Decision Strategies Inc. of New York is joining forces with a Dutch software developer, Inter Access Risk Management, to help banks fight fraud, including money laundering.
By combining Decision Strategies' security consulting expertise with Inter Access' software, called Syfact, the companies hope to give U.S. financial institutions a way to cut into the $290 million they reported lost to money laundering last year.
"The vision is to make banks better able to identify money launderers, rather than just looking into their eyes," said Richard W. Harms, director of strategic technology at Decision Strategies.
Financial fraud in general often is hard for banks to detect because many sort transaction information into a variety of computer "silos," which make suspect patterns of activity difficult to notice.
"It's getting harder for banks to know their customers," Mr. Harms said. "You could have someone go around to 25 different ATMs in one day, and he could get away with fraud if he knew what he was doing. Banks need to have systems that would detect that pattern immediately."
Syfact creates a central data base for a bank's daily transactions. Using algorithms, the system links data and events that a bank security officer might consider unrelated. It then highlights unusual "footprints" that may indicate fraud.
Typical footprints include rises in transactions from areas known to be prone to crime and an increased frequency of transfers to the same person.
Syfact also can detect whether an account holder is using aliases and whether a person is depositing or withdrawing from multiple accounts in different postal zones. Such common indicators of money laundering often take days for a bank to detect without a high-speed data base, said Mr. Harms.
Mr. Harms, who holds a doctorate in geography from the University of California at Berkeley, has a background in both statistical analysis and law enforcement. Most recently, he was senior intelligence program manager at the Treasury Department's Financial Crimes Enforcement Network, informally known as Fincen.
Before that, he had spent several years as a consultant to the Australian government, building a data base to help law officers detect and track money laundering in that country.
Austrak, as that system was called, was installed in 1991. Australia's banks sent their wire transfer information to the data base, which the Attorney General's office managed and monitored.
Using Austrak, the government was able to uncover bank con artists, corporate tax evaders, and drug traffickers, said Mr. Harms.
He also developed a tracking system specifically for individual Australian banks. Western Pacific Corp. in Sydney used his "compliance assistant" data base to aid its risk management efforts, he said.
In 1993, Mr. Harms returned to the United States to build the same system for Fincen, the government agency that tracks financial crimes.
The system serves two purposes, he said.
"At one end, banks' interest in using the system would be to verify that they are doing everything they can to prevent money laundering," said Mr. Harms. "On the other end, banks help their bottom lines by detecting and preventing fraud."
