September 20, 2001

It's no secret that international terrorists continue to use the worldwide banking system to launder money. Indeed, the U.S. Treasury's Office of Foreign Assets Control, or OFAC, maintains a list of individuals and companies with terrorist ties for financial institutions to avoid, and hopefully report if they try to open accounts.

Unfortunately, this list grows in size every day, and now is likely too long for banks to notice suspect names with only cursory inspections.

"The concept of paper-based OFAC lists doesn't make sense," said Dave DeMartino, vice president of sales and marketing for Prime Associates, Clark, N.J. "You're looking at a database of maybe 10,000 names. Are you going to remember all of these names if someone happens to open up a new account?"

That's where OFAC compliance software kicks in--to automatically check names against the most current version of the OFAC list. But many smaller banks lack these automated OFAC compliance capabilities.

"The chances of a community banks having an automated OFAC solution is very, very minute," said DeMartino.

That's likely to change, given recent events and the government's promise to fight terrorism on all fronts and by any means available. "If you cut off the flow of money, these terrorists cannot survive," said DeMartino. "We, from a financial perspective, need to strangle their ability to move funds into this country."

But to effectively block access to funds, OFAC screening has to occur at every distribution point, not just the largest ones. "The money comes in through possibly a money center bank, but the ultimate beneficiary is sitting in Florida or Minneapolis or wherever else they are in this country," said DeMartino. "The local community bank or S&L is just taking the instructions and depositing money into an account."

"If you had an automated money laundering detection system, there's a lot of different things you could do to combine both detection on the money laundering side and certainly any elements of OFAC," he added.

But banks aren't the only ones that could benefit from cross-checking their customers against the OFAC list.

"How come the airlines don't have the ability to monitor for OFAC?" asked DeMartino. "Today, people are looking at any level of electronic surveillance that may make sense."

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