As money laundering grows more global and real-time in scope, experts agree that it is vital for financial institutions to use more-flexible strategies to combat criminals. The result is a growing need for more-dynamic technology.
"The big issue is keeping track of money-laundering schemes and making sure we stay current," relates Mason Hinkle, AML manager with Winston-Salem, N.C.-based BB&T ($127.6 billion in assets). "The greatest change in the money laundering area is that the criminal element is smarter and more brazen than ever. Also, we have to follow money laundering developments globally now more than we've done previously because the financial services industry is more of a global industry today. Plus, as [financial crime] opportunities diminish in one country, they open up in others."
According to Colin Kerr, senior analyst with Boston-based TowerGroup, another reason for more-real-time vigilance around AML is the evolution of financial services technology itself. "The traditional concept of banking was doing things offline in batch mode," Kerr explains. "That process has become a little slicker and more real-time with online transactions."
As a result, AML technology has to evolve as well. "Banks will want to capture suspicious transactions at the point of initiation rather than after the transaction is processed," says Kerr. "Vendors need more flexibility so their systems can receive more information and integrate better with other systems."
Beyond the technology itself, Kerr adds, even vendors' approaches to AML are changing. "You're seeing more AML vendors turning to organizations like LexisNexis that have large repositories of knowledge on people," he comments. "The idea is to intercept the payment as early as possible."
Centralizing AML Efforts
To stay on top of money laundering -- and ahead of perpetrators -- BB&T has changed the way it approaches AML, according to the bank's Hinkle. Over the past two years, he says, the institution has begun to centralize its AML efforts. AML initiatives used to be spread among many lines of business at BB&T, and the degree of automation in tracking money laundering varied within each unit, according to Hinkle.
"We started centralizing AML here around 2003 because of the changing environment and regulations," Hinkle says. "And it's just more efficient to manage BSA [Bank Secrecy Act] requirements from a centralized department." BB&T also has enhanced its AML training program to include all employees throughout the enterprise, not just those in the AML area, Hinkle notes.
Another important move by the bank was adopting the SAS AML solution from the Cary, N.C.-based vendor. The system, which was implemented in 2004, provides BB&T with more automation and more-robust analytics capabilities, Hinkle contends. "SAS AML provides us with automation to monitor millions of transactions daily for suspicious activity," he explains. "It also provides a repository of historical data for all investigations. The automation capabilities provide us with a more effective way to filter transactions more efficiently."
According to TowerGroup's Kerr, however, most AML technology is designed to do the same thing. "What have changed are the types of transactions involved in money laundering," he says, noting that ACH, mobile payments, prepaid cards and Internet payments traditionally had not been the subject of AML scrutiny. Now, Kerr asserts, as the world embraces these methods more, AML technology and policies need to keep up.
Uncovering the Trail
The USA Patriot Act stepped up the pressure on banks to detect and prevent illicit funds activities. Among the requirements placed on financial institutions are:
• Voluntary information sharing among financial institutions.
• Verification of customer identity programs.,
• Implementation of enhanced due-diligence programs.,
• Implementation of anti-money laundering programs.,