The Importance of Adverse Media in an AML Program: Protecting Your Business from Hidden Dangers

Hello, Zarha, welcome to The Know your compliance

podcast.

Thank you for having me.

Yeah, very, very excited to have this

conversation with you. We I want to introduce you a little bit,

give you a bit of a background. Give our guest a little bit of a

background as to who you are and why you're on our show today. So

I'll say that Zahra comes, joins, joined the really trusted

team about three and bit months ago now, and Zahra comes with a

bunch of different credentials and experience that was really

important for for the really trusted team. And one of the

main reasons we're really excited to have her join our

team some of Zara's previous work in the anti money

laundering space has been with one of the local credit unions

here and one of the local FinTech companies that are both,

I should say, for our guests, we're based in Vancouver,

actually, funnily enough, I realized this last night, Zahra

and I are On the minority of the really trusted team as being

local Vancouverites.

Yeah, it seems like, it seems most people live

outside of Vancouver, which is, which makes sense, which makes

sense well,

and not only are live outside of our from Vancouver,

like there's very few, there's, there's, there's, we're a

minority. It turns out we are a

minority. No, that's true. Whenever people ask

me where I'm from, and I say Vancouver, I'm usually, the

response is usually, no, no, no, no, no. I mean, when, when did

you move here? At what point did you

right? Yeah, yeah. So Zara's previous work has been as

an AML supervisor analyst, pick AML and add a title to it, and

we did the same thing to her. Zahra is our AML Operations

Manager. So, so there you go. So really, welcome to the podcast.

Happy to chat with you today. Sarah, yeah, awesome. Happy to

be here now. I wanted today to talk a little bit about adverse

media. It's something that's become topical within the real

estate sector, where we do most of our work right now, and it's

something that I'm increasingly having conversations about with

people even outside of the real estate sector, as being kind of

a really important piece of the puzzle. So why don't we start

very basic. Why don't you give me, like, a 32nd description for

people who may not have heard before, what is adverse media

and what does it do? Why is it important? I guess, yeah,

so adverse. I mean, if you look up adversing

Google, basically just the word negative, it's the idea. And

then media is any kind of articles or really anything

related to media, video, anything that's kind of online

that is potentially negative about somebody. And so whenever

we think of adverse media, we think of, you know, articles

that break on people who have committed crimes or whatever

that is. And so the practice of adverse media is just doing that

actual work, going and actually finding those articles to match

with the individuals that you're doing business with, and that's

adverse media, and that's

adverse media. So really it's and I guess in terms

of framing this for people new to the AML space, it's probably

the piece of the KYC that know your Well, for us, it's know

your compliance, but in that AML land, well, it's the Know Your

client regulations, and it's the way of getting a bit more of the

KYC information outside, from an outside source, from an external

source. Would that be?

Yes, that's absolutely correct, because

there's information that you obtain from whoever you're doing

business with that they voluntarily give you, and

totally fair if they find that that information is what they

want to give you, that's fair. There's very much outside

sources, which could include, say, a Twitter or x now, or

whatever it is that they might not necessarily think it should

be shared or or it just might not even come to mind, or

potentially they don't want to share it whatever it is. It

could be whatever. And so yes, it's absolutely just extra

information that you could get that is publicly available that

might impact how you do business with this individual

totally. So that's a great kind of built foundation

place to start. And I think there's a couple of things that

come to mind that are that some of our guests are probably going

to want us to delve into. So the first thing that I get pushed

back on occasionally is, well, I may enter blank here, whether

you're a realtor or a mortgage broker or a jewel dealer or

anything, I don't want to have to research my clients. Why

should that be my obligation? And I guess let's try and let's

try and trot through that a little bit, because I understand

the perspective, certainly, but

I think I do too. I mean, it's, and I've

heard this too, right? I I am this. I am not a, like, you

know, private investigator. I'm not a criminal investigator. I'm

not somebody that's supposed to be like, should I be that nosy,

essentially, should I be that nosy into my clients doing? The

reason why, unfortunately, you have to is, is because it's in

law, it's, it's literally in law, it's, it's part of our

laws. And because it's part of that laws, our laws, a lot of

entities, a lot of businesses, business types, are now having

these obligations where they do have to fulfill that. And the

example that I always give whenever somebody gives me push

back on this is, hey, at some point, when these laws came into

place, where people were depositing their funds into a

bank account, at some point, there was probably some pushback

where clients were not wanting to give all of that information

for just opening up a bank account because it's their money

at the end of the day. But at some point, enough bank

accounts. Sorry, enough banks, or whatever it is, the people

who are opening the banks had done it to the point where it

was normalized, and then consumers are now expecting

those questions. So if you don't get those questions that are

that nosy, you're probably wondering why this bank is not

asking you that, and it's probably a bit sketchy, and so

you should go to the bank next door. I guess my push to that

is, it's, it's relatively new, but at some point it won't be,

it'll be the total, the total expectation whenever somebody is

doing business with

you, yeah. And I mean, I think the the continuing

line there becomes, and I guess where I yeah, I mean the

continuing line. And I'm mostly steel Manning this argument, by

the way, I generally agree that I actually have a slightly

different view before I get down that path. I have a slightly

different perspective on it, which is, as a business, I don't

think most businesses want to conduct business with criminals,

whether you know there be that a human trafficking ring, a drug

smuggling ring, whatever it is I think, like, when I think about

my business, I wouldn't want it affiliated with all of that

stuff, and Not not out of like, mostly out of like. I just don't

think that that's something I want to be involved in in any

way, shape or form. And I guess, from a risk management point of

view, to me, there's actually a case to be made for businesses

doing this, just on that level alone, if we, if we strip away

the regulatory obligation, which there clearly is as well, by the

way, and you've made a great case for there. Now, of course,

the where I wanted, the the next conversation, though, about that

is, is this a slippery slope? Is it, at what point are we

intruding into our clients lives so much that it's an

unreasonable amount of of due diligence or an unreasonable

amount of investigation? Is where the next challenge comes

up frequently in these conversations,

yeah, and that's a really good question. I

mean, I think, I mean, yeah, it's a really good question. I

think that if there's precedence that other entities, other

businesses, are able to do it, then I think generally the

common stance is that you also can, and you also should,

because the wheel has been invented, and all you're doing

is just using the wheel truly, truly right? It's not, it's not

something that is completely, completely brand new. And so I

think that's the perspective. But you bring up something that

is interesting, because at some point it could get to that point

where it is, it is actually crossing that line. And I would

imagine that there would be enough pushback that it'll start

to claw back a little bit

interesting. That's a that's a interesting point that

I I'm not sure I'd consider the what the clawback looks like.

And I guess we're is certainly within the real estate sector.

We're still so new to adverse media. I had a conversation a

couple months ago with a managing broker who was very

proud to tell me that, you know, they do adverse media. They

check every now and then to make sure there's nothing being said

about their business in a bit negative

and unfair, though fair. Of course I would

if I wasn't, if I wasn't someone that was that was well versed in

anti money. Latter I also would that is literally the definition

of adverse media, which is negative, so good and so true.

But no, it is. Yeah, I do think that there's going to be some at

some point, because it is true, like the government is asking a

lot of businesses to do a lot of work because they can't handle

it. They can't do it themselves. So it is this one way of just

being able to safeguard, basically, the economy in

Canada, yeah, the

financial system of our country. Yes, yeah. Now, in

your experience, can you think of an example where adverse

media has has played a role? What do you have a good story

you could tell us about where adverse media has been really

kind of interesting?

Yeah? I mean, I, I want to use, I'll, I'll

talk about one. But I also want to use other ones that are not

as almost like, like big the big stories are fun and they're

juicy, but I think, yeah, they also can take away from the idea

that it does, it's just really commonplace sometimes. So, so

maybe, maybe I'll talk about two, but the first one is one

that is just really common. You already touched about it, which

is just trafficking in general. So whether that be sex

trafficking, the most recent one, actually today was a fin

track publication about migrant workers. And so human

trafficking, 100 100% the number of times that I and so yes, from

previous roles, I've done a lot of financial crime. And so I'm

looking through accounts and just making sure that, hey, is

there anything that's off, or any indicators for money

laundering? With, with the indicators that with, with, with

what you can see. Sometimes the picture is just not there to

complete what you think you might be seeing. And so there

was this one, one case where it was one person that we were able

to just do an adverse media and when we say do an adverse media

search, we just mean just basically going to Google or

Bing or defect or whatever, whatever browser use, and

literally just type their name, potentially with their city. And

things can come up absolutely and so it ended up being that

this person had actually been sex trafficked. So the

individual that I was looking at was one of the victims, but the

name in that article that was also noted was the person that

was actually trafficking that individual through that article,

we then went back, found that one account in our system that

we were doing business with, and it was, I think it was like, it

was like over 250 separate accounts that they had created

with different names and different aliases that money was

flowing in, in and out of all of those accounts where, then that

that ended up being 250 STRS just from that one adverse media

publication that we saw. So I guess, I guess. What I want to

say about that is that you might, you might think, Oh, hey,

you know I, I know my client, you know, I know the people that

they that they hang out around, whatever it is, but it there are

so many links that we actually don't really know, just just

because we know them in person, that there might be online that

you would have just never known. Had you not doing that, had you

not completed that search. And I

mean that that person hadn't told you that he was

human trafficking. That's odd. That's hard to believe that one

listed Carpenter, carpenter. He was a

carpet well.

And, you know, I think that's a really

illustrative example of why this stuff is important. Because I

think, you know, even, even the people who really don't want to

be captured by fin tracks, regs, and we talk with a lot of those

people on a regular basis in our business, even those people

would agree that they also don't want human trafficking to exist

In Canada like that is, I that's a pretty vanilla statement. I'd

like to think, and I hope so anyway, and, and I think the

perspective I've tried to take on it, and what I've tried to

tell people is, you know, if you can just by doing your job the

way you're supposed to be doing it help prevent just a little

bit of that. Doesn't that make it worth it? I think, like,

that's,

yeah, I mean, and that's exactly it. I mean,

do we want this person who has sex trafficked over 250 victims

to use their funds that they obtained during that time to

then buy a house? Right? I just don't. I just don't. Yeah, you

don't really feel right about that. And it has, it doesn't

have anything to do with, like, necessarily. Well, actually, it

does have a lot to do with ethics. I guess

it does quite a bit, yes, yeah, but, and it's okay, I

think again, it's one of those things that as a country, I

think we can all agree that that's not. I think if we were

to take a poll, you know, whether whatever political party

you're gonna vote for, yeah, I think most people would still

vote that they do not want sex trafficking to occur in Canada.

That's, I hope we would get somewhere in the 90% ish on that

one, yeah, there's always gonna be a few people. Who are you?

Well, those people are likely, those people

committing the crimes.

Hey, maybe this is a new adverse media technique we

could inform

to be made in criminals. That's for sure.

There

you go. So that's a really great dramatic example

that I think really highlights the power of the tool. Are there

some other kind of less dramatic ones you could think of that

would be worth kind of sharing and talking about?

Yeah, I think that the less kind of exciting

ones are are just related generally to fraud. And I want

to, I wanted to bring this one up, because I think similarly, I

guess it might not be as shiny, but it is also really important,

because once again, it just goes back into the people that are,

you know, that have clean money and that are trying to use these

services and pay for things. Things are more expensive,

generally, are harder to come by, because, unfortunately,

things are kind of blown out of proportion from the people that

have dirty money and have access to dirty money. And so when it,

when I say fraud, the one, the one example that I brought, or

that I was thinking of, was just a person who had gone from

corporation to corporation to Corporation, to Corporation,

filed for bankruptcy, filed for bankruptcy, and just through

this chain of kind of corporate filings, would basically commit

whatever various type of fraud it was. Filed for bankruptcy,

not not be held liable in any sort of way where they wouldn't

be able to just start a new corporation, and then continued

that chain. And so what was happening is, and I am talking

about, technically, a Ponzi scheme. This person was an

investment person, but as a say, as a realtor, if somebody comes

to you and they say, Hey, I've got this corporation, I've got

this business, this is the cash flow. I can show you the

statements like without doing a adverse media search. You might

never, ever know that this person who looks extremely

legitimate looks like they've had years and years of business.

This corporation might appear big because they might have

multiple employees. It might be completely illegitimate and the

victims are actually the people that are, unfortunately, people

that you don't know and who are having good faith in that one

individual. And so in this way, it's like they're able to

continually move their money in ways where the government's not

able to actually seize the funds and give it back to the victims.

And that is the kind of one that I think I see a lot, which, and

not specifically the Ponzi scheme, general types, different

types of fraud that that can be found in adverse media. But

aren't, as you know, flashy and massive, and there's no Netflix

documentary, well, there might be, but that'll be flashy

anyhow, too. Yeah, they'll

find a way to make it flashy. But I think that's a

really good example, actually. And the reason I really like

that example is because one of the things businesses don't want

to do is be involved in fraudulent activity, because

they might just be the victim of that fraud. And I guess, like,

if I think about the real estate sector, and where that might

come up is, if you're dealing with somebody who's buying a

home and their deposit check bounces for $100,000 the

brokerage might be the one on the hook. That's that's a real,

actual possibility. And so ignoring the like societal

benefit angle of adverse media, that's something that the

business who's doing the adverse media probably wants to know,

just for their own protection, let alone anything else. So

yeah, 100% Yeah, yeah, no, it's, it's

tough. But I mean, and that, I think, you know, this might

segue into different conversation, but that that kind

of goes into, okay, well, what are the brokerages able to do to

get their adverse media sorted? Well,

I think that's the natural next part of this

conversation. And I, you know, wanted to give the audience a

couple of good examples of why. Let's talk about the how and

what are the best practices out there. How are people doing

this? Are people doing this, and what does it look like?

I think you would be, you'd be a really good

person to speak about with regards to the real estate

sector, but at least I can maybe speak on other sectors that are

all, yeah, there's, there's generally one way of doing it,

which is very manual, which is just somebody sitting there at a

computer and just doing these searches every time a new client

comes in. There are various systems that people can pay for

that goes ahead and uses llms largely large language models to

be able to do that as well. There's various automations.

Those can get really expensive. Unfortunately, it's. It's and

literally just coming off of just certain quotes a few years

or, sorry, a few months ago, a lot of people will charge you $1

for every client that you want to run through some adverse

media. So it can be quite expensive. And those are, I

mean, those are really the two ways, unless, unless your

business is able to create a system at hand within the

business that's free, that manual is kind of the way to go.

Now, I just want to, because I think a bunch of our

real estate clients right now are probably going, Oh, it's

only $1 we can totally afford that. Oh, sorry, but, but I

think they're, they're missing a really important piece about

that puzzle. It's the ongoing nature of the whole thing. Yes,

so let's, let's delve into that for a second to because it's not

$1 per client, it's actually $1 per client per period,

yes, yes. Sorry, I should clarify. So when

I say $1 per client, what I mean, is so the expectations

that you're at least doing this, and, you know, people can do

this once a day, a check, once a day, people can do this once a

month. I would say probably once a month. And maybe I'd probably

say once a month is probably the longest you want to go. So say

you have, I don't know, 1000 clients, and you need to do that

every month for one year, right? The the dollars do it up, that's

$1,000 a month, and then that's $12,000 a year. And then

depends, of course, you're going to have more clients. So of

course, you're going to be wanting to add more to that. So

depending on how big you scale and how many clients you enter

into. And then on top of that, I should also note tintrec has

been their guidance has said that we do want to be doing this

for a five year period, from once you get a client to just

the end of the the relationship of the client. Even if you

haven't spoken to that client in five in four years, you still

need to be doing these adverse media searches for that time

period. So it's can become very hefty, very quickly. Good.

I just wanted to kind of come back because I think

otherwise, there's a bunch of real estate companies out there

who are like, Oh, dollar. I can afford that. Let's go. But what

you're actually saying is it's, it ends up being quick math, $60

a client, kind of minimum to do it properly, and that's if you

have a system that's built out so it's actually ends up being

far more, far, far, far more. Yeah, no. And I think to the

question you raised at the beginning, my experience in the

real estate sector would tell me that very, very, very few

brokerages have any sort of a adverse media concept at all at

this point. And certainly that's that's one of the reasons that

we felt it was important to start to build that, that that

segment of our capabilities, for our for our clients, on the fin

track, express, part of things as you as you well know. So,

yeah. Okay, so I guess I wanted to leave we've kind of presented

the the what it is, and the the why it's important, and the how

to do it, side of things. Is there any other Is there

anything about the future of adverse media, or anything that

we haven't talked about that you think we we want to leave the

audience with, yeah, yeah.

I think, I think one thing that I would

love to just quickly touch on is the idea that, I think a lot of

the times when people are starting to do adverse media

searches, they can feel overwhelmed, rightly so about

what crimes are actually ones that that are maybe applicable

to their brokerage or applicable to their practice. Yeah. And

this, you know, I, my very common kind of example is that

in every different job that I've been in, every different

industry that I've been in, everybody takes a different

stance on, say, for example, the crime of first degree murder,

where, which, which is, I think, a really good one, because, of

course, nobody likes murder. Nobody wants murder. It's

terrible. I think, I think, once again, no matter what side of

the political spectrum you're on, you can generally agree that

that's bad. But is this necessarily something that is

related to money laundering or terrorist financing associated

to your business's transactions and practices. Some people will

err on the side of caution and say, yes, absolutely, I have

this is a violent crime. You know that the some people will

say, No, actually, and, and finally, I'm actually on that,

on on that kind of side where I think that there's a lot of gray

and a lot of crimes, yeah? So yeah, I wanted to bring that up

because I know that people can feel overwhelmed with what

they're looking at and if it's something that they should file

on.

Yeah. No, that's a really good point, actually, and

I'm glad you raised it, because, yeah, you know the the murder

for hire? Well, yes, that's. Not might be money laundering, but,

but how do you differentiate that? And how do you kind of

figure that out? And that's where really getting the back.

And I'm going to tell you that the Hitman probably doesn't

identify themselves to you in their occupation as being a hit

man, unless you have access to the dark web and

you're able to look up their name.

Yeah. That's, that's a whole new level of adverse

searching, going, going to the dark web like it. Yeah,

that's fun too. That that, that's, that's really

interesting. It's a lawless land

that's awesome, lovely. Well, thank you so much

for for coming on today. Sorry. It's been really a lovely

conversation, and I hope that our audience will get something

out of it. And yeah, thank you. And I look forward to chatting

you at some point in the future. Yeah,

no, thanks for having me. And yeah, chat later.

Take care. Bye, great. You.