ABA Banking Journal - October 2009 - (Page 36) BSA/AML TECHNOLOGY REPORT that they are virtually always in catchup mode, much as computer security experts are always just a trifle behind the latest virus, according to Jeff Margolies, senior executive in the Accenture Technology Consulting Security Practice. While traditional channels like branch transactions will be used, and must be watched, there are always bad guys on the leading edge. Margolies points out that banks need to be watching atypical areas such as call center transactions, internet banking, and other web-based transactions these days. Harland’s John Meyer sees stored-value card transactions as an area that must at least be better understood, and likely monitored, going forward. He points out that many in-branch card sales involve noncustomers, often people who are “unbanked.” Collecting data from them can be problematic; many lack taxpayer ID numbers. He poses the question: Why don’t they have the numbers? Many don’t recharge cards at the bank, leading to other questions. Pay special attention to correspondent transactions. A key channel to pay attention to, because of the large amounts of money that can be involved, are correspondent banking transactions, warns Paul Henninger, head of the financial crimes product group at Actimize, which recently acquired Fortent (an ABA-endorsed provider). Henninger believes this will be the next major area that the regulators begin delving deeper into. Monitoring software requires special attention to handle correspondent transactions because they are a multi-layered. A single transaction can involve one or more intermediary banks, and sometimes the data that the bank needs tracked can be hard to intercept. Henninger points out that key information may reside in the memo field of an interbank document. Don’t forget to include new products! Monitoring software doesn’t read the employee newsletter, even if it is delivered electronically. If the bank develops a new product that has BSA/AML implications, part of that development must be determining how to connect your monitoring software into its transaction stream, says David Gilles, “You can’t take anybody’s word new features will work” —Ann Marie Tarantino, Bank of Smithtown Bankers’ experience varies widely in this regard. One mid-sized institution reported that customized help used to be easier to obtain when the vendor’s software was new, and the bank was an early adopter. After many more banks bought in, changes became subject to majority rule—if enough other banks wanted it, you could get a new feature. If not, it might be a long wait. 25. director, forensic and dispute services, Deloitte Financial Advisory Services. Network locally and beyond. Many of the software providers maintain user groups, which meet periodically. Your area may also have a BSA or compliance peer group organized. Bank of Smithtown’s Tarantino says she’s attended Jack Henry user group meetings to keep up with Yellow Hammer-related issues, and is going to try to organize a local Yellow Hammer group. 22. 23. 20. Investigate what assistance your vendor can provide on an ongoing basis, besides software updates and revisions. For example, Patriot Officer, from GlobalVision Systems, Inc., Chatsworth, Calif., offers a daily monitoring service that ensures that each client’s data integrity is being maintained, according to Catherine Lew, executive vice-president. This helps financial institutions pass audits and regulatory examinations without any question about data accuracy. Be clear how much your vendor will do for you. Some software tweaks and changes can be made by the client using “dials and levers” preset in the software, but other changes require new programming by the vendor. “The willingness of the vendor to do what you want is key,” says consultant Lucy Griffin. In fact, she says the inability to get what the bank needs on a timely basis is a good reason to change vendors. Consider alternatives to off-theshelf software. There are many offerings among the vendors, but even today some banks, and not the largest, grow their own electronic approaches. At $5.7 billion-assets Johnson Financial Group, Racine, Wis., John Topczewski, vice-president and compliance officer, says his institution didn’t just start shopping around as volume made automation essential. Staff studied the data embedded in transactions and developed an internal approach piggybacked on existing core system reporting mechanisms. Topczewski says this effort gives the bank ultimate flexibility when it needs changes (either staff or vendor employees can write code for new reports); and costs far less than a purchased package that comes with the ongoing cost of updates and other charges. Topczewski estimates it would cost his bank around $150,000 annually to keep a vendor-written package up to speed. And for that kind of money, he said, he would be able to have three more analysts on the bank’s payroll, working the information generated by the system. “Our examiners are fine with this,” says Topczewski. “They understand its pluses and its minuses. We took our time and built it right. We put four or five people in a room for 120 days and said, ‘Build it’.” 21. 24. Consider alternatives to handling all of BSA/AML yourself. Deloitte’s David Gilles says that some institutions are exploring “FIUs for hire.” “It’s a fairly new approach,” says Gilles. Nonbank financial companies, such as hedge funds, have tended to use the tool more than banks, but bank usage could develop. Gilles likens it to a “timeshare” taken in software and support and investigative staff. BJ 26. 36 OCTOBER 2009/ABA BANKING JOURNAL Subscribe at www.ababj.com http://www.accenture.com http://www.accenture.com http://www.deloitte.com http://www.actimize.com http://www.ababj.com Table of Contents for the Digital Edition of ABA Banking Journal - October 2009 ABA Banking Journal - October 2009 Contents Editor's Column Briefing ABA Resources ABA Chairman's Position Community Banking Pass the Aspirin A Good Time fo a Steady Hand Get the Best Out of BSA Technology Long Stretch of Workouts Ahead Make Entry-Level Hiring an Asset Tech Topics Compliance Clinic Mailbox The Economy ABA Banking Journal - October 2009 http://www.nxtbook.com/naylor/BAKS/BAKS0515 http://www.nxtbook.com/naylor/BAKS/BAKS0415 http://www.nxtbook.com/naylor/BAKS/BAKS0315 http://www.nxtbook.com/naylor/BAKS2/BAKS1014 http://www.nxtbook.com/naylor/BAKS2/BAKS0914 http://www.nxtbook.com/naylor/BAKS2/BAKS0814 http://www.nxtbook.com/naylor/BAKS2/BAKS0714 http://www.nxtbook.com/naylor/BAKS2/BAKS0614 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