Shawn O'Hara (00:01.552)

Welcome, everyone. Our guest today is David Vijan . He is a co-founder of Outlier Compliance Group and has an established track record of providing insightful compliance solutions. His expertise includes anti-money laundering, counter-terrorism financing, fraud, privacy, and legislative compliance management.

David's educational background encompasses accounting, forensic accounting, finance, and economic crime. His introduction to this industry and what ignited his passion stems from working in the fraud department of a federally regulated financial institution. He was asked if he'd be interested in reviewing newly drafted procedures related to anti-money laundering. David jumped on the chance, which resulted in him moving over into an anti-money laundering role, and the rest is history. He has been in compliance roles ever since. David's with Outlier Canada, and he's a true supporter of the mission statement, which is, “good compliance can enable good business.” He's also a firm believer that it starts with the tone at the top. Welcome, David.

David Vijan - Outlier Compliance Group (01:17.166)

Thank you for having me.

Greg Dent (01:19.093)

I just want to add that I've known Outlier and David and the rest of the team at Outlier for a bunch of years now. I'm super excited to be having this conversation because Outlier has been a leader in the compliance space in a way that I think is really important. I genuinely believe that they are out to do good in the industry and I think that's hard to find. And I think that there's a lot of, I mean, you generally talk about consultants, and consultants have a bad name, just because they're out for themselves. And I don't, I've never found that to be true working with Outliers. So I'm very pleased to be able to have this conversation and hear more about David's background and where he thinks things are going in the world.

David Vijan - Outlier Compliance Group (02:02.862)

Yeah, definitely. Thanks for that, Greg.

Greg Dent (02:06.069)

So I think it'd be interesting to start by saying that we're a compliance podcast. We like to talk about compliance. What do you think are the major issues? For the purpose of today, I'd like to focus our conversation around FINTRAC and anti-money laundering in particular. What do you think are the current issues that you're seeing as particularly interesting in the AML space right now?

David Vijan - Outlier Compliance Group (02:31.79)

Yeah, so specific to the real estate sector, I think we can kind of look to what FINTRAC has been calling out in their reviews and examinations as kind of what's going on in the sector. And a lot of it goes back to just even some of the fundamentals of having a compliance program in place, which brokerages have to have in place. Sometimes even those basics are not really even being understood of what's required of them. And then also reporting of STRs is probably another very big area of concern and that we're really seeing a lot of penalties kind of being issued.

Greg Dent (03:15.605)

Yeah, for sure. And as we record this, FINTRAC actually just released its report, which was in the news substantially yesterday, in fact, highlighting just how true what you've said is that there was an overwhelming percentage of real estate brokerages that had quote unquote, failed there. And that's that's some media speak. But when when when we see that, what do you think the public should be doing from that? And what do you think the people listening to this podcast should be concerned about? Like the people working in the space, what does that translate? Or the people who are trying to work in the space, I think is probably who we're going to be talking to the most here.

David Vijan - Outlier Compliance Group (03:58.286)

Yeah, definitely. So I think understanding what is required is probably, you know, it sounds kind of counterintuitive, but there's a lot out there that don't even understand the regulatory regime and what's needed, right? So just to back up a little bit, you know, any sort of mortgage brokerage right now, they have to have a full compliance program in place. What that is is you have to have policies and procedures in place that outline various things such as identification of clients, reporting of suspicious transactions, and transaction monitoring, and there's a laundry list there. A risk assessment is also needed. A risk assessment is basically a document that will outline all the possible ways that the business could be used to launder money, but then all the mitigating controls that need to be in place. So that's kind of just even the foundational part to start with. So, for brokerages to understand that that documentation is

key and important and needs to be in place is definitely something that's important. I think from various clients and speaking with them, there's really been a misunderstanding that agents are the ones who are solely responsible for compliance. And that's not really true, right? The brokerages are the regulated entities. The agents have responsibilities under that, but it is the brokerage that is ultimately accountable for compliance.

Greg Dent (05:24.469)

That's interesting. And I think you've hit on something that I intuitively know speaking with with compliance officers, broker owners across the country is that you're absolutely right. I think most brokerages, I would say there's kind of three buckets. There's a small bucket of brokerages who have taken the time to do the research to understand the regulations and have done a reasonable job of implementing some sort of compliance program.

I would say my experience tells me that it's not always missing maybe a few components, but generally is on the right track. There's a really large swath of brokerages, an exceptionally large swath of brokerages who want to comply, but just feel so lost and, and, and I don't know, lost in the regulation is probably the best way I can phrase it that they don't even know where to start. And then there's a small percentage of very, very, very small percentage of brokerages who really just don't care and who are going to put their head in the sand as long as they possibly can, I think of the ostrich on that one. 

David Vijan - Outlier Compliance Group (06:28.206)

Yeah, I think that's a very fair statement and I would agree with that.

Greg Dent (06:33.813)

Now, I guess to me, what this pivotal kind of problem and, you know, just full disclosure to our listening audience, Outlier and Really Trusted have a partnership where we've worked together to develop a compliance program that is kind of a turnkey solution for real estate brokerages. So I want to kind of disclose that up to not too early in or early enough in our conversation that, we do generally see the world in very similar ways, I think. But what do you think, brokerages who just don't have the resources to do something like that, how would you suppose they would possibly begin to tackle that? How would you suggest they even approach this problem?

David Vijan - Outlier Compliance Group (07:21.07)

Yeah, so I think there are a lot of resources out there, right? So whether that comes from an association that they belong to or reaching out to consultants such as Outlier or other companies, those are kind of places that they would want to turn to to understand. There's even free resources out there. There's training documents and training recordings that can be used as kind of just even the foundation. FINTRAC themselves is really trying to strengthen the relationship and, I guess, engagement with the real estate sector. So they understand that there is a disconnect in terms of the obligations and there is misunderstanding. And going back to what you said earlier, you know, a lot of the brokerages want to comply. It's just, it's a lot and they don't know where to start. So, going back to FINTRAC, I think it was in late 2022 that they kind of started touchpoints with the Real Estate Association of Canada. And have put out sessions and recordings related to various topics. So that's even a good starting point there. The regulator is trying to work with the industry, right? So I think the fear sometimes of reaching out to them, you know, I think some sometimes brokerages don't want to reach out because it's like, oh, it's going to draw attention to me. But  FINTRAC is really there to kind of help. And then they're really trying to strengthen that engagement with the real estate sector.

Greg Dent (08:50.293)

Yeah, I agree. And my interactions with Vintrac have always been really positive. Anytime we've ever needed some sort of clarity or some sort of guidance beyond what's published, I found their staff, their people to be really quite helpful and useful and wanting, as you say, wanting to do good within the industry and wanting to make us all kind of point us in the right direction, probably is the best way to present. Yeah.

David Vijan - Outlier Compliance Group (09:15.822)

Yeah, definitely. And, you know, just to kind of go back, we started off with, you know, FINTRAC and fines and, you know, not having a program in STRs. But really what happens there is we are seeing a lot of it. But generally, it's, it's repeat offenses, right? So if FINTRAC comes in, they are the regulator, they're the examiner, and there are cases where they will potentially issue a fine right away. But these are for not companies that are trying to comply, the ones that are trying to do the right things, the ones that are just missing a few pieces. If they come in and observe such, they are likely not going to administer a fine the first time. If they come back and you haven't done anything, that's potentially where you're opening up yourself to fines and reputational risk there. From an STR, a suspicious transaction perspective, is kind of the same thing. If you're reporting, and you're doing as best as you can and you really have strong processes related to that, while there may be situations that  FINTRAC will come in and ask questions about why you didn't file an STR, they're likely not going to issue a fine right away. They will have you and kind of go back and report that. But again, they're trying to work with the industry and strengthen the engagement with the real estate sector. So we're hearing things in the news, but the regulator is really trying to work with industry. And that's probably a larger statement than just real estate. They're really trying to work with the various sectors of regulated entities. There's a good handful out there of types of companies that are regulated under this regime.

Greg Dent (10:54.837)

Yeah, no, absolutely. Yeah, I think it's a really important point and to say, you know,  FINTRAC isn't the big bad wolf that I think some people have made them out to be sometimes. It's probably a really helpful thing for compliance officers listening to hear. I would agree with that. So let's shift a little bit to all of these other regulated entities. There are two entities, sorry, two sectors, regulated sectors, that I think are worth kind of touching on. One thing I hear a lot about from real estate brokerages is lawyers. How did the lawyers get out of this whole mess? And why did the lawyers get out of this whole mess? And my goodness, if I ever stop hearing that question, I'll be shocked. And then the, I think the other one that, you know, maybe we'll touch on that for a brief second. And then I think the other place I'd like to talk about is where  FINTRAC is going, and ultimately, mortgage brokers and what that's going to look like for that sector would be the two things that I think are interesting.

David Vijan - Outlier Compliance Group (11:55.502)

Yeah, so I guess on the lawyer piece, it is an interesting piece. It is something that has been called out in our evaluation. So, a financial action task force does mutual evaluations of various countries. That's been something that's called out in our report. To your next piece, a new piece that's coming in related to the real estate sector is, we talked about brokerages and agents and the selling of property and kind of that piece, which has been covered for quite some time. But the new piece coming in is mortgage lending. So the actual loans related to such properties and that's coming in in October, there was amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which is the main AML regulation or act for Canada. Back in October, they gave companies 12 months to kind of comply with the regime, and they will have to follow the same type of regime that other companies that are regulated entities have to follow, too.

Greg Dent (13:17.909)

I think there's so many parallels between the real estate industry and the mortgage broker sector. There's a lot of a lot of small businesses. Many of them are small businesses. Many of them have these independent contract relationships. Oh, and that's not always true. But, you know, some independent contract relationships, there's certainly a smattering of kind of a complex landscape of paperwork that mortgage brokers are responsible for. And this is just one more layer that's going to be thrown onto them. Do you think that the do you think and I guess I'll lead you a little bit on this maybe but I hope not. Certainly from the inquiries that my team and I are getting around FinTrack compliance for the mortgage broker sector, there's a lot of fear in the sector. I think the mortgage brokers have gotten the message that this is complicated and really don't know how to comply. And I guess my question is, what do you think are the particular pain points that they're going to struggle with? My observation as the real estate sector would be that we're, what is it, almost 15 years into trying to comply and real estate offices to this day still don't necessarily understand what the components of a compliance program are and how to implement that.

Do you think that's going to be the challenge? Or do you think the actual challenge is going to be more of the actual the day to day of how to do the business part of things? Or do you think it's both?

David Vijan - Outlier Compliance Group (14:52.366)

So in all honesty, I think it's going to be both and that kind of goes back to depending how the brokerage is set up and exactly what they're doing. So, really, this legislation is coming in for several reasons. It goes back to the comments that we said around the focus for real estate. It has been called out in our financial action task force, the last review. The Cullen Commission, which formed to do research into the AML space or what's happening from a money laundering perspective in British Columbia across various different types of regulated entities. So they had some findings there to bring in mortgage lenders. A lot of mortgage lenders today, they may have existing AML documentation. And a lot of times, that could be just the way the loans are underwritten or if they have investors that are purchasing the loans. A lot of times, those purchasers are in those situations; they're already regulated entities, right? So because of that, companies already have to have AML policies and procedures in place. They have the risk assessment. They may be doing some light training. From a record keeping perspective, they're going to have to tweak some of the records that they're keeping. But for the most part, I think those companies are probably in a little bit better places than the ones that have nothing. And I think the ones that don't have anything, the smaller brokerages are depending, they can be large too, depending on what the business model looks like.

It is definitely going to be a learning curve. I think the pieces that they're going to struggle with are maybe not so much the documentation, but the practicality of the pieces that they need from an operational standpoint. Training and effectiveness reviews are probably going to be another piece. So compliance effectiveness review is basically an audit of your AML program that all regulated entities have to do every two years. Going back to we were talking about the agents and kind of the brokerages earlier, that's a piece that also is failing. A lot of them are not aware even that they have to do this two year compliance. 

Greg Dent (17:24.053)

Oh, big time, big time failing. Oh, absolutely. Yeah. Yeah. Yeah.

David Vijan - Outlier Compliance Group (17:29.87)

Yeah, so I think, you know, really bringing in the mortgage lending piece is covering all the major participants in a mortgage or in a real estate transaction. So definitely a good thing there. And just for background, financial institutions that actually do mortgage lending have already had to comply with the legislation. They've had to comply as a regulated entity for quite a long time now. So this levels the playing field a little bit more. And really the premise there is potential for money laundering, terrorist financing risk in the mortgage lending sector. So, this will hopefully get rid of some of that risk. A lot of times where there's exposure is payments. So receiving funds that potentially came from proceeds of.

Greg Dent (18:26.901)

Yeah, yeah. Interesting. So I'm hearing you say that and I guess if I if I kind of go back to I've touched on this a couple times and when I talk about the full compliance program, I look at it as kind of five key pillars to the whole thing. I see a compliance officer, the appointment of a compliance officer, specifically a risk assessment, policies and procedures, the training and then that effectiveness review. And I think you're quite right. The effectiveness for you is something that real estate, the real estate sector is really struggling to wrap their heads around still at this point. But I think the, the risk assessment, and it sounds to me like what you're saying is that mortgage brokers might actually be a little more comfortable with doing that risk assessment and then, therefore, developing the policy procedures from that, because in many cases that's something they're already doing in, it may be not in a FinTrac regulated way, but in a way that has to comply with, conceptually the same ideas because of their tie-ins to financial institutions is what you're saying.

David Vijan - Outlier Compliance Group (19:30.862)

Exactly, yeah. So there may be some tweaking, but they would definitely have voluntary programs in place in some instances because their investors would actually be looking at the documentation and making sure that it aligns to their expectations. And as a regulated entity, their expectations are going to be fairly high. So going back to, you know, for that piece, like I said, I think it's sometimes the operational piece that's going to be a little bit more around the pillars that you said, you know, maybe they don't have a formal appointment of a compliance officer. So they'll have to do that. Maybe they don't have formal training. So they'll have to put that in place. The way they're keeping records may need to look a little bit different. And then the effectiveness review is probably another large piece because I don't know, you know, if it's voluntary, unless the investors are kind of potentially requiring that or other, you know, financial service providers, they're probably not doing effectiveness reviews. They may do some monitoring testing internally, but they may not be doing external or independent effectiveness reviews.

Greg Dent (20:35.989)

Yeah, well, that's interesting. And I, you know, as really trusted continues to kind of self-interact express across the country, a lot of our conversations with, with managing brokers, compliance officers at real estate brokerages is, well, do we really need to do this effectiveness review? And that one's easy for me to answer. Yeah. Every 24 months, whether you like it or not. But then, you know, I get a lot of pushback on whether it really has to be somebody external and, or if it can't just be my accountant doing it. And I always kind of urge people to really consider that. Do you want to talk about it? Because I think it's applicable to both sectors and it's something that's super important. And to be perfectly honest, does add a fair bit of cost to the ultimate compliance program done properly. And whether you do it internally or externally, there's a cost, whether we, you know, either way. So do you want to kind of talk through what that really looks like when it's done properly just to kind of give people some background on that?

David Vijan - Outlier Compliance Group (21:39.502)

Yeah, so under the legislation, really it talks to the review being independent. So it doesn't explicitly say that it has to be an external provider. To your point, it could be an auditor. So if you're a large organization and you have an internal audit department, your audit department could essentially do that effectiveness review for you. Where it becomes tricky is they need to be an expert in AML. And, you know, the average auditor may not know the legislation. For an effectiveness review to meet the regulatory expectations, it has to be robust enough to review your compliance program, so all your documented policies and procedures, and assuring that it aligns to the requirements that are specifically called out in guidance and regulation, but then testing of your operations as well, right? So taking samples of your transactions, looking at KYC, looking at reporting. So, as long as it's independent and the person understands AML, it can be internal. But, you know, we, us as, you know, in being transparent, Outlier does do effectiveness reviews. We often go in, and we've seen past reviews where it was done by somebody internally, and they were independent, but there were pieces missing because of that subject matter expert. And maybe this is a little bit of a shameless plug here, but a little bit about going back to Outlier. What sets us apart, I think, from other consulting firms is the name Outlier actually comes from the book by Malcolm Gladwell, Outliers, which basically is the premise to be really good at something, you got to do it a whole heck of a lot of times, roughly 10,000 hours. All consultants at Outlier have at least ten years of experience in-house compliance at various regulated sectors, such as securities dealers, financial institutions, MSBs, et cetera, before we even moved into consulting. So our expertise in terms of doing these reviews is going to be a lot more in-depth than sometimes you're going to find elsewhere. Again, a little bit of a shameless plug, but just kind of stressing the importance of the SME and the expertise there.

Shawn O'Hara (24:05.008)

It's staying on top of it too. It's the knowledge. So somebody may have had the knowledge before being hired, say, as an auditor and accountant, but things would change over time, which is why I heard somebody mention the other day fish farms as a way of doing money laundering. So I want to follow up to find out what's involved in that. But anyway, things change, new methods are identified, and that's why you and Outlier have to stay on top of that.

David Vijan - Outlier Compliance Group (24:34.99)

Yeah, and I agree with that. I feel like I am always reading a piece of legislation or some guidance or having these conversations with other experts in the industry. You know, we sit on FINTRAC exam sometimes. So there's just even knowledge from that of what the regulatory expectation is that may not be spelled out elsewhere. So really, you know, understanding who the right person is that can do the job is really important for that piece.

Greg Dent (25:04.981)

Yeah, it's incredible how much regulatory change as to your point can happen through examinations. And I think back to three years ago when we when ReallyTrusted introduced our version of the ID records, it was based on feedback that we were hearing from brokerages. There was no change in the regulation. It was that we were just seeing that FINTRAC examiners were going down this path that we better get caught up on. And that just on some level, and this is this is my version of a shameless plug, I suppose. But you really do need to be in it enough to have the sense of where the winds are shifting to be ahead of some of this stuff sometimes, unfortunately, fortunately, or unfortunately, depending on how you look at it. So yeah.

Shawn O'Hara (25:56.624)

I've also noticed the reference to the legislation. When I've been on, say, BCREA calls, then somebody will ask a question. And there were FINTRAC people who said, well, if we look at the regulations and we interpret it this way, and then they're frequently changing as well.

Greg Dent (26:19.381)

An ever-changing landscape. That's actually probably a great way to kind of wrap up the concept, because one of the things we really kind of are focused on on this podcast is where is regulation going next and where is compliance going next to that regulation? And I guess with your view, David, where do you think, what is the next step from a compliance? Like where is FINTRAC leading? I hear the digitization of FINTRAC is something that they've been talking about for a while. How much you believe that? I mean, I know they finally got the API out on the SDRs. That's exciting, I suppose, but like what's next on that front? And do you believe is AI a part of that? What does that all look like for us in the next couple of years, five years, whatever?

David Vijan - Outlier Compliance Group (27:04.718)

Yeah, definitely. I think we're going to start to see more guidance related to those pieces. I do hope for FINTRAC that that statement is true, the way reporting and things kind of happen. I think some of the existing pieces of legislation, and just understanding that sometimes it can be a burden, I think that's going to be revisited in terms of streamlining or kind of condensing requirements in certain areas where possible, which I think will be great. Yeah, definitely. I mean, that's the hope. I think, and we're specifically talking to real estate and there is legislation there, but depending on the type of regulated entity, there's a lot of new legislation coming in that is related to risk overall. So I think there's going to be...

Greg Dent (27:39.093)

That's welcome news for sure.

David Vijan - Outlier Compliance Group (27:58.446)

...perhaps some streamlining there. Will it happen in the next five years? Probably not. Optimistically, we'd like to see that. But yeah, in terms of, you know, other digital pieces of what's out there playing roles in the space in terms of tools and so forth, I think that's going to also be another area, right? You have digital identity and what that piece kind of looks like for identification. You mentioned AI and what AI looks like for transaction monitoring and investigative tools. I think we're going to see some things there because as companies start to look at these technology solutions, unfortunately, the regulation lags behind the technology, but it eventually tries to capture it or catch up. I think that's where we can see some change.

Greg Dent (28:53.461)

I jokingly like to remind people that between the signing off of FATFA and the foundation of FinTrack was an 11 year gap. So I don't think any of this happens super quickly, but we'll get there. We'll get there.

Shawn O'Hara (29:08.784)

We've also got armoured car businesses coming on this year into the FINTRAC happy family, shall we say. Yeah.

David Vijan - Outlier Compliance Group (29:08.942)

Definitely. They'll be another type of regulated entity. They were actually part of the same amendments as the mortgage lenders at the same time. So, anybody doing cash pickup will be involved in the FINTRAC or AML regimes. And they'll have, again, similar, the same requirements, having a compliance program in place with the five pillars and the operational pieces as well. Their record-keeping pieces are obviously going to look a little bit different from what it does in the real estate sector. But yeah, they're another one that's coming on. And I think for that sector, it kind of holds true to the statement that I said, it's going to be a mix of, you know, there are some companies that already have voluntary compliance programs in place because of who they're servicing, right? If you're picking up cash from some very large companies, those large companies are regulated entities, perhaps, and they would want to see AML-related policies and procedures already in place. If you're a smaller one or depending who you're doing cash pickup for, you may not have anything. So it's going to be definitely a learning curve and more work there. But yeah, similar to the mortgage lending piece. And just since I'm on the mortgage lending piece again, just to clarify, I think one interesting piece is the definition. So we're talking about brokers and kind of lenders, there's one piece we didn't really talk about, which is administrators. So if you're just an administrator servicing alone, you are actually still captured under this new regime of mortgage lending. So that's one piece I think we probably should clarify. The draft regulations had a way larger net for a definition. So we are glad to see that. And I think the brokers and lenders were expecting it, but I think the administrators, depending on the servicing piece, they may or may not have been.

Greg Dent (31:18.773)

Yeah, no, absolutely. That's a good point. And it's something that I remember you and I talking about it to one point when we were when we were chatting over the definition of the diamond sector and how, you know, you go sell five baubles and suddenly you're captured entity in some in some jurisdictions. So I'm glad to hear about everything got captured in the mortgage sector.

David Vijan - Outlier Compliance Group (31:37.678)

Yeah, and that goes back to my comment around the hopes of streamlining and some of these kind of, you know, perhaps changing is, you know, where some of it is not going to change because it's in the regulation. And unless the regulation changes, it doesn't change, but things that are in guidance may change.

Greg Dent (31:58.485)

Lovely. Lovely. 

Shawn O'Hara (31:59.632)

One last point. Just looking at Outlier’s mission statement that, “good compliance can enable good business.” Can you touch on that of how adopting the stringent compliance measures enhances efficiency and profitability and protection?

David Vijan - Outlier Compliance Group (32:19.886)

Yeah, so I think it just goes back to just overall risk management. If you're managing your risk, including AML risk, at the end of the day, you're protecting yourself against fraud a little bit more. You're looking at it from a reputation risk, you're protecting yourself there. So, stronger compliance overall and not specific to just AML should translate into good business.

Greg Dent (32:45.269)

I like it. I like it. David, thank you so much for spending the time. I always appreciate, I learn something from you every time we talk. I always appreciate, taking your time and appreciate, all of what you've taught me over the years. I really look forward to continuing to work with you as we deliver FINTRAC Express to Canadian real estate brokerages and maybe other sectors based on this conversation.

David Vijan - Outlier Compliance Group (33:11.726)

Yeah, definitely.

Shawn O'Hara (33:14.032)

Great, thank you so much.

David Vijan - Outlier Compliance Group (33:16.462)

Thanks for having me on. Take care.