A new breed of vendor is cropping up to aid financial institutions trying to comply with anti-money-laundering rules enacted following the Sept. 11 terrorist attacks.
The number of potential users of such aid continues to grow as the scope of the USA Patriot Act expands to require not just banks and large investment houses but also brokers and dealers outside of banks, credit unions and money-transmitting businesses to be on high alert for suspicious financial activity. Beginning this week, all such institutions must have anti-money-laundering programs in place.
The Southwest IBM Employees Federal Credit Union, in Irving, Texas, has manually monitored its members accounts for years to report suspicious dealings to the government. But the heightened concern embodied in the act spurred the credit union to purchase software from Bankers Systems Inc. to screen the accounts more thoroughly.
"What we did in the past was work off a paper report, which is basically 50, 60 or 70 pages of names and organizations in fine print," said Jack Coffey, chief operations officer at the 17,000-member credit union. "The Patriot Act put a little bit more emphasis on foreign nationals. Were trying to step up to the plate and be more diligent."
Coffey uses OFAC, or Office of Foreign Assets Control, Watchdog software, one of three products offered by Bankers Systems to deal with Patriot Act obligations. Working with Attus Technologies Inc., of Charlotte, N.C., Bankers Systems delivers a continually updated version of OFACs list of suspected terrorists and organizations. In 1999, OFAC made an addition or a deletion to the list about once a month, but last year, it made 31 changes, and this year, it is expected to make a change about once a week.
"Regulators are looking at the use of software as a mitigating factor [in prosecuting noncompliance]," said Robert Ballieu, an attorney at Bankers Systems, in St. Cloud, Minn. "Some financial institutions are trying to do this manually, but its arduous."
Larger commercial banks use software with neural network technology to go beyond government control lists and root out complex money-laundering schemes.
Applied Communications Worldwide Inc., of Omaha, Neb., offers software that compares customer account characteristics with fraud models and patterns in real time, over ATM, credit card and point-of-sale debit card systems.
This week, the Treasury Department is supposed to offer more details on the required anti-money-laundering programs. Of much greater concern to the industry, however, is another set of Patriot Act provisions addressing "know your customer" requirements that go into effect in October.