Money Transmitter Receiving
and Paying Agent Risks: Are
Both Regulators and Operators
Missing the Mark ?
John Bishop – Moderator
Paul S. Dwyer, Jr. –CEO , Viamericas Corp
Juan Llanos-Director of Compliance, Unidos
Financial Services, Inc.
PRESENTERS
Juan Llanos – Receiving Agents
Paul Dwyer, Jr.- Foreign Agents
RISKS
COMPANY EXPOSURE
REGULATORY FOCUS
A Typical Money Transmitter Agent
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Agenda
1. Risk identification and assessment: Have we
identified all the risks?
2. Risk mitigation: Are we doing everything we can
to mitigate the risks? How are we executing our
programs?
3. Conflicting views and paradoxes
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competitiveness vs. control
business vs. compliance
low price vs. high costs
federal vs. state, etc.
4. What are we trying to accomplish?
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Money Transmitter Risk Fronts
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Non-Compliance vs. Money Laundering
NON-COMPLIANCE
MONEY LAUNDERING
2006 AZ Cases
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Report termination of employees
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File personal history statements
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Maintain records to demonstrate
compliance
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Display notices
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Include language in contracts
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File duplicate SARs with AZ
Attorney General’s Office
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Keep records of customers’
identities, occupations, and
signatures
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Update manuals
2006-07 NY Sting
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Remitters created false
documentation to conceal the drug
source of the funds
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Undercover agents told the remitter
which names on a list would be
used, and the remitter typically
made up the sender information.
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Undercover agents and confidential
informants, posing as drug
traffickers, brought more than $1.5
million in currency to money
remitter stores.
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Operation Pinpoint (2005-06):
storefronts operating as networks –
the remitter took some money and
recommended other locations. All
shared in the profits.
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Agent Risk Fronts
1. Risk of under performance
Commercial
2. Risk of non compliance
Regulatory
3. Risk of ML, TF, fraud,
default and breakdowns
Operational
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Agent Risks and Mitigators
RISKS
MITIGATORS
• Assistance in structuring
• Complicity with sender or
• Agent acceptance,
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beneficiary
Commingling of funds (front)
Credit risk
Identity theft, privacy and
security.
Non-compliance with state
regulations
Non-compliance with Section 352
of PATRIOT Act
•
monitoring and termination
protocols
POS training
Transaction monitoring
Zero tolerance policy
Secret shopping and
stress testing
OFAC screening
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Focus
1. Agent acceptance, monitoring and
termination (Life-Cycle Management)
2. POS training
3. Transaction monitoring
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Life-Cycle Management
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POS Training
1. “Traditional” contents
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ML Risks and Methods
Rules and Regulations
KYC, reporting and record-keeping
Suspicious activity
2. The real knowledge gap: ORGANIZATION
3. Most of AML Compliance is about behavior
and attitude, rather than knowledge.
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“What you do
speaks so loudly
that I cannot hear
what you’re
saying.”
(Paraphrasing Ralph Waldo Emerson)
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Is Learning Taking Place?
“Said is not yet heard
Heard is not yet understood
Understood is not yet approved
Approved is not yet applied”
Konrad Lorenz
Ultimate test
behavior change
and deliverables
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A
A
A
Front Office
A
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C
Back Office
BB-
Archives =
Secure and
Accessible
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Why Do Things Go Wrong?
MOTIVATION
PERFORMANCE
SATISFACTION
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KEY Employee Program Elements
• Written Acceptance, Monitoring and
Termination Protocols
• Zero tolerance policy
• Employee Code of Conduct
• Background verifications
• Whistleblower program
• IT security (access and monitoring)
• Training and development
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Creating a Culture for Compliance
DRIVERS
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Values of founders
Selection practices
Management actions
Socialization
Learning vehicles:
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Stories
Rituals
Symbols
Language
ACTIONS
• Make values explicit
• Start with mini-cultures:
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Documentation
Transparency
Respect
Ethical execution
Accountability
• Role model behavior
• Get involved in the people process
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Be Unequivocal!
Assisting a sender in
structuring = structuring
• CAUTION: undercover ops!
• CAUTION: “professional” informants!
If you fall, zero tolerance!
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Conspicuous
Surveillance
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The Risk-Based Approach:
Separating the Wheat from the Chaff
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Measure, measure, measure.
Treat different segments differently.
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Sample Risk
Segmentation
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Detecting Suspicion through
Monitoring and Analysis
The goal is to detect abnormal shifts in volume, frequency
and size of transactions. To achieve these goals, we
- Track the transactional behavior of all participating entities
- Track specific patterns such as:
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Aggregations in excess of predetermined thresholds
Overactive and dormant accounts
Dollar or unit volume inconsistent with a class or profile
Detection tools and techniques:
• pattern recognition
• contrasting legitimate vs. illegitimate behavior
• looking for outliers and changes in normal behavior
• link analysis (entity and event associations)
• ratio and score tracking over time
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Sample Entity Pair
Concentration
Analysis
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Sample
Geographical
Concentration
Map
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Agent (POS) Risks - (Summary)
1. Money laundering (e.g., Operation Pinpoint)
2. Fraud and credit (against the company and also, facilitating
fraud-induced MTs)
3. Identity theft (identity document copies) (terrorist magnet?)
4. State and federal compliance (e.g., AZ)
5. Money remitter agents = multiple remitters, multiple
products, larger amounts (in aggregate)
6. Industry-specific risks = “impersonation” & structuring
7. General risks = fake IDs, incompetence & internal
corruption
8. Life-cycle management and the right mix of detective and
deterrent techniques, including effective training, are key.
9. Most agents are good and will react positively to fair and
consistently executed risk controls and actions.
10. What to do with the minority who aren’t, and won’t?
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Will biometrics be
the solution?
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Tugs and Contradictions
1. Business vs. Compliance
2. Low price vs. High Cost
3. Agents vs. Branch
4. Federal vs. State
5. Centralization vs. Decentralization
6. Competitiveness vs. Control
7. Form vs. Substance
...
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What are we trying to Accomplish?
OPERATORS…………………………………………
INDUSTRY …………………………………………
REGULATORS …………………………………………
GOVERNMENT …………………………………………
CONSULTANTS …………………………………………
© 2007 Juan Llanos – All Rights Reserved
Thank you!
Juan Llanos
Director of Compliance
Unidos Financial Services, Inc.
1250 Broadway – 30th Floor
New York, NY 10001
Direct: (646) 485-2264
Mobile: (646) 201-6217
[email protected]
© 2007 Juan Llanos – All Rights Reserved
FOREIGN AGENT AS
RECEIVE AGENTS
Financial Risk
ƒ Counterparty Risk – Who has
the exposure?
ƒ Danger of false order
confirmations
FOREIGN AGENT AS
RECEIVE AGENTS
Regulatory Compliance Risk
ƒ US Law – Illegal payers are illegal
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for US companies
The Brazilian Doleiro Market:
Danger to the Industry
New tactic: Doleiro operators
leaving the US; sends going to
Brazil indirectly
Need for international cooperation at
the regulatory level
FOREIGN AGENT AS
RECEIVE AGENTS
AML Risk
ƒ How good is their program;
What is their CIP?
ƒ Risk of smurfing
ƒ Risk of corrupt firms?
FOREIGN AGENT AS
SEND AGENTS
Financial Risk – in this context, they are like a
US agent
Regulatory Compliance Risk
TAKE GREAT CARE: regulations on send
agents much tighter than regulations on
receive agents
FOREIGN AGENT AS
SEND AGENTS
AML / Terrorist Finance Risk
ƒ Here the funds are INCOMING:
More direct terrorist finance
danger; make sure OFAC filters
are well tuned
Foreign Agent Compliance
SARs
Type
Reports
Aggregation
Customer
Identification
Program
Paul S. Dwyer, Jr.
CEO, Viamericas Corporation
4641 Montgomery Avenue, Suite 400
Bethesda, MD 20814
[email protected]
Tel: (301) 215-9294 ext 102
www.viamericas.com