This page is part of an in-progress commentary by Roger
Frye
on High Altitude
Thinking: The International Informatics Summit.
Mohr intro -- something about history of formation of his group
Imbert intro:
USA Patriot Act: Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (10/26/2001)
Defines money laundering and bank and legal efforts to prevent. International Monetary Fund estimates at 2 to 5% of global GDP. Critical to financing of global terrorism. Offshore jurisdictions make it difficult for law enforcement. Corresponent baning facilities are susceptible to manipulation.
Section 313 prohibits US correspondent accounts with foreign shell banks, must be certified.
Section 319: treasury or justice dept may summons or subpoena any foreign bank that maintains a correspondent account in the US. Agents for service of process. Terminating correspondent relationships.
Section 312: special due diligence on correspondent banks.
Section 328 international cooperation on identification of orginators of wire transfers.
Section 314a -- information sharing between law enforcement and financial institutions. FinCEN on behalf of a requesting federal law enforcement agency may require a financial institution to search its records to determine whether the financial institution maintains or has maintained accounts for, or has engaged in transacions with any specified individual, entity, or organization.
Enormous challenge to identify people on the basis of their names.
Baril intro:
Critical components: technology to provide historical balance and transaction scanning. JPMorgan does 300,000 transactions a day 6000 characters per transfer. Across multiple products (credit cards, payments, demand deposit accounts, securities, broker/dealer) globally. False positives.
A comprehensive risk-based know your customer program (KYC). should mandate collection and review of data across the firm. should be integrated with the account set up process, so use restricted until KYC data avaiable. Should be risk based and maintain country and customer anti.money laundering risk profiles. Federal regulations change rapidly.
An effective anti.money laundering (AML) program. to identify suspicious activity and pattern of behavior by mining historical accountand transaction data. There are a few powerful enterprise wide products and many banks have developed own. challenges of scale. sophisticated scanning techniques t handle variation in names, minimize false hits.
Enhanced for high risk jurisdiction FATF and FinCEN guidelines. Enhanced for internet gmabling (legislation under review). Internet gambling is illegal, so have to threaten clients not to do it again. Ned AML staff with expertise. Need business intelligence software to provide baseline trend data.
Future: institutions will share info about suspicious activity among themselves. (never seen such motivation). improved scanning techniques. effective scanning KYC and AML tools. enterprise wide account profiling. implementation of FinCEN secure web site. imporved AML regulations in foreign jurisdictions.
Richards intro:
10 basic things to think about.
Have an open case on informatics -- turned out to be his own trip to this conference.
Would have needed a charisma bypass operation if he had become an (anything you want to insert here, he used) accountant. Joke about no email at branches -- some don't have FAX. there are 34 companies offering AML technology.
1) don't want to hear: a) a great software solution -- there are no solutiions, only tools. b) false positives .. there are none, only know when goverment gets back.
2) will your product be enable me to isolate every customer with a US zip code doing structured cash deposits at multiple ATMs followed by cash withdrawals in foreign countries in 9 of the last 10 months .. because ours can! (Sturctured means avoiding 10K limit).
3) Be prepared to explain exceptions that are filtered out, so we don't have to manipulate the number of exceptions in order to match thme to the number and capacity of our investigators. Missing potential AML.
4) Going from 30 years (bank secrecy act) of detecting suspicious transactions using internal data to being asked (patriot act) to identify suspects from lists given to us by the government.
5) Most people can not use more than 10% of the features of the most basic desktop tools -- internet and excel. How many of you can use filters and pivot tables.
www.invisibleweb.com 2.5 billion on google, 500-700 billion on the invisible eb.
6) "Normal and expected activity" no more meaningful than a dating service application form. Will fill in the expected answers. Need dynamic running profile.
7) 90% of customers in a bank don't have a dedicated relationship manager, but that is where the answers come from.
8) Money laundering is not fraud. Money laundering is not terrorist funding which is different from terrorist financing. Most of the terrorist accounts were typical.
9) Money laundering is not a problem -- a symptom. Build your softare so I can determine what really went wrong.
10) 3 years ago had to build own AML Database. Now get 3 or 4 calls a wee.
Dilbert cartoon. Seller says We provide win-win. We don't have a product, we partner. Dilbert replies: I don't buy, I shovel.
QUESTIONS
Question -- missed: Answer from Richards, we provide 2 databases and has proved helpful.
Question measures and counter-measures. Patriot Act pushes terrorists to use non-banking transactions. Baril responds. Yes there are such systems Hawala = soutwestern asian, also ICHIN. Using gems.
Question $600B problem compared to price of solution: Answer from Mohr.didn't follow. Richards says the 600B figure is a gospel. Really $300B to $900B. Baril says banks have increased level of funding several times from 100K to 2M in her bank.
Question from Jan Hauser about a federal mandate that cost him money. About turning exceptions knob back because not enough people. Is there any remedy like hiring people? Answer from Mohr. History 1991 OFAC to identify special nationals overseas to block funds -- very expensive for banks, indirect taxation.
END