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Anti-Money Laundering – Role of Technology Vasant Godse. L&T Infotech Ltd. - Powai. October 13, 2006. IIBF Seminar on ‘Anti Money Laundering & Know Your Customer’ Guwahati. Background.

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Anti-Money Laundering – Role of Technology

Vasant Godse

L&T Infotech Ltd. - Powai

October 13, 2006

IIBF Seminar


‘Anti Money Laundering


Know Your Customer’


  • The process of transforming illicit funds into legal capital. Involves Placement /Layering/Integration
  • Money laundered annually nearly 3 to 5 % of World GDP or USD 500 billion to 1.5 trillion.
  • Organized crime groups becoming more global and carrying on their activities far away from their geographic region
  • Not only economically destabilizes a country but also exposes to terrorist attacks,threatening its integrity & sovereignty
  • Result: International organizations and regulators to developing international standards and best practices to address to money laundering issues in a collaborative manner
players detectors
Who are involved?



Car dealers,

Real estates builders,

Accountants and

Others, who allow their businesses to be used by someone to launder the proceeds of a crime.

(23 industries covered in USA)

Who is watching?


European Union Directives

Basel II


USA Patriot act



Wolfsburg Principles on Private Banking and Correspondent Banking

All countries’ regulators

rbi guidelines kyc
RBI Guidelines – KYC
  • KYC guidelines to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering
  • Components

Customer Acceptance Policy

Customer Identification Procedures

Monitoring of Transactions; and

Risk management

  • Two broad approaches to controlling money laundering:

1.  Know your customer and correspondent.

2. Monitoring the transaction flows.

(Correspondents yet to be covered in India)

data information requirements
Data Information requirements

Compliance expectations

Bank must locate, extract, warehouse and assimilate data Solution that can evaluate transactions at more details

Single view on customer activity

Data/Informational needs

  • Data Acquisition from source system, transformation and loading capabilities.
  • Data analysis engines
  • Analysis and detection capable of revealing pattern
  • Identify behavior changes
  • System in place to document all findings
  • Ad hoc research capabilities
technology criteria
Technology Criteria

Any solution for AML compliance has to address to the

following issues:-

  • Monitoring of individual transaction
  • Profiling of risk in respect of existing and new customers
  • Referencing the transaction with regard to the watch list
  • Marinating of records on customers, transactions, regulations and their up-dates
  • Analytics to assess and develop patterns of client behavior
  • Facilitating regulatory reporting and related requirements
  • Providing alerts and
  • Generation of audit trails
technology offers

Manage customer account opening, acceptance & ongoing maintenance

Risk based customer modeling

Risk class based on risk factors and scores

Links company wide customer acceptance documentation requirements

Stores, manages and queries electronic documents

Risk Assessment

Maintains & monitors details for customer

Profiling technique to evaluate customer & transaction

Creates customer behavior pattern

Tool for reviewing suspicious activity

Real time transaction enquiry tools

Automates creation and filing of suspicious activity

Comprehensive audit trail

Technology Offers
technology offers9
Legal/Regulatory compliance

Electronic workflow from receipt of information to response back

Automated process to import the request for information

Flexible search algorithm

Electronic filing of responses back to inquiring parties

Comprehensive security control to ensure confidentiality

Detection of Black listed customer

Detects violations consistently across enterprise for a multitude of global sanctioning bodies

Real time, intra-day interfaces to all at-risk business system

Reduce expensive due diligence

Provide automatic sanctioned party updates

Integrates with multiple disparate business systems

Technology Offers
technology present status
Technology– Present Status
  • Product vendors as well as solution framework providers like L&T Infotech
  • Multiple approaches to AML implementation
  • Basic transaction filtering and exceptions based reporting systems that give 'hits' and 'alerts' based on the violation of rules.
  • Artificial intelligence based adaptive learning systems that monitor activity patterns in transactions and accounts to detect and prevent money laundering
  • Integrating these solutions with the current architectures and developing multiple interfaces to existing systems
  • More vendors and processes.
  • Additional costs in maintaining multiple packages
  • Security and database issues.
technology trends
Technology Trends
  • Browser-based interfaces, for enhanced usability and ease of deployment
  • Visualization tools, such as network diagrams to depict account relationships
  • Peer profiling, network analysis, risk scoring and other analytic approaches currently being emphasized by regulators
  • Enhanced case management functionality with rich workflow and investigation features
  • “Compliance dashboards,” to integrate output from multiple regional and line of business systems, including the integration of AML with anti-fraud and other compliance systems

Source: Celent, Trends in Anti-Money Laundering 2006.

technology trends12
Technology Trends
  • Additional modules to make a more comprehensive solution suite, including account opening due diligence and watch list filtering in addition to transaction monitoring
  • Integration with SWIFT and other payments networks to enable real time interdiction of wires
  • Outsourced AML services, offered by major core banking processors such as Fiserv or Metavante, as well as new shared data center initiatives focused solely on AML
  • The pursuit of scalability, to achieve greater competitiveness for business from large financial institutions
  • Introduction by high end vendors of “AML lite” versions of their products, aimed at the emerging small and midsize FI market.
commandments for compliance
Commandments for Compliance
  • AML Compliance is a Board level and not only Branch level issue
  • Size of the bank is immaterial
  • Locations is redundant
  • AML Compliance is NOT a local problem
  • Compliance is a business challenge not MID drill
  • Address to data needs and data consistency
  • Training and its proper documentation for regulatory review



Thank You