Work through compliance complexity in Banking with the right tools by Giny Philips

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BY GLnny PhLLLLPS
rom Bank Secrecy Act (BSA) and anti-
money laundering (AML) concerns to
Gramm-Leach-Bliley and Sarbanes-Oxley
requirements, the sheer amount of data that
needs to be sifted through and monitored
gives technology a clear edge in solving the
f
compliance puzzle. And though the
technology alone doesn't totally address
bankers' compliance obligations, the right
software can offer a systematic, consistent
of community banks identify method to assess behavior and risk and play
acquiring regulatory compliance
software as a long-term a lead role in tackling compliance issues.
technology decision.
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Software can help bank officers sort through a assessment and is in.the process of choosing a suitable
large number of records - qpturing, aggregating softwaresolution "to help us gather information about
and analyzing customer data as transactions occur. all of our accounts and consolidate that information
But customer identification is only one component into an ongoing risk assessment,"explains Cluck.
of AML requirements. Banks also need to develop a "We're not talking about customizing software,"
system for transaction monitoring (establishing a Rocll says. "It's about filling the gaps." A bank may
customer profile with every individual or business need to look at its money transfer record-keeping
entity). That customer profile will provide guide- system, monitor those transfers, identify who is
lines as to what kinds of transactions will be doing those transfers, and be sure its Money Ser-
conducted through the account. Activities outside vices Bureau (MSB) customers conform to
those parameters will raise a red flag and create a regulations. Software helps institutions alleviate the
case file for further investigation. Transactions in ex- risk of accepting and transferring funds from
cess of $10,000 also raise a red flag and prompt the high-risk individuals by automatically checking
issuance of a suspicious activity report. government lists and other privately developed data-
"Technology is a big part of complying bases. And software flags individuals that
with BSA/AML, but the process is may be conducting suspicious
key," stresses Patrick Roch, direc- activities. If the local grocery
tor of financial intelligence store account started showing
solutions for Wolters Kluwer multiple international de-
Financial Services, which posits, the software would
helps banks with their risk flag that, for example.
assessment compliance
solutions. "When we go Best practLces
in to a customer, we're Each regulation does not
not just throwing tech- need to be tackled indi-
nology at them. We vidually, either. Instead,
[perform an] evaluation common activities that
of their current process take place in complying
and identify their gaps, with different regulations-
then we recommend tools protecting data, for example,
that we have." under BSA, Sarbanes-Oxley
For example, some institutions and Gramm-Leach-Bliley-can
can do more to verify the identity of often be addressed by following the
their customers as required by Section same best general practices. "It'll be one
326 of the u.S. Patriot Act. More than the four common project that says 'how do we identify how
minimum pieces of identification-name, date of our people operate? How do we insure data? And
birth, address and identification number- bank how do we improve customer trust while we comply
processes should look to validate that the person with these laws?'" explains Paul Reymann, CEO of
opening the account is who he or she claims, Roch ReymannGroup Inc. in Edgewater, Md., and co-
explains. That might mean inquiring about a author of a section of the Gramm-Leach-Bliley Act.
previous address, where the person has lived for the After seeking a consultant for BSA/AML, Susque-
past two years and confirming identification on hanna Bancshares took a similar approach for
more than one database. Compliance software can Gramm-Leach-Bliley and Sarbanes-Oxley. The
help automate the process of capturing, validating, bank sought a subject matter expert to help provide
storing, monitoring and alerting the institution to a consistent application and assessment, then
suspicious activities. looked at sofuvare options to track data. Ultimately,
"With the Patriot Act, documentation issues are the processes were more similar than different,
substantially different," agrees Peter Cluck, senior Cluck notes. "They all have similarities-risks, con-
group manager for corporate IT audit for the $7 trols, owners, measure of effectiveness, qualification
billion-asset Susquehanna Bancshares. "Now you of risk and possible tracking of any remediation."
have a whole new level of what you ask a customer." New Jersey's Roma Bank has relied on technology
The bank recently finished its own BSA/AML risk to help comply with the requirements related to the
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3. ThSof~t~e
"Technology is a big
scrubbing of its customer sure it's a partnership, ad-
database, as recommend- part of complying with vises Reymann. If a
ed by the Office of BSA/AML,. but the partner understands the
Foreign Assets Control.
The software also allows key.
" workings and goals of a
the $870 million-asset bank
process IS bank, they'll be able to
prioritize the list of needs,
to demonstrate compliance -Patrick Roch, realizing when a bank can't
with the customer identifica- compliance technology afford everything at once and
tion requirements of the Patriot expert needs to space out purchases and
Act. And with compliance, of processes, he says.
course, comes useful customer Susquehanna Bancshares had
information. conducted internal assessments before but want-
"Technology helps us to keep track of multiple ed an expert who knew the specifics of the
customer transactions, like making deposits at regulations and what technology needed to accom-
different branch offices in a single day, which plish. "You need somebody who's got expertise in
otherwise might go undetected," says Barry more than just performing a risk assessment-there
Zadworny, senior vice president at Roma Bank. are specific things the BSA/AML assessment
The right technology partner can make a difference required, and it was better to be proactive and invest
too. Community banks should choose a company the time and money to address specifics." IIJI
that understands their customers. Evaluate the
strengths and weaknesses of the solution and make Ginny Phillips is a free-lance writer in Birmingham, Ala.
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