The company processes approximately 100 million payment transactions per year across a portfolio of more than 19 million properties located throughout the U.S. As a payments provider, RealPage has an obligation to its banking partners, clients, and residents to monitor transactions processed through its payment services and to identify and reduce instances of fraud and other illicit activities.

The challenge

“The biggest challenge we have is keeping up with constantly growing levels of fraud. Just when you get used to certain patterns and volumes, they change again,” explains Blanca Rojas, Transaction Risk Manager at RealPage. The risks and typologies RealPage need to account for are driven by its atypical business model. For example, it has to screen across business-to-business and business-to-business-to-consumer relationships – both real estate firms and their customers – while also analyzing how money moves between them.

RealPage designed specific scenarios designed to capture illicit activities such as card testing fraud. However, the COVID-19 pandemic also introduced new fraud typologies that also had to be considered. As outlined in a FinCEN report (FIN-2021-NTC1) released on February 24, 2021, financial institutions, including payments companies, had to comply with reporting requirements on COVID-19 fraud activity. With such complex, fast-changing requirements, speed is essential. As a result, a reliance on manual reviews of customers and transactions would not deliver the scalability and efficiency RealPage requires.

The solution

While RealPage did engage in a “buy vs build” debate, the firm quickly made the decision to partner with an external vendor. “We felt it was important to work with a company that had expertise in transaction monitoring, could understand our regulatory requirements, and how to apply these to our unique business model,” explains Rojas. ComplyAdvantage appealed to RealPage because its transaction monitoring and fraud detection client base extends beyond traditional financial institutions.

“Other software providers we looked at just had generic scenarios that were geared towards traditional financial institutions, rather than payment companies. Our business model is different even to other payment providers. The flexibility to build custom scenarios was important for us. Many vendors do not have the same level of flexibility. When we built our custom fraud scenarios, they were very targeted, and we knew exactly what we were looking for. We would not have been able to do this if we’d gone with another provider using out-of-the-box scenarios built for a traditional financial institution.“

– Blanca Rojas, Transaction Risk Manager, RealPage

During the implementation process, RealPage met with ComplyAdvantage’s development team to explore the best way to implement its unique rule set. This included the need to follow individuals across different properties and state jurisdictions, as well as identifying connected individuals. “One of the ComplyAdvantage developers suggested a way to achieve our rule objectives which was eye opening. It helped us to see our challenges in context,” Rojas noted.

Once live, the RealPage team worked with ComplyAdvantage to tune the logic of its rules, simplifying the number of data points they were screening. This included a range of above and below the line testing and assessing the potential impact of raising/lowering risk thresholds.

“I am seeing the activity in close to real-time – seconds. I have worked with different software providers at different institutions, and the rapid response to alerts is the biggest benefit I have seen.”

– Blanca Rojas, Transaction Risk Manager, RealPage

For Rojas, the biggest benefit of the ComplyAdvantage transaction monitoring and fraud detection platform is its near real-time capabilities. “I am seeing the activity in close to real-time – seconds. I have worked with different software providers at different institutions, and the rapid response to alerts is the biggest benefit I have seen.” This means RealPage can immediately review alert activity and act as necessary to prevent significant losses for its clients. Rojas’ team tracks cases and bad actors frequently and can see what they are able to achieve with the platform, and which rule sets are most effective at preventing illicit activity.

The case management functionalities in the transaction monitoring platform are also “streamlined and easy to use,” improving the efficiency of Rojas’ team and ensuring that all investigation documentation is properly logged and easily accessible.

Managing and triaging alerts effectively, escalating from junior analysts where necessary, is also seamless. “The dashboard reporting helps us to monitor the whole department so we can make sure alerts are cleared on time and we’re not getting behind on anything,” said Rojas. “The color coding means we can immediately see if there’s something that’s past due.”

Ongoing support provided by ComplyAdvantage’s customer success manager is critical. “She is hands-on, she has learned our system, and knows the ins and outs of RealPage’s business model. This means she can produce innovative ideas, communicate those to development, and explain why we need them,” said Rojas. Regular scheduled meetings enable the team to review issues and plan for new scenarios the team would like to implement. Quarterly success meetings provide RealPage with reporting on how its scenarios are performing, providing an external set of checks and balances on internal tests.

Next steps

RealPage is now working with ComplyAdvantage to ensure its transaction monitoring and fraud detection program scales with its rapidly growing business. The firm recently integrated a new segment of its business into the platform and is working with its customer success manager to assess next steps based on projected dollar and transaction volume amounts. Above all, Rojas says, we are “ensuring there’s room for growth, so the product can grow with us.”

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• Implementing licensing requirements and ownership criteria for casinos. 
• Introducing effective monitoring systems to ensure DNFBP compliance with AML/CFT requirements. 
• Preventing criminals and their associates from owning or controlling DNFBPs.
• Implementing proportionate and dissuasive sanctions to deal with Designated Non-Financial Businesses and Professions compliance violations. 

In most jurisdictions today, Designated Non-Financial Businesses and Professions are regulated in much the same way as credit and financial institutions. Some financial authorities have tailored their AML/CFT regulations to counter the unique money laundering threats posed by different types of DNFBP.

DNFBP AML regulatory challenges

Many criminals exploit regulatory uncertainty around DNFBPs to commit financial crimes such as money laundering. The specific AML challenges that firms face when dealing with DNFBPs often vary depending on the national regulatory environment and industry. 

DNFBPs: Regional challenges

DNFBP AML compliance is a global regulatory concern and deficiencies in national regulation offer criminals attractive opportunities to commit financial crimes. 

Governments and national authorities frequently take action to raise awareness of DNFBP money laundering as it relates to specific criminal trends. In Australia, for example, the Senate recently released a report focusing on the country’s failure to expand its AML regulations to DNFBPs – which has led to billions of dollars being laundered through the housing market and the “systemic non-compliance” of casino operators. The report stated that “Australia is a laggard on the world stage, one of only three states to fail to enact any regulation in relation to DNBPs.”

Australia originally proposed updated DNFBP AML legislation in 2008, but the financial crisis delayed the relevant reforms, which shifted the government’s political priorities. In 2015, a FATF Mutual Evaluation Report (MER) found Australia largely non-compliant with Recommendation 24. As a result, the FATF recommended that Australia accelerate its legislative reforms. It stressed that the government should introduce a beneficial ownership register to catch up with Western peers like the US, the UK, and the EU. 

DNFBPs: Industry challenges

Certain industries pose a higher DNFBP AML compliance risk than others. Examples of recent AML/CFT incidents that highlight industry-specific risks of DNFBPs include: 

Casinos 

Australia: In March 2022, the Australian Transaction Reports and Analysis Center (AUSTRAC) started civil proceedings against Australia’s largest casino operator, Crown Resorts, citing “serious and systemic non-compliance” with AML/CFT laws. The AML/CFT failures that AUSTRAC identified included: 

• Poor governance and risk management
• Failure to maintain a compliant AML/CFT program
• Failure to carry out appropriate customer due diligence and enhanced due diligence
• No framework for senior management to provide AML/CFT oversight

United States: The US casino industry also faces AML/CFT challenges. A scam artist who used casinos to launder thousands of dollars through a Cincinnati casino is currently featured on the FBI’s most-wanted list. In perpetrating his criminal activity, Ismail Shalash would visit casinos to convert cash obtained through fraud and then launder that money by cashing out in credits. Between May and August 2021, Shalash cashed in $464,796 and cashed out the significantly larger amount of $789,541. 

Precious metals and stones

North Korea: Many criminals, and even rogue states, are exploiting DNFBPs in the precious metals and stones industry. In January 2022, the Royal United Services Institute (RUSI) released a report warning that North Korea was targeting DNFBPs to evade sanctions imposed against it. One of North Korea’s key targets was dealers in precious metals and stones (DPMS). RUSI found that jewelry is featured in 25% of North Korea’s sanctions evasion cases, while diamonds are featured in 5%. Similarly, gold was the most frequently mentioned precious metal, appearing in 60% of the DPMS sanctions evasion cases. 

RUSI identified DPMS mining and production as a prominent target of North Korea’s sanctions evasion attempts (accounting for 21% of cases) and wholesale and trading (34% of cases). Under current FATF record-keeping and CDD requirements, RUSI points out that DPMS only have to apply AML/CFT measures to cash payments over $15,000. Similarly, the FATF’s AML/CFT standards do not define ‘precious metals and stones.’ 

Real estate 

United States: In 2021, the US Financial Intelligence Network (FinCEN) issued an advance notice of proposed rulemaking (ANPRM) in response to money laundering and corruption threats to DNFBPs in the real estate industry. In the US, real estate businesses do not have particularly stringent reporting requirements, especially for transactions that do not require a mortgage. FinCEN found that over 50% of those transactions involved politically exposed persons (PEP), along with their relatives and close associates, and that many illegal transactions involved using shell companies to conceal beneficial ownership. 

Accordingly, the ANPRM emphasized the need to implement anti-corruption regulations in the US. FinCEN stated it would take “aggressive aim at those who would exploit anonymous shell corporations, front companies, and other loopholes to launder the proceeds of crimes, such as corruption, drug, and arms trafficking, or terrorist financing.” 

Australia: The 2021 inquiry by the Australian Senate revealed that criminals were exploiting the country’s real estate industry to launder billions of dollars through the housing market. The Australian Federal Police (AFP) revealed that $116 million of illegal real estate assets were seized in 2021 – accounting for over half of the total assets seized in that year ($187 million). Similarly, FATF Mutual Evaluation Reports (MER) have repeatedly recommended that Australia address DNFBP exploitation. Its 2015 MER noted that Australia’s regulatory framework gave DNFPBs ‘substantive discretion’ for applying AML/CFT requirements and offered only ‘limited guidance’ for high-risk customers. 

Following input from Australian banks and financial institutions, the senate inquiry found that Australia’s AML legislation had major loopholes. Those deficiencies were helping criminals to launder money and hurting the country’s international reputation. Accordingly, the Senate recognized the urgent need for legislation that would subject DNFBPs to the same AML/CFT regulations as banks and other financial institutions.

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