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Banks Are the First Line of Defense Against Money Laundering

Databases and modeling tools are among the systems helping banks analyze the data required to understand customers, monitor millions of transactions and identify suspicious behavior.

Q: How have the anti-money laundering (AML) requirements placed on banks changed since 9/11?

Eva Weber Aite Group

Eva Weber, Aite Group

Eva Weber, Aite Group: There is tremendous regulatory pressure on banks to be a virtual front-line defense against money laundering. The threat of significant fines and potential damage to their reputations is driving banks to make significant investments in technology, training and process controls. Banks must now be able to articulate the AML risks inherent in their businesses, and must have programs and tools in place that are appropriate for those risks. Doing this right requires that institutions have a solid understanding of their customers and what constitutes "normal" behavior for each customer. Banks then need to get a handle on the millions of transactions that occur every day.

Teresa Pesce KPMG

Teresa Pesce, KPMG

Teresa Pesce, KPMG: One of the most significant developments has been the enactment of the USA Patriot Act, which has increased and formalized AML requirements for virtually all financial institutions, not just for banks. The Patriot Act sets a high bar, and regulators have heightened their expectations, evidenced by the many enforcement actions we have seen over the last several years. To meet these high expectations, institutions must understand and analyze the risks inherent in their products and their customer base, and must effectively use that understanding to monitor customer transactions for suspicious activity. Given the variety of products available, the many channels through which business is conducted and the global nature of banking, this amounts to a continually evolving process.

Stephen Epstein Mantas

Stephen Epstein, Mantas

Stephen Epstein, Mantas: By far the biggest impacts to banks have been the adoption of automated surveillance solutions and reengineering of anti-money laundering processes and procedures, in addition to much more robust Know Your Customer(KYC) and Enhanced Due Diligence (EDD) processes/solutions. KYC, in particular, involves the assessment of the risk associated with each customer as banks continually monitor customers' behavior based on their transactions.

Bhairav Trivedi PayQuik

Bhairav Trivedi, PayQuik

Bhairav Trivedi, PayQuik: The most significant developments have been stricter adherence to AML guidelines by banks and financial institutions. This comes in light of increased oversight by the regulatory bodies. Of these activities, OFAC compliance, Know Your Customer and Customer Identification Program (CIP) requirements are the most important and most developed.

The biggest AML challenge banks face today is ensuring their technology is constantly updated to [comply with] new regulations. With increasing product flexibility, AML challenges will become even more complex as banks struggle with increasingly complex KYC decisions.

Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio

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