What happens when the rules change, but the risks don’t? In this episode of Ten Minute Talks, Brena Nath welcomes Bob Simpson, veteran mortgage fraud investigator and founder of Daylight AML, for a discussion on the compliance challenges facing lenders.
Simpson, who has spent over 25 years investigating mortgage fraud, shares personal stories, including his first brush with the FBI and explains how those lessons translate into practical guidance for today’s industry professionals. From AML oversight to regulatory uncertainty, he outlines steps every lender can take to avoid penalties and stay ahead of rising fraud risks.
00:00Hi, I'm Brenna Nath, Vice President of Events and Community here at Housing Wire.
00:12This conversation is one I'm super excited about because when I first connected to Bob
00:17Simpson, who is the founder of Daylight AML, was a few months ago.
00:23And at the time, we knew this conversation was an important one to have.
00:27And even though a few months have gone by, this industry still needs this conversation
00:33when it comes to what are the known unknowns, where's this industry going when it comes to
00:38the shifts in Washington right now, how they can stay certain, where they can find some
00:43certainties.
00:44And Bob is the person I've been able to chat with to help bring some insights into that.
00:48But before we jump in, Bob, I wanted to start off by first saying thank you for joining me.
00:53But also, you have some interesting stories that I think are great to share.
00:58For starters, your first time getting an FBI phone call for a fraudulent loan was back in
01:061995.
01:08That shaped a lot of your career.
01:09So I wanted to start there, where I think helps paint the picture of why you're passionate
01:14and why we're having this conversation.
01:17You know, I don't think I've ever talked about this in public before.
01:20Um, in 1995, I was a loan originator and my phone rings and it's the FBI saying, you did
01:27a loan for Betty.
01:28And I said, I don't recall such a loan.
01:31And I said, you better come down and talk to us.
01:34So I did.
01:34I went down.
01:35Uh, I quickly got reminded I had done a loan for Betty.
01:39Well, she slipped me fake tax returns and two other banks, one in Arizona and one in Las
01:46Vegas.
01:47And, you know, I was really glad she got those other two banks too, because it got me off
01:51the hook.
01:51I wasn't being viewed with suspicions.
01:54She was, she was getting cash out from a number of different banks.
01:58And it's a sobering thing.
02:00And over the course of the next 20 years, you know, I ran the largest mortgage fraud investigation
02:06company in the country for 25 years.
02:08And that lesson with the FBI always taught me that when you're looking at problem loans,
02:16let's just call them problem loans.
02:18There's a thing called relative sophistication that you have to keep in mind.
02:22How sophisticated are your borrowers?
02:24How sophisticated are the people that might be lying to you?
02:27In this particular case, she was a real estate agent and knew the game.
02:31And she got me in these two other banks.
02:34But that sort of feeling of, yeah, I got had by somebody who knows the system was pretty
02:41much foundational for my investigation techniques.
02:45And to your point, that was probably now 30 years ago, I think, as if I'm doing the math
02:51there for 2025 to 1995.
02:53And in that timeframe, this conversation has only become more important.
02:58And it's still a top topic.
02:59So if we fast forward 30 years to today and like how you've seen this conversation change,
03:06why is BSA?
03:08And maybe we should also start by, because I know when I jump on this conversation, I
03:11know a lot of our key listeners at Housing War probably know these acronyms and what
03:14they stand for.
03:15But it doesn't hurt for you to kind of spell it out when it comes to BSA, AML, compliance,
03:20and why it's important today.
03:22All right.
03:23So let me start by defining what BSA is, the Bank Secrecy Act and Anti-Money Laundering.
03:28It's a compliance duty.
03:30And a lot of banks and mortgage companies look at it like, oh, man, another thing I
03:33have to comply with.
03:35But it has nothing to do with HMDA, Tila, Trid.
03:38It has nothing to do with be nice to your borrowers, be solid citizens, disclose things
03:42properly.
03:43This goes back to 1970.
03:45Richard Nixon is president of the United States.
03:481986, until then, money laundering wasn't even illegal.
03:52So in 86, you know, we say that money laundering is illegal.
03:58In 2001, 9-11 happens.
04:02And all of a sudden, now our focus changes to countering the financing of terrorism.
04:07So we've had these developments in these laws over time.
04:10And in 2012, the big thing happened to the mortgage industry, which is when FinCEN, the
04:16Financial Crimes Enforcement Network, a division of Treasury, decided that it does, in fact,
04:23apply to mortgage lenders.
04:25Until then, it was kind of a question, you know, before 2012, does it apply?
04:30Well, it does.
04:31And so that means that every mortgage broker, every non-bank lender, has got to have an adequate
04:37BSA program.
04:39From that, that's a huge kind of mile marker in this space and setting that foundation.
04:45What, from, I think what I'd want to drill down into a little bit more is why is this
04:50especially important right now?
04:52So we have the what this is.
04:54And then if you take the history there, why is this important for lenders in 2025?
04:59You know, to answer that question, let me go to where people screw up.
05:04When you read the consent decrees, when you read the punishments of where people went off
05:08the beam and didn't comply with BSA, it's always like the most embarrassing headlines you
05:14could possibly come up with.
05:15One big bank got in trouble because, kind of unbelievably, they let $700 million in ATM withdrawals
05:25be taken out in countries they don't even do business with.
05:28So that should have hit somebody's auto scans when you're looking at all the cash that's
05:35getting taken out in South American countries and you don't have offices there.
05:40That's the kind of thing, if you're not complying, if you're not paying attention to the details,
05:44you end up doing business with Pablo Escobar and you don't want to do that.
05:48So, sure, there are more mundane penalties than that.
05:52There are more, you know, it's kind of interesting.
05:55I point out to people that these penalties sometimes get levied on individual officers of the companies.
06:03There was a $400,000 penalty that got levied on a BSA officer individually.
06:08So it's not just corporate problems.
06:11There are mundane fines and problems, but there are also really bad headlines that can come when you get caught not complying or kind of not caring.
06:21Right now, you take this, you know, we have a shift in the White House administration.
06:29People are looking for where they can get some certainty on.
06:33There's a lot of shifts in what regulation to pay attention to, especially when it comes to anti-money laundering.
06:40What are some of the biggest uncertainties in regulatory shifts that are keeping lenders up at night?
06:44And then what would your response be to how to move forward in that uncertainty?
06:51Okay, so there, you're right.
06:54There are some real uncertainties that have sprung up since the new administration came in.
06:58First, when they say we're not going to enforce the corporate, the Foreign Corrupt Practices Act, that was the first thing.
07:06We're not going to really go after people who are paying bribes.
07:10The next thing they did was to say that under the Corporate Transparency Act, the CTA, they aren't going to require domestic companies to file that report called the BOI, the Beneficial Ownership Information Report, in which you disclose who owns your company.
07:26Now, let me explain why that's just way out of step with the rest of the world.
07:31If you pay attention at all to the financial intelligence units or there's a voluntary Paris-based organization called the FATF, Financial Action Task Force, every non-rogue nation is a member of it.
07:47And they came out with 40 recommendations to be good citizens, to have a good BSA program.
07:54And one of the chief concerns around the world is preventing shell companies from transferring purchase and ownership of real estate.
08:05And when we came out as a nation and just said we are not going to require domestic companies to disclose who owns the companies, we're going to require foreign companies to disclose but not domestic,
08:19it was kind of a collective gasp, a record scratch moment around the world because every non-rogue nation is trying to prevent anonymous transfers of property.
08:31They get a grade at the FATF.
08:34Every nation gets a grade on these 40 recommendations.
08:38And just by way of interest, Ireland, tremendous grades.
08:43Everything's transparent in Ireland.
08:46You can't buy or sell real estate without absolutely knowing who's involved.
08:49It gets the top grade.
08:51A little below that is France.
08:53They keep the same records, but they charge to access the database.
08:57So when they're keeping records of who's more, you know, transparent, you know, it's not France because they charge.
09:06We get graded along with everybody else.
09:08And what I want to convey to everyone is that just because the Corporate Transparency Act is not requiring you to disclose,
09:20that does not relieve you of your duty to refrain from doing business with drug lords and human traffickers.
09:28You have to know who you are dealing with.
09:30So just because the companies don't have to disclose doesn't mean you are relieved of your obligation to do your KYC, your know your customer.
09:40So just because of the one action on the CTA doesn't mean you're off the hook for doing business with prohibited people.
09:49So wrapping up my last two questions kind of together, because I really want people to know what to do with that.
09:56You just laid out why it's important.
09:59I mean, this industry is known to have overlays to make sure that you are watching your risk and your compliances with even your own appetite as a company.
10:07For you, whether you are looking at a small lender who maybe doesn't have full compliance teams that are trying to solve for this to, you know, a larger IMB who's also trying to, you know, digest what to do with still seeing the importance of this conversation.
10:23What are one to two practical pieces of takeaways that you'd give, whether it's a small lender or maybe bifurcate kind of your comments on small lenders versus big lenders?
10:33I'm like, OK, what do they do?
10:34All right.
10:34So let me let me give you three things.
10:36One is the person that you appoint to be your BSA officer can have other jobs.
10:40So you don't need to hire somebody specifically to handle this.
10:44They just have to have enough time to do the job.
10:46So you can appoint could be your broker of record if you're a small shop.
10:50Second, let me direct you to a free resource, which is my website, Daylight AML.
10:56There's a lot of video content there that you can get for free.
10:58You don't have to pay me for that.
11:00And the third thing I want to mention is that in tough times, people cheat.
11:04So if times are a little tougher right now, people have car payments, they have house payments, they have the big car.
11:14There are actions people take to get deals done now in tougher markets that they wouldn't have had to have taken two years ago.
11:21So be be aware of what's out there.
11:24It can be increasing.
11:25Fraud can be increasing.
11:26Thank you, Bob, for listing out those three things.
11:28This is a conversation that I know is super it's important, but it's also an ongoing one.
11:34So thanks for noting those free resources and ways that people can learn more because this conversation is shifting and evolving and what people are looking for is growing.
11:41So thank you, Bob, appreciate having you on 10 Minute Talks.
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