As banks scramble to upgrade their anti-money-laundering systems to meet new regulatory guidelines, a recent brief by Forrester Research (Nasdaq: FORR) advises firms to adopt an enterprise visibility strategy that will help them spot suspicious behavior by synchronizing transaction data and automating decision-making.
“Money laundering accounts for 3 percent to 5 percent of global GDP,” said Forrester Research Senior Analyst Remus Brett. “And today, finance firms face increasing pressure to enhance their anti-money-laundering (AML) capabilities as regulators turn up the heat with the US PATRIOT ACT and the Europe-based Financial Action Task Force (FATF). Also, highly networked financial systems make evasion easier, and firms’ existing AML systems don’t cut it. Firms must adopt a pragmatic approach to data synchronization, use inline analytics to dynamically profile customers, automate AML processes and reporting, and focus on application usability.”
To control data extracting, transforming, and loading (ETL) costs, Forrester advises that IT and compliance officers set realistic ambitions for the transaction data that their AML systems will monitor. AML teams should, for example, shortlist the 20 most critical data fields — such as transaction time, origin, and FATF code. They should then build a data hub to store and synchronize this information across multiple transaction databases. Today’s analytics enable banks to monitor transactions against known money-laundering patterns but don’t help uncover new patterns of criminal behavior. By contrast, inline analytics allow firms to track behavior in real time and adapt AML profiles during the course of a transaction. But synchronized data and advanced analytics only become useful when put into the hands of the right people — so firms should add business process management (BPM) capabilities to their AML solutions to ensure that alerts get routed to the right compliance staff or external regulators.
“Over the next five years, the sophistication and scope of money-laundering techniques will increase as criminals target new geographies and new lines of business — such as life assurance and leasing,” Brett added. “Converging market forces make 2003 an ideal time to buy packaged apps, as license costs are at an all-time low and technical standards are maturing. So, with regulatory deadlines looming, firms should look to buy rather than build AML software. And executives should understand the power and reusability of the visibility created by their AML systems and extend this approach to foster their overall enterprise visibility strategy. They should work with IT to selectively integrate transactional data — while respecting privacy — to fuel other functions like marketing systems.”