When Tech Helps Keep Money Clean

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Written by Charu Bahri

Thursday, 05 March 2009 16:46

Money laundering is one of the biggest challenges facing financial systems all over the world. Here's how technology could help out.

september 11 shook the world as no other terrorist attack ever had. As the US and other developed nations realised that they were not insulated from well-coordinated terror strikes, they looked for ways to attack the networks of the perpetrators planning these crimes. And as money makes the world-even the underworld-go round, the International Monetary Fund (IMF) launched a global endeavour to curb money laundering and thus, snap off terrorists' links to finance.

The danger of money laundering
The IMF defines money laundering as "a process in which the illicit source of assets obtained or generated by criminal activity is concealed to obscure the link between the funds and the original criminal activity." Simply put, this implies that ill-gotten money from activities like trading in drugs may be routed to fund other illegal acts, including terrorist attacks. Criminals always look to ‘launder' funds so as to use them without alerting law enforcement agencies to their source and its links with any underlying crime.
Money_Laundering

Since different nations have different laws and systems to curb money laundering, criminals seek to transfer funds from one country to another, always looking to take advantage of countries with weak jurisdictions or ineffective controls. The IMF is therefore concerned about countries whose commercial and financial sectors are vulnerable to money laundering, as this may deter foreign direct investment (FDI) in a country, enhance the volatility of its international capital flows, as well as risk the stability of its financial systems.

Prakash Seernani, COO, Synlog, feels that this concern is well-founded. "Money laundering, with an estimated value of over 3 trillion dollars per year, is the world's third largest business," he points out. No wonder then that the IMF has emphasised the need to protect the integrity of the international financial system for fund transfers.

The power of IT: RAFTS
Information technology, with its ability to help monitor the billions of financial transactions taking place every day across the world, can play a key role here. But as Seernani observes, an anti-money laundering (AML) tracking solution is only effective if it functions in real-time, as that is the only way to stop suspect transfers.

In this context, Synlog, a Globsyn company providing IT solutions to the banking and financial services domain, has launched RAFTS (Real-time AML Filter for Turbo Swift) software that tracks transactions on a real-time basis. While RAFTS has already been well received in the international market-where it is represented by Synlog's business partner, BankServ Inc (USA)-it has only recently been customised for the Indian market by Synlog's development centres in Kolkata and Chennai.

Seernani explains how RAFTS works: "Banks that are authorised to deal in foreign exchange (forex) do so electronically over the international SWIFT network. A connection to the SWIFT network is available through what is called SNL (SWIFT-NetLink), which is a combination of hardware and software. However, in order for the bank to be able to create messages (i.e., transfer requests) to be sent over the SWIFT network using the SNL, the bank needs message management software. The TurboSWIFT suite from BankServ is a popular message management software that has three essential components. TurboSWIFT is the main server that caters to all the users in a bank; TurboConnect is the client software that bank users have installed on their machines to log onto the server to perform their tasks (message creation, verification, authorisation, or system management); and TurboWEB is an Internet browser based front-end for TurboSWIFT that enables users across multiple bank branches to access the TurboSWIFT server (over a wide area network)."

RAFTS functions as an add-on ‘plug and play' solution to the main TurboSWIFT interface. As an overlay, RAFTS monitors every incoming and outgoing forex transaction occurring over the SWIFT network. To do so, RAFTS uses the Bridgers List of words/patterns. The Bridgers List, issued and regularly updated by organisations in Australia, Canada, Europe, the UK, the US, the United Nations, and the World Bank, is a comprehensive listing of names and keywords that could spell trouble. For instance, it would contain words like Osama Bin Laden, Dawood Ibrahim, Al Qaeda, etc.

Dual protection: manual plus automatic screening
When RAFTS encounters any of these words in a message, it moves the message to a separate folder of suspect transactions, in queue for manual authorisation. This queue appears on the computer terminal of the AML officer of the bank, who may then allow the transaction to go ahead, or reject it and send it back to its creator.
Using RAFTS, an officer may also append patterns to the black-lists (the existence of this pattern means the transaction is to be stopped) and white-lists (the existence of this pattern indicates the transaction is to be allowed). Further, the officer may set the priority in which messages (such as letters of credit, advice of cheque, bank guarantee, etc) of various kinds are to be scanned, as well as define the message types to be scanned or passed without scanning. Essentially, while RAFTS enables a bank to adhere to the first cardinal rule to prevent money laundering-know your customer-it also necessitates a bank's strict compliance with the second cardinal rule - know your employee-in appointing a completely trustworthy AML officer. And that, in turn, will go a long way in ensuring that funds are not misused, resulting in a safer world in the long run.