Watch list filtering is every compliance officer's worst nightmare. With a single name like Muammar Gaddafi, spelled hundreds of different ways, and multiple watch lists to manage and update, the work is time consuming, costly and onerous.
Banks have often complained about the number of false positives generated, all of which need to be investigated. Some firms have even outsourced false positives' investigations to offshore locations in order to cope with the workload.
Anti-money laundering vendors are under pressure to not only reduce the number of false positives, but to make the filtering process more intuitive. In a report on Achieving Global Sanctions Compliance, Neil Katkov, senior vice president, Asia, Celent, says, "Achieving consistency in global sanctions compliance involves standardising operations, technology systems, and perhaps most essentially the compliance data—watchlists—that drive sanctions filtering.”
The lists themselves can be onerous and difficult to manage. Dr Tony Wicks, director, AML solutions, NICE Actimize, says HM Treasury's sanctions list in the UK had 3652 changed entries this year alone. There are also other lists banks need to comply with depending on the scope of their activity, including the well-known OFAC list, there is also an EU and UN watchlist and a Japanese FSA list.
The so-called Arab Spring has also had an impact on sanctions activity with new sanctions coming out associated with Iran. Anti-money laundering (AML) vendors like NICE Actimize say they are trying to lessen the workload for banks and the number of false positives using "fourth generation computational linguistics" - throwing raw computing power at "transliterate" words .
Explaining how the technology works, Wicks of NICE Actimize, says it can understand 800 million names, the context of those names and their cultural significance and make a "probalistic match" against the source of the name, which he says is important in terms of reducing false positives.
Wednesday, 5 October 2011
Increased risk of money laundering using pre-paid cards
There could be a high risk of increased fraud during the 2012 Olympic Games as a result of pre-paid cards, which could also potentially be used to launder money.
Dr Tony Wicks, director, AML solutions, NICE Actimize, sounded the warning last week, having walked into a shop in a UK high street, asking if he could buy an unlimited number of pre-paid cards which contain a stored value. According to Wicks, the shopkeeper responded by saying he could buy as many pre-paid cards as he liked.
Unlike credit cards, pre-paid cards are not linked to a bank account and no ID is required to buy them over the counter. Wicks says outside of a closed loop environment where the amount that can be spent on pre-paid cards or what they can be used for is controlled, anyone can buy a pre-paid card. He says most cards have an annual spending limit of £25,000, but there are no obvious restrictions he says on someone being able to buy multiple cards, top them up and use them to potentially launder money. "There is an increased risk of fraud with pre-paid cards as you can buy them anywhere and there are no credit checks or ID required," says Wicks.
Pre-paid or stored value cards are a relatively new phenomenon in Europe. They are also being promoted as a form of payment during the 2012 Olympics by Visa. There are different pre-paid card systems throughout Europe. In Italy most pre-paid cards are "open loop" whereas in other European markets, including the UK, they are typically part of "close-looped gift card schemes." Wicks makes the distinction between closed loop and open loop debit cards schemes, saying the greatest threat in terms of fraudulent use lies in "open loop" schemes.
Laundering money using pre-paid cards? According to AML experts, as banks deploy more sophisticated technologies to detect money laundering, fraudsters are turning to other means, such as cards, as a means of laundering money. While credit cards can be traced back to a user, pre-paid cards have no user ID or credentials.
Dr Tony Wicks, director, AML solutions, NICE Actimize, sounded the warning last week, having walked into a shop in a UK high street, asking if he could buy an unlimited number of pre-paid cards which contain a stored value. According to Wicks, the shopkeeper responded by saying he could buy as many pre-paid cards as he liked.
Unlike credit cards, pre-paid cards are not linked to a bank account and no ID is required to buy them over the counter. Wicks says outside of a closed loop environment where the amount that can be spent on pre-paid cards or what they can be used for is controlled, anyone can buy a pre-paid card. He says most cards have an annual spending limit of £25,000, but there are no obvious restrictions he says on someone being able to buy multiple cards, top them up and use them to potentially launder money. "There is an increased risk of fraud with pre-paid cards as you can buy them anywhere and there are no credit checks or ID required," says Wicks.
Pre-paid or stored value cards are a relatively new phenomenon in Europe. They are also being promoted as a form of payment during the 2012 Olympics by Visa. There are different pre-paid card systems throughout Europe. In Italy most pre-paid cards are "open loop" whereas in other European markets, including the UK, they are typically part of "close-looped gift card schemes." Wicks makes the distinction between closed loop and open loop debit cards schemes, saying the greatest threat in terms of fraudulent use lies in "open loop" schemes.
Laundering money using pre-paid cards? According to AML experts, as banks deploy more sophisticated technologies to detect money laundering, fraudsters are turning to other means, such as cards, as a means of laundering money. While credit cards can be traced back to a user, pre-paid cards have no user ID or credentials.
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