Financial institutions must accelerate watch list management processes, says Norkom Technologies

Boston - 31 July 2008

Whitepaper outlines strategies to improve monitoring of watch lists of suspects and politically exposed persons (PEPs)

Recent research conducted by Norkom Technologies reveals that, while the costs associated with watch list management continue to rise, most financial services organizations are struggling to meet their regulatory obligations and are ill-prepared to monitor suspected terrorist activity in times of crisis.

This was evidenced when, after a foiled terrorist attack in 2006, the UK government asked institutions to search their global operations for 17 named suspects. For most, the process took over three weeks. Yet, despite these apparent failings, the cost and time associated with watch list management continues to rise. 38% of organizations have seen time associated with watch list management rise within the last 12 months. Over one-third say that it accounts for more than 20% of investigatory time, representing an annual business cost of US$1 million.

According to Edward Doyle, Norkom's Sanction and PEP Compliance Manager and author of the whitepaper, "If it takes organizations so long to conduct an enterprise-wide name check at the behest of their government at a time of national emergency, it seems safe to assume that they complete the task no less speedily during the course of daily business".

Other findings include:

• Fewer than half (45%) of institutions surveyed in The Endless Watch: Battle Strategies for the Counter Terrorist Financing Frontline are able to search for a person's name across all of their business lines, databases and geographical boundaries
• One third (31%) still rely on manual processes in such searches, even though some of the institutions have more than ten million active customer accounts and process more than a million transactions each day
• Encouragingly, however, 79% of institutions have recognized the seriousness of the problem and have centralized all anti-money-laundering responsibilities under a single reporting line
• 27% have taken the more decisive step of centralizing their intelligence gathering by implementing a single technology capable of consolidating information from various detection systems.

Doyle maintains that the approach to the problem must be a risk-based one, in which the degree of scrutiny devoted to the ongoing monitoring of accounts and transaction matches up to the degree of risk. Norkom's whitepaper, The Endless Watch: Battle Strategies for the Counter- Terrorist-Financing Frontline, outlines a six-pronged approach for boosting the effectiveness of anti-money laundering processes:

• Centralize data
• Manage variation
• Transliterate and translate
• Link multiple data points
• Monitor transactions in real-time
• Manage across geographies.

Concludes Doyle, "Our whitepaper attempts to point a way forward by weighing up the value of new approaches in the unglamorous but strategically vital frontline in the war against terrorist financing."

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