SKOKIE, Ill. - Banks of all sizes are taking on the services of a hired gun for the 1990s.
The assignments include searching for suspect ships in the Mediterranean, shady operators in faraway lands, and crafty characters on American soil bent on doing illicit business through U.S. banks.
This hired gun, however, is not human. It comes in the shape of a floppy disk or a roll of magnetic tape.
FACS, FACFile, and FACLine software products, designed to assist banks in complying with the regulations of the Treasury Department's Office of Foreign Asset Control, keep obscure places, odd spellings of names, and other factors from costing a bank thousands of dollars in fines. The aim: make sure no U.S. dollars get into the wrong hands.
"The reason for using the OFAC software is to find bad guys," said Joseph Madison, who created the product for Joseph Madison Associates, which was bought by Thomson Financial Publishing in April. (Thomson Financial Publishing is owned by the same company as American Banker.)
The software, which ranges in price from $1,195 for FACS to $5,995 for FACFile, is in use in about 40 banks. It compiles information from the Treasury Department's list of Specially Designated Nationals and embargoed countries. The list includes countries like Iraq and North Korea and suspected terrorist groups like the Abu Nidal organization.
But at the end of the government's list is a disclaimer saying it is incomplete and warning banks that dealing with someone, on the list or not, who is associated with a restricted country is a fineable offense.
That means banks need more than just the list to protect themselves, said Michael Harris, Thomson vice president of electronic product development.
"Banks were asking, 'How I could be fined for something I don't have the information to stop?'" Mr. Harris said. "The government is not going to tell them to use this data base or this technology."
Mr. Harris said the FACS line of software is updated within approximately three days with changes in the Treasury Department list. By adding names of foreign government officials, cities, and companies, with various spellings if necessary, obtained from translators, atlases, and almanacs, the FACS software aims to cover all the bases.
The list also covers places like Hackensack, N.J., Pittsburgh, and Solon, Ohio, and businesses like Furniture Americana and Swan Laundry and Dry Cleaning Company Ltd., which do business with large and small banks but hardly seem like settings for Tom Clancy novels.
But that's the point, said T. Emmett Dages, vice president of funds transfer at Thomson.
"The initial thought with this software was that it would be used mainly in huge cities like New York and Miami that do lots of international wires," Mr. Dages said. "But banks of all sizes are recognizing the need for this type of product."
The product comes in different forms for different sizes of banks. FACS works in a PC, FACLine is used with Windows software, and FACFile holds the data base itself on disk or magnetic tape.
Thomson is not alone in marketing software that helps banks comply with foreign asset control rules. Among its competitors is Hotscan, produced by Logica North America Inc., in Waltham, Mass.
The current Thomson products evolved from Mr. Madison's Qualitran software, which is used to obtain identification numbers for wire transactions, but not to ferret out bad guys.
"When we recognized the OFAC compliance need, it seemed like a natural that we expand on what we already had to address that need," Mr. Madison said. "They were telling banks, 'Thou shalt not do transactions with restricted countries.'"
To prove that point, a release from the company quotes a top Treasury official as saying a bank received a $225,000 fine for returning, instead of blocking, a payment involving a restricted person.
More than $2.1 million in fines for foreign asset control office violations were handed out in fiscal 1994, a Treasury official said.
To run the FACS software, a user enters the name of a city, person, or company involved in a suspicious transaction. Any names that match the Treasury list or the FAC data base appear on the screen. A few clicks of a mouse can reveal whether the transaction should be cleared or refused or if the foreign asset control office should be called for clarification.
Along the way an audit trail is left, showing what transactions were checked and when and leaving evidence of an institution's effort to comply with foreign asset control rules.
Bankers' Bank in Atlanta, which provides correspondent services in the Southeast, has used FACLine for a few months, according to vice president of operations Alice Rainey.
"Our respondents are 250-some-odd banks who send wire transactions through us," Ms. Rainey said. "Our job was to detect and stop illegal transactions, and we determined that the manual review process was not worthy."
Though no illegal transactions have been detected, several suspect transactions have prompted additional inquiry, Ms. Rainey said.
John Byrne, senior federal counsel at the American Bankers Association, said bankers are clamoring for compliance help.
"We've been getting more calls and questions in the past four or five months than I've ever had on OFAC requirements," he said in an interview Wednesday. "Banks want to know what kind of software is out there. "They are saying, 'We need something to help us.'"
The ABA is currently looking at software vendors and will soon endorse one, Mr. Byrne said. "Software that is capable of picking up as many variants as possible is critical," he said.
However, as in any spy novel, information in the FACS products could be troublesome if it fell into the wrong hands.
A person or organization on the list could use the information as a money-laundering road map. A money launderer could find his business on the data base and change its location or name.
"That certainly is a danger," Thomson account manager David Leverenz said. "We research banks we sell to and have licensed agreements signed in order to protect ourselves." The agreements prevent banks from sharing the software without Thomson's knowledge.
