B.C. has long been accused of being a magnet for money laundering activity.
Billions of dollars are estimated to illegally flow into the province every year, particularly through B.C.’s the real estate industry – a phenomenon that can drive up housing prices and the cost of living.
One 91原创 startup is working to tackle this by tracing the money that flows into the real estate industry and flagging any suspicious activity to help real estate agents detect and avoid money laundering-related transactions.
Friedrich Klaus founded Iluminai Intelligence with his business partners Jesse Latham and Christopher Moreno in 91原创 about two years ago, after realizing the need for and challenges involved in identifying money laundering in the real estate industry.
Real estate professionals are required to identify suspicious transactions and warning signs for money laundering when working with clients, report to authorities when appropriate and monitor activity after a transaction. Failing to do that can result in a significant government fine.
“But the real estate offices are effectively very small businesses – they don't have lots of money or time or they have very few tools available to them to act as money laundering investigators,” said Klaus.
“[Real estate agents] who are supposed to be doing the research to provide the government with targets to go and prosecute have the least powerful tools. So, we made a tool for that.”
Iluminai has developed a database that includes individuals and companies with ties to illegal financial activities such as money laundering, pump-and-dump fraud and mortgage fraud. Sources include publicly and privately available information such as news reports, court decisions, financial crime websites and databases such as the Paradise Papers and Panama Papers.
When a real estate company puts their client and transaction data into Iluminai’s platform, the data is compared against the database, and an alert will be sent to the company if any suspicious data is found, according to Klaus.
“We also add our own proprietary insights. We have a team of researchers who’ll, for example, identify [bad actors or members of organized crime].… Anyone charged with stealing money from the system goes into our database,” said Klaus.
“And we look at the people around them – who they're married to, who their sons and daughters are, who their cousins are.... Anything that's in the public sphere, we go out into the Internet and scrape it all.”
He added that the database continues to be updated and will alert the company if it links a previous buyer with any unusual activity. This function is considered especially helpful by real estate agents who often find it challenging to track clients after transactions are completed.
“Once you finished a transaction with somebody, follow-up and monitoring them and staying on top of them and asking them personal questions.… The consumer sometimes isn't too comfortable with that,” said Andrew Carros, COO of residential real estate company Engels and Völkers 91原创, who is finalizing a contract with Iluminai.
“Iluminai has given us a tool that takes it off our plate a little bit while still giving us the opportunity to do what the government needs us to do. It makes me feel like we're protecting the business and the industry and doing our job much better. And that's magic in my eyes.”
The company, according to Klaus, is finalizing deals with a number of real estate firms in Canada, especially larger ones that oversee a sizable number of transactions and want to ensure that they don’t get fined by the authorities for failing to follow anti-money laundering regulations.
Carros said he believes this is a tool that should be adopted by every real estate company in Canada, but noted that not all of them can afford or are willing to pay for it.
“Because at the end of the day, no matter how hard we try, getting information about people and what they're doing or how they're doing it isn't easy,” he said, adding regulations and the tools to monitor who's buying and selling real estate can be complicated.
“[Iluminai]'s just a really important tool. I think it's a tool that government should be giving us. I don't know why they're making us find these different people and make us pay to do these different things.”
Klaus said the company will continue to grow its database. In the future, he said he hopes to include data from beyond the real state industry – such as from the world of art, which is a preferred money laundering asset – and extend this offering to markets outside Canada.
“We would love to become the most powerful anti-money laundering tool that’s available to everyone so that we can keep dirty money out of Canada's economy and stop affecting the lives of 91原创s,” he said.
