The Australian government will soon present a draft bill to bring national law into line with international guidelines to eradicate money laundering. One of the key provisions will require financial institutions to identify foreign customers, so-called ‘politically-exposed persons’ (PEPs) worldwide.
Assuming the legislation goes ahead, we need to ask what role will technology play in achieving compliance? In looking at solutions, IT managers in financial institutions need to consider where the biggest risks lie and how technology can help to reduce those risks.
In the retail banking arena the greatest risk is at the frontline, where bank tellers interact with customers and facilitate the opening of accounts. In institutional and investment banks, it may be account managers or the compliance area that are responsible for identity checking. Making the right information available to all staff at the right time is critical for complying with the new legislation.
However, the existing process to open new accounts and identify customers is already complex. The challenge facing IT is to enhance this process to allow compliance without causing extra work for bank employees. Integrating information on PEPs into the existing workflow process - across all customer touch points - is the ultimate goal for IT.
There are a number of commercially available databases which monitor PEPs. In choosing a solution there are a number of factors to consider:
- Flexibility of the database – can it integrate with existing systems?
- Data structure – are the data elements clearly labelled and fields well-defined, preferably in XML?
- Scope of the database – does it extend beyond ‘black lists’ to include public figures and their family, friends and associates?
- Does the database meet your corporate security guidelines?
- Does the database comply with applicable privacy laws around the world?
- How will you receive database updates, via the Web, CD-Rom or XML feeds?
With an increasingly sophisticated range of information sources and tools available, effective PEP screening is now possible.
Bruce Macfarlane is director, Factiva Asia Pacific