Financial advisors, in their position as handlers of money, are vulnerable to con artists, stock manipulators, money-laundering criminals and inside staff looking for a way to skim a little off the top.

In an time of rising terrorism and increased technological sophistication, it is increasingly important for advisors to learn to recognize crooked transactions and avoid being party to a crime, says Chris Mathers, founder of chrismathers.inc, a Toronto-based crime and risk-consulting firm.

“Many people don’t know how crime works and can be oblivious to suspicious activity,” says Mathers, who spent 20 years as an undercover agent with the Royal Canadian Mounted Police infiltrating groups involved in drugs, guns and money laundering.

“Dirty money has to flow from criminal sources, and criminals will try to corrupt others to get their money into the system,” he says. “If fraud is illegal deprivation, money laundering is illegal integration. It’s not uncommon for criminals to corrupt or co-opt employees of financial institutions. Dirty money may be used to kill people, destabilize governments and other horrible things.”

Mathers teaches a course called Fraud and Money Laundering through CE Network Inc. , which is approved by Advocis and eligible for continuing education credits. He recently wrote a book entitled Crime School: Money laundering, true crime meets the world of business and finance (Key Porter Books Ltd., $25).

In a blunt, conversational style spiced with colourful street slang, Mathers describes the various ways criminals turn the profits of their nefarious activities into clean money with origins that are difficult to trace. He also shows how easy it is to sneak through regulatory and compliance barriers with charm, cunning and a strategy. His crime tales are so entertaining that he is popular on the speakers’ circuit. He has also been hired by financial companies to train front-line employees and executives to spot money laundering and other illegal activities, or to check out a job candidate’s background.

During his years in law enforcement, Mathers conducted numerous international investigations involving the Federal Bureau of Investigation, U.S. Drug Enforcement Administration, U.S. Customs Service, Interpol, Scotland Yard and various police networks around the world. Assuming a variety of disguises, he infiltrated criminal organizations as an undercover operator and established a number of storefront money-laundering operations in Canada and the U.S. to nab Colombian, Russian and Asian organized crime figures.

In 1995, he retired from the RCMP to join the Toronto-based forensic division of international accounting firm KPMG LLP, later becoming president of KPMG Corporate Intelligence Inc. He left to start his own consulting firm in 2004.

“Chris Mathers is a human chameleon,” says Norman Inkster, former RCMP commissioner and former president of Interpol, who later became the global managing partner of KPMG’s forensics group before starting his own Toronto-based consulting firm, Inkster Group. “He knows the lingo crooks use, and the many schemes and tricks they employ to deal with the problem of having too much ill-gotten cash — cash they want to slip into the legitimate economy.”

Role-playing was vital to Mathers’ success in moving undetected in criminal circles. By changing his voice patterns or switching from corporate business suit to biker garb, he was able to take on a wide range of personas.

“I have been charming to bad guys,” he says. “I have posed as their friend and their business associate. But I knew why I was there. I’m pretending to bond with them but I’m acting, and I’m not sad when they get arrested. I always have the big picture in mind: there are bad people who need to be put down.”

Mathers’ past activities have left him with an invaluable book of personal phone numbers that he can tap into when he needs a favour or a tidbit of local information. “My thing is people, and after 30 years in the business I know a lot of guys,” he says. “They may have been with Scotland Yard or the South African police, but many are now in private practice. It’s great fun to work together, and I make a point of watering the plants all the time and keeping the relationships alive.”

A recent survey by PricewaterhouseCoopers LLP on Canadian corporate fraud at 100 diverse companies found that 80% of fraudsters are male and usually in their 30s; many have post-secondary degrees, along with a sophisticated understanding of internal controls and how to circumvent them.

@page_break@Almost one in four corporate frauds is committed by senior management, and the number of companies saying they have suffered from fraudulent acts increased to 55% in 2005 from 46% in 2003. “It’s difficult to perpetuate a large securities fraud without collusion of insiders,” Mathers points out.

It’s also surprisingly easy for a manipulative con artist to win over insiders, he says. During his time as a supposed money launderer, he was able to cultivate friendly relationships with front-line bank employees with flattering compliments, small talk about the personal details of their lives and free muffins. Later, when he asked for large sums of money to be transferred without coming into the bank to fill out the proper forms, “they were more than happy to oblige that nice man, Chris,” he says.

The “muffin man” technique, which Mathers says he learned from the bad guys, works all the way up the ladder.

“Advisors are vulnerable when a ‘client’ becomes friendly to the point at which it’s hard to say no,” he says. “First, they treat you to tickets to hockey games, then it’s a weekend deep-sea fishing. Next thing you know, they want you to turn a blind eye to a few unusual third-party cheques they’re depositing. There’s an air of collegiality, the nod and the wink, but an advisor who allows it is a party to the offence. The danger is that the financial advisory business is commission-based, and the client’s activities are this month’s mortgage payment for some advisors.” IE