Clean Data Needed To Find Dirty Money

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BASKING RIDGE, N.J.-Affinity FCU here is aggregating a hoard of warning signs to detect money laundering in high-risk member accounts-but accurately assigning account risk took awhile.

Fiserv's Anti-Money Laundering (AML) Monitoring software helps the CU monitor member behavior, business rules and watch lists, items that help satisfy the Bank Secrecy Act (BSA). Though Affinity installed the software two years ago (see Credit Union Journal, November 9, 2009), the majority of the benefit has come only in the past three months, said Jim Wilcox, AVP-risk administration at Affinity.

"At first, you have to clean the core data until you get rid of any errors or omissions in account records that might affect the integrity of the risk results," Wilcox said. With accounts for more than 130,000 members, Affinity only recently finished the scrubbing.

Before the $1.8-billion CU installed AML Monitoring, employees attempted to manually track member behavior, business rules and watch lists, said Wilcox. The CU imported core data into Microsoft Access reports to track transaction activity and read through watch lists for matches against member names, Wilcox said.

"Looking at the watch lists took us an hour every day," he said. "And we couldn't see wire transactions in our Access reports." Correlating transactions across reports and over time to detect suspicious activity wasn't humanly possible. "I would have had to have six employees work the reports, and I still wouldn't have gotten the information I needed. We just didn't have a rich base for our AML operation."

Affinity changed all that with Fiserv's software, which automatically aggregates all warning signs from data in the CU's account processing solution, Fiserv XP2, Wilcox said. "Don't buy AML software that doesn't integrate completely with your core transaction system," he warned. "An AML application will only work as well as the data you can extract from your core.

"We are totally dependent on this software now," Wilcox continued. "It's a big-ticket item that's worth the money. I'm anxious to hear what the feds think of our operation next time around."

Once the system identifies a suspicious pattern across transactions over time, it alerts the CU. Currently, one full-time employee investigates the approximately 150 daily alerts, ranging from low to high risk.

Cash and wire transactions, currency transaction reports (CTR) and structuring transactions are analyzed by the system, he said. The software considers anomalies in members' transaction behavior over time and follows business rules, such as how to treat certain transaction types from overseas members.

Data are run through about 20 risk scenarios, showing Affinity "activity we would have never seen without the software," Wilcox said. Extremely high-risk accounts are dropped into a "close-monitoring" feature and vigilantly tracked.

The system takes just seconds to check against current OFAC, Patriot Act 314a and Bureau of Industry and Security watch lists, he said.

Affinity's comprehensive AML monitoring aligns with BSA goals, suggested Wilcox. "The feds are starting to hardball on the ability to risk-profile your accounts. You can't risk-profile just on dollar placement. You need to bring in other components, such as the member and the type of account."

The CU has few extremely high-risk accounts, most likely because it doesn't hold many commercial accounts, which are often conduits for money laundering, he said.

Affinity has yet to encounter a case of money laundering, he added. "But we have a number of accounts that wash a lot of money through them, and we're liable if there's any money laundering."

The software also allows Affinity to submit and track Suspicious Activity Reports (SAR) and CTRs directly from the system's case management and workflow features.

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