Anti-money laundering software
|This article does not cite any references or sources. (November 2007)|
Anti-money laundering software is software used in the finance and legal industries to meet the legal requirements for financial institutions and other regulated entities to prevent or report money laundering activities. Anti money-laundering guidelines came into prominence globally after the September 11, 2001 attacks and the subsequent enactment of the USA PATRIOT Act. Today, all financial institutions globally[dubious ] are required to monitor, investigate and report transactions of a suspicious nature to the financial intelligence unit of the central bank in the respective country.
There are four basic types of software addressing AML business requirements:
- Currency Transaction Reporting (CTR) systems, which deal with large cash transaction reporting requirements ($10,000 and over in the U.S.)
- Customer identity management systems which check various negative lists (such as OFAC) and represent an initial and ongoing part of Know your customer (KYC) requirements. Electronic verification can also check against other databases to provide positive confirmation of ID such as (in the UK: electoral roll; the "share" database used by banks and credit agencies; telephone lists; electricity supplier lists; post office delivery database
- Transaction monitoring systems, which focus on identification of suspicious patterns of transactions which may result in the filing of Suspicious Activity Reports (SARs). Identification of suspicious (as opposed to normal) transactions is part of the KYC requirements.
- Compliance software to help firms comply with AML regulatory requirements; retain the necessary evidence of compliance; and deliver and record appropriate training of relevant staff.
An entire industry has developed around providing software to analyze transactions in an attempt to identify transactions or patterns of transactions, called structuring, which requires a SAR filing, or other suspicious patterns that qualify for SAR reporting. Financial institutions face penalties for failing to properly file CTR and SAR reports, including heavy fines and regulatory restrictions, even to the point of charter revocation.
These software applications effectively monitor bank customer transactions on a daily basis and, using customer historical information and account profile, provide a "whole picture" to the bank management. Transaction monitoring can include cash deposits and withdrawals, wire transfers and ACH activity. In the bank circles, these applications are known as "AML software".
Each vendor's software works somewhat differently. Some of the modules which could be present in an AML software are:
- Know Your Customer
- Entity Resolution
- Transaction Monitoring
- Compliance Reporting
- Investigation Tools
- Delivery of AML Training
- Customer due diligence checks, including electronic verification
- Dissemination of AML policies and procedures