With increasing instances of black money, corruption and frauds, both in the corporate world as well as the government, the anti-money laundering (AML) software industry is seeing good business.
Narayan V, region head (South Asia), 3i Infotech, says spending on information technology for AML solutions in the banking, financial services and insurance (BFSI) sector is estimated to rise 32 per cent in the next 12 months. 3i Infotech on Monday said Sampath Bank—one of Sri Lanka’s largest financial services companies—would be the first Sri Lankan bank to implement Amlock, the company’s AML software. The due diligence process, initiated by a consortium of 13 banks in Sri Lanka and facilitated by the Sri Lanka Bankers Association (SLBA), took more than two years to complete, according to a 3i Infotech press release.
AML software is primarily used by the finance and legal industries to describe legal controls that require financial institutions and other regulated entities to prevent or report money laundering activities. Illegal activities such as terrorism, drug trafficking and other organised crimes are typically funded through money laundering.
Software applications monitor bank transactions on a daily basis and, using historical information and account profiles of customers, provide a ‘whole picture’ to the bank’s management. Transaction monitoring includes cash deposits and withdrawals, wire transfers and automated clearing house activity. Today, software packages are capable of name analysis, rule-based systems, statistical and profiling engines, neural networks, link analysis, peer group analysis and time-sequence matching.
Anti-money laundering software filters customer data, classifies it according to the level of suspicion and inspects it for anomalies, including any sudden and substantial increase in funds or a large withdrawal. Smaller transactions that meet certain criteria may also be flagged as suspicious. The software would also flag names placed on government 'blacklists' and transactions involving countries that are thought to be hostile to the host nation. Once the software has mined the data and flagged suspect transactions, it generates a report.
AML business requirements typically comprise currency transaction reporting systems which deal with large cash transaction reporting requirements (over $10,000 in the US), customer identity management systems which check various negative lists (such as OFAC) and represent an initial and ongoing part of know-your-customer requirements. They also compromise transaction monitoring systems, which focus on identification of suspicious transaction patterns, which may result in the filing of suspicious activity reports.
The PMLA Act, 2005 forms the framework for combating money laundering in India. AML standards are defined by the Reserve bank of India under the guidance of Parliament and the Ministry of Finance. These guidelines, rules and regulations are monitored through the Financial Intelligence Unit, which has released nearly 50 recommendations subscribed to by many countries, including India.
AML guidelines gained global prominence after the September 11, 2001 attacks in the US and the subsequent enactment of the USA PATRIOT Act. Today, financial institutions globally are required to monitor, investigate and report suspicious transactions to the financial intelligence unit of the central bank in the respective country.
Players in the AML segment in India include 3i infotech, Infrasoft Technologies, SAS, and Oracle Financial Services software. The global financial crime management technology market is expected to touch $3.75 billion by 2012, with a compound annual growth rate of 13 per cent. This includes all services and products for financial crime management. Asia AML software spending was estimated at $93 million in 2009, according to a report by Celent.
Aite Group's new ‘Global Anti-Money Laundering Vendor Evaluation: A Reinvigorated Market’ report ranks SAS Anti-Money Laundering the top AML software provider. Aite Group interviewed 36 financial institutions and 18 leading vendors in the global AML sector between January and April. The report said the current global $450-million AML software market “will grow at a compounded annual growth rate of nine per cent over the next few years, reaching $690 million in 2015.” The key market drivers include “rapid growth in Asia Pacific, West Asia and Africa, financial institutions in the United States and Europe replacing outdated solutions, and smaller financial institutions replacing manual processes with automated solutions.”
The report also said AML solutions should include customer due diligence, suspicious activity monitoring, case management and watch-list filtering.
