MONEY laundering is an elusive organized crime that law enforcement throughout the world battles against every day. No one ever knows exactly how many dollars are cleaned in this deal and how many will be cleaned in the next. But stricter measures are being adopted as countries work hard to fight this new method for financing terrorism.
Success in the financial sector is based squarely on the trust between a client and a bank. If a bank loses that trust, it loses one of the main prerequisites for its further development and profitability in the financial market.
Banks currently face substantial risk of having their reputations damaged by allegations of money laundering. Ever since the tragedy of September 11 in New York, banks have been charged with uncovering any illegal financial resources that could be funneled to terrorists.
Financial regulators at the national and international level pay special attention to whether banks are keeping their obligation to fight against money laundering. In some countries, like Russia, for example, banks that were unable to explain hundreds of unclear transfers lost their licenses. The introduction of tools used for detecting these kinds of transactions is currently compulsory for commercial banks in many countries.
Technology is a valuable tool
Software and modern technology are among the tools that can be used to turn the tide in the battle against money laundering.
Modern software systems can match transactions on-line with a list of sanctioned persons published by national and international market regulators, such as central banks and the Office of Foreign Asset Control.
The system also checks customer databases to verify whether the sanctioned persons have a current account in the bank.
This enables regulators to block a financial transaction if the sanctioned subject is a sender or a beneficiary of a payment. In this case, signing and sending the money is subject to the authorisation of a bank employee who operates within defined procedures.
Up-dated software versions also enable regulators to monitor customer profiles, including expected activity and transactions.
Thanks to progressive statistical analysis, it is now possible to identify suspicious financial trans-actions. Therefore, the relevant bank department can be automatically notified when a customer performs an operation significantly different from his usual profile.
Slovak banks taking an active stance
The Department for Bank Supervision of the National Bank of Slovakia (NBS) focusses on implementing and enforcing measures against money laundering in banks and subsidiaries of foreign banks in Slovakia.
"There is always a risk of banks being used to obtain illegal financial resources and that could have a negative impact on bank system security... Each bank should use its own software to monitor transactions of client bank accounts," reads one NBS recommendation.
Ján Vittek, the head of the compliance and AML department of Tatra banka, explained that Slovak legislation, as well as EU regulations, now oblige banks operating on the Slovak market to adopt measures for ensuring international peace and security.
"We fully realise the risks involved in leaving these obligations unfulfilled, so we have adopted the needed measures.
"Effective implementation would be impossible without software, considering the large number of daily bank operations," Vittek said.
David Saleh is a senior business consultant with
20. Feb 2006 at 0:00 | David Saleh