This article aims to provide a point of view on some of the things banks can do to plug some of the gaps that exist in most financial crime management infrastructure. This point of view will cover aspects of what to monitor, how to monitor and most importantly when to monitor to help banks not just detect potential frauds but most importantly prevent frauds from happening.

1. www.customerxps.com | clari5@customerxps.com | +91-80-3221-8309
TARGETING THE CREVICES: EFFECTIVE FINANCIAL CRIME PREVENTION
CustomerXPs

2. www.customerxps.com | clari5@customerxps.com | +91-80-3221-8309
Banks grapple with the increasingly sophisticated
means and methods of fraudsters who always
seem a step ahead of bank’s fraud prevention
apparatus. Be it cross channel or cross function or
cross geography or mostly, in cohorts with bank
employees, the fraudster is adept at finding the
bank’s Achilles heel. Banks only have piece meal
solutions with single product focus; that have left
crevices wide enough for malicious fraudsters to
exploit.
To add to the Financial Crime head’s woes is the
bad political weather in the Middle East which has
led to creating several PEPs and immense scrutiny
around Anti Money Laundering.
According to KPMG’s Global Anti Money
Laundering report, sanctions and transaction
monitoring is still very nascent and banks are not
satisfied with their own capabilities, especially
transaction monitoring.
Banks have watertight KYC norms while on-
boarding customers but seldom monitor the
customer on an on-going basis. The good news is
that regulations like FATCA are ensuring banks
take a good look at their KYC process and
continuously update their customer information.
Finally the most important aspect about Fraud
and AML lies not only in detection of aberrant
patterns but importantly in attempting to prevent
malicious transactions from being executed.
This article aims to provide a point of view on
some of the things banks can do to plug some of
the gaps that exist in most financial crime
management infrastructure. This point of view will
cover aspects of what to monitor, how to monitor
and most importantly when to monitor to help
banks not just detect potential frauds but most
importantly prevent frauds from happening.

3. www.customerxps.com | clari5@customerxps.com | +91-80-3221-8309
USER LEVEL MONITORING
Monitor activities of all users including inquiries, pattern of activity, etc.
ACCOUNT LEVEL MONITORING
Monitoring activities at an account level
BRANCH LEVEL MONITORING
Monitoring activities at branch level- which includes activities done collective by all users
MULTI CHANNEL MONITORING & CROSS PRODUCT MONITORING
Monitor ATM, Internet banking and core system working together as one
CUSTOMER LEVEL MONITORING
Monitor activities at customer-level which includes all his account/ ATM/ Internet and also
at individual account level
PIECING THE CRIME TOGETHER: WHAT TO MONITOR?
Most people would be surprised when told that a large part of frauds are done in cahoots with bank’s
internal employees. A rather innocuous transaction like ordering a debit card by bank personnel may be part
of a much larger fraud scheme. Therefore it is essential to establish what needs to tracked and monitored by
a bank to ensure that no cracks exist.
A REASONABLY ASSURED MONITORING PLATFORM SHOULD MEASURE THE
FOLLOWING:
It is essential to not just monitor financial activity such as movement of funds but it’s equally essential to
monitor non-financial activity such as spurious inquiries, high velocity of failed attempts and most
importantly treat lack of an expected event as an aberrant pattern.

4. www.customerxps.com | clari5@customerxps.com | +91-80-3221-8309
Core Banking
Solution
Enterprise
Payment Hub
Payment
Warehouse
MDM Island
APPROACHES TO MONITOR
The “How” of monitoring is often a tricky question and in my view the most challenging part of monitoring is
to draw information from a holistic view of data. A bank’s monitoring as well as analytics is only as strong as
the data it acts upon.
Over the last few years the industry has seen many “Single Customer View” solutions to tackle the problem
of providing a holistic view of data. Some contemporary solutions include...
What
Next?
Enterprise payment hub is an
exciting new approach where all
payment information comes
together and lends effectively for
monitoring and analytics.
Arguably the most effective form of
data aggregation as it provides
multi product and multi relationship
transaction information in one go
MDM Islands provide all customer
data in one place albeit in a bit of
a random fashion – It’s a start but
just only!
Payment warehouses, by virtue of
being built like a data warehouse,
are most conducive to reporting
and end of day analytics and not
just in time monitoring.

5. www.customerxps.com | clari5@customerxps.com | +91-80-3221-8309
THE CRUX OF THE MATTER: WHEN TO
MONITOR
Financial Crime has traditionally been detected
through an array of post facto analysis software.
While these systems are immensely effective in all
the regulatory reporting; the one thing they
fundamentally lack is to influence an outcome at
point of interaction. What use would ATM fraud
detection software be if a fraudster has already
withdrawn a large sum of money from the
account and is now untraceable?
The new age fraud monitoring systems go way
beyond fraud detection, they essentially provide
fraud prevention and transaction decline
solutions. For this to happen, fraud solutions need
to act in Absolute Real Time and any post
Financial Crime has traditionally been detected
through an array of post facto analysis facto
detection is going to be counterproductive.
The resistance to real time comes from the
perception of performance issues real-time
solutions carry with them. However recent
technologies like big data computing and in-
memory computing have helped building a strong
case for Real Time computing.
GLOSSARY
PEP – Politically exposed persons are individuals
who are or have been entrusted with prominent
public functions in a foreign country, e.g., Heads
of States or of Governments, senior politicians,
senior government/judicial/military officers,
senior executives of state-owned corporations,
important political party officials, etc. Banks
should gather sufficient information on any
person/customer of this category intending to
establish a relationship and check all the
information available on the person in the public
domain. Banks should verify the identity of the
person and seek information about the sources of
funds before accepting the PEP as a customer. The
decision to open an account for PEP should be
taken at a senior level which should be clearly
spelt out in Customer Acceptance policy. Banks
should also subject such accounts to enhanced
monitoring on an on-going basis. The above
norms may also be applied to the accounts of the
family members or close relatives of PEPs.
FATCA – Foreign Account Tax Compliant Act is a
compliance act is a compliance act enacted by the
IRS that mandates foreign national banks outside
the US to scrutinize and report customers of US
origin to the IRS to ensure that all such customers
are duly taxed by the IRS.
MDM – Master Data Management in computing
comprises a set of processes and tools that
consistently defines and manages the non-
transactional data entities of an organization
(which may include reference data). MDM has the
objective of providing processes for collecting,
aggregating, matching, consolidating, quality-
assuring, persisting and distributing such data
throughout an organization to ensure consistency
and control in the ongoing maintenance and
application use of this information.

6. www.customerxps.com | clari5@customerxps.com | +91-80-3221-8309
Conclusion
Banks world over are waking up to the reality of Effective Financial Crime Management. Most banks are not earning as much
revenue as in the early part of the millennium and the last thing they want to do is lose money to the regulators. Effective
monitoring is about getting the “What to Monitor”, “How to Monitor” and “When to monitor” absolutely right. Any slack in the
above three will lead to crevices that will be wilfully exploited by the fraudsters and hackers without any compunction.
Also, while it is important to detect and prevent frauds from occurring, it is important to acknowledge that fraud detection can
sometimes be an inaccurate science that has to be garnished with intuition and simulated intelligence to try and make
detection watertight. To this extent solutions have to not just read the obvious but also interpret the unsaid…till such time
there will continue to be crevices!

7. www.customerxps.com | clari5@customerxps.com | +91-80-3221-8309
About Us
CustomerXPs, a Red Herring Asia Top 100 winner, is a Software
product Company that creates real-time, intelligent products that
empower Banking, Retail and Telecom Enterprises with instant
insights enabling influenced outcomes of deeper customer
engagement and fraud-free transactions. With a vision to provide
ammunition to its clients to delight their customers even before
they could articulate their needs/wants, CustomerXPs software
identifies and solves, in real-time, complex problems in the areas of
customer experience management, contextual right-sell, fraud
monitoring, compliance, accurately predicting risk and automating
targeted treatments.
Ratnesh Pandey is the Head of Marketing at CustomerXPs. He can be reached at
ratnesh.pandey@customerxps.com. For more information on Enterprise Fraud
Management and Financial Crime Solutions, please write to us at
clari5@customerxps.com or visit us at www.customerxps.com
About Author