes: 00:27:45

folks to understand those red flags that you're looking for,

Rodney MacInnes: 00:27:49

because if you're seeing similar red flags, and you decide to

Rodney MacInnes: 00:27:54

report on one, you should probably be reporting on the

Rodney MacInnes: 00:27:56

others. And so that's the other is like, if you've, if you've

Rodney MacInnes: 00:27:59

done some recent reporting, maybe as part of your ongoing

Rodney MacInnes: 00:28:03

monitoring. Let's go back through the last month, three

Rodney MacInnes: 00:28:05

months, six months, depending on how many transactions you're

Rodney MacInnes: 00:28:08

doing, and just like, double check to see if those red flags

Rodney MacInnes: 00:28:11

were present in any other of your files. Because from a

Rodney MacInnes: 00:28:15

record keeping perspective, you should have reasonably enough

Rodney MacInnes: 00:28:19

information to kind of look for those things, but also it's like

Rodney MacInnes: 00:28:22

an easier mind situation, that if FINTRAC calls, you're not

Rodney MacInnes: 00:28:26

wondering, oh no, was there one of those in the background that

Rodney MacInnes: 00:28:29

I missed? Yeah, which is always, you know, a looming fear as

Rodney MacInnes: 00:28:33

someone who's been in that position, staying on top of of

Rodney MacInnes: 00:28:38

the ongoing monitoring of the transaction that's going through

Rodney MacInnes: 00:28:40

and on the training with your staff will help calm you down

Rodney MacInnes: 00:28:44

when it comes to time for a fin track exam.

Greg Dent: 00:28:48

Yeah, lovely. Well, thank you so much for taking the

Greg Dent: 00:28:52

time. I've really appreciated the chat. I hope our listeners

Greg Dent: 00:28:55

will appreciate the the in depth thoughts around risks and the

Greg Dent: 00:29:01

the importance of creativity in determining risks and in

Greg Dent: 00:29:05

examining risk and examining your your business, I think, is

Greg Dent: 00:29:07

probably how I could best summarize this conversation. So

Greg Dent: 00:29:10

thank you so much for trusting your gut. Yeah,

Rodney MacInnes: 00:29:12

no problem. Thank you for having me.

Greg Dent: 00:29:14

Have a wonderful rest of your day.

Rodney MacInnes: 00:29:17

Yeah, you as well.