August 31, 2004

The Best Defense

Terrorists do not walk through walls. They're flesh-and-blood beings who need to travel, talk to one another, eat and sleep. Often, these activities require access to the banking system. To the extent that terrorists can hide their identities and their financial transactions, they can plan attacks unabated. That's why law enforcement has turned to banks for help in detecting individuals on terrorist watch lists. During the account-opening process, banks request data that is not only helpful for assessing the potential risk of a loan, but also can help to unmask stolen or fake identities.

Using a combination of public records and proprietary techniques, SRD (Las Vegas) allows banks to verify customer data and make sure that it's stored in a format amenable to rapid and accurate searching. With this technology comes the ability to cross-reference data points from within the customer base. If two customers share the same beneficiaries, emergency contacts or phone numbers, the SRD system automatically generates a report that points out the accounts that bear further investigation. "Instead of a very large stack of suspicious activity, you're going to have a smaller, more refined stack," says John Slitz, SRD's CEO.

SRD also has tackled the problem of how to cross-reference customers from different institutions. Banks are loath to provide customer lists to competitors, even if for noble purposes. In response, SRD has developed a "hashing" algorithm that transforms each data element into a string of coded characters. Instead of two banks exchanging real customer names and addresses, they exchange encrypted versions of customer data. If there's a connection worth pursuing, the compliance officers at the respective financial institutions can then follow up with identifiable information.

But everyone else's information remains within the banks' walls. "They want that evaluation to take place in a way that protects the privacy of the individual and is not data-mining," Slitz says. "They want to be able to find that 'Joe Smith' is a relation to 'Fred Barnes,' and Fred is a known, convicted felon for money laundering, and that association makes Joe Smith a reasonable and particular lead for them to investigate."

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