From the November 2011 issue of Treasury & Risk magazine

Merging Fraud, AML Systems

Collecting and analyzing data on the same platform likely will improve crime prevention, quality control and cost savings.

This month, Capital One will begin using the same technology platform to monitor its commercial banking services for indications of fraud that it uses for anti-money laundering (AML), providing corporate customers with a major benefit they’ll never directly see: safer accounts. Stronger measures to prevent financial crimes have become increasingly important for banks, as perpetrators have become more sophisticated and the courts have sided with corporate plaintiffs suing banks for inadequately protecting their accounts.

McLean, Va.-based Capital One, with $199.8 billion in assets, will analyze commercial customers’ wire transfers in real time before they leave the bank to detect potentially fraudulent activity.

“This is the first instance where we’re doing the fraud detection work on the same platform as the AML work,” says George Kunkel, vice president of AML operations at Capital One.

While Capital One has deployed an enterprise-wide solution since 2008 to collect alerts and file the Suspicious Activity Reports (SARS) required by anti-money laundering regulations, it has used different systems to detect activities indicating fraud, even though they involve much of the same data.

Collecting and analyzing that data on the same platform, says Kunkel, will ensure consistent quality and control over SARs, an important factor for regulators. It will also allow the bank to use just one platform to detect suspicious activity, for a significant cost savings. And Capital One’s AML and fraud investigators will be able share information more efficiently, leading to better crime prevention—the boon for corporate customers.

Tony Wicks, director of AML product management at NICE Actimize, which provided Capital One with the platform, says the bank is “leading development in this area.” He notes that at most large financial institutions,  businesses are in silos along with their respective crime detection systems, increasing costs and making data sharing difficult.

Kunkel says Capital One’s AML unit is “horizontal,” supporting the entire company. Fraud systems are embedded in their respective business units and are likely to stay that way, since they investigate different types of crimes.  It will be up to the business units to decide whether to join the suspicious-activity detection platform, Kunkel says.

Julie Conroy McNelley, an analyst at Aite Group, says recent high-profile enforcement actions have pushed financial institutions to look at new technology and greater integration of AML and anti-fraud units. “From a technology perspective, I think we’ll see a lot more convergence,” she says.



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