10: Anti -Money Laundering with David Griffiths

March 7, 2018

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Yigal Adato: 00:02 Hey everyone! My name is Yigal Adato, and this is the Pawn Leaders podcast. A podcast to help you make more money,stress less, and live an epic life, all while working at the pawn shop. Hey Pawnbrokers, welcome back to another episode of the Pawn Leaders podcast with me today I have Dave Griffiths who founded the consultants in 2012, after he realized there was a market for the experience. He had developed over the last 30 years in business. Since most precious metal dealers are unaware of the federal guidelines they must follow, it's Dave's job to educate them and get them in compliance before the IRS comes knocking. With 100 percent, with 100 plus clients spread along the West Coast from Alaska to southern California, he's able to help navigate through the local, state and federal regulations, many fine burdensome and conducing. Since June of 1996, Dave has owned two pawn shops, one in California and one in Oregon. Spent 15 years in the board of Oregon pawnbrokers association as a secretary and treasurer and is involved in helping pass the legislation at the state level. He's married to his wife, Robin, and they have one son and live in Beaverton, Oregon. Dave, welcome to the show.


David Griffiths: 01:20 Thank you very much.

Yigal Adato: 01:22 Thanks so much for taking time to be here. Today, we're going to talk about something that I think most pawnbrokers like to avoid talking about, but it's extremely important to talk about and that's the AML, or the Anti "Mon-ry" And it.. it's hard to say Anti Money Laundering that we're responsible for.


David Griffiths: 01:40 Right.

Yigal Adato: 01:41 So give us some background about you. How'd you get into pawnbroking and how did you get into helping other pawn brokers with the Anti Money Laundering?


David Griffiths: 01:50 I got tricked into being a pawnbroker by some friends and they,they had a nursing home business and I had the license and they had everything but a license. And so at one point in time they,they tricked me into going into a pawn shop and I, I thought that was a building we we're gonna make into an Alzheimer's care facility and until it took me several minutes to figure out why in the world we were in a pawn shop. I was trying to convert it into a residential care home all the way, and eventually found out that I was there to help look at the books.They trusted me enough to look at the books of this guy and,and, and about 45 minutes to an hour, I thought this was pretty cool. I've never been at a pawn shop before in my life, and the three of us then went and opened a pawn shop after that,because that's what you do, you know, it's cool. Let's go open a pawn shop. And, did learn a lot of things, and after about three years I'd said, I'd had enough of that and went up to Portland. I opened my own one to work for myself basically. After all the years in restaurant management, I'd made everybody else money. It was time to do it for myself. In working with the state legislation and being on the Oregon Pawnbrokers Association board for all those years, it became clear that there was very few that knew what was going on and they counted on others to kind of do the work. Kind of the old 80, 20 rule, you know, we never get all of them. And so, in doing that, I decided after I sold my pawn shop, I sold my pawn shop when gold was at 1700. I thought that would be a good idea. Got out and, and took a couple of years to just kind of get my act together and decided,okay, I'm bored again. Got to go climb another mountain. And thought that was the one thing that was missing. I kept seeing the pawn, NPA magazines that come up and have compliance bootcamp and all that and yet, I go talk to people that had NPA stickers on their doors and nobody was doing the compliance.They skipped past that to the stuff about how to fit, how to spot a fake rolex. That's important, right? But not the, not the compliance stuff. And so, in both will cost you money in different ways of course, as a pawnbroker. But, then I started seeing that there was a need and as I started talking to my friends, I started getting more people saying, you know what, I am concerned about that I want to deal with it. And so I just started taking off one state at a time, tackle the Oregon and they went to Washington, was, had overwhelming response in Washington a year and a half, two years ago. And so then I just kind of trickled my way down to California.


Yigal Adato: 04:02 That is so, you know, I had my own pawn shops as the listeners note, as you know. And I got a AML handbook. It sat on my desk. We did what we had to do, did the reporting but, it was, I guess more scary than, than wanting to open it up and actually know what was going on. So what do you think, what is? First of all, let's talk about the AML. What is it? Why are we, why are we as pawnbrokers required to do it? And why do you think the Pawnbrokers are kind of, too relaxed about it?


David Griffiths: 04:37 First of all, the, the feds don't really tell you what you have to do.

When you go into business as a Pawnbroker your, your local, folks will tell you they're either gonna license you like in California. In different states in Oregon, you have to get it from the state, but you have to follow the rules set by the state and those Local Jurisdiction. But, you still have to follow the federal rules like payroll tax, things like that. You kind of understand that, but you don't know the rest. And so, in 2005, the title 31 was put in place in that was for the Patriot Act. And the patriot
act had to do with the idea that, people like our friend El Chapo Guzman, did a lot of, a lot of a money laundering. And when
they asked him, 85 percent of where he got his funds laundered was through pawn shop, secondhand stores, on pawnbrokers,
I've known pawnbrokers, but a jewelry stores, anybody that would take precious metals so they could do that because he
knew they couldn't trace it. And so they said, you know what,we need to kind of, we kind of need to work on that. If we've got Narco terror going on and we've got the other side of terrorist going on, we need to make sure we're not giving them that funding. So a lot of the, the money laundering stuff's been around a lot longer than 2005, but precious metal dealers got hooked into it 2005. And the idea is if you have a certain level threshold of business, if you do $50,000 in and out in, in precious metals that have a 50 percent content or hiring gold,you have in a year, you have to have a money, Anti Money Laundering program in place. It's not a question of whether you choose to or not. It's a federal law. And if you get caught without it, then there's the fine starts at $25,000.


Yigal Adato: 06:09 Wow!

David Griffiths: 06:09 Not having an account. A program in place. So the program itself for those people, includes, you need to have a program in place, number one, which you had done, right? You had the book and you have to identify someone who is in charge of that program. So that's number two. Those are the easy ones. I mean, the book costs money one time and you get somebody in charge. The action items that people don't do is you have to train your staff within 30 days of hiring. You have to have an annual refresher training every single year. You have to document all that and then you also have to have someone combine an audit your systems to make sure they're catching things are capable of catching things. If you don't have the last two. It's kind of like having to have all four legs on the table or you've got a real wobbly table and, and so it does happen where they'll come in and they'll say, let me see your compliance program. And, and people say, oh no problem. Got It right here. And then they realized that he first took 20 minutes to find the thing. They lost it all off. You know, they know that you didn't do anything with it. You're already in trouble. And the goal is to not, is to satisfy their needs with that book enough for that program that they don't go looking any further.


Yigal Adato: 07:14 Yeah. And so when I remember from the, from the AML handbook, it's, you know, if you do loans over a certain amount,you know, if you know, filling out the CTR's, $10,000 in cash,what, what are three mistakes that pawnbrokers are making today, above and beyond, not having a program in place. What are three mistakes that pawnbrokers are making today that is against federal regulation that can get them into some trouble?

David Griffiths: 07:40 Okay. So the probably, the probably the one that's got the most people confused is the $10,000. And as pawnbrokers, we don't have to fill out a CTR, MSB's have to fill out a CTR. Pawnbrokers fill out an 8300 form.


Yigal Adato: 07:54 Yes.

David Griffiths: 07:54 Because pawnbrokers a business, not a bank or financial institution. So the rules are slightly different. And unfortunately you've got programs that, are not reporting this correctly and not helping the pawnbrokers. Pawnbrokers are counting on the,those programs to, to identify their, their reporting requirements and they're not doing it correctly. So working on that offline, I'm counting on your program to do it. You need to have some kind of a backup program to make sure it may be even manually. Right now, most of our shops are doing it manually because it's, it's easier than having to deal with the program. That's not correct. They, they're either taking deposits
to the bank. This is triggering more IRS issues than anything right now that I've seen is there, when they take deposits to the bank and they're taking those deposits in, in less than $10,000 increments, but they might do to in two days and that puts them over the 10,000. And so if in old days a banker would know you and go, oh, well, you know, that's just Yigal in his shop, that's how they do it. And it's not a big deal. We know it. Now, there's a program in place and there's some person that has no idea who you are sitting an office, running reports, your name comes up on a report and they submit a suspicious activity report because you're trying to get away with getting past the $10,000 filing rule. That's probably the first thing and then you will get a visit from the IRS, they'll come to you and they'll say, we understand that you were, you know, putting these deposits in and you were trying to skirt the 8300 rule. He said, wait, Whoa, whoa, whoa. Hold on. What? I just took deposits to the bank. So you need to know if this is tough at Christmas time. It's also tough when we always get the rest of our money, which is what? Tax time. People are coming in,picking up all their loans. You get these big. If your insurance company has said to you, your liability company said, you know,no more than $15,000 in your store, put the rest in the bank. So,your managers doing exactly what he was told to do. Take the money in the bank and it's not his fault. One was 7,000. Next dated 9,000 or 16,000 you're over the top. Now you're going to have a visit from the IRS, so you need to be having that conversation with your bank ahead of time, explaining to them what's going on. They don't see a lot of cash anymore. So you,we're an anomaly. One of the other problems is, is not understanding what related transactions are and how the $10,000 relates to that particular type of transaction. So, heavy hitters is what you're looking for. You're not looking for the person that comes in every Friday and gets a loan to go gambling or whatever it is. We'll call it gambling. I know they call it something else, you know, diapers and beer, whatever,you know, in some cases. So you, you're looking for the heavy hitters. You're looking for the ones that actually could be doing money laundering and all that that are capable of doing 10,000.So just understanding the $10,000 rule. And on top of that,making sure that you understand it's not 10,000. I can bring 10,000 into your store today and you don't have to fill out a form. It's $10,000 and a penny, it's the penny that will get you every time. So, they need to understand that difference. And the last thing is just..
David Griffiths: 10:49 Go ahead.

Yigal Adato: 10:50 Sorry. And it's starting to it's overtime as well, right? Like if it's-

David Griffiths: 10:52 Gambling

Yigal Adato: 10:53 brings in 6,000 today, 4,000, $20 the next day, then there's an issue there as well.


David Griffiths: 10:58 Sure. There's a 24 hour period that makes it related. So you have to look at is it the same household? Is it the same account? So, somebody coming in and getting a, picking up some things and giving you 4,000 in cash, in the morning. And then they get a big check in the mail. They go cash it and bringing another $8,000 and pick up the rest of their items. That's, you know, gonna to put you over 10,000. It's one day,one account. You'd have to report that information, that transaction. So the other is the hardest one is a 365 rolling days.So if you get somebody who comes in and borrows, let's say you're going to double your money in most, any state that any union, so over a year at that minimum. So let's just say, let's say somebody comes in and borrows $6,000 in a day and they've got maybe four different items they bring in, you have to track those items through all the way until they're picked up.


Yigal Adato: 11:49 Wow!


David Griffiths: 11:49 At any point in time in that 365 rolling day period that starts the day. The first payment is made, not the day they were loaned out because that money went out. You need money coming in.So as soon as the money starts coming in, you start to ticker and you go 365 days. And if at any point in time in that you hit $10,000 and a penny or more, you have to report that to the IRS.


Yigal Adato: 12:08 So, So let's talk about the real quick, just that we got some clarities. So if somebody comes in and pawn something, like a bracelet and they get $5,000 for it, they come back two weeks later and they take it out and then they put it back in, they take it out, they put it back in, at some point you're over the $10,000?


David Griffiths: 12:23 That doesn't matter because that's, it has to be an unbroken chain. So only on renewals. So if the item is that chain or a bracelet stayed and they renewed it twice and then they picked it up and it hit over $10,000 with the interest and the principal they bring in.

Yigal Adato: 12:36 Okay.

David Griffiths: 12:37 There it goes, but they pick it up. It stops. Okay. Your transaction is over. He didn't hit 10,000 and you get to start all over again.


Yigal Adato: 12:43 Gotcha. So it's somebody who's got a big item in there, where the interest is, is a high dollar amount, let's say over 365 days.It's up to $10,000 of money coming into the pawn shop-


David Griffiths: 12:56 Right.

Yigal Adato: 12:56 Not with redemption, you have to essentially track it from day one to the end of the year to make sure that you didn't hit 10,001 petty

David Griffiths: 13:06 Right. Right.

Yigal Adato: 13:06 And a lot of the software systems out there are not doing this currently. Correct?

David Griffiths: 13:10 They're not doing it correctly, yeah.


Yigal Adato: 13:12 Correctly. Okay, Gotcha. Alright.


David Griffiths: 13:13 So they, they're using it as a CTR which is cash in and out. So for example, if, if you loan someone $5,000, a luxurious bracelet as an example, $5,000 loan. They do the bracelet, they come back,they pay a thousand in interest, pick it up at $6,000. Most of the software programs out there calling at $11,000 and it boom it trips report and now you think, oh my gosh, I've got to do something to get over 10,000. No they didn't. They did 6,000.
Six thousands all that came in. That's all we care about. We don't care about the money that went out. The money that
went out is a, is a marker for you to say, Hey, wait a minute, I need to pay attention to that transaction. That's all.
Yigal Adato: 13:50 Gotcha. So the most important thing is, and I remember you talking about, you know, when you go make deposits at the bank. I remember us getting letters from the IRS saying, why you depositing so much money? What's going on?What's the nature of the business? And we had to explain it, talk with the bank manager. It was, it was, we had to jump through some hoops. I remember that for sure.


David Griffiths: 14:11 Usually, the best thing you can do is be proactive. Go Talk to the bank

manager today and tell them, look, these are the things that happened. This is the time of year here in the next couple of months where you're going to start seeing bigger transactions and you can look back at our history and see that historically. So please don't lump us into this, you know, just nameless, faceless bunch that's trying to do something wrong.This is our business. We've been here 20 years, whatever it is and, and let's not just be writing letters to the IRS because there
were actually no letter they get, they send the suspicious activity report. So automatically you're, you right to the top.

Yigal Adato: 14:45 So, and a lot of banks right now are, are kicking pawnshops out,right? Bank of America just did a sweep when I was at chase, did a sweep. What do you recommend for a pawnbroker to do when finding a bank to work with all these, these AML issues with?


David Griffiths: 15:02 So what's happening right now, The feds came out September and said Operation Choke Point, which is what that was called,was no longer happening. No one void and pawnbrokers California for example know that is absolutely incorrect. They might've said that federally, but in California is alive and well and thriving right now. So all the big banks are kicking people out. At some point or another, you're gonna to get, the bank will get audited. They're going to say you are a kind of a high risk customers, a pawnbroker. So what you need to do, the new banks now that was a smaller banks will take you, but they want to make sure that you have an AML program in place. Most of requiring that if you don't have it, then you're not going to get into the get an account, a good for Dave, I guess, right?


Yigal Adato: 15:43 Yeah!

Speaker 3: 15:45 So what you need to do as a pawnbroker's, you need to be looking at in this becomes a real problems, a problem soon if you have a, a line of credit because they'll turn your line of credit out. Now you've met a problem, now you got to go apply for a loan. And we know banks don't like to give pawnbrokers loans so you can have a real problem real fast. The, the idea is to go find your regional or small business bank that's local to you and wants your business and we'll come in and see your business and get to know you as an individual, as a customer.And those are the ones that will pick you up. Those are the ones that want your business gladly. They don't care about b of a chase key. Wells knew the city. All those guys are dumping pawnbrokers left and right.


Yigal Adato: 16:24 So, so building a relationship with a small local bank as opposed to what these big, big banks are, credit unions in the same boat as that?


David Griffiths: 16:33 Mental health, yeah, yeah, especially the local, anybody local,it's got to look about local community and because they're just like us, we don't like, we would rather support small business and family type businesses than anybody else and that's what they do and that's what they are so they can appreciate it a lot more.

Yigal Adato: 16:49 Yeah.

David Griffiths: 16:49 It has to do with the FDIC insurance and all that. So the, if you, if you're dealing with high risk people like pawn shops, which is a percep, a misconception, obviously there are those that give us a black eye, but that's, it's not the norm. It's the exception. It's just the one that's, you know, out there for everyone to believe.And so the banks are believing that and they just add that to the list with gun dealers, if any. So goodness, if you're a pawn broker in California that deals in guns, you're screwed. You're not going to get, you know the banks don't want you. Well, I can tell you I've helped banks in the last 30 days helped pawnbrokers and last 30 days get bank accounts and they have got lots of guns, you know, and it's just because of how we write the program and sometimes I have to call the bank and help, but we get through it.


Yigal Adato: 17:34 So the most important thing is to know that you have the most important thing that a bank wants to know, even on a local base, is that you have an AML program, you're following it to the T is they don't want to get hit by the federal government with, with, with some type of a, a warning saying you're not taking care of what you need to take care of. So we, we as pawnbrokers have to do the work for them. So they are calm and they can keep the relationship open. Correct?

David Griffiths: 18:02 Sure, sure. And it's kind of a proactive stance for you as a pawnbroker because you're going to be the one that has to go chasing a new bank account if you're not careful. So you need to work to massage that. No different than you work to massage your customer base, you need to massage that banking relationship on a regular basis.


Yigal Adato: 18:17 So I think what you said about being proactive is important. I remember about a year before I left chase shut us down and we had three accounts with them. We had men from mortgages to loans. We had it all credit cards and they give us 30 days to get out, give us some. Just kicked a boot to the butt and we'd been with them for 15 years plus and we were scrambling to find what we can do, start a new relationship, so I'm going to guess that a recommendation that you're going to make Dave is to go out there and find out local

bank or if you're at one, just kind of have a conversation.

David Griffiths: 18:55 Absolutely. Yeah.

Yigal Adato: 18:55 Especially now that January, February, March is coming up, you know the podcast is going to release during this time when there's a big cash flow coming in. Be Proactive about talking about it.


David Griffiths: 19:05 That's right. Yeah. Get out there and make a, make the effort.It's going to be one of the most important things to you,because we all as business owners want to make sure that we're in control and you're very out of control when you get the letter from the bank and it says, you know, we really appreciate you blahblahblahblahblah bottom line, you have 21 days or whatever it is to, to get out or we're freezing, you know, and if
you have, if you have a loan, we're going to term it out. Gee,sorry. Have a nice day. It's not changing and you can call and talk to him. Nothing gonna happen. So you need to be proactive about that and get out in front of it.


Yigal Adato: 19:34 Nice! So pawnbrokers listening up to Dave, go out, be proactive.Talk with your bank. Make sure that you're not going to get kicked out and make sure that they're okay with what you do,especially depositing big amounts of money. And even sometimes I remember getting slack for, for needing money from the bank. Walk in saying, Hey, I need, you know, $25,000 to fill the till. And it was, it was jumping through hoops and come back and four days and


David Griffiths: 20:03 They don't have cash. It, it's become such a problem. Most banks don't have more than any more than $40,000 on hand at a time.

Yigal Adato: 20:10 Wow..

David Griffiths: 20:10 Communities too because they just don't need it. So yeah, you have to order the cash ahead of time and that's where you need to have that relationship with the bank. Now you can have that relationship with B and A all you want, but at the end of the day, if some regulator from upon high, some, some area guy says, you know what? This is what we're doing and we're. It doesn't matter. Then the customers are gone.


Yigal Adato: 20:32 Yeah.

David Griffiths: 20:32 And you're just gonna be on the chopping block. So. But if you have that relationship with somebody local, be at a credit union or or a regional business bank, you're gonna have a much better goal of it and they're usually with open arms will take you.


Yigal Adato: 20:43 Yeah.

David Griffiths: 20:44 It's not the masses at the bigger banks, bigger name banks that we're all familiar with, they're going to go after the masses. They don't care who you are, they just want your account. And I
did have one that happened, this was down in, I think it was down in the Riverside County area. He had gotten a choke
pointed and so then he went and he thought he had three stores. He thought, you know, I'm gonna do, I'm gonna, go get
three different accounts, three different banks for my three different stores. And so he went with three big banks. And guess what happened? They all took him. Two weeks later he starts getting the, Gee, we're really sorry, but we can't be your
bank now.

Yigal Adato: 21:14 Arrrghhh..


David Griffiths: 21:14 He got his checks yet he's ordered, right? And they now all three banks have canceled him. And so now he's had to go back to the idea of you need to get to the small bank.


Yigal Adato: 21:24 Wow.

David Griffiths: 21:24 And they'll take care of you. The local bank will take care of you.

Yigal Adato: 21:27 Yeah. Listen, pawnbrokers, we're a small business, like you said,support a small bank, a community bank that, that needs the needs the accounts that you want the relationship with. And I think as pawnbrokers, we need to create relationships in our communities with our banks, you know, especially with our,with our elected officials, you up in Oregon, served on the board or, and you know that that's important to connect with the people in your community.


David Griffiths: 21:53 And you need to do that continually. I mean, that's a hold on their podcast. You need to do that continually. You cannot just stop. Well, we did it once. Everybody understands us and go away because it was election things. Keep happening and so people keep getting booted out and you get, hopefully some do,some don't, but you keep having a different mix every, every single time you get a new mix of people that you've got to go make friends again with these people because they have overwhelmingly got misconceptions about pawnbrokers.

Yigal Adato: 22:19 Okay. One of the ways that we were able to change that as I became the president of my business association, 750 members. And so now we are regarded as a respectable business within the community.


David Griffiths: 22:33 And that doesn't happen overnight. Does it?

Yigal Adato: 22:34 No, no, no, no. I had to work for it. I was on the board, I went to meetings. It took me three or four years to do, but if you want to lead, which that's what the Pawn Leaders are all about, you have to get into a leadership position, you have to do what you need to do to protect your business, your family, your money, and it starts with leadership. One hundred percent.

David Griffiths: 22:55 Yeah! Whining, Whining is not usually a good way to do it.

Yigal Adato: 22:58 Yeah.

David Griffiths: 22:58 Well, I think we seen as whiners sometimes.


Yigal Adato: 23:00 Yeah. Well, I think it's because a lot of people now, especially a lot of pawnbrokers listening, they say all the business changed and I bring this up on almost every podcast. I believe that in order to be a great pawnbroker today, you have to be a better leader, a better marketer, and a better business, business strategists because before the doors would open and money would come walking in, what do you think about that?David Griffiths: 23:22 Oh, I agree. One hundred percent. Yeah. You said opening. You don't have to advertise just to open your door. If they knew you had money and they needed it, they found you. it's like you're the only restaurant in town. You know, they knew you and then as soon as people started and it happened with the televising,the pawn stars and people like that, all of a sudden, everybody can be a pawn shop. You know you have furniture store down the street. We buy gold, you know that whole we gold thing that changed the entire environment at pawnbroking at that point we got 60 percent less gold across the country now to deal with than we had before because everybody got rid of their gold, was enticed to do that and now where do we buy gold guys? They're gone.


Yigal Adato: 23:59 Yeah.

David Griffiths: 23:59 They're gone. They decimated the industry and now you've got pawnbrokers that came in that could could buy gold, buy and scrap gold in a moment and just thought, man, this is so cool until it's not. And now you get a camera that comes in and a guitar and a TV and they have no clue what to do with these things and now they all want out of the business because, well,she is not fun anymore. And that way you should have been around 20 years ago when we were dealing with VCR's, you know?


Yigal Adato: 24:25 Yeah, I agree. Let's talk about, I don't want to scare people, but I want to make sure that people know who are listening that the IRS can come knocking.

David Griffiths: 24:35 Sure. Oh sure.

Yigal Adato: 24:37 Give us, give us a story about a pawnbroker who didn't have an AML, AML program in place. If you could share with us kind of what happened, what, how much work it took you to help them out with it, how to get out of it, what, give us a story.

David Griffiths: 24:53 So the, the one that comes to mind right away is there was a guy in, in kind of central Washington. Central, a central western Washington down by the capital. And at one day the IRS walked in and this guy's not necessarily huge pawnbroker. He's not glitzy, glamoury. He's just an average guy, you know, hasn't as a medium average store, and they walked in, IRS walk in, put up their badges out, told the employees we're here to do a federal
compliance investigation or inspection, sorry, give us right term.And, and so the employees said, what? And he goes, Federal
Compliance Inspection, do you have a federal compliance program? And he goes, well, hold on a second, let me get my boss to go get the owner. Owner comes out and goes, what do you need? He goes, need a federal compliance inspection? Do you have a federal compliance program? A money laundering for? Yeah, yeah, I've got that somewhere. So he goes and he looks forward to come 20 minutes to find it. He bought it eight years prior and he brings us program out and of course you can see the guy in the back dusting it off at a shirt, you know,blowing it off and all that. Right. And, and after 20 minutes IRS knows that this program is at the very least not used very often.If the guy can't find it, you know, either the batteries in the back and he's having a panic attack and just can't come face them.They go out, he brings a program out. They go. Good. You got one because the, we got one. Okay, good. That's number one.That's table leg number one. Who's in charge of it? Well, I am.
Okay. They opened it up. Sure enough, there's a certification.He's the guy in charge. Well, that's two. How about your training? Well, we didn't really do any training. Oh, how about your audits? How about your annual inspections and your audits of your program to make? Oh No, we really can build those either. Well, okay. Then what we're going to have to do is we're going to have to identify whether you really need the program or not. So for four and a half days they worked in his computers to identify whether he needed a program or not. Now we all know that it wouldn't take us probably an hour to figure that out, but for four and a half days they crawled through his computers, of course, identified that he needed to program and then the set by how much are they going to fine him? He did have a program and they were actually kind to him. Am I going to say how much they fine him? But it was five figures. And so the idea was that he was, he was now once again going to be
compliant. But what he did, this was before he met me. Alright,this was just before he met me. And so he ended up having to
contact the gentleman that originally got them the thing flying back up there and do the whole thing all over again, which cost
him a fortune, and in any open another store. So we're going to work in that one with him and try and help ease the pain. I've given him some free stuff just to, he doesn't need to keep paying for this. But the idea is that yes, it does happen and people say, oh, I never heard it. Well, I can tell you it happened to him. I wanna say it was like November, a couple of years ago and he was a pawnbroker meeting five months later for Washington state and he was still upset about this and he was
telling everybody you do not want to go through this. And what he didn't know was I was in the room and that was my first time to present to the Washington Pawnbrokers Association. And so the president knew it and he says, well, Dave, I think it's your turn to talk now about, you know, and this guy was like, yeah, he's right. Everything he says, that's right. That's what they did to me. You're, I mean, it was, I couldn't have asked for a better setup, right. Dog and pony show, right. I finally said, I don't know you right? We've never met. He goes, nope, we've never met. So, but yeah, it's, it's painful when it happens. And He, he would tell anybody right now, don't be caught without the
program. Just because you've never needed it before, doesn't mean you don't need it now. You've always needed it. You just don't think so and, and the other thing you don't think about is still the, the consumer finance folks to find people in Washington that decide that payday loans are bad and all that.So they've put such strict regulations on them and they've done away with most of them who rises to the top of the bad guys pile now, it's us.

Yigal Adato: 28:50 Yeah.

David Griffiths: 28:50 And so don't think for a second, see, we've been shielded from a lot because we could always say, well, title lenders this and check cashiers that and all these, oh blah blah blah blah. Okay,well now guess who's at the top of the heat? It's the pawnbroker. We're the nasty person that takes advantage of people supposedly. And we're the predatory lender now supposedly. And we know that's not true, but you can't convince some, some folks that that's the case. And so they can legislate against us for easily. So don't think for a second that you the layers off the onion, they've been peeled back a little bit. So we're now more of a target that we've ever been. You
can't be complacent now.


Yigal Adato: 29:26 That, that's story gave me heartburn. Just listening to it. I can't imagine what that pawnshop owner went through.


David Griffiths: 29:33 He lost years off his life.

Yigal Adato: 29:34 Yeah, I'm sure pawnbrokers don't sit by the wayside. Stop lying to yourselves. If you don't have an anti money laundering program, talk with Dave will give you his contact information at the end of the podcast. But before we give them the information on our pre interview day, we spoke about a highland pawnbrokers. I had no idea are you were a partner in that, there was a shooting a couple of days ago where I believe it was your partner's son, uh, was shot, correct.?


David Griffiths: 30:04 Yeah.

Yigal Adato: 30:05 So I don't want to kind of relive the story, but I'm firsthand information is, is very, very important. Security is very, very important. What can I, what just like, a glimmer of information.Can you give to the pawnbrokers who have heard about the story, about what's going on or what, what the family needs?

David Griffiths: 30:29 Right now, the, in particular because it was in California. The outpouring of support from the California pawnbrokers association is, is incredible. And it personally, because I had been the one kind of fielding most of it. It's been absolutely incredible. So I think that that to me, the association membership, everybody knows it could have been them and,and just hopes and prays, It never is. And in most cases it never is. In this case, there was a, there was a fatality. Right now, a lot of what they need is to just get back to their normal, whatever their new normal will be. We have, we do have the go fund me account set up and we'll give that out at the end as you said.They, they just need to, I think for them it would be important to the, to know that somebody learned from their situation.And I won't say mistakes because it was not mistakes. This was something that nobody had this been any shop, it could have been as bad or worse than what we experienced in our shop when somebody comes in and they just throw them all a tough cocktail and start shooting, no commands were given. No, get down. No, this is a robbery just started shooting. There was,there was a, in some ways he was the only one at the front of the store. The other two were doing things and happened to be just right behind where he was at. And in all the shots that were fired. They didn't chase the guys out of the store. They were only in the store 17 seconds and in 17 seconds the only thing they took was a life, which we would gladly trade to have back.But, they got nothing, absolutely nothing. And they changed everybody's life in that store forever. So I think the big thing for us is to make sure that people are re doubling their efforts to talk with their staff. What do you do? Train your people, make sure they feel comfortable, do the right things there. Have the conversations of this store right now, just needs time. They,they have a service on Monday for their for, for Jason and then a week after that we'll be back down there and we'll, we'll start talking about going to the different stores and talk about different security ideas and thoughts and rather than make a knee jerk reaction that we might regret, we're going to go back and do some research and see what we can do to store shore things up. It's just a shame because there's just senseless.

Yigal Adato: 32:44 Well, thank you for sharing. And in an upcoming episode I have an interview with Tony Gallo. Just talk about security and what people can do and, just I think I can leave the listeners with you know, be responsible for, for what your business, when it comes to the AML, training your employees when it comes to security and yourselves and be safe. Be Safe all around. Super important.

David Griffiths: 33:09 Yeah.

Yigal Adato: 33:09 Dave, how can people get a hold of you if they need and because they need an AML program? As we heard the horror stories when it comes to not having one, how can they get a hold of you?


David Griffiths: 33:20 The best way is by email or phone and email is dave@theconsultants.us, and my phone is five,Oh, three, nine,seven, zero, seven, seven, three, nine. That's on my side all the time. And the only time I don't answer it is when I'm standing in front of a pawnbroker talking to them.


Yigal Adato: 33:39 Got it,so we'll put that in the show notes and we'll put up those recommendations. Guys, thank you so much for listening to the Pawn Leaders podcast. If you want more information about the pawn leaders, go to www.pawnleaders.com. Subscribe to the podcast. Share it. If you can give me a review, I would truly,truly appreciate it. Dave, thank you so much for being here today and sharing your wisdom and thanks for your time.


David Griffiths: 34:05 Absolutely. Thanks for having me.




Dave founded The Consultants in 2012 after realizing there was a market for the experience he developed within the last 32 years. Dave educates the precious metal dealers who are unaware of the federal guidelines associated with their business. He has over 100 clients that he helps navigate the local, state and federal regulations that many find burdensome and confusing. He owns 2 pawnshops since June 1996 (one in California and one in Oregon). Dave spent 15 years on the board of Oregon Pawnbroker’s Association as a Secretary and Treasurer and is involved in passing legislation at the state level. Dave and his wife Robin have 1 son and live in Oregon.
Dave talks about Anti-Money Laundering.


Dave founded The Consultants in 2012 after realizing there was a market for the experience he developed within the last 32 years. Dave educates the precious metal dealers who are unaware of the federal guidelines associated with their business. He has over 100 clients that he helps navigate the local, state and federal regulations that many find burdensome and confusing. He owns 2 pawnshops since June 1996 (one in California and one in Oregon). Dave spent 15 years on the board of Oregon Pawnbroker’s Association as a Secretary and Treasurer and is involved in passing legislations at the state level. Dave and his wife Robin have 1 son and live in Oregon.


Dave talks about Anti-Money Laundering.


[01:50] Dave got tricked into being a pawnbroker by his friends, through starting a business



[02:34] After 3 years, Dave opened his own store, as he wanted to work for himself



[02:47] Working with the state legislation and being on the Oregon Pawnbroker’s Association board made it clear that there were many store owners who were unaware of the complete operations of the business. They had to depend on others to help them.



[03:06] He sold his pawnshop and decided to go back into the pawn business, regarding compliance



[05:47] If you have a certain level of business you must have an AML (anti money laundering) programme in place. The fine for not having a programme starts at $25,000.



[06:18] Have a programme in place and identify someone in charge of the programme



[06:30] You must train your staff within 30 days of hiring, have an annual refresher training and do an audit of the systems to ensure everything is being captured



[07:48] What are 3 mistakes pawnbrokers are making today that are against federal regulations?


  • Pawnbrokers do not have to fill out a CTR, they only need to fill out a 8300.
  • There should be a backup programme.
  • Taking deposits to the bank in less than $10,000 increments creates a red-flag from the IRS. Many pawnbrokers do not understand related transactions and how the $10,000 relates to that transaction.


[10:38] “I can bring $10,000 today and you don’t have to fill out a form. It’s $10,000.01. It’s the penny that will get you every time.”



[10:58] There’s a 24 hour period that makes transactions related. The same household or account would link the transaction.



[13:16] Many reports count the in and out of money. It should really only show the money that comes in.



[15:02] The Feds stated that Operation Choke Point was no longer enforced, when this was not the case. Banks would get audited and the pawnbrokers will be seen as high risk.



[15:31] The new, smaller banks will take pawnbrokers with an AML in place



[28:18] Do not be caught by the IRS without the AML programme


[33:21] Contact Dave by email at dave@theconsultants.us and via phone 503-970-7739.  


Yigal Adato

Yigal is a 3rd generation pawn broker, and is now a mentor, coach and educator with the pawnbroking industry.

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