Home Cash Management Securities Services Trade Services Business Solutions Events Directory Contact
Home » Business Solutions

Business Solutions

Business solutions featuring articles and comment on solutions used in wholesale banking, correspondent banking, reference data, risk management, risk and compliance

Latest Article:

What is sufficient anti-money laundering protection?

What is sufficient anti-money laundering protection? In the wake of the Financial Services Authority fining private bank Coutts more than £8 million for anti-money laundering failures, Michael Rhodes, senior fraud consultant, SAS UK, says banks need to monitor all activity for fraud and analyse typical fraud techniques.

To ensure adequate monitoring of high-risk individuals, such as politically exposed persons (PEPs), financial institutions are obliged to show due diligence from customer acquisition through to in-life monitoring. This emphasises the importance of not only screening clients against watch-lists, but also examining the transactions of a client to detect suspicious behaviours. It is essential for banks to have sufficient anti-money laundering systems in place, particularly in the case of PEPs who are susceptible to being targeted for illegal payments.  What needs to be determined however is what exactly sufficient anti-money laundering protection is? 

Ultimately the responsibility for this monitoring falls to the money laundering reporting officer within the bank. It is up to this individual to ensure that the banks have the best possible protective systems in place to be able to identify money laundering activity.
 
In the event of PEPs attempting to hide illegal payments, there should be monitoring systems for analysing typical fraud techniques such as proxy accounts, regular smaller transactions or outright first party identity fraud. Banks need to be willing to monitor all activity; particularly the point of acquisition that can lend itself to being abused by money launderers. Failure to do so will allow illegal payments to go unnoticed and will result in the bank receiving severe penalties.
 
A key issue to overcome is ‘false positives’ in sanctions screening.  Appreciation of the varying accuracy and completeness of the supplied sanctions data sets (and PEPs for that matter), is paramount to implementing a feasible strategy that complies with FSA regulations. Ultimately, strong fuzzy matching capabilities are essential to reducing false positives, and to reduce exposure to undesirable clients. Such a system should include transaction monitoring, rules-based analysis and complex analytical modelling techniques, and should be designed so as to not inhibit new business growth, but rather fulfill the obligations as required by law.
 
Then there is the problem of the amount of data that is accrued by financial activity. This is exacerbated in the case of PEPs, who have investments scattered across the globe. On any given day there will be millions of transactions occurring within a bank. The only way that illegal activity will be detected is if the AML system can spot a suspicious transaction.
 
Banks should protect themselves with technology using powerful data matching techniques that can search and flag transactions that break the normal pattern of activity for account holders. Coupled with software that can read data and detect anomalies, they can build an accurate profile of the customer, making it easier for money laundering monitoring systems to spot activity that banks should be reporting.
 
The action taken by the FSA against Coutts reflects the above position, and shows that AML frameworks need to operate over the entire lifespan of an individual, undergo constant monitoring and improvement and receive full,
wholehearted sponsorship from the company’s directors.
 

Ignore this:
Add a comment
Required fields are marked

Recent Posts

What is sufficient anti-money laundering protection?

What is sufficient anti-money laundering protection? In the wake of the Financial Services Authority fining private bank Coutts more than £8 million for anti-money laundering failures, Michael...


Read More >>

Increased risk of fraud with pre-paid cards

Increased risk of fraud with pre-paid cards Open loop pre-paid cards could potentially be used to launder money, says AML expert.


Read More >>

Standards are not just for geeks

Standards are not just for geeks Guest blogger, Chris Pickles, head of industry initiatives, BT, says the Standards Forum was the highlight of the Sibos Toronto 2011...


Read More >>

ISO 20022 - no big game changer

ISO 20022 - no big game changer Alan Jones of SmartStream Technologies says there is still a lot of work to be done before the industry reaps the benefits of the new ISO...


Read More >>

Banking on utilities

Banking on utilities A new utility service that will help market regulators and financial institutions see where risks exist is on the cards, but guest blogger,...


Read More >>

Video interviews

Scroller Scroller Scroller

Current issue

Q4.2011 - The unusual suspects The unusual suspects

While high-profile insider trading scandals continue to impose reputational damage on banks, Jackie Harvey, professor of Financial Management at Newcastle Business School, Northumbria University, says it is difficult to ascertain the real extent of financial crime.

Download Article >>
© 2012 Financial-i. All Rights Reserved.
Company Information | Help | Sitemap | Login | Site by Refractiv