monitoring high risk transactions may 11, 2009 why we monitor what we monitor how we monitor does it...
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Monitoring High Risk Transactions
May 11, 2009
Why We Monitor
What We Monitor
How We Monitor
Does it work?
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MONITORING HIGH RISK TRANSACTIONS
WHY?
1. Protect against “Bad Guys”:
• Money Launderers
• Sanctioned Parties( OFAC, EU,etc.)
• Terrorist Financiers
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MONITORING HIGH RISK TRANSACTIONS
2. Protect against regulators:
• Policies and procedures
• Automated systems
• Manual reviews
• Training
• Record keeping
• Consistency
• FFIEC Manual
WHY?
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MONITORING HIGH RISK TRANSACTIONS
• Interdiction: OFAC =“Strict liability”
•Monitoring: Risk =Reputation, “reputation is priceless”
•Cost Justification
– Riggs Bank, Lloyds Bank
– Insurance model: Expected return is negative, but pay a premium you can afford to avoid a loss you cannot afford.
Are risk based programs a myth?
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MONITORING HIGH RISK TRANSACTIONS
• Funds Transfer( SWIFT & ACH)
• Capital Markets
• Trade Finance
• Liability Management?
• Checks
• Third party payments
• Vendors, employees
What?
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MONITORING HIGH RISK TRANSACTIONS
• Manual Monitoring
• Automated systems
–Interdiction systems
•Source lists
•Algorithms:
–Stop descriptors
–Phonetic matches
–Fuzzy logic
–Monitoring systems
•Rules Based
•Change based
•Artificial intelligence
How?
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MONITORING HIGH RISK TRANSACTIONS
• Interdiction is the more simple task
• Comparison of three tools on same data
Does it work?
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MONITORING HIGH RISK TRANSACTIONS
92
8
176
184
481 4688343
True Hit
Comparison of screening tools
Single day Funds Transfer
Phonetic (460)
Stop Descriptor (1008)
Fuzzy Logic (5529)
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MONITORING HIGH RISK TRANSACTIONS
•Ratio of alerts to SAR’s;>2000:1
•Ratio of interdiction hits to block/reject;=1000:1
•Regulators seem satisfied
•Lack of objective standards
– Testing bio labs
Does it work?
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MONITORING HIGH RISK TRANSACTIONS
Research & Development Project
• Staffing
– Investigator
– Statistician
• Technology
– Database
– Business Objects ver. XI (BOXI)
• Projects
– Digit distribution
– Business line risk assessment
– Vessels
– Resource optimization