Anti-money laundering dilemma for IT heads

While fraudsters and money launderers have been innovative in adapting their techniques over the years, the technology approaches by banks have unfortunately not been as innovative. These approaches have often been limited to manual inspection of records or programming systems to flag out transactions above a certain amount - a fact borne out during interviews with regional banks.

One industry player, who requested to remain anonymous for fear of losing the trust of his banking clients, expressed a fundamental dilemma impeding banks: “When you have projects like CRM, which deliver returns on investment…. if the regulators are not going to penalize you (for system deficiencies in detecting laundering), you won’t rush off to do compliance first.”

Many monitoring systems across banks in the region continue to utilize a rule-based approach, engineered to detect fraudulent activities rather than suspicious patterns of behaviour.

Asian banks are under the spotlight today. Three out of the six “non-cooperative countries and territories” identified by Financial Action Task Force, an inter-governmental body against money laundering and terrorist financing, are in Asia – Indonesia, Philippines and Myanmar. Generally, Asian banks have not had a good track record in money laundering, thanks in part to the fact that they have not faced the same sanctions as European and North American banks do for negligence in this area.

Factiva, leveraging its archives of news reports, today provides a product called ‘public figures and associates’, a database which the company claims includes 350,000 politically exposed persons, and a further 100,000 of their relatives, friends or close aides. The database also includes a black list of 4,600 individuals that financial institutions are barred from doing business with, under the advice of national regulators or international bodies.

Alterman adds: “When you look back over the last year or so, some of the biggest money laundering scandals have involved political figures.”