On October 18th, members of the Securefact Financial Crime Risk Management team spent some time at the 2016 CMSBA Fall Conference & Training Session in Toronto. The comprehensive event agenda included featured topic sessions on some of the most serious challenges facing Canadian MSB’s, including human trafficking, de-risking, and recognizing suspicious behaviour.

Securefact’s Senior Advisor, Financial Crime Risk Management, Moh Datoo participated in a spotlight session outlining the importance of strong compliance-based operational frameworks to mitigate financial crimes risk and better manage relationships with financial institutions and regulators. His presentation: How to Strengthen Your Bank Relationships, Improve KYC and Comply with FINTRAC is below and also here.


2016 Canadian MSB Association Partner Spotlight from Securefact

Moh’s overall thoughts on the event, featured topics, and Securefact’s solution mix for Money Service Businesses in Canada were explored in an interview following the event:

Moh Datoo: Canadian MSB Association 2016 Event Wrap-Up

Audio Highlights:

  • The financial services industry, especially the banking industry, can help limit human trafficking here in Canada and around the world.
  • Worldwide, banks are de-risking, and MSB’s need to ensure that they are not viewed as high risk and costly to monitor for non-compliance.
  • Less developed nations, whose populations lack access to accredited financial institutions rely heavily on MSB services, sometimes to survive.  Their removal will encourage the rise of unregulated shadow banking systems.
  • MSB’s are moving towards internet solutions and will need to incorporate solutions to insure that online customers are authenticated via FINTRAC’s most recent regulations.

For detailed information on where MSB’s can fail under the latest FINTRAC Anti-Money Laundering Compliance requirements, download our Briefing Paper specifically written for Money Service Businesses.

Audio Transcript:

Chris Herbert:    Hi, I’m here with Moh Datoo who is the Senior Adviser, Financial Crime Risk Management for Securefact. We’re going to talk a little bit about the Canadian MSB Association’s Fall Conference & Training event that took place on October 18th. Moh, you were there as representing Securefact as a sponsor. I just wanted to get your sense of what you thought about the event. General thoughts on the event and key topics that were covered.

Moh Datoo: Yes, thanks for having me. I want to first congratulate Michael Smith and Carinta Mannarelli, the co-chairmen, the Canadian MSB Association, for a fabulous event. I think it was a very successful event with great attendance from people from a wide spectrum of the MSB industry in Canada, as well as abroad. They had an excellent panel of lawyers, accountants and regulatory experts providing great insight into the challenges facing the industry.

Chris Herbert:    Great. Were there any specific topics that were covered that jumped out at you, specifically, at the event?

Moh Datoo:  I think a lot of thought seems to have been put into the content of the conference. There were very interesting sessions on the recent regulatory updates in financial crime here in Canada. I had a very interesting session with a compliance expert, from one of the large banks on what they see are the way MSB’s need to enhance their compliance regimes. As well, there was interesting topics on how to recognize suspicious transaction and suspicious behaviors. They also invited somebody who had experienced human trafficking and they shared her story. What was really interesting is how the financial services industry, especially the banking industry, can help limit the money trafficking here in Canada. I think it was really, really exciting, very informative for everybody.

Chris Herbert:    An interesting link between MSB’s and the financial services industries and human trafficking, isn’t there?

Moh Datoo:  Yes. Now I think human trafficking is a huge issue, not just in Canada but abroad. I think the only way to deal with this issue is to stop the money flow. Because banks play such a key intermediary role, it is really encouraging to see banks have taken an extra step of working together to reduce the risk of money laundering through human trafficking. The MSB’s especially would play a huge role in that, in the way they can monitor transactions done by money traffickers.

Chris Herbert:    I know there was a key area of concern for the attending MSB’s, who have to be a little bit more stringent, or maybe a lot more stringent, when it comes to anti-money laundering requirements. Why is that? What’s the risk to MSB’s at this point in time, in terms of not complying with regulatory regimes in Canada?

Moh Datoo:  I think MSB’s are going through a very difficult period of time. The financial institutions, the banks that MSB’s rely on to carry on the day-to-day operations, are closing their accounts. This phenomenon is just not happening here in Canada, but very much so in the United States, in Europe, as well as in Australia. Banks talk about this concept called de-risking. What they’re saying is that it is costing them a lot of money to monitor MSB’s and the risks are very high. I guess you must have read of quite a few situations where banks have had to pay millions of dollars in noncompliance with anti-money laundering regulators. They are carrying on this blanket approach to closing long-term relationships, some with MSB’s, to manage their costs as well as their risks. That has a huge impact on the MSB industry, both from a social perspective as well as in terms of how they conduct business.

Chris Herbert:    Yeah, they’re providing a critical service to people in Canada that need to transfer money to their friends and family in other countries.

Moh Datoo:  Look at the demographic profile of Canadians. The majority are immigrants. A lot of them are immigrants from third world countries. They have their families to support, especially in the rural areas. You may be aware that being in a third world country, you don’t have the kind of access to banking services that the population here in, should I say a  developed country has. There’s a huge under banked population there and they rely on the relationships that MSB’s have with corresponding banks to be able to remit the funds to the families in those rural areas. You can only imagine if that corresponding banking relationship is closed or if that MSB ceases to operate, the impact that would have on the families that rely on the remittances, for education, health to daily food consumption. The impact is huge. One of the things that is of concern to me is that this blanket approach to de-risking really does not meet the objectives of combating financial crime. As a matter of fact, what it does do, is encourage shadow financing. This is where money gets transferred outside the banking system. Which is one of the main concerns of why we’re trying to combat crime, to make sure that that money is not illicit. Yes, I think something really needs to be done in order to limit the de-risking of these MSB’s.

Chris Herbert:    Yeah, I know the leaders of the Canadian MSB Association, were quoted in a Financial Post article, or Globe & Mail Post article about the concerns they have about the MSB market being affected by some of these blanket de-risking approaches.  Securefact was quoted in another article which we’ll have in our blog post that’s tied to this interview. The media’s aware of it and I think more and more Canadians are becoming aware of this de-risking risk against the MSB’s. Let’s move on. You had a brief presentation to the attendees on how to strengthen bank relationships, improve KYC (Know Your Customer) and comply with FINTRAC. Now you only had seven minutes to present, so what did you talk about and is there anything you want to add?

Moh Datoo:  Thank you. The key messages I had to deliver at the conference was that the MSB industry is facing challenges from both the banking industry, as well as the regulators. The common theme behind those challenges is that MSB’s do not seem to have a strong compliance regime to manage financial crime risks. The main issue I wanted to bring out here was that there are areas where the MSB industry can improve their compliance regime to meet the expectations of the banks that they operate with, as well as the regulator.

Chris Herbert:    Last question is how can Securefact help MSB’s address some of the challenges they face today when it comes to regulatory compliance? I have two thoughts from my perspective. One is helping them understand how to put in place proper compliance policies and procedures and being probably more aware of what their compliance requirements are. Securefact’s Financial Crime Risk Management Group offers advisory services to help them in that regard. Then there’s technology solutions that they could potentially use too, that Securefact offers. Am I right in these assumptions?

Moh Datoo:  Securefact develops state of the art digital onboarding Know Your Customer technology products and advisory services in the area of Financial Crime Risk Management. Our advisory services help clients develop a risk culture as well as a governance framework that includes comprehensive policies and procedures from evolving risk management programs, detailed training for MSB’s to identify financial crime, and suspicious transactions reporting. Because this is a highly transactional kind of work, in order to ensure efficiencies are built in it to the MSBs operation, we suggest they consider using our software solutions when it comes to individual identities and company beneficial ownership identities. This helps speed up and reduce the costs of their compliance regimes.

Chris Herbert:    And, automate to some degree, I would imagine.

Moh Datoo:  That’s correct. I think the important point to mention here is that a lot of the MSB’s are moving towards internet FINTRAC solutions, where a lot of the customers are non-face-to-face. What our solutions actually help do is provide the MSB with the assurance of the person who is dealing across the internet from the other side of the world is a valid customer and can be authenticated in accordance with the requirements of the FINTRAC regulations, especially ones that got outdated as recently as June of 2016.

Chris Herbert:    Thank you Moh. We’ll leave it at that. Thank you very much for your time.

Moh Datoo:  Thank you for the opportunity.


This post has been written by members of Securefact’s AML Advisory and Financial Crime Risk Management division, consisting of industry experts, committed to managing your Financial Crime Risks and ensuring that you are compliant with the latest AML regulatory requirements.