Switzerland's largest bank has decided to use the technology of Searchspace, the UK anti-money laundering software house, to monitor all its banking transactions. The bank provides the driving force behind the Wolfsberg group of 12 global financial institutions that vowed in January to screen financial transactions for signs of terrorist finance.
The Searchspace mechanism is simple in concept, consisting of an intelligence enterprise framework, which does the heavy duty work of building profiles for every entity, and a sentinel part of the software which picks out unusual patterns, evaluates risk and uses audit trail, workflow and case management methods to decide what to do with it. The sentinel contains some product knowledge and some capacity for recognising patterns. In tracking unusual activity and organising workflows it aims to automate the decision making process for money laundering reporting officers.
A culture of secrecy
Software vendors in the AML arena have long suffered from the reluctance of financial institutions to publicise their contracts. This has made it more difficult for them to use testimonials to attract new business than would otherwise be the case, depriving them of opportunities to boast about their deals. Jason Kingdon, global head of Searchspace, explained to Private Client Management the reasons that clients gave for not wanting the identities of their software vendors to be a matter of public record and said that their attitude might be changing.
"I don't really think that they want the names of their vendors kept quiet because they're worried that the launderers will know what systems they have and thus be able to thwart them. It has more to do with PR departments. People at banks don't want to promote negative issues as regards what they're doing.
"I'd say that about 80 per cent of vendors' customers want the existence of their agreements kept quiet. I also think that this is about to change. Banks are now saying that it's not good enough just to promote an internal process. They want to be seen to be systematic in covering the sorts of risk that money laundering entails. That is why I think we'll be seeing more declarations of the type that UBS has just made."
Other commentators have stated that banks are secretive about their AML programmes purely because their compliance departments are situated in the area of risk management, and that risk managers have always preferred secrecy on general principles. Many banks, at least until 11 September last year, even refused to publicise the fact that they had an AML policy at all.
New areas of business
Kingdon said that Searchspace charged between $500,000 and $5m for a deal which was tailored to the requirements of the customer and which used both the intelligence enterprise framework and AML 'sentinels', but would not be drawn on the price that UBS was paying. IBM, Searchspace's global strategic partner that provides a platform for its products, was not involved in the deal. Installation is expected to take between six and eight months.
Software companies are taking note of the USA PATRIOT Act and moving into areas which are new to them. Kingdon said that Searchspace had already produced components for securities traders, with the London Stock Exchange, Lloyd's and the US Archipelago exchange already on its books. The firm has yet to provide AML software for insurance companies, however, and this seems to be the case with nearly all providers.
UBS has a market capitalisation of about SFr92bn (£38.7bn) and ranks among the top ten financial service groups in the world. No UBS spokesmen were available for comment.