Know-YourCustomer Technology

Matt Schriner

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Three-Legged AML Stool

1. 2. 3.

Effective analytics Management reporting Current Methodologies

Technology

1. 2. 3. 1. 2. 3. Sufficient knowledge Strong internal controls Compliance commitment

Knowledge and knowledge transfer Investigative savvy Current tools and processes

AML PROGRAM

Line of Business

Compliance Managemen t

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

We Have a Nomenclature Problem What is know-yourcustomer (KYC) technology? Vendors and consultants are confusing the KYC term. For purposes of this conversation, KYC is .everything?

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Different Features Included in KYC Technology

Open source technology

Google your investigation.

Community bank space

Knowledge but lack of consistency. Fits the billcheap.

Keys
Dont forget to capture your trail. Information can be misleading focus on the negatives.
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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Different Features Included in KYC Technology, Continued

List checking
Checks names against the following:
 OFAC  Internal lists  Other lists

Community bank space

 100% penetration  Minimum functionality

Keys
 False positives choking the process  Where to stop
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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Different Features Included in KYC Technology, Continued

Public data search tools

Check names and entities against public data.

Community bank space

Strong penetration. Can be leveraged for other risks to the organization.

Keys
Costs vary but can be prohibitive. Shelf-ware? Information needs interpretation.
2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Different Features Included in KYC Technology, Continued CIP solutions

Information collection, management and retrieval. Too many banks collect but fail to use.

Community bank space

Home grown solutions.
 Integration issues?

Leveraging other technologies to provide solution.

Keys
Is the front-end collection leading to back-end analyses? Integration with account opening is a must. Core vendors are responding to needs.
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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Different Features Included in KYC Technology, Continued

Account monitoring
Not necessarily KYC (remind the vendors on the difference).

Community bank space

Geography and volume are the two driving forces. Vendors still see this as the greatest opportunity. Core vendors are happily filling this niche.

Keys
Risk assessment should support need. What can you do without dedicated software?
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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Different Features Included in KYC Technology, Continued Account surveillance

Using internal data for high-risk account monitoring. Different than transaction monitoring.

Community bank space

With lack of transaction monitoring, this becomes increasingly important. KISS method for technologyUse Excel, ACL or BI tools that are already in-house.

Keys
Get the right data. Focus efforts on high risk accounts.
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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

AML Technology Primer First questionDo I need software?

Three considerations

Software realities
There are many vendors. Asset size seems to be determinant today. ASP model is driving investment cost down. Core vendors are partnering or developing integrated solution.

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Consideration #1 Risk assessment

Where is AML risk in your overall risk assessment? What are the key AML risks in your AML risk assessment? Can those key risks be mitigated by technology?

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Consideration #2 Current technology ability

Core providing sufficient reporting? Analyst has ability to create reporting using business intelligence reporting? OR Still having trouble recognizing cash-in? Core reports printed on perforated paper?

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Consideration #3 Volume, volume, volume

At the end of the day, some level of volume will require an AML solution. Can you boil the ocean? Consider:
 Where is the volume located?  Can an end-to-end solution work in your current environment?

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Must Ask Vendor Questions

Financial stability Product roadmap False positives Case management Data integration
How is this accomplished? What is the scope of the data?

Customer support Knowledge of staff Clients references

Similar in size and core

Implementation time

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Matt Schriner Managing Director RSM McGladrey 1010 RR 620 South, Suite 200 Austin, TX 78734 512.485.3646 matt.schriner@rsmi.com

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2007 RSM McGladrey Inc. RSM McGladrey Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.