The Danger From Within: Protecting Your Business From Internal AML Risks | 016

Unknown: 00:00:00

Alright, welcome to another episode of the Know Your Compliance podcast. Now, today's a little bit different. You'll notice that I'm here by myself. And the reason I'm here by myself is because today's topic is a little wonky, and I couldn't figure out who actually wanted to talk to me about this. So it's a little uncomfortable. I'm going to title this episode the danger from within. Now, when I started in anti money laundering, if you had asked me if I thought agents were ever involved in the laundering of the money, I would have naively said no, and to for the record, I don't believe that there's like, tons of agents or brokers out there laundering money on purpose. And I actually don't believe that there's tons of agents or brokers even unwittingly helping an assist in laundering money. And I think there's some, for sure, but I think we're getting better as a sector. But that's not what I'm here to talk about today.

Unknown: 00:01:01

What I'm here to talk about is the people who knowingly become real estate agents or mortgage brokerage mortgage brokers to enable themselves to launder money, or to help with laundering money, specifically. And what I really want to drill down on a little bit at least, is what you as a compliance officer and a business owner, can do to make sure that that's not you. All right, let's dig into this a little bit, because this one's tough. There's the reality is, as a compliance officer, you rely on your frontline staff and the information that your frontline staff are transmitting back to you to have a complaint of compliance program. And by definition, if the people involved in the laundering of the money are the ones who your front or your frontline staff are, it's really hard to catch them, because they're going to not tell you that, funnily enough, now here's the tough part about all this. If you're listening to this and you're thinking, holy goodness, this can't possibly be me. That's always going to feel like that, because on some level, the people who work in your business, the the agents you've recruited, the mortgage brokers you've recruited, they work in your business because you've built a relationship with them, and you know who they are, and you have a sense of who they are, and you are thinking to yourself, it's absolutely not possible for them to be the ones laundering on the money.

Unknown: 00:02:35

And I'm here to tell you that that simply isn't true. Unfortunately, that simply isn't true. And look, I don't think this is a massive problem. The reality of our sectors are that they're regulated. And to become a real estate agent or mortgage broker, there's a certain level of criteria. A criminal record check frequently needs to be provided there's attestations around criminal record checks, so the odds are lowered, but they're not zero. And as with all things around anti money laundering, if we take a risk based approach to this, we have to acknowledge that there is a possibility that somebody, where somebody at your business, somebody working in your business, who you've recruited, trained, and you've become built a relationship with might be actually using your business to launder money, and you have an legal and ethical obligation to stop that. So what does that do? How do you do that? What does that look like? I want to give you a couple of quick tips on this one. I don't think this is going to be a super long episode, but I do want to talk about it a little bit. So the number one control measure you're going to have applied is screening and recruiting at the beginning. So who are you recruiting? What are your recruiting methods? Is it just willy nilly? Anybody? Are you only poaching from people who have an established track record of doing a lot of business. Does that help?

Unknown: 00:04:06

Maybe it does. Maybe it doesn't. There's a whole conversation to be had about that. As I already mentioned, and should be identified in your policy, procedure manual, there's already likely a criminal record check on file with the regulatory authority. So that's in control measure that helps you should be talking in your job descriptions or your postings or your recruitment ads or in your recruitment conversations, even about the importance of having some level of anti money them. Don't go too deep on. It's like people don't love to hear it, but it is a part of what we should be doing. And then so, so that's the front end. But then what are you doing in the interval? How are you monitoring to know whether you do have a bad apple in your brokerage? And it's not always going to be obvious. We had a situation recently whereby the only way it came up was because of a. Really well done effectiveness review that showed a pattern of behaviors. That's the only way the individual transactions looked perfectly reasonable. The agent was producing at a reasonable volume, nothing bonkers, nothing terrible. The deals themselves looked fine, but it was only when they were taken on Agra that we thought, oh, this might be a problem, and we need to look into this further. And as soon, just as soon as we looked into it further, we realized that there was a problem, that this was likely, and we don't know for sure, by the way, but we were certainly at the reasonable grounds to suspect that money laundering was happening here, and a specific transaction report had to be filed.

Unknown: 00:05:47

So I want to really double click on that a little bit. Transaction monitoring is important, and this is one of the reasons transaction monitoring is important. It's only when you start to look at the aggregate of your transactions, that you're going to notice patterns of behaviors, either within your business, or, in some cases, within your one agent or one broker. What else can you do? Well, adverse media searching. Do you currently have a program on adverse media, searching your own people. Some do. I know of some brokerages that that's something they do on an irregular basis. I've heard so far as some age or some some businesses will actually set up a Google search, an automatic Google search, on everybody who works in the business, so as soon as there's a news article about that person, pops up. It's not a terrible idea. Is that something you're doing, maybe it's something you should be okay. So if you're doing enhanced transaction monitoring, you're actually paying attention to your transactions, and you're noticing the patterns that might help. But what else is there? The adverse media, that's a great other tool. What else could you be doing? Well, honestly, training. And you know, so many of my answers always come back to training, but training is helpful.

Unknown: 00:07:15

And here's how training is helpful. Obviously, you're not going to train the agent out of money laundering. That's why they started. But training your conveyancing staff, training your reception desk, training the people who interact with this person on indicators, maybe that's helpful. That's somewhere that you have a fresh set of eyes who have a different perspective on their operations than you do, and they might be able to alert you to something long before that effectiveness, you enhance transaction monitoring peaks kicks in. So that's a really important thing, and then ultimately, the end of the day, building relationships with people and actually understanding who they are and knowing that what else they do in their lives, if I think back to one of the situations I'm thinking about, and I don't mean this to throw the manager under the bus here, but the manager might, and this is a pretty big might, so I want to take this with a big grain of salt, but might have been able to identify that there was some money laundering based on the associations that the person had that were pretty clearly obvious as you got to know the know the person. So ultimately, today's episode is the wolf amongst the sheep and the danger that lies within. And I want to really cause you, as a compliance officer in your business to think about what systems do you have that would cause you to know that somebody who works for you was actually involved in and enabling money laundering and was aware of it. Whole different set of things to consider and to think about. I do hope that this has been a helpful episode. I look forward to chatting again in the future. Take care.