Navigating FINTRAC Compliance in the Mortgage Sector

All right, welcome to another episode of The Know Your

Compliance podcast. Thank you so much for joining us. Today. I'm

going to be interviewing Cagatay Sen from the really trusted

team. He's our FINTRAC Express program lead, and Taylor

Cameron, who's our manager of business development. And the

topic I wanted to bat around today is something that we

actually are uniquely positioned to talk about, and that's

specifically how things are going in the mortgage sector in

the first three ish weeks now, depending on when you're

listening to this of their quote coverage under the fin track,

regs. So let me kind of give us give our audience a bit of

framing here, Taylor spends most of her day most weeks, chatting

with potential clients, people who have realized that they need

to know more about FINTRAC. They reporting entities across both

the real estate and the mortgage sectors primarily, and develops

some interesting insights around their beliefs at that stage,

chat. I spends most of his life chatting with brokerages who

have chosen to hire us, and gets really granular on their fin

track compliance policies. And so what I was hoping to bring to

our audience today is the insights that Taylor and Chad I

have brought or have gleaned through the last three Well,

actually, we've been we launched this kind of mostly about a

month ago. Now today's date is November 1, but we launched. So

we launched this the big roughly the beginning of October, where

we really started talking with a lot of brokerages specific

around their policies. So with all of that long intro, let's

get into it. Taylor, let's start with you. Can you give me three,

four, maybe five, things that you've observed as the feedback

that mortgage brokerages, the designated individuals,

principal brokers, depending on how you want to call them, what

they're seeing as the challenges in their fin track compliance

programs?

Yeah, that's interesting. I mean, I don't

even know if we can say that they're seeing it, or rather,

what I'm seeing, because I don't. I think we, I think we've

got two populations. I think we've got the the population

that doesn't know what they don't know. And then as as we're

moving through this, we have the population that knows there's a

lot they don't know. So I feel like some of the bigger things,

I think, that I'm seeing just as a general as a whole, is that we

have a lot of individual brokers going in and finding their own

IDD software that works for them individually, and they're not

referencing back to our Di's and our principal brokers to find

out what is actually indicated as what we're using in our

policy and procedure manuals. So that's a big piece. I feel like

a lot of we've got a lot of designated individuals waiting

for templates to come from associations. And, I mean, we

can certainly dive into that topic a little more. Yeah, I

think

that's worth coming back to for sure. Yeah, yeah,

yeah.

What are some other things here? And I think

the other common thread is that we are hearing, I'm a small

brokerage. All of my clients are repeat. They're all low risk.

I've dealt with them for years and or that I'm so small that,

you know what I really, you know, I don't really need to do.

This is another unique and interesting perspective in the

industry. So, I mean, those are some of the things that come top

of mind.

Okay, so the overarching things I think are,

are generally a lack of, perhaps frontline staff seeing IDV as

being the entirety or the bulk of their obligations or and

whether that's true or not, as a conversation we'll have in a

second, but, but really being focused on that IDV part di is

thinking that Maybe templates are going to solve this for

them, and then going back to the frontline staff. Well, actually,

this is kind of where frontline staff and Di's need to get on

the same page. Is what is a low risk individual and what is risk

and how is risk identified?

Okay? And it's not a tech box determination,

right? Yeah. Okay. Yeah, yeah,

yeah, no, and we'll sorry. We'll come back to that.

I want to open up the conversation to chat. I see what

he's seeing on the other side, people who have chosen to engage

with us for either of the two reasons Taylor has identified,

maybe they know they have a problem, they need some help, or

they don't know they have a problem, but they need some

help. What are you seeing in those in those meetings, when

you're doing that consult, when you're creating the policy

manuals, where are you finding the the real challenges that the

eyes and brokerages are facing?

Right? Yes, so I've had several meetings now, and

one of the issues. That I've seen pop up regularly is that

these guys, up until now, have been used to having the lenders

do all the pretty much, you know, burdensome work of ID

verification, etc, ensuring that the proper controls were in

place to properly identify the clients things like that, and

they never touched based on any client funds, either. They see

they do not do that. So one of the issues now that with the

financial competition coming to play as of october 11, is that

they are a bit nervous as to how they're going to go through this

process, because they are the front line now to do this, I

mean, the assurance that I try to give them naturally is that

we as really trusted, are here to assist them along the way

from our systems that are going to be in place for the ID

verification, etc. And that's where Taylor, I agree with you,

some have already started to, in the past, utilize some IDV third

party applications, but I always assist them that you know you

because the question pops up sometimes that they also asked

whether they need another application for this purpose. I

said you don't, because when you sign up for our program, you're

getting full coverage as to the systematic capabilities of the

app, etc. So all the ID verification, remote ID

verification applications are going to be in place, and that's

going to be covered in respect of your sanction is controlled,

peppers, controls, etc. We're going to ensure that you know

your database is going to be covered respect your high risk

of monitoring obligations, your adverse media control, which

will come into play, which, you know, really gives them a good

insight into what we can do for them, etc. And the training

aspect is very exciting for them, I see, especially they

want to have this as soon as possible training, because they

want to create that much shift in mindset for their

underwriters, their you know, associates, etc. We're going to

be dealing with the client information, the files, etc.

They want to understand what those indicators are going to

be. How do you risk great clients? Especially this is

something that all. I also underline many times that it's

okay to risking your clients as high as clients, because if you

don't in the future, and you have a possible field track

examination coming through, and they identify something, where

you they go in the field that should have been read as a high

risk client, then you're going to be in trouble. So I am going,

I'm reiterating throughout these meetings that risk rating your

clients is high risk is okay, and it's important for you. And

I also give them the example that you know, there's some

perception that if you risk a high risk client, then somehow

regulator authorities are going to know about this, etc, and

they're going to flag their clients and actually may pick,

carry out further orders and things like that. Is not the

case in terms, of course, but it is to ensure that, you know, you

have the proper controls in place to keep that business

relationship, you know, and under taps throughout that time.

Yeah.

No, that's interesting. So if I can unpack

what, what I've just heard you say that I think was really

interesting is kind of two pieces there. One, a lot of

these mortgage entities were already aware of some of the

anti money laundering stuff because of their upstream

relationships, and had been relying on those upstream

relationships. Well, relying is too strong word. Actually, just

knew they could ignore that part of the world because of those

upstream relationships, and they were right and there. But the

result of that, and this is where I'm particularly

interested to hear this, is they're now they realize they

have these obligations. They're taking them very seriously.

Their excitement around training is amazing and awesome, and so

wonderful to see is very refreshing, in fact. But they

they're not necessarily understanding all of the the

specific part around this risk, risk rating clients, and that's

something Taylor touched on as well. This this challenge that

frontline staff in particular have around appropriately risk

rating clients, and realizing that that's not a bad thing, and

realizing that that's actually what you want, and and realizing

that just because you know them doesn't mean they're low risk,

which is something you know, we've been we've been struggling

with as a company, with our with our real estate brokerages for

years. In fact, it's not an uncommon conversation to be

having. In fact, I had this conversation the beginning of

this week when I was presenting one of our brokerage partners

where that's exactly what the agent said, and I had to walk

them through how the flaws in their thinking on that. So no,

that's interesting, and really kind of appreciate the feedback

on that. So let's pick through. Let's start at the beginning.

There's kind of four or five areas there that I've heard

everybody kind of talk about. So let's talk about this IDV thing.

Taylor, you brought this up as as something that we're seeing

kind of a fragmented use of IDV solutions is perhaps the

language there and chat. I You brought this up as you know,

what other programs are people going to have to use? So what's

the like? I mean, obviously I know the answer to this, but I

don't want to just battle on Chad. I What is your view?

You're the you're the fin track program expert, you guys, you're

the one doing the consults. Is it okay to be using various IDV

solutions? Do? Is that what we want to encourage? We want to

discourage that. What would your view be on that?

Well, I mean, as really trusted, we're providing

a, you know, turnkey solution in respect to the establishing the

compliance program, and which is not necessarily just, you know,

preparing the documentation and placing in a folder and handing

it over to the client. We're ensuring that with the

systematic tools in place as well. Hence the IDV solution

which we're providing, we're giving a complete program and

where they're able to utilize the app with the convenience of

having available on their forms, etc, and ensuring that, you

know, they trust us in the properly you know, carrying out

those controls in the background for our systematic databases,

and also the added the you know, comfort of carrying out the

sanctions control Purpose controls. Which have we in place

as well, etc. So I definitely underlie the message when I

really think, when I received a question like this, is, you

don't need any other solution. You might have done so in the

past for any other purpose, just to have the completed some of

your mortgage loan records. Perhaps, I don't know that would

have been your own choice at that time, but as you're signing

with really trusted and you're signing for the fin track

Express program, you have to be trusting us and ensuring that

you know we do the proper thing for you guys, which is the

documentation, the training modules, the whole IRT app

solution, which we provide and plus, on the other hand, for

your high risk clients, the address media controls and

monitoring tools that we provide for you in a monthly basis, etc.

Plus, I also underlined the fact that, for example, in a possible

future control examination when, if and when they receive such

requests for information in the form of an E car, a podcast, a

subject we covered in the past? Yeah, we are always here to

assist them as well, so that they are assured that you know

they're properly discussing those questions, so that Finch

doesn't necessarily need to go into any further detail, or

might actually leave it at that at that point.

Yeah, so what I'm hearing you say, and I think I'm

going to bring Taylor into this in a second, but what I'm

hearing you say is that the the importance of having IDV is

actually just a small part of that frontline staff, and the

real kind of key about what we're offering is, in fact, the

integration of all of the thinking into one platform in a

meaningful way. Taylor, is that ringing true to the people

you're talking with? Is that? Is that what you're hearing, what

are the benefits that you're seeing that maybe chat I hasn't

touched on and or what are the drawbacks to that approach? I

suppose? Yeah, I

think really important to talk about the

drawbacks too. So I agree with everything that Chad has said,

but one of the drawbacks in using multiple streams of an IDV

is that, how are you then providing consistency in the way

that we are doing risk determinations? If we're using

two different programs, they might be, you know, the value

systems might be different or off. So trying to get a

continuity across those systems and then being able to document

it, I think you're going to run into a big challenge when it

comes to an audit and the questions that are going to be

asked of you, and how these two different groups, if there's two

different softwares, how these two different groups are aligned

in doing those risk determinations. So I'd say

that's a challenge. And again, I just think it comes back to

education. I don't think that we are fully grasping yet in the

mortgage industry, what FINTRAC is really about, and that there

has to be a continuity across all of your pillars, that

whatever you have done in terms of risk determinations is how

and tied into, sorry, you want to, I can see, well, I

just want to jump in, because you mentioned pillars,

and I some of our pillars, and I some of our audience may or may

not be familiar with the concept. So let's just unpack

that for a second, if you would just just walk people through

that the five what

we call the five pillars. Yeah, so you know the

five pillars and what a program should entail as a documented

compliance officer, kind of easy, but there are some

specific traits and skills that you. Going to want to see in the

person that you put forward is that, because there has to be

enough AML knowledge to be able to properly roll that out and a

few other things. And we've got a great training program on that

and webinar that you can join. And don't know when the next

date is Greg, but sure, we'll roll that out again. You need to

have a documented policy and procedure segment, documenting

everything that you say you're going to do, and then procedures

allocated to each of those two areas. So we have two in our

program. We have two procedure manuals. One is going to be for

our front facing licensees. Front facing, I mean client

facing licensees. And then one we have on the back end, which

supports all of our compliance or admin staff on the back end,

any anyone touching administrative documentation for

vendor Act. The other pillar then becomes training. And then

we have the effectiveness review, which comes around every

two years. I think I've hit that right. We've got the compliance

officer your documented policies, training,

effectiveness review and risk. No,

there you go. Yeah, that's the one you're missing.

What you've just walked people through, in fact, is crucial to

a business's opera, ability to have a complete compliance

program, right? And, and what you've just walked people

through, whether, whether, and it's subtle, but so let me kind

of delve into this exactly. Touches on this, next two things

that you had identified in the opening to this, which was a

templates don't really work and or create a bunch of additional

challenges. And the the other thing you had talked about was

this idea of of risk rating your clients, and the importance of

risk rating your clients. And so what you've just highlighted for

me is is both of those things, because, on the one hand, it's

basically impossible for you to have a consistent risk rating

process if you're using several different methods of creating

information records, client information records, and now I

should put a bit of an asterisk in there. Our view of client

information records are that IDV are a small part, or are a part

of that client information record, and it's important to do

your IDE verification properly, no question. But we've bundled

it into the rest of the client information record, because

that's generally how people are engaging with their clients. And

the beauty of that is, if I can go back to the other thing

you've said, which is the templates and the importance of

weaving it all together is that when we weave that together

operationally, we can then have a very clear answer to what is a

low risk client. And you just can't do that. If you're picking

somebody else's manual up and using it as your own, it just

doesn't work. And I think that's the, that's the crux of one of

the things that I've heard, like both of you say that that is

the, and we spend a lot of time talking about this as a business

with a lot of different people, is the specificity of your

compliance program for your business is really, really

important. Yeah,

and Greg, to add to that point, I am very happy that

we have a lot of buy in from these mortgage brokers and

companies, etc, in respect of the development of the

compliance program. Of course, the first step being that when I

attain the appropriate information regarding their

business and further insight into the risk, etc. I am

responsible for the establishment of the

documentation. And when I share the draft manuals, it's not just

merely, oh, thank you. Let's move on. Kind of thing they want

to ensure that you know it properly reflects the ongoing

business model that they have. Ensure that you know that the

all the information which is in the documentation is properly

and easily understood by the staff, we're going to be able to

revert to that when the time comes, etc. So I'm very happy

that there, these guys are putting a lot of buy in into the

development of these documentation just not merely

accepting them because it's a requirement of the French leg

obligations kind of thing? Yeah,

yeah. No, it is. And that's, that's one of the things

I first, my first bit of feedback to you was that you're

absolutely right. Like it's been, it's been really nice to

see how and I think it comes from being in a business where

there was already a culture of compliance. Compliance as a

concept isn't new to the mortgage sector. There are

there's lots of check boxes and signed forms and things that

need to happen for you to be able to process a mortgage deal.

And I think that is more true for mortgage entities. Then it

historically has been, necessarily, for the real estate

sector. And we could, we could talk about that, and that's a

whole host of problems on the real estate side of things. So

kind of what's got side of the scope of today's conversation.

But certainly, and I think what you've just highlighted for me

is exactly that, that like these are businesses that really do

want to have a good compliance posture on this stuff. They

really don't want to be helping criminals launder money for lack

of like, if we can go back to the brass acts of what this is

all about, they take that obligation seriously, I think is

what I'm hearing you say. Is that reflected in the

conversations you're having as well? Taylor,

yeah. I mean, again, going back to one of the

comments I made earlier, that we have this, this population that

don't really know what they don't know yet. And then we have

the ones that know that there are things that they don't know.

And it's, it's the ones that don't know what they don't know

that I have the most fear for. You know, not completely

understanding what it is that we're trying to do, not having

enough knowledge to be able to understand the complexities of

it and putting a full and complete program together. And

then I think once we give them a little education, they go, Oh,

crap, there's a lot more to this than we actually initially

realized. And I think that's the place that, that's what we

should be aiming for right now, is to be able to educate this

market, or sort of this industry, to really allow them

to understand what it is that we're doing here and the way

that we need to be doing it, as well as the wise like, I mean,

it was, I had a I had a consult just The other day, who said, I

only do repeat business. Been doing this a long time. Further

along into the conversation we were talking about I had shared,

I've been a realtor for 16 years, and shared how once I've

been with really trusted almost a year now, but coming out of

the training that we provided, I look back on my career and was

like, Holy crap. There's at least a half dozen individuals

or clients that should have been marked as something more than a

low risk and including a suspicious transaction. And he's

like, You know what? Now that you say that I did have this one

incident where somebody, it was a part of a drug cartel,

somebody was knocked off. And the the remaining partners in

this business setup came to me and and, and I'm like, did you

ever like, Did you do anything with that information? He's

like, No, I was scared. And I you know. But the point is, is

that this conversation started with, I know all of my clients,

we are all risk going to they had somebody that was knocked

off. I'm like, okay, need I say more? So

I would suggest to you that there will be a

slightly higher level of risk in this transaction, and you became

aware of it at some point in time. Whether that was before or

after, the deal is somewhat irrelevant. You still had some

sort of ongoing obligation here. So,

yeah, so, I mean, it's been interesting, and

I think if I can just touch on this, because I have, I've have

such passion about this, is that we have to remember this is

called money laundering, for a reason. This is the people that

we are dealing with. This has gone through several channels.

We're not dealing with the head of a cartel. We it's gone

through several channels before. We are front facing with whoever

it is that individual is. They're there to put down our

defenses. They're there to be likable and really not want us

to dive in and want us to believe the best in them. That's

the whole purpose. So we can't go blindly into this and just

say, really like them, you know that you know nothing we need to

do the due diligence. We need to do that little extra bit of

questioning and looking into this to make sure that we're not

on, you know, we're not offside on on what they are trying to

accomplish.

Now you've just said we need to do this, and I

completely agree with you, but some portion of the audience

always says, right? But that's not my job. I'm not a police

officer. How? How do each of you I have one response that I hope

that somebody would say, but what would your answers be to

that? Maybe chat. I do you want to take a crack at that and give

us your thoughts on that.

Well, this is, yeah, indeed, something that has

come across, perhaps mostly in the real estate council meetings

I had naturally. But I like to give this as well and just

basically saying that you may feel that you're doing the work

of the work of the regulatory authorities, etc. But I was

telling that you know you are providing basically valuable

intelligence information, which may be only one piece of the

puzzle, but when you fulfill your obligation, especially in

regards to something unusual, especially. Services, and you're

submitting STR defense, right? That is very valuable

information, which may, in the end, end up at the hands of the

law enforcement agencies, etc, and they may bring down the all

criminal gang, etc, things like that. So everybody has their

proper role in respect of this process. Yes, it may be a burden

just doing the additional control here and there, etc. But

I mean, it is not something that they have to feel like they're

doing alone, especially with the French work expense program that

they signed up for. We were trusted. We have a whole support

test, which is backing up their whole day to day activities.

They just have to give us a call or send an email, and we always

available to always provide that legislative guidance,

elaboration as to what they have to do. They're not alone. It's

something new for them. They don't necessarily feel like they

have to do it at first instance, but this is what I said one day,

that should shift the mindset happens. And that will happen

with the day to day experiences, the training, awareness, etc.

Things will be built up, etc. And they will then feel more

comfortable that they have to be doing this, etc, and they want

to be doing this, and they will be benefiting the whole system

in general, in that regard.

Lovely. And I completely buy into that part of

things. And I think it's really important to call out that good

compliance is actually just good business. I mean, as a business,

I don't want to be working with a criminal for all sorts of

reasons, reputational risk, fraud risk increases. Like they

just the effort. And I guess here's the like from a from I

think there's, like, some obvious, really good to society

parts of things, and you've just kind of really well elaborated

on that, in fact. But I think beyond that, just like, Let's go

really selfish for a second. I'm running a business. It costs me

money when I spend a bunch of time working with somebody who

ends up being fraudulent and I therefore don't get paid, or end

up getting dragged into a lawsuit, or getting up get out,

being investigated by somebody having a production order,

having to spend the time to deal with the production order before

I even get to the reputational risk of being the guy who gets

published in the newspaper as the one who was involved in the

drug trafficking ring and all those things. So there's,

there's both, I think, a really good to society, part of things

that that just, well, look, you have an obligation, and so you

might as well. But also, from a good business point of view, it

is insane to me that a reporting entity would willfully choose to

not put into in place some form of safeguards to protect

themselves against all of the elements of fraud that might be

perpetrated within their business otherwise. So I think

there's kind of the both sides of that, to me, are really

powerful. I'm looking at the clock. Taylor, you look like

you've got something you want to wrap up. Go ahead. Yeah, and I

would

just wanted to say, you know, we it is like

chat. I said it is a piece of a puzzle. So when we have, you

know, the banking system doing a report on somebody, and then,

you know, the conversations are having with a bank versus the

conversations clients are having with me as a realtor, when I'm

showing a property, everything is really relaxed. Their guard

is down. Is then a different conversation that they're having

with a mortgage broker, and it is a piece of a puzzle. And I

think we also have these two thoughts that, you know what,

when we report something, it goes into a dark void, and we

never know anything that happens. And then we have the

other school of thought that is, oh, my God, I'm gonna risk

somebody as high or assessment as a high risk, and you know,

they're, you know, CIA is gonna come banging on their door and,

you know, tear apart their home. And the reality is, is that we

are not going to know. We're not always going to know the impact

that we have. You know, Greg and I, you and I have traveled a lot

in the in September, when we sat at tables and rubbed shoulders

with a lot of people from chinchak, and their ability to

disclose a lot of information is also withheld, so similar to, if

we have witnessed an accident and and we take somebody and

drop them off at a hospital, we are not privileged to their

medical well being after we drop them off, but we have to know

that we had an impact. And so I think that's just, I just wanted

to end on that note, that we all have a piece of the puzzle to

create and build and and we should all take it seriously and

and that we are doing something for the betterment of our, of

all of us,

that's a really positive way to end this. So

thank you for that. I love it. That's terrific. All right,

guys. Well, thank you very much. Taylor, thank you. Thank you

very much. Chant, I really appreciate you both joining me

and having this conversation. I do hope that for our listening

audience, you'll be able to take away some thoughts as to if

you're a mortgage entity listening to this, I hope you've

you're considering what we've said from your point of view.

Um. Um and and you know, if any of what what we've said rings

true as challenges you might be facing, give us a shout. We're

happy to help. That's that's certainly what we do. If you're

looking at this, if you're not a mortgage entity and you're

you've listened this far, well, thank you for joining us. I hope

that we've managed to to give you some insight into it, a

different sector of the world, and managed to help you

understand how other people are grappling with their reporting

obligations, as it were. Thank you very much. Folks. Have a

wonderful day.

Thanks everyone.